Reading · Laws of Software Engineering

2 min read

Sticking with a choice because you've invested time or energy in it, even when walking away helps you.

Takeaways

Don’t stay stuck based on past investments. The fact that ‘we’ve invested a year already’ is not an excuse to continue if it’s clearly not working.
Healthy engineering organizations pivot or stop projects that no longer make sense. Continuing a bad project just because of sunk costs usually leads to greater loss.
Use clear measures and decision points: ‘If we don’t meet target X by end of quarter, we’ll re-evaluate or discontinue.’
Teams should feel safe admitting a project isn’t working without fear of blame.

Overview

The sunk cost fallacy is a cognitive bias that challenges our decision-making. Humans irrationally value what they’ve already invested, whether money, time, or effort, even when those investments can’t be recovered.

In software development, teams often continue working on a feature or product without making progress simply because “we have come this far.”

Understanding this fallacy allows engineers and managers to make more rational choices: past costs should be ignored when deciding the future. Instead, consider current facts and future benefits.

If a rewrite or switch to a third-party solution will clearly save time and money from this point forward, do that, regardless of how much was sunk into the old approach.

Overcoming sunk-cost bias is tough because it requires admitting past efforts were in vain, but in technology it’s crucial to learn to let go when evidence demands.

Sunk Cost Fallacy

Examples

Consider a company that spent two years building a custom in-house CMS, only to find it’s buggy and team productivity is low. An objective analysis might show it’s better to adopt an off-the-shelf CMS. Yet the engineering leadership hesitates: “We invested two years in this; abandoning it means that time was wasted!” If they persist solely for that reason, they fall for the sunk cost fallacy.

A positive example is Google, known for periodically killing off underperforming products (the Google Graveyard). This practice means companies don’t need to move forward with bad decisions once it’s clear an initiative isn’t working.

Teams that conduct pre-mortems or use agile sprints to reassess work frequently are better at avoiding sunk-cost traps.

Origins

The concept of sunk costs comes from economics. The term “sunk cost fallacy” was popularized by behavioral economists and psychologists in the late 20th century. Nobel laureates Daniel Kahneman and Amos Tversky studied this and related decision biases in the 1970s.

Behavioral economist Richard Thaler officially coined the term “sunk cost fallacy” around 1980.