Rants, Raves, and Rhetoric v4

Sunk Cost Fallacy

In economics, a sunk cost is any past cost that has already been paid and cannot be recovered. For example, a business may have invested a million dollars into new hardware. This money is now gone and cannot be recovered, so it shouldn’t figure into the business’s decision making process.

… from How the Sunk Cost Fallacy Makes You Act Stupid.

The article goes on to describe common situations where we fall for it. The solution of making a pro and con list did not really impress me. Really, the solutions are:

  • Be willing to cut losses and run. The Cull and Surrender post is about being willing to cut out things not worth the time.
  • Actively expose mistakes to find. Embarrassment about being wrong or having made a mistake keeps us on the path of that bad place. On Being Wrong.
  • Act like the present is all there is. Past experience contributes to making a decision. But the present case should be handled as a new, independent situation and not a continuation.

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