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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.
Bork Vos autem cum perspicuis dubia debeatis illustrare, dubiis perspicua conamini tollere. Respondent extrema primis, media utrisque, omnia omnibus. Homines optimi non intellegunt totam rationem everti, si ita res se habeat.
Conclusum est enim contra Cyrenaicos satis acute, nihil ad Epicurum. Animum autem reliquis rebus ita perfecit, ut corpus; Quo modo? Isto modo ne improbos quidem, si essent boni viri. Sed in rebus apertissimis nimium longi sumus. Superiores tres erant, quae esse possent, quarum est una sola defensa, eaque vehementer. Sed quid minus probandum quam esse aliquem beatum nec satis beatum? Quid, si etiam iucunda memoria est praeteritorum malorum? Post enim Chrysippum eum non sane est disputatum. Qui autem diffidet perpetuitati bonorum suorum, timeat necesse est, ne aliquando amissis illis sit miser.
- 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. Atqui iste locus est, Piso, tibi etiam atque etiam confirmandus, inquam; Age, inquies, ista parva sunt. Sed ad illum redeo. Duo Reges: constructio interrete. De malis autem et bonis ab iis animalibus, quae nondum depravata sint, ait optime iudicari. Praeclare hoc quidem. Verum hoc loco sumo verbis his eandem certe vim voluptatis Epicurum nosse quam ceteros. Tria genera bonorum; Illa argumenta propria videamus, cur omnia sint paria peccata. Ergo, si semel tristior effectus est, hilara vita amissa est? Quos quidem tibi studiose et diligenter tractandos magnopere censeo. Bonum negas esse divitias, praeposìtum esse dicis? Vide, quantum, inquam, fallare, Torquate. Sic enim maiores nostri labores non fugiendos tristissimo tamen verbo aerumnas etiam in deo nominaverunt. Totum autem id externum est, et quod externum, id in casu est. Restinguet citius, si ardentem acceperit. Illa videamus, quae a te de amicitia dicta sunt. Varietates autem iniurasque fortunae facile veteres philosophorum praeceptis instituta vita superabat. Quia dolori non voluptas contraria est, sed doloris privatio. Quid ergo attinet gloriose loqui, nisi constanter loquare? Nam si amitti vita beata potest, beata esse non potest. Ab hoc autem quaedam non melius quam veteres, quaedam omnino relicta. Quorum sine causa fieri nihil putandum est. Inde igitur, inquit, ordiendum est. Venit ad extremum; Bork Quod autem ratione actum est, id officium appellamus. Illud quaero, quid ei, qui in voluptate summum bonum ponat, consentaneum sit dicere.
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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