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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.
Quid censes in Latino fore? Equidem e Cn. Illa enim, quae prosunt aut quae nocent, aut bona sunt aut mala, quae sint paria necesse est. Nihilo beatiorem esse Metellum quam Regulum. Si enim ad populum me vocas, eum. Esse enim quam vellet iniquus iustus poterat inpune. Positum est a nostris in iis esse rebus, quae secundum naturam essent, non dolere; Venit enim mihi Platonis in mentem, quem accepimus primum hic disputare solitum;
Inquit, dasne adolescenti veniam? Etenim semper illud extra est, quod arte comprehenditur. Tamen aberramus a proposito, et, ne longius, prorsus, inquam, Piso, si ista mala sunt, placet. Hoc etsi multimodis reprehendi potest, tamen accipio, quod dant. Transfer idem ad modestiam vel temperantiam, quae est moderatio cupiditatum rationi oboediens. Expectoque quid ad id, quod quaerebam, respondeas.
- 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. Cur ipse Pythagoras et Aegyptum lustravit et Persarum magos adiit? Non est igitur summum malum dolor. Heri, inquam, ludis commissis ex urbe profectus veni ad vesperum. Illis videtur, qui illud non dubitant bonum dicere -; Duo Reges: constructio interrete. Nondum autem explanatum satis, erat, quid maxime natura vellet. Sed quid minus probandum quam esse aliquem beatum nec satis beatum? Atqui iste locus est, Piso, tibi etiam atque etiam confirmandus, inquam; Quis est tam dissimile homini. Cui Tubuli nomen odio non est? Negare non possum. Ita relinquet duas, de quibus etiam atque etiam consideret. An nisi populari fama? Quid, si etiam iucunda memoria est praeteritorum malorum? Praeclarae mortes sunt imperatoriae; Ne tum quidem te respicies et cogitabis sibi quemque natum esse et suis voluptatibus? Quia nec honesto quic quam honestius nec turpi turpius. Bonum negas esse divitias, praeposìtum esse dicis? Nam aliquando posse recte fieri dicunt nulla expectata nec quaesita voluptate. Nunc vero a primo quidem mirabiliter occulta natura est nec perspici nec cognosci potest. Quod non faceret, si in voluptate summum bonum poneret. Quod si ita sit, cur opera philosophiae sit danda nescio.
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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