What is the sunk cost fallacy, and what is the correct way to decide instead?

Sunk cost fallacy: letting unrecoverable past investment drive a decision — the fix is to weigh only future costs and benefits.

A sunk cost is time, money, or effort already spent that you can't get back whatever you now choose. The fallacy is treating that past spending as a reason to continue: "I've already invested so much, I can't quit now." But because the cost is gone either way, it's irrelevant to which option is now best.

Rational decisions are forward-looking: compare the future costs and benefits of continuing versus stopping, and ignore what's already spent. Finishing a bad film because you paid for the ticket, or pouring more money into a failing project "to not waste the earlier money," both throw good resources after bad.

Tip: Ask: "Knowing nothing about the past, would I start this today?" If the honest answer is no, the only thing keeping you in is the sunk cost — which is exactly what you should ignore.