sunk cost fallacy

Definition

The irrational commitment to failing projects because you've already wasted so much time and money that stopping now would mean admitting it was all pointless. It's throwing good money after bad while calling it 'persistence.'

Example Usage

We've spent $2 million on this feature nobody wants, but the sunk cost fallacy means we'll spend $2 million more before admitting defeat.

Source: Behavioral economics and decision theory

Related Terms

Intermediate

municipal

Pertaining to local city government, or a bond issued by said government that lets you bet on whether a town can pay its debts. Municipal bonds are beloved by tax-averse investors who trust city councils more than they probably should. It's the financial equivalent of believing your local DMV will process your paperwork efficiently.

💰 Finance / Accounting

Advanced

parking

Temporarily moving assets or liabilities off the books through short-term sales with prearranged buyback agreements, essentially hiding things in plain sight. It's the financial equivalent of shoving everything into the closet before guests arrive.

💰 Finance / Accounting

Intermediate

Amortization

The process of spreading the cost of something over time so it hurts a little bit every month instead of a lot all at once. It's the financial equivalent of eating an elephant one bite at a time, except the elephant is debt and you're never not eating.

💰 Finance / Accounting

Beginner

aged receivables

Outstanding customer invoices categorized by how long they've been unpaid, typically in 30-day buckets. The older they get, the more they resemble wine—except instead of improving with age, they become increasingly worthless.

💰 Finance / Accounting

Advanced

backflush costing

A simplified cost accounting system that records costs only when production is complete, skipping the tedious tracking of work-in-process. It's for manufacturers who prefer speed over precision and assume everything flows smoothly.

💰 Finance / Accounting

Intermediate

Penny Stock

Stocks that trade for less than a dollar, which are to investing what scratch-off tickets are to financial planning. They're cheap, exciting, and almost certainly going to leave you with less money than you started with, but the thrill of potential riches keeps people coming back.

💰 Finance / Accounting

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