I’ve always been fascinated by the concept of Sunk Costs – it’s one of those discussions that intellectually most people understand – as long as it applies to someone else!  However when it comes to your situation, things aren’t always so clear.

Just so we’re on the same page, sunk costs are essentially old investments (time or money) that are now irrecoverable.  Logically they should have no bearing on any decisions going forward (they’re sunk costs that you can’t get back) however there is a very real psychological component that tends to impact decisions.

How often have you heard someone say something like:  “I can’t let Susie go, I’ve invested all of that time and money into training her”.   It’s not a rational statement, the only thing that matters is whether or not the business owner believes Susie is going to deliver more value than her future salary.  If the answer is no, then she should ‘let her light shine brighter elsewhere!’ as one of my old bosses used to say.

How do you catch yourself from getting caught up in the Sunk Cost trap?

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