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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.
Semper enim ex eo, quod maximas partes continet latissimeque funditur, tota res appellatur. Quare obscurentur etiam haec, quae secundum naturam esse dicimus, in vita beata; Vitae autem degendae ratio maxime quidem illis placuit quieta. Quam ob rem tandem, inquit, non satisfacit? Bork Hoc sic expositum dissimile est superiori. Ab hoc autem quaedam non melius quam veteres, quaedam omnino relicta. Dat enim intervalla et relaxat. Qui autem de summo bono dissentit de tota philosophiae ratione dissentit.
Verum hoc idem saepe faciamus. Certe non potest. Duo Reges: constructio interrete. Quacumque enim ingredimur, in aliqua historia vestigium ponimus. Si id dicis, vicimus. Ut id aliis narrare gestiant? At ille non pertimuit saneque fidenter: Istis quidem ipsis verbis, inquit; Sed fortuna fortis;
- 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. Haec et tu ita posuisti, et verba vestra sunt. At multis se probavit. Nunc haec primum fortasse audientis servire debemus. Nemo igitur esse beatus potest. Quod non faceret, si in voluptate summum bonum poneret. Quod idem cum vestri faciant, non satis magnam tribuunt inventoribus gratiam. Stoicos roga. Duo Reges: constructio interrete. Quae si potest singula consolando levare, universa quo modo sustinebit? Quonam, inquit, modo? Fortitudinis quaedam praecepta sunt ac paene leges, quae effeminari virum vetant in dolore. Nec vero sum nescius esse utilitatem in historia, non modo voluptatem. Immo videri fortasse. Poterat autem inpune; Cenasti in vita numquam bene, cum omnia in ista Consumis squilla atque acupensere cum decimano. Ita similis erit ei finis boni, atque antea fuerat, neque idem tamen; Id et fieri posse et saepe esse factum et ad voluptates percipiendas maxime pertinere. Nunc agendum est subtilius. Heri, inquam, ludis commissis ex urbe profectus veni ad vesperum. Negare non possum. Illis videtur, qui illud non dubitant bonum 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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