The Blind Spot: Sunk Cost Fallacy

You Know You Should Walk Away. Why Can’t You?

Eight months ago, you agreed to lead a project that was supposed to take six weeks.

Then the scope crept. The deliverable—once a clear, achievable goal—is now a bloated, unfocused thing nobody's excited about. The version you'll eventually ship, if you ever ship it, will land with a shrug. You know in your gut that people have moved on. The work stopped being worth the hours a long time ago, and the finish line keeps backing away from you.

You'd give a lot to go back and say no. But you can't. And now, a little voice in your head talks you out of pulling the plug. “You've come too far to quit now,” it whispers.

That voice is the sunk cost fallacy at work—the instinct to keep pouring time, money, and effort into something because of what you've already spent, long after the smart move is to stop. It’s a dangerous trap, and one of the most tragic cognitive distortions I’ve seen. Being willing to walk away is a skill that’s hard to learn—but it’s one of the most valuable disciplines poker continues to beat into me.

Just One More Call

I recently got into a pot with an opponent I was almost sure had a big hand. The way he bet, his mannerisms—every signal pointed to it. I was holding something marginal myself, the kind of hand you should fold and never think about again. I called anyway.

I'll just try to outflop him, I told myself.

The flop came. He bet, and I knew I was still behind. I'll call once more. Maybe I'll catch up. So I called.

The turn. He bet again. Maybe he's bluffing. He'll shut down on the river. I called.

The river. He moved all in.

I knew I was beat. Not a hunch—I knew, and I'd known since before the flop. I still felt pulled to see it through, dragged along by the chips I had already put in the pot—my soldiers left on the battlefield. I've come this far. If I fold, what was all of that for?

So I called. He turned over the big hand I'd put him on from the start. I should never have been in the hand, but I paid him off four times to try to justify my first mistake. Why do I do this to myself?

Turns out, the sunk cost fallacy, which I fell victim to, is built into our wiring. It’s how we humans naturally think. But that doesn’t make it right. Quite the opposite, actually.

The Theater-Ticket Test

That instinct torches money at a poker table. Away from the felt, it costs even more. It keeps people grinding on dying projects, propping up failing businesses, staying in jobs they've outgrown, and clinging to relationships that ended a long time ago.

A 1985 experiment by psychologists Hal Arkes and Catherine Blumer showed how automatic it is. They sold theater-season tickets at three prices—full price, a small discount, and a steep discount—then tracked who actually used them. Same seats. Same plays. Everyone had identical access. The only difference was what each person had paid.

The full-price buyers showed up for noticeably more performances in the first half of the season: about 4.1 plays, compared with roughly 3.3 for the discounted groups. The only thing pushing people out into the cold to claim a seat was a bigger number on the receipt. As Arkes and Blumer put it, we keep spending to avoid feeling like we wasted what we already spent.

Underneath that is a basic asymmetry. Losing stings more than an equal gain feels good, so we go to great lengths to avoid booking a loss. Quitting forces you to say it out loud: I made a mistake, and the time or money is gone. Pressing on lets you postpone the admission. But the delay isn't free. You pay for it by feeding good resources into a bad position, just to keep from feeling the loss.

It Feels Like the Honorable Thing

You might be reading this and feel like pushing back. There's a version of hanging on that feels right. Principled, even. You made a commitment, and you don't quit on people. You finish what you start.

That gut reaction is exactly what makes this thought distortion so dangerous. From the inside, the sunk cost fallacy almost never looks like bad judgment. It looks like loyalty and grit—the traits you're proud of.

The failing initiative becomes "we don't give up." The job you've outgrown becomes "I'm not a quitter." Every bad situation feels honorable while you're in it. That's the camouflage this fallacy hides behind.

The Chips Belong to the Pot

Here’s a helpful way to think about it: When you're caught in a sunk cost situation, whatever you've already spent is gone. Sunk. It is not coming back, and, unfortunately, it has no bearing on what you should do next. The only thing that counts is the decision in front of you, judged on its own.

Poker makes this almost mathematically clean. At the table, people mistakenly believe that folding is losing. It’s actually not. In reality, folding is neutral. Why? Because the chips you put in earlier in the hand stopped being yours the moment you bet them. They belong to the pot now. They are the textbook definition of a sunk cost. When you fold, you risk nothing more.

Looking back for validation or justification is pointless. You’re here now, and the only thing that matters is making the best decision going forward.

It's Okay to Wave the White Flag

An example might help clarify what I mean, so picture this spot. You're facing a bet, and you have two options.

You can call with a hand you know is beat. That call has a negative expected value—say it costs you $10 on average. Or you can fold, which has an expected value of $0.

Zero beats negative ten. It doesn't matter how many chips you've already pushed in. It doesn't matter that folding feels like surrender. The disciplined play is the one with the better expected value from here forward, and "lose nothing more" beats "lose ten more" all day long.

There is nothing weak about folding. It keeps you in the game long enough for your good decisions to pay off. Bad players rarely go broke from bad luck; they go broke refusing to fold hands they know they've lost.

The Question That Gets You Out

When you feel that pull to keep going, one question cuts through it:

Knowing what I know now, would I start this today?

Not "look how much I've put in." Not "think how far I've come." Just this: standing at the beginning, with everything you've since learned, would you choose to begin? If the answer is no, you have your answer. What you spent is gone either way. The only thing still in your hands is whether you keep adding to it.

Two things make that question easier to ask honestly. Decide your exit before you're in—the budget, the deadline, the condition that means you walk. Figure all that out before there’s money, reputation, or relationships on the line.

And don’t be afraid to get an outside opinion. The person with no chips in the pot sees the hand clearly because they feel none of the loss. Find them before you double down, not after.

Leave With Your Stack

The hardest part of folding is that it feels like admitting you were wrong. Usually, that's because you were. In poker, I make mistakes every session—hands I could have played better, decisions that were questionable at best. But dwelling on the past doesn’t change it, and allowing previous decisions to justify future mistakes only makes things worse.

The only thing you can control is the choices you make right now. You don't owe a bad project, a lost pot, or a sinking investment another dollar just because you've already fed it so many. You owe your next decision a clear head and an honest answer to one question.

Walk away with your stack. You'll want it for a better hand.