Not being pulled by what you already spent
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
Money already spent and time already invested cannot be recovered by any future decision. People nonetheless tend to keep going in proportion to what they have already put in. This page describes that tendency; it does not tell you to continue or to stop.
Key points
- Money already paid is not evidence about what to do next
- The more that has been invested, the harder withdrawal becomes — a widely observed pattern
- 'I have come this far' says nothing about the thing itself
- Knowing the pattern does not make any particular action correct
Definition
The tendency for costs already incurred and unrecoverable — sunk costs — to influence decisions about the future.
Only what can still happen is evidence. Money already paid does not come back under any option, so how much you have spent is logically irrelevant to what to do next. The structure is simple and, in the moment, extremely hard to hold to.
In an investing context the pull is strongest on a holding sitting at a loss: 'selling now would make the loss real.' But the loss already exists, and continuing to hold does not automatically return the lost value. A judgement that a recovery is possible can stand on its own merits — but if the reason behind it is the amount already committed, then you are not looking at the asset at all.
The same applies to time and effort: a project you have followed for years, an asset you researched exhaustively, a setup that took a weekend. The more effort spent, the more forgiving the assessment tends to become. It is worth checking for yourself whether what is happening is 'I researched it, so I am right' or 'I researched it, so I cannot let go'.
Note carefully that knowing this pattern does not lead to a conclusion like 'you should cut your losses'. This site does not direct trading decisions. What can be said is only this: when you put your reasoning into words, you can check whether it describes what might happen next, or how much you have already spent.
Watch out for
- · This is not investment advice and recommends neither holding nor selling
- · Understanding a cognitive tendency does not prevent losses
- · Reasoning differs by person — decide on the basis of your own circumstances
Frequently asked questions
Should I cut a position that is down?
This site will not answer that. What this page addresses is only how to tell whether your reasoning rests on what might happen next or on what you have already spent.