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Sunk Cost Fallacy
Sunk Cost Fallacy
Sunk Cost Fallacy
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Overview

This model is a reminder to cut your losses and focus on future opportunities rather than getting pulled down by past decisions.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut nemo dubitet, eorum omnia officia quo spectare, quid sequi, quid fugere debeant? Nonne videmus quanta perturbatio rerum omnium consequatur, quanta confusio? Quarum ambarum rerum cum medicinam pollicetur, luxuriae licentiam pollicetur. Quid ergo aliud intellegetur nisi uti ne quae pars naturae neglegatur? Quod ea non occurrentia fingunt, vincunt Aristonem; Virtutis, magnitudinis animi, patientiae, fortitudinis fomentis dolor mitigari solet. Duo Reges: constructio interrete. Nihil opus est exemplis hoc facere longius. Facit enim ille duo seiuncta ultima bonorum, quae ut essent vera, coniungi debuerunt;

Maximus dolor, inquit, brevis est. Quae in controversiam veniunt, de iis, si placet, disseramus. Quid enim est a Chrysippo praetermissum in Stoicis?

Nec vero sum nescius esse utilitatem in historia, non modo voluptatem. Rapior illuc, revocat autem Antiochus, nec est praeterea, quem audiamus. Quis est enim, in quo sit cupiditas, quin recte cupidus dici possit? Quis enim est, qui non videat haec esse in natura rerum tria? Cum id quoque, ut cupiebat, audivisset, evelli iussit eam, qua erat transfixus, hastam. Sed ea mala virtuti magnitudine obruebantur. Paulum, cum regem Persem captum adduceret, eodem flumine invectio? Expressa vero in iis aetatibus, quae iam confirmatae sunt. Theophrasti igitur, inquit, tibi liber ille placet de beata vita? Et ille ridens: Video, inquit, quid agas;

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Actionable Takeaways
  • 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. Longum est enim ad omnia respondere, quae a te dicta sunt. Re mihi non aeque satisfacit, et quidem locis pluribus. Luxuriam non reprehendit, modo sit vacua infinita cupiditate et timore. Quae cum ita sint, effectum est nihil esse malum, quod turpe non sit. Quo modo autem philosophus loquitur? Putabam equidem satis, inquit, me dixisse. Potius inflammat, ut coercendi magis quam dedocendi esse videantur. Eam stabilem appellas. Duo Reges: constructio interrete. Ut id aliis narrare gestiant?

Illud dico, ea, quae dicat, praeclare inter se cohaerere. Haec dicuntur inconstantissime. Teneo, inquit, finem illi videri nihil dolere. Sed tamen omne, quod de re bona dilucide dicitur, mihi praeclare dici videtur. Torquatus, is qui consul cum Cn.

Laelius clamores sofòw ille so lebat Edere compellans gumias ex ordine nostros. An vero displicuit ea, quae tributa est animi virtutibus tanta praestantia? Quae contraria sunt his, malane? Etenim si delectamur, cum scribimus, quis est tam invidus, qui ab eo nos abducat? Si quicquam extra virtutem habeatur in bonis. Esse enim quam vellet iniquus iustus poterat inpune. Erit enim mecum, si tecum erit. Qui est in parvis malis. Paulum, cum regem Persem captum adduceret, eodem flumine invectio? An eum discere ea mavis, quae cum plane perdidiceriti nihil sciat? Nemo igitur esse beatus potest. Nunc omni virtuti vitium contrario nomine opponitur.

Limitations

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.

In Practice

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’. 

 

Build your latticework
This model will help you to:

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.
Origins & Resources

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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