Week 35: The Sunk Cost Trap (Advanced Guide)

Letting Go of Lost Causes

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The sunk cost effect is one of the most studied and perplexing decision-making errors. It impacts personal lives, businesses, and organizations across the world.

The Deeper Brain Science

Studies using functional magnetic resonance imaging (fMRI) have shown that individuals who score high in agreeableness and conscientiousness are more vulnerable to the sunk cost fallacy. This occurs because these individuals show increased activity in the insula, a brain region that generates emotional discomfort at the thought of wasting prior investments. The insula’s heightened activity interacts strongly with the lateral prefrontal cortex, allowing emotional distress to overpower the logical decision-making processes normally governed by the prefrontal cortex.

In people with gambling disorder, those with longer periods of abstinence showed reduced susceptibility to the sunk cost effect, suggesting that the bias can be modified over time.

The Psychodynamic Lens

Psychodynamically, the sunk cost fallacy can be viewed as a fear of change and loss of identity. It may even relate to Freud's concept of the death instinct (Thanatos), where the familiar failure feels psychologically safer than the chaos of starting over. The emotional weight of abandoning a long-held pursuit can be experienced as an internal psychic loss.

The Role of Emotion

Recent research indicates that the sunk cost fallacy is primarily driven by emotions directly related to the decision itself, rather than by a person’s general mood. High cognitive load increases this reliance on emotion, heightening the risk of falling into the trap.

Researchers have also tested strategies to reduce sunk cost bias. A study