5 ms·

>> The sunk cost of unused office space has been a major factor in companies’ decisions to change their RTO approach, says Kacher. I'm not sure that the author

>> The sunk cost of unused office space has been a major factor in companies’ decisions to change their RTO approach, says Kacher. I'm not sure that the author, or the company executives, know what a sunk cost is. Just to clarify, since there is a younger generation on HN now, 'sunk cost' is something you have spent money on that you can't get back. The 'sunk cost fallacy' is the mistaken belief that you have to use a resource you have already spent money on (sunk cost into).

suprjami 3y ago
The sunk cost fallacy is that you should continue spending money on something you've already spent money on. Make a bad expensive investment but give it up and move on? That's fine. Make a bad expensive investment then keep pouring money into it because you've already spent so much and can't throw away all this money now? That's the sunk cost fallacy.
- itronitron 3y ago
  Not just money. Any resource, time, or mental effort applied to use something because of it's initial expense when a better alternative exists.
  - rightbyte 3y ago
    Then there is the sunk cost fallacy fallacy. Where you throw away investments since making another investment would have been better in hindsight.
mschuster91 3y ago
> I'm not sure that the author, or the company executives, know what a sunk cost is. Just to clarify, since there is a younger generation on HN now, 'sunk cost' is something you have spent money on that you can't get back. Depending on how long your office lease runs - and many run 5-10 years - it effectively is sunk cost because, short of a bankruptcy, you can't get out of that super expensive office space that's now sitting 80%+ empty if you don't find some other sucker willing to sublet from you. Best case is you find someone with a sublease, but with a heavy discount so all you're getting from that is a bit lower running cost.
- MBCook 3y ago
  Assuming you’re even allowed to sublease.
zuminator 3y ago
I'm not quite seeing your point. Are you saying the article's usage is inconsistent with the meaning of sunk cost? In some cases companies have multi-year leases for office space that is drastically underutilized due to WFH. Does that not count as a sunk cost in your opinion? It's true rent is paid on an ongoing prorated basis but to quote from Investopedia, "Sunk costs also cover certain expenses that are committed but yet to [be] paid." [0] Like I said, maybe I'm just missing the point you're making? [0] https://www.investopedia.com/terms/s/sunkcost.asp https://www.investopedia.com/terms/s/sunkcost.asp (edit: upon posting I see others have already raised this question)
- itronitron 3y ago
  My point is that if the companies are locked into their office leases then that is a sunk cost, and companies requiring employees to return to the office in order to justify that expense is an example of decision making under a sunk-cost fallacy. I don't know why the author doesn't point that out in the article, hence my pedantic tone which some have noted.
  - zuminator 3y ago
    Because utilizing a sunk cost isn't a fallacy. Believing that you should utilize a sunk cost isn't a fallacy, either. As you said earlier, it becomes a fallacy when your belief is mistaken, that is, when you continue to utilize or invest in the sunk costs despite the cognizable fact that doing so is a net detriment. But how can the author make a reasoned determination of whether or not these business decisions are detrimental? She doesn't have available all the financials or other relevant information. And even if she did, how to best operate with those facts is a matter of business judgment. For example, a company might reason that maintaining a vacant business tower will look bad on their expense sheet and lower investor confidence. In that case better to fill it up with hybrid workers even if there's no operational benefit to doing so. If there's a sunk cost "fallacy" there, it's only by proxy perhaps; the business itself is making a reasoned decision based upon the shareholders' (fallacious) need for the sunk cost to be utilized. Point being that without knowing all the ins and outs, calling the business practice a fallacy would be at best premature.
deleted 3y ago
[deleted]
syndicatedjelly 3y ago
This is massively pedantic
Freedom2 3y ago
What does the younger generation remark have to do with anything? Do you think the younger generation not know what sunk cost is?
deleted 3y ago
[deleted]

suprjami 3y ago

The sunk cost fallacy is that you should continue spending money on something you've already spent money on. Make a bad expensive investment but give it up and move on? That's fine. Make a bad expensive investment then keep pouring money into it because you've already spent so much and can't throw away all this money now? That's the sunk cost fallacy.

itronitron 3y ago
Not just money. Any resource, time, or mental effort applied to use something because of it's initial expense when a better alternative exists.
- rightbyte 3y ago
  Then there is the sunk cost fallacy fallacy. Where you throw away investments since making another investment would have been better in hindsight.

mschuster91 3y ago

> I'm not sure that the author, or the company executives, know what a sunk cost is. Just to clarify, since there is a younger generation on HN now, 'sunk cost' is something you have spent money on that you can't get back. Depending on how long your office lease runs - and many run 5-10 years - it effectively is sunk cost because, short of a bankruptcy, you can't get out of that super expensive office space that's now sitting 80%+ empty if you don't find some other sucker willing to sublet from you. Best case is you find someone with a sublease, but with a heavy discount so all you're getting from that is a bit lower running cost.

MBCook 3y ago
Assuming you’re even allowed to sublease.

zuminator 3y ago

I'm not quite seeing your point. Are you saying the article's usage is inconsistent with the meaning of sunk cost? In some cases companies have multi-year leases for office space that is drastically underutilized due to WFH. Does that not count as a sunk cost in your opinion? It's true rent is paid on an ongoing prorated basis but to quote from Investopedia, "Sunk costs also cover certain expenses that are committed but yet to [be] paid." [0] Like I said, maybe I'm just missing the point you're making? [0] https://www.investopedia.com/terms/s/sunkcost.asp https://www.investopedia.com/terms/s/sunkcost.asp (edit: upon posting I see others have already raised this question)

itronitron 3y ago
My point is that if the companies are locked into their office leases then that is a sunk cost, and companies requiring employees to return to the office in order to justify that expense is an example of decision making under a sunk-cost fallacy. I don't know why the author doesn't point that out in the article, hence my pedantic tone which some have noted.
- zuminator 3y ago
  Because utilizing a sunk cost isn't a fallacy. Believing that you should utilize a sunk cost isn't a fallacy, either. As you said earlier, it becomes a fallacy when your belief is mistaken, that is, when you continue to utilize or invest in the sunk costs despite the cognizable fact that doing so is a net detriment. But how can the author make a reasoned determination of whether or not these business decisions are detrimental? She doesn't have available all the financials or other relevant information. And even if she did, how to best operate with those facts is a matter of business judgment. For example, a company might reason that maintaining a vacant business tower will look bad on their expense sheet and lower investor confidence. In that case better to fill it up with hybrid workers even if there's no operational benefit to doing so. If there's a sunk cost "fallacy" there, it's only by proxy perhaps; the business itself is making a reasoned decision based upon the shareholders' (fallacious) need for the sunk cost to be utilized. Point being that without knowing all the ins and outs, calling the business practice a fallacy would be at best premature.

deleted 3y ago

[deleted]

syndicatedjelly 3y ago

This is massively pedantic

Freedom2 3y ago

What does the younger generation remark have to do with anything? Do you think the younger generation not know what sunk cost is?

deleted 3y ago

[deleted]