0 saved
8.8K views
This model is a reminder to cut your losses and focus on future opportunities rather than getting pulled down by past decisions.
Venit enim mihi Platonis in mentem, quem accepimus primum hic disputare solitum; An vero, inquit, quisquam potest probare, quod perceptfum, quod. Nihil opus est exemplis hoc facere longius. Hoc simile tandem est? Suo genere perveniant ad extremum; Potius inflammat, ut coercendi magis quam dedocendi esse videantur. Quodsi vultum tibi, si incessum fingeres, quo gravior viderere, non esses tui similis; Videmus igitur ut conquiescere ne infantes quidem possint. Conferam avum tuum Drusum cum C. At certe gravius.
Memini vero, inquam; Videamus animi partes, quarum est conspectus illustrior; Quid autem habent admirationis, cum prope accesseris? Cupit enim dícere nihil posse ad beatam vitam deesse sapienti. Praetereo multos, in bis doctum hominem et suavem, Hieronymum, quem iam cur Peripateticum appellem nescio. Quamquam tu hanc copiosiorem etiam soles dicere. Itaque et manendi in vita et migrandi ratio omnis iis rebus, quas supra dixi, metienda.
- 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. Nam adhuc, meo fortasse vitio, quid ego quaeram non perspicis. Summum a vobis bonum voluptas dicitur. Tum Quintus: Est plane, Piso, ut dicis, inquit. Quare attende, quaeso. Cur igitur, inquam, res tam dissimiles eodem nomine appellas? Eadem nunc mea adversum te oratio est. Duo Reges: constructio interrete. Nobis Heracleotes ille Dionysius flagitiose descivisse videtur a Stoicis propter oculorum dolorem. Isto modo ne improbos quidem, si essent boni viri. Quo plebiscito decreta a senatu est consuli quaestio Cn. Quid, quod homines infima fortuna, nulla spe rerum gerendarum, opifices denique delectantur historia? Potius ergo illa dicantur: turpe esse, viri non esse debilitari dolore, frangi, succumbere. Quam ob rem tandem, inquit, non satisfacit? Nonne igitur tibi videntur, inquit, mala? Non minor, inquit, voluptas percipitur ex vilissimis rebus quam ex pretiosissimis. Nam neque virtute retinetur ille in vita, nec iis, qui sine virtute sunt, mors est oppetenda. Tollenda est atque extrahenda radicitus. Ad quorum et cognitionem et usum iam corroborati natura ipsa praeeunte deducimur. In parvis enim saepe, qui nihil eorum cogitant, si quando iis ludentes minamur praecipitaturos alicunde, extimescunt. Et si turpitudinem fugimus in statu et motu corporis, quid est cur pulchritudinem non sequamur? Superiores tres erant, quae esse possent, quarum est una sola defensa, eaque vehementer. Huius, Lyco, oratione locuples, rebus ipsis ielunior. Prave, nequiter, turpiter cenabat; Bork Ut in voluptate sit, qui epuletur, in dolore, qui torqueatur.
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
Oops, That’s Members’ Only!
Fortunately, it only costs US$5/month to Join ModelThinkers and access everything so that you can rapidly discover, learn, and apply the world’s most powerful ideas.
ModelThinkers membership at a glance:
“Yeah, we hate pop ups too. But we wanted to let you know that, with ModelThinkers, we’re making it easier for you to adapt, innovate and create value. We hope you’ll join us and the growing community of ModelThinkers today.”
You Might Also Like:
- Actionable summaries of the world's most powerful ideas.
Subscribe now and download this practical guide to transform your thinking, plus recieve one short, powerful and actionable idea in your inbox each month.