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Sunk Cost Fallacy
- The article discusses the sunk cost fallacy – the common pitfall of staying in unfulfilling roles or careers just because of the energy and time invested in them. The writer explores the psychology behind this fallacy and practical strategies for recognizing when one is stuck and moving forward. Sunk cost fallacy is a cognitive bias that makes individuals follow through on an idea because of the resources invested in it. This can lead to irrational decisions and impair decision-making skills. The bias is prevalent in most areas of life and not necessarily business decisions only. The reasons why people are susceptible to sunk cost fallacy include loss aversion, regret avoidance, and several beliefs that have become pervasive in modern culture.
- The author shares several examples of sunk cost fallacy, which include continuing to work on a project that is not yielding results, continuing with a job when unfulfilled, staying in a failing business, and refusing to switch a career path. Personal commitments like marriages can also fall victim to this irrational thought process. The article goes ahead to provide a four-step framework for avoiding the sunk cost fallacy, which involves consistent self-reflection, seeking accountability, reviewing evidence, and having a bias towards action. Consistent self-reflection enables better decision-making by assessing one's feelings and goals.
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