Go Darke

Light thinks it travels faster than anything but it is wrong. No matter how fast light travels, it finds the darkness has always got there first, and is waiting for it

Erratic Erudition, Libertarianism

The sunk cost fallacy

Sunk costs is a jargon term in business that refers to money that you spent on something in your business that you will never get back. It can also refer to time and effort, but since those can both be usually quantified in monetary terms, its easier to just stick with money.

Spending money on research and development, equipment or machinery, rent, payroll, marketing or advertising are usually the main examples quoted at examples in Business Management 101.

Enter the sunk cost fallacy.

Imagine I purchased a machine for my business. I think this will do something for me… creating widgets…. or whatever. At this point it is already a sunk cost.

One of the giant bandsaws I purchased. Employee used for scale. (it worked fine, I just needed a picture)

Once I have installed the machine and it is up and running I soon realize it is completely and utterly not what I expected. In fact, this machine is completely inefficient for the purpose I had originally intended.

At this point I have to make a decision. I can, cut my loses. Or… I can try make it work… somehow.

I decide (because I’m stubborn) that I am going to make this thing I’ve spent money on work, come hell or high-water. I sink more money, time and effort into making it productive. It still doesn’t work as originally intended… but now I’m in it… and so I’m tempted to spend even more money to save face.

The sunk cost fallacy happens in other things…

For example people who were peddling the Corona virus as just another flu. Turns out its not. But now you’ve spent all this social media capital punting your flu-hypothesis. You could just cut your loses… admit that you were wrong… and move on. OR you can double down and carry on peddling even more, increasingly wacky and fringe hypotheses.

Same thing has happened with politics. You initially support Donald Trump because… well, he’s not Hillary. And Hillary is the anti-Christ. Fair enough. You defend some of his early kookiness… his political bull-in-a-china shop stuff… his clear leadership deficit.

By the time the emperor is revealed in all his naked glory you’ve spent so much time defending him… you just can’t bare the thought of losing face. So you just… carry on. Balls to the wall. No matter how crazy he gets, no matter how insane…. you are there in the trenches defending him against the barbs and arrows of his detractors.

In business there usually comes a reckoning for the person trapped in the sunk cost fallacy.

In life… I’m not so sure that’s true. People having gone down the rabbit hole find little support networks among themselves… peers so to speak that legitimize their support. Quite soon you’ve got a cult going. Grouted together with a persecution complex and bouncing their mad reasoning (to much applause and affirmation) off the walls of their echo chambers.

This happens on the left as well. I’m just picking on Donald because if Barack had mouthed off something stupid about UV light and bleach those same people who are weirdly quiet now about their guy would be foam ranting from every soapbox strong enough to support their burgeoning egos.

In any event… it is what it is. Its not a particularly new phenomenon and is likely been around since we swung out of the trees and started hitting each other with rocks.

Don’t be that blind follower. Use your reason.

BACK TO ERRATIC ERUDITION

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