Showing posts from April, 2021

The Insidious Nature of Sunk Opportunity Cost

For this article I wanted to take a look at two concepts and pair them together. The first is the idea of sunk cost. This is cost that has already been paid. Often times this concept helps show a fallacy of “well, I am already this far, might as well keep going”. When you don’t know the bottom of a cost, it doesn’t make sense to keep going with a cost that’s not paying off. This is like investing in a “money pit” where your money keeps disappearing. The second idea I want to add in is opportunity cost. This idea is basically that every action you take, can close off other actions. The classic analogy of this is that you can’t “have your cake and eat it too”. You can only do one thing and by doing that one thing, other ways are closed off to you. These other ways that are closed off are called an opportunity cost. I want to take a moment and combine these two concepts. A sunk opportunity cost is continuing with a method because you are familiar with it. Consider it like being “stuck in