“The Concorde Fallacy refers to the tendency to continue investing resources (time, money, labor, etc.) in a project or situation after a substantial amount of resources has already been invested, even though there will be no return on this investment. This term is frequently used in economics and business. It is named after the decision by the governments of the United Kingdom and France to continue the Concorde supersonic passenger aircraft project. This decision was made despite the clear economic irrationality of the project. The Concorde Fallacy is related to the concept of ‘cutting one’s losses’ and often negatively affects the logical decision-making process, as people base their decisions on previous investments regardless of the outcomes of these investments.
At the heart of the Concorde Fallacy is the tendency to ignore the reality that past investments (sunk costs) will not be recovered.
People often make irrational or harmful decisions in an attempt to recoup their prior investments.
The origins of the Concorde Fallacy are typically based on two main psychological factors:
Confirmation Bias: Individuals prefer information and outcomes that validate their previous decisions and tend to ignore contradictory evidence.
Investment Effect: The tendency to place greater value on something into which time, money, or effort has been invested, and the inclination to spend additional resources to ensure this investment is not wasted.
This phenomenon is not limited to economic decisions but can also be observed in personal relationships, career choices, and even hobbies.
When applied to relationships, the Concorde Fallacy refers to the tendency of a person to continue a relationship because of the time, emotional energy, or even material resources invested in it, regardless of whether the relationship is healthy. In this case, an individual often focuses on past investments in the relationship and decides to continue it to avoid these investments being ‘wasted.’ This can make it difficult to objectively assess whether the current state of the relationship is healthy. For example, a person might stay in an unhappy relationship because they have invested much time and effort and do not want these investments to be ‘wasted.’ This can lead to negative outcomes in terms of personal happiness and fulfillment in the long run.
‘Sunk cost’ refers to the cost that has already been incurred in a project or venture and cannot be recovered. This term is commonly used in economics, business, and finance. A sunk cost should not be rationally considered in a decision-making process, as it cannot be recuperated or changed regardless of the decision made.
For example, suppose a company has made a significant investment in research and development (R&D) for a new product. If it becomes apparent after a while that this product will not be successful in the market, the money spent on R&D is considered a sunk cost in the company’s decision-making process. At this stage, the important thing is for the company to base its decision on potential future revenues and expenses, as past expenses cannot be recovered.
The importance of the sunk cost concept is particularly related to the ‘sunk cost fallacy.’ This fallacy describes the tendency of people to make irrational or harmful decisions in an attempt to ‘recoup’ past investments. In a rational decision-making process, sunk costs should be ignored, and current and future costs and benefits should be considered.”
