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Sunk Cost Fallacy: Difference between revisions
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In the case of the Concorde, the sunk cost fallacy was evident from the beginning of the project. The development of the Concorde was a massive undertaking that required the investment of huge amounts of money, time, and resources. However, as the project progressed, it became clear that the costs were much higher than anticipated, and the economic viability of the project was in doubt. | In the case of the Concorde, the sunk cost fallacy was evident from the beginning of the project. The development of the Concorde was a massive undertaking that required the investment of huge amounts of money, time, and resources. However, as the project progressed, it became clear that the costs were much higher than anticipated, and the economic viability of the project was in doubt. | ||
Despite these challenges, the British and French governments continued to invest in the project, as they believed that the prestige and technological advancements associated with the Concorde would be worth the costs. The sunk costs of the project were already substantial, and it was difficult for the governments to abandon the project without admitting that they had made a mistake. | Despite these challenges, the British and French governments continued to invest in the project, as they believed that the prestige and technological advancements associated with the Concorde would be worth the costs. The sunk costs of the project were already substantial, and it was difficult for the governments to abandon the project without admitting that they had made a mistake. It took a Concorde crash that killed 100 passengers and the aviation crisis after September 11 attacks for them to retire it in 2003. | ||
==== (I)rrationale ==== | |||
British & French governments thought that they had already invested a lot in Concorde, so they continued pouring even more money and time to make it work. They could have stopped the losses while they were small, but the sunk cost kept them going, which ended up with a much bigger failure. Rational decision-making requires the evaluation of possible future gains and losses. The invested effort, money, or time has no rational impact, but only emotional. So when making decisions, detach your emotions about the sunk cost. It’s unrecoverable. Assess the situation rationally and don’t be scared to cut the losses if you have a better option for investing your resources. | |||
When you find yourself in a hole, the best thing you can do is stop digging. | |||