Don’t let sunk costs affect your choices

There is a concept I learnt from Finance: Sunk Cost. Sunk Costs are investment of time, energy and money that can’t be recovered once they’ve been made. No matter what you will do, you will not recover the sunk costs.
Even if this seems easy to understand, we often make our future decisions victims of the sunk cost fallacy. We continue to invest more time, energy and money in something that is not worth it, just because we already spent so much and these sunk costs affect our choices.

Instead all that matters is how much more investment is required versus the reward you expect to obtain.

I give you an example:

Time ago I’ve I booked a flight to London. It was one month before the departure. Some days before I didn’t feel very well so I decided to do not go. I might have taken the flight , but I thought that If I had gone to London, the additional investment in time, energy and money would have been much higher that the expected reward in enjoying the city. The reaction of my friends was: “Are you mad? You have already spent the money for the flight!”…  They were under the sunk cost fallacy. I knew that in my situation I wouldn’t have had a good time in London and I didn’t let the sunk costs affect my choice.

Unfortunately our life is full of examples of the sunk cost fallacy, we should recognize it and don’t let the sunk costs affect our choices.


I just finished my personal MBA

I just finished reading the book “The personal MBA – master the art of business” of Josh Kaufman. I found it really interesting and well structured. You can use it as starting point for your curiosity and as a reference on the many concepts and principles around Business. Recommended reading for curious minds that understand that this a high-level overview.

“You wasted $150000 on an education you could have got for a buck fifty in late charges at the public library”
– Matt Damon as Will Hunting, Good Will Hunting.

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