Logical Hallucinations of a Sunken Cost Fallacy
Why we hold on longer than logic advises—and what we sometimes discover along the way
We like to believe our choices are guided by reason. Yet one of the oldest traps in decision-making is the sunk cost fallacy—the belief that because we’ve already invested time, money, or effort, we must continue, even when logic says otherwise.
The real danger? The logical hallucinations our minds create to justify holding on. They sound rational, but they’re illusions.
Table of Contents
- The Stories We Tell Ourselves
- Example: The Housing Bubble Stalemate
- A Personal Example: My Green Card Journey
- The Deeper Lesson
- How to Break Free
- Conclusion
The Stories We Tell Ourselves
- “If I stop now, everything will go to waste.”
- “The payoff must be close—I’ve come this far.”
- “Finishing proves I was right all along.”
- “This has no value unless I complete it.”
- “Quitting means I’m weak.”
These thoughts keep companies, investors, and individuals locked into paths that no longer serve them.
Example: The Housing Bubble Stalemate
The U.S. housing market today offers a vivid case study of sunk cost hallucinations on a national scale.
During the pandemic, the Federal Reserve slashed interest rates to near zero. Cheap borrowing ignited a surge in demand, sending home prices to record highs. For many buyers, the logic seemed simple: “Rates are low, prices are rising, buy now before it’s too late.”
Then came the reversal. Inflation surged, and the Fed raised rates aggressively. Mortgage costs jumped, affordability plummeted. By textbook economics, housing prices should have cooled significantly. Yet, in many markets, prices have remained stubbornly high.
Why? Because both buyers and sellers are caught in sunk cost illusions:
- Sellers cling to their pandemic-era 2–3% mortgages: “I can’t trade this for a 7% loan.”
- Buyers wait endlessly for a price crash: “If I buy now, I’ll regret it when prices fall.”
- Investors refuse to sell at a discount: “I paid too much to back out now.”
The result is a stalemate: a market frozen not only by economics, but also by psychology—where decisions are driven less by present value than by the ghosts of past rates and prices.
A Personal Example: My Green Card Journey
My own Green Card journey illustrates how subtle these hallucinations can be.
I came to the U.S. on an L1A visa in May 2018, and by April 2023 I had my Green Card. Compared to many peers on L1B or H1B visas, this was relatively quick. The trade-offs were real: career growth was slow, promotions were limited, and for several years salary hikes were minimal as the company navigated financial headwinds.
Still, those five years weren’t wasted. I built strong trading expertise in both Indian and U.S. markets, creating financial security that was more valuable than the raises I had hoped for.
The true sunk cost trap began after I received the Green Card.
My parents and most of my investments were still in India. My cultural and emotional roots were there too. Yet, I felt compelled to remain in the U.S., telling myself:
- “We sacrificed too much to leave now.”
- “At least the kids will get a better education here.”
These thoughts weren’t entirely false—but they were hallucinations of sunk cost. I was letting past sacrifices dictate the future, rather than weighing the decision on its own merits.
The Deeper Lesson
The real danger of sunk cost hallucinations isn’t just wasted time. It’s the way they narrow our vision. They convince us there is only one valid path forward—the one that justifies our past—when in reality, multiple futures are always available.
The housing market shows this on a societal level. My Green Card story shows it on a personal level. In both cases, the trap isn’t the investment itself—it’s the illusion that because we’ve already paid the price, we must keep living in a way that validates it.
How to Break Free
The simplest way to cut through the hallucinations is to reframe the decision:
“If I hadn’t invested anything yet, would I still choose this path today?”
If the answer is no, then the decision is being driven by sunk cost, not by present value.
Conclusion
The sunk cost fallacy is not just about wasted effort—it’s about the illusions we tell ourselves to justify continuing. From the frozen housing market to deeply personal career and immigration choices, these hallucinations can trap us long after logic says otherwise.
The lesson isn’t to glorify persistence blindly, nor to quit at the first sign of hardship. It’s to recognize when our “logic” is really a hallucination—and to stay open to futures that may be more aligned with our present values.
Because the hardest part of wisdom isn’t starting.
It’s knowing when to stop—or when to keep going for reasons that truly belong to us.
đź’¬ What about you?
Where have you caught yourself—or seen others—fall into the trap of sunk cost hallucinations? Share your story in the comments below.
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