Economics & Finance
Sunk Cost & Strategic Exit
When a business has invested capital that cannot be recovered and continued investment would only increase losses, the rational response is to cut losses and exit decisively. However, human nature tends toward 'since I've already invested so much, a little more won't hurt'—leading to the sunk cost trap of escalating commitment. The most rational decision recognizes that past money is gone; the only question that matters is 'is it worth continuing from here?'
Read the daily articles behind this idea on the Chinese edition.