Sunk Cost Fallacy

The tendency to continue investing in a failing project or decision because of resources already committed, rather than evaluating the decision purely on its future potential.

Sunk costs are gone regardless of what you do next. Founders who cling to failing projects because of past investment destroy more value than those who cut losses early and redirect resources toward better opportunities.

A founder has spent £15,000 building a product that shows no market demand. Her instinct is to spend another £5,000 to fix it because she cannot bear to write off the investment. Recognising the sunk cost fallacy, she pivots rather than doubling down on a product the market does not want.