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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.
Ergo adhuc, quantum equidem intellego, causa non videtur fuisse mutandi nominis. Aliam vero vim voluptatis esse, aliam nihil dolendi, nisi valde pertinax fueris, concedas necesse est. Itaque mihi non satis videmini considerare quod iter sit naturae quaeque progressio. Habent enim et bene longam et satis litigiosam disputationem. Videmusne ut pueri ne verberibus quidem a contemplandis rebus perquirendisque deterreantur? Qui est in parvis malis. Maximas vero virtutes iacere omnis necesse est voluptate dominante.
Quis enim potest ea, quae probabilia videantur ei, non probare? Nihil enim iam habes, quod ad corpus referas; Egone non intellego, quid sit don Graece, Latine voluptas? Restinguet citius, si ardentem acceperit. Inde igitur, inquit, ordiendum est. Quod dicit Epicurus etiam de voluptate, quae minime sint voluptates, eas obscurari saepe et obrui. Qui non moveatur et offensione turpitudinis et comprobatione honestatis? Facit igitur Lucius noster prudenter, qui audire de summo bono potissimum velit;
- 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. Nec vero pietas adversus deos nec quanta iis gratia debeatur sine explicatione naturae intellegi potest. Quos nisi redarguimus, omnis virtus, omne decus, omnis vera laus deserenda est. Tenent mordicus. Quare conare, quaeso. Quae duo sunt, unum facit. Portenta haec esse dicit, neque ea ratione ullo modo posse vivi; Duo Reges: constructio interrete. Dolor ergo, id est summum malum, metuetur semper, etiamsi non aderit; At multis malis affectus. Nonne videmus quanta perturbatio rerum omnium consequatur, quanta confusio? Quid enim me prohiberet Epicureum esse, si probarem, quae ille diceret? Quis est enim aut quotus quisque, cui, mora cum adpropinquet, non refugiat timido sanguen átque exalbescát metu? Multa sunt dicta ab antiquis de contemnendis ac despiciendis rebus humanis; Ita fit beatae vitae domina fortuna, quam Epicurus ait exiguam intervenire sapienti. Tum Triarius: Posthac quidem, inquit, audacius. Qua ex cognitione facilior facta est investigatio rerum occultissimarum. Sed ne, dum huic obsequor, vobis molestus sim. Quare conare, quaeso. Conferam tecum, quam cuique verso rem subicias; 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
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