Apply the new investor test

Ask: would a rational person who had not already invested choose to invest now?

Why it works

The new investor test removes the asymmetry between you (who carry the sunk cost’s emotional weight) and a fresh observer. If a well-informed outside investor would not put money or time into this project starting today, that is strong evidence that only sunk cost psychology is keeping you in. The test makes the counterfactual concrete and gives it a person — which is more cognitively tractable than abstract principle.

How to do it

1. Imagine a knowledgeable investor who has no prior stake in the project.
2. Brief them on the current state and future prospects — not the history.
3. Ask: "Would they invest in this, starting from scratch today?"
4. If no: their reluctance reflects the pure forward value, and your desire to continue reflects sunk cost.

Evidence

The new investor test is a practitioner tool derived from the sunk cost fallacy literature. Its mechanism — perspective-taking and counterfactual framing — has research support in the broader debiasing literature as a way to reduce in-group and self-serving biases. (mechanistic)

Perspective-taking reduces but does not eliminate biased judgment; the test is most useful as a check rather than a definitive verdict.

Common mistake

Briefing the imaginary investor on the history anyway ("and we’ve already invested two years...") which re-introduces the sunk cost through the back door.