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.
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.
From Sunk Cost Fallacy published October 12, 2015 at 07:05AM.