The Escalation Trap

The sunk cost fallacy fuels escalation of commitment — a pattern where each new investment makes walking away harder, building a self-reinforcing trap.

A failing business venture: you put in $10K. It struggles. You add another $10K, reasoning the first is wasted if you stop. Now $20K is at stake, making the next $10K feel necessary.

The cycle runs: investment, bad news, more investment to save the first, more bad news, an even larger investment. The exit cost at step 2 is small. By step 5 it is enormous.

Breaking out takes pre-commitment: set kill criteria before you start. "If this doesn't break even by month 12, I close it."