I completed an Executive MBA twenty years ago, and while I honestly can’t tell you much about what I learned, one thing I remember from my economics class that stuck is the sunk cost fallacy.
An economist named Richard Thaler originated this concept in 1980, arguing against a popular assumption that people make purely rational economic decisions by weighing only future costs and benefits. His point was that people also factor in “bygones,” resources already spent, whether in money or time, into decisions where those resources should be irrelevant going forward.
It’s a cognitive bias that is easy to fall prey to, and it can block your ability to scale your business.
I suspect that you can relate to this...most business owners can.
The Grind At Work
Sunk cost fallacy thinking is a visible manifestation of the grind operating system. Its roots are fear and pride. And the problem is that staying loyal to a past decision solely due to fear or pride is often disloyalty to the truth.
Let’s walk through a few examples so you can see what I mean:
Scenario 1: The offer your business has outgrown
You’ve provided three primary solutions for your clients for years, and it was how your business grew from $0 to $2M in revenue over the past five years. However, in order to scale your business, you realize you need to discontinue one of the services. One that you invested so much money and energy in creating, building out systems and SOPs for the team, but it’s still only 5% of your business after two years.
Fear says: “What if I’m wrong and this 5% actually matters more than I think it does?”
Pride says: “I spent two somewhat painful years building this. Nobody thought it was going to work, yet it’s finally profitable. Walking away feels like admitting all this work was for nothing.”
Scenario 2: The hire that isn’t working out
You’ve poured six months into developing your sales director Jonathan, and even vouched for him publicly with your management team. He displays great character, but he just isn’t getting the job done. While he’s improving, it simply isn’t enough. The whole reason you hired him was so sales could grow without you having to carry that full load. Instead, you’re still having to constantly step in and cover the gaps he should be closing.
Fear says: “What is the team going to think about my judgment of talent if I let him go?”
Pride says: “I already told the team he’d be fantastic. I can’t be wrong about this now, and I’m great at developing people. I just need another 90 days to fix this.”
Scenario 3: The custom software that was never the right fit
You invested nearly six-figures and six months having a custom software system built that would help the business scale delivery without having to add more headcount. But somewhere between the sales conversation with the software company and the actual implementation, it became clear that the system wasn’t going to be what you needed. Unfortunately, the fit was wrong from the start, and now you’re paying thousands a month just to keep patching things together. Another CEO told you about a tool her company has been using for a year that seems to be exactly what you need.
Fear says: “What if the new tool doesn't work either, and I've now failed twice?”
Pride says: “I'm not going to be the CEO who wasted six figures and still ended up using someone else's solution.”
Grace At Work
Sometimes your original decision was exactly right at the time, and circumstances simply changed. Other times it wasn’t the right decision at all. Perhaps you missed something you could have caught because you were moving too fast. Regardless, the failure isn’t in changing course; it’s in staying loyal to a decision instead of staying loyal to the truth.
The grace operating system leads to a clearer decision, made without shame, blame, or self-protection in the way. Instead, it pauses long enough to take note of lessons learned and respond based on the best way forward, despite the “bygones.” Its roots are trust and surrender. What makes that possible? Grace. Power beyond you. Not willpower or sheer determination, but power outside your own capacity that enables you to release your grip.
Consider the scenarios now with a lens of grace:
For the offer, grace says: “I trust that letting this go doesn’t erase what it taught me or the revenue it helped the business build along the way. It was wonderful to serve our customers in this way, and now I can release my grip on this offer, trusting that there’s something better ahead for me, my team, and those we serve.”
For the situation with Jonathan, grace says: “I trust that making the right call for the team doesn’t undermine the truth about my ability to develop people. I surrender the need to prove I was right about him, and trust that the right decision now is what protects my credibility.”
For the software, grace says: “I trust that even though this investment didn’t pay off the way I hoped, it wasn’t a total loss, and it taught me exactly what to look for next time. I can surrender the story that switching to another better solution makes me look foolish, and trust that the right tool now serves the business more than defending the wrong one will.”
Reflection
When you’re scaling your business, sunk cost thinking is not only costing you time or money; it’s costing you progress on your vision.
Consider this: Where are you currently protecting a past decision instead of trusting what’s true now?
P.S. If you recognized this pattern in your own leadership, here are two ways to keep going:
Take ROOTED, my free diagnostic, to see where you actually stand in your leadership foundations and begin to grow in grace.
Join GraceOS Insider, which gives you practical tools for moments like this one, plus a monthly seat at the Grace Table where you can access live advising. GraceOS Insider helps you make grace the operating system of your leadership so you, your team, and results can all flourish.