Summer Series on Psychology #1: Cutting our Losses

We know these situations all too well. We see them on The Soothstream every day.

I’ve been dating my girlfriend for five years, but it seems like we aren’t compatible anymore. We lost that “spark,” and sometimes I think it would be better for us to break up. But, I’ve spent half of my twenties with her, and I don’t want it all to have been a waste

I started my own business a year ago and I put a ton of money into it. Things aren’t going the way I expected, and I find myself dreading going to work every day. I want to let go of that dream, but I already put so much money into it so I think maybe I should just stick it out…

A few weeks ago, I shelled out for some concert tickets, but now that the day is here I’m not feeling well. I don’t think I’m going to have fun at the concert, but I already spent the money and now I feel like I should just suck it up and go…


Sound familiar?

When we put a lot of time or money into something, we feel like it will all be wasted if we don’t end up following through. This is called the sunk-cost fallacy, or “throwing good money after the bad.”

Our three advice seekers are all worried about what they have already invested in their situation – they don’t want the time and money they invested to be a waste, and they don’t know if the time is right to cut their losses.

When we fall victim to the sunk-cost fallacy, we focus too much on the amount of time or money that we have already put in, and we do not pay not enough attention to what is likely to happen in the future. So, we are more concerned with making sure we didn’t waste the past 5 years than with making sure we aren’t going to waste the next 5 years. 

So, what can we do about it?

The good news is that simply by knowing about the sunk-cost fallacy, we are more likely to rethink our options the next time we are worried about wasting time and money by cutting our losses!

When we stick with our original choices, it feels like we’re not wasting anything. But, this isn’t really true – our three advice seekers would be missing out on potential opportunities for better outcomes (a more fulfilling relationship, an exciting new career, time to recharge at home).

We can ask ourselves: If I knew at the beginning how I would feel now, would I have made the same decision? Would I have even started this relationship? Would I have started a business? Would I have bought the tickets? If the answer is “No way!” maybe it’s time to cut our losses.


This post was written by Sooth Intern, Rachel Korn:

Hi everyone! My name is Rachel and I’m just finishing my fourth year as a grad student in the social psychology program at the University of Rochester. My research focuses primarily on motivation; in particular, I am interested in how negative types of motivation can lead to positive outcomes for certain types of people and in some types of situations. This summer with Sooth, I'm  exploring how individuals’ motivations are reflected in the language they use when soliciting and giving advice and whether matches in motivational styles are related to the effectiveness of advice.