D·04
Decisions & Judgment
Sunk Costs Are Not Costs
Money and years already spent are gone whatever you now decide. The only question is forward value.
- Evidence
- proven
- Topic
- Decisions
- Things to do
- 3
- Read
- 1 min
provenHow strong is the evidence?
Tested again and again, by different people, and it keeps coming out the same. You can lean on this.
- Arkes & Blumer, OBHDP, 1985
Why it works
We treat quitting as converting a paper loss into a real one, so we keep paying to avoid admitting what has already happened.
What to do about it
- Ask the transfer question: “If I were handed this today, with this history and this outlook, would I start it?”
- Ask a person with no stake. Their answer is usually immediate and usually right.
- Set the exit condition in writing before you start anything long.
Where people go wrong
Confusing it with commitment. Persistence is a virtue when the forward case is good; otherwise it is only expensive.
Read next
- Look for the Missing DataYour evidence is made almost entirely of things that survived long enough to be visible.proven
- Start From the Base RateAsk what usually happens to cases like this one before you consider what is special about this one.proven
- The Planning FallacyYour estimate of how long this will take is an estimate of the best case, and you know it is not the best case.proven
- The Pre-MortemBefore committing, assume it is eighteen months later and the project has failed. Write the story of why.solid