A 3-minute read on the identical piece of faulty math that keeps someone holding a stock that’s down and paying for a gym they dread walking into.
Sunk cost logic wears two outfits and answers to two different names. In a brokerage account it sounds like “it’ll come back eventually.” In a gym contract it sounds like “I already paid for the year.” Underneath, it is the same move: letting money that is already gone decide what happens with money, or time, that hasn’t been spent yet.
The stock doesn’t know what you paid for it, and the gym doesn’t care whether the annual fee already cleared. Both only respond to decisions made from today forward. The original price is a fact about the past, not a variable in the current decision.
A cleaner test than “how much have I already put in” is “would I choose this again, today, knowing what I know now.” Would you buy this position at this price, given the company’s current numbers. Would you sign this membership at this price, given how often you’ve actually gone in the last two months. A no to either isn’t a reason to grit it out, it’s a signal the original call is worth revisiting, not the follow-through.
Paying twice, once in the original decision and again in the discomfort of staying, is the actual cost of sunk cost thinking. The fix isn’t willpower, it’s asking the forward-looking question before the backward-looking one gets to vote.
P.S. Tomorrow: a one-week experiment for finding out whether that subscription and that supplement you keep meaning to cancel are actually costing you anything.
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