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This model is a reminder to cut your losses and focus on future opportunities rather than getting pulled down by past decisions.
Fatebuntur Stoici haec omnia dicta esse praeclare, neque eam causam Zenoni desciscendi fuisse. Duae sunt enim res quoque, ne tu verba solum putes. Quae duo sunt, unum facit. Sed erat aequius Triarium aliquid de dissensione nostra iudicare. Quantam rem agas, ut Circeis qui habitet totum hunc mundum suum municipium esse existimet? Eadem nunc mea adversum te oratio est.
In quibus doctissimi illi veteres inesse quiddam caeleste et divinum putaverunt. Non pugnem cum homine, cur tantum habeat in natura boni; Ne amores quidem sanctos a sapiente alienos esse arbitrantur. Hoc loco discipulos quaerere videtur, ut, qui asoti esse velint, philosophi ante fiant. Bork Praeclarae mortes sunt imperatoriae; Ergo opifex plus sibi proponet ad formarum quam civis excellens ad factorum pulchritudinem? Aliter enim explicari, quod quaeritur, non potest.
- Ask, ‘does this cost have an impact on what will happen in the future?’
Identify Sunk Co ... Lorem ipsum dolor sit amet, consectetur adipiscing elit. Hosne igitur laudas et hanc eorum, inquam, sententiam sequi nos censes oportere? Quis istud possit, inquit, negare? Quamquam non negatis nos intellegere quid sit voluptas, sed quid ille dicat. Prioris generis est docilitas, memoria; Duo Reges: constructio interrete. Plane idem, inquit, et maxima quidem, qua fieri nulla maior potest. Quippe: habes enim a rhetoribus; Quod idem cum vestri faciant, non satis magnam tribuunt inventoribus gratiam. An vero displicuit ea, quae tributa est animi virtutibus tanta praestantia? Aut, Pylades cum sis, dices te esse Orestem, ut moriare pro amico? At multis malis affectus. Illud dico, ea, quae dicat, praeclare inter se cohaerere. Sed haec quidem liberius ab eo dicuntur et saepius. Iam doloris medicamenta illa Epicurea tamquam de narthecio proment: Si gravis, brevis; Dolere malum est: in crucem qui agitur, beatus esse non potest. Maximus dolor, inquit, brevis est. Minime vero, inquit ille, consentit. Partim cursu et peragratione laetantur, congregatione aliae coetum quodam modo civitatis imitantur; Deprehensus omnem poenam contemnet. Nam, ut sint illa vendibiliora, haec uberiora certe sunt. Itaque eos id agere, ut a se dolores, morbos, debilitates repellant. Tu enim ista lenius, hic Stoicorum more nos vexat. Ad eas enim res ab Epicuro praecepta dantur.
Identifying a Sunk Cost can be difficult when there is no precise way of comparing a loss to a gain. The desire to not appear wasteful also can limit your ability to base a decision on relevant costs exclusively, especially when you feel personally responsible for the investments representing sunk costs.
The Concorde Fallacy.
The Concorde Fallacy is an alternative name for the sunk cost fallacy, coming from the way the British and French governments continued to co-fund the development of the expensive Concorde supersonic aeroplane even after it became financially untenable. Their previous investment, financially and politically, was thought to determine the ongoing funding.
Eat too much?
A common example of the sunk cost fallacy is when someone buys a large meal, then overeats to ensure ‘they get their money worth’.
The sunk cost fallacy is an unconscious bias that arises from accounting and financial domains. It is an important consideration in decision making.
Use the following examples of connected and complementary models to weave the sunk cost fallacy into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above.
Connected models:
- Cost-benefit analysis: to consider actual pros and cons of a choice
- Opportunity cost: to consider the potential loss of a future facing decision.
Complementary models:
- First principle thinking: in breaking down a situation to its basics.
- Inversion: considering the opposite, e.g. ‘how can we continue to make that loss again?’
- The Lindy effect: to challenge sunk costs and seeing past longevity as a potential positive.
- Availability heuristic: being overly impacted by immediate situations and losses.
- Lock-in effect: is there greater friction to breaking from the status quo.
Read N. Gregory Mankiw’s Principles of economics for information on various economic theories that involve the concept of sunk costs.
This brief article references some of the relevant studies arising from Behaviorual Economics and the Sunk Cost fallacy. Check this video resource for a quick overview of the sunk cost concept and how it applies to the Concorde supersonic plane case.
My Notes
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