The sunk cost effect: Why people stick with questionable investments
From the outside, it often seems incomprehensible: Why do people stick with projects that obviously don’t benefit them or even harm them? The answer often lies not in a lack of intelligence or information, but in a psychological phenomenon: the sunk cost effect.
What is behind this effect?
The “sunk cost effect” describes the tendency to continue pursuing decisions that have already been made because time, money or energy has already been invested – even if it would make more sense objectively to pull out. These costs are no longer recoverable, i.e. they are ‘sunk’, but the emotional weight of the investment prevents many from drawing a line under it.
Particularly pronounced in the context of MLM and crypto projects
This error in thinking often occurs in areas where high hopes are linked to financial or idealistic promises. These include multi-level marketing (MLM) models and crypto investments that promise passive income or technological breakthroughs.
Former participants in projects such as Lyoness, Lyconet, myWorld, @Media, Safir, Zeniq, XPro, VOO, GSPartners, Apertum and DAO1 also report significant investments in licence packages, tokens or distribution structures. The promised returns failed to materialise for months or years. Nevertheless, many stuck with their investments, thinking: ‘I’ve already put so much into it, it can’t be for nothing now.’
A dangerous fallacy
It is precisely this thinking that often leads to further losses. From an economic point of view, only future opportunities and risks should play a role – not what has already been lost.
A call for self-reflection
Anyone who has invested in a project that is not working as promised, whether in cryptocurrencies, MLM or other structures, should ask themselves the following questions:
• Would I get involved again today, with the knowledge I have now?
• Or am I only sticking with it because I have already invested?
These considerations require courage. But they can help you make future decisions more freely and clearly.
Conclusion
The sunk cost effect is human, but also dangerous. Recognising it can free you from psychological traps and help you make more rational, self-determined decisions – in everyday life as well as in financial investments.
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