0 saved
8.2K views
This model is a reminder to cut your losses and focus on future opportunities rather than getting pulled down by past decisions.
Bona autem corporis huic sunt, quod posterius posui, similiora. Illa videamus, quae a te de amicitia dicta sunt. Nonne igitur tibi videntur, inquit, mala? At ego quem huic anteponam non audeo dicere; Summus dolor plures dies manere non potest? Virtutibus igitur rectissime mihi videris et ad consuetudinem nostrae orationis vitia posuisse contraria. Nam bonum ex quo appellatum sit, nescio, praepositum ex eo credo, quod praeponatur aliis. Quia nec honesto quic quam honestius nec turpi turpius.
Quem Tiberina descensio festo illo die tanto gaudio affecit, quanto L. Expectoque quid ad id, quod quaerebam, respondeas. Virtutis, magnitudinis animi, patientiae, fortitudinis fomentis dolor mitigari solet. Quam ob rem tandem, inquit, non satisfacit? Sint modo partes vitae beatae. Vidit Homerus probari fabulam non posse, si cantiunculis tantus irretitus vir teneretur; Tu autem negas fortem esse quemquam posse, qui dolorem malum putet. Mihi, inquam, qui te id ipsum rogavi?
- 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. An me, inquis, tam amentem putas, ut apud imperitos isto modo loquar? Hic, qui utrumque probat, ambobus debuit uti, sicut facit re, neque tamen dividit verbis. Equidem etiam Epicurum, in physicis quidem, Democriteum puto. Sed erat aequius Triarium aliquid de dissensione nostra iudicare. Non igitur potestis voluptate omnia dirigentes aut tueri aut retinere virtutem. Conferam tecum, quam cuique verso rem subicias; Etenim semper illud extra est, quod arte comprehenditur. Scaevola tribunus plebis ferret ad plebem vellentne de ea re quaeri. Iis igitur est difficilius satis facere, qui se Latina scripta dicunt contemnere. Urgent tamen et nihil remittunt. Rapior illuc, revocat autem Antiochus, nec est praeterea, quem audiamus. Duo Reges: constructio interrete.
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.