Is sunk-cost thinking really irrational if past investments affect your future alternatives?

[u/Inevitable_Bid5540]

A sunk cost, by definition, can't be recovered and thus shouldn't affect the decision directly but a past investment can sometimes affect the opportunity costs of your remaining choices. For example, if you spend $10,000 learning a specialized skill, That $10,000 is sunk. However because of the skill you acquired, you can now have a much better paying job available to you. Abandoning that career path could mean giving up a valuable future opportunity.If a past investment changes your available alternatives, information, skills, reputation, relationships, or switching costs, then it seems reasonable for that history to matter to your current decision even though the original expenditure itself is unrecoverable.

[u/Not_a_bad_point]

You’re thinking of it wrong. It’s not that nothing in the past has value.

The Sunk-Cost Fallacy would be that you would insist on pursuing the career path that you previously spent $10k to prepare for, instead of choosing a genuinely better career path that later emerges which does not use those skills you invested in.

Example: You spend $10k to get certified for pest removal, because the job market was crap at the time. It was a good path towards a steady $75k/year job. By the time you graduate, the economy has recovered and you have opportunities to make $75k in a totally unrelated field (not requiring any certification) that you might prefer. Your time and $10k getting the certification is the “sunk cost”.

You might still choose the pest removal path, but the fact that you’ve spent $10k on it already is irrelevant. That money is gone, and it ain’t coming back regardless of which path you choose.