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That's a clear example of the sunk cost fallacy. What explains it? Why do people persist in investing more to make themselves suffer more? In the athlete and
by wombatmobile 5y ago
That's a clear example of the sunk cost fallacy. What explains it? Why do people persist in investing more to make themselves suffer more?
In the athlete and entrepreneur examples, the outcomes are not as clear or predictable as your one start restaurant example. Things might work out, or they might not. It's impossible to tell.
Almost every athlete, artist, entrepreneur and warrior has dark moments in which they feel doomed to failure. Some of them quit, and we never hear about them. Others keep going regardless. For a few of them that make it through to the other side, the reward is a success that could never have happened without blind faith.
The blind faith is like a flywheel that powers the venture through uncertainty. It's a powerful asset that not everybody has enough of. But it's also a double-edged sword that can result in the sunken costs fallacy.
In the case of many ventures, the only people who can tell the difference between a sunken cost fallacy and a heroic tale of persistence are the historians.
- mcny 5y agoYour comment makes me think of Theranos. Imagine if they could string us along long enough and meanwhile the researchers there figured out some breakthrough. Would we see the con artist as a visionary?
- inglor_cz 5y agoFamously, first three rockets made by SpaceX failed and the one that got into the orbit first was literally the last one they had available funds for. Musk would have been considered entirely rational if he pulled the plug after the third crash, thus saving himself some millions. Maybe a certain level of irrationality is necessary to push things beyond usual limits, even though that effort often fails.
- antasvara 5y agoThat example seems more like Musk put a very, very high value on entering orbit. It's not irrational to continue trying to put rockets into orbit if you value that accomplishment more than millions of dollars.
- Ma8ee 5y agoWhy? After three failed rockets they knew much more about building rockets, and they could with much more confidence assess their probability of success, so at that point it was more rational to spend money that it was before the three failures.
- BoiledCabbage 5y agoThis thread is confusing to me. I thought everyone knew about sunk-cost fallacy, but all I keep seeing is people referring to "sunk-cost fallacy" like it's the antonym for "persistence" or something. Sunk cost fallacy isn't saying: don't be persistent in chasing goals, or give up early. It's specifically saying the costs to get you to your current point are already lost and should not factor into whether you chose to continue forward or not. Only the potential future cost and your estimate of likelihood of future success should. Not "how much you're already invested".
- inglor_cz 5y agoIs that even a realistic frame of mind for human beings? I think previous experience will weigh on you, and losing money is a painful emotional experience.
- djmips 5y agoYes. And I think the world works that way sometimes.