You Sunk My Cost Fallacy

The sunk-cost fallacy is committed when one factors costs previously spent (and therefore "sunk") into present-day decisions. People have a tendency to hang on to projects in which they've invested a lot of resources, even beyond the point at which the project has proven futile, simply so that their past efforts won't have been wasted. The rational human must always consider the best choice from here on out; to select a worse choice because of past decisions is to commit the sunk-cost fallacy.

A famous example (so famous, in fact, that the fallacy has been renamed after it) is the Concorde supersonic jet. The story goes that although it was obvious to the British and French governments that the Concorde would never be a profitable form of transportation, they kept investing money and work in it because of all the money and work they had put in it so far. This until the first Concorde crash in 2000 finally ended the dream. This crash was not due to any flaw of the Concorde, so although it was fallacious to end the project because of the crash, at least two fallacies met and destroyed one another. Along with 113 people.

I have never read an example of the sunk-cost fallacy wherein the committer irrationally "jumps ship" because of previous efforts, yet I have avoided the fallacy twice in my life in just that manner (and never in the classic Concorde manner). That is, the committer of the sunk-cost fallacy is commonly seen as putting a Herculean effort towards a lost cause, simply because he doesn't want his previous Herculean effort to have been wasted. However, the committer may well do the opposite and quit a cause because he adds the effort he has already put towards the cause to the effort he now realizes he will have to further put in, and deems the sum too Herculean. If he had known the entire effort required to begin with, he would not have thought it worthwhile, but already having put forth half the effort, he should weigh the cause against the remaining half of the total effort.

Here is my example: in 2004 I bought a ten year old Mazda for $1000. There was a motivated seller; the car was pretty much a steal. But $2300 would have likely been too much to ask. The car was stolen in 2005 and driven so carelessly for more than 200 miles that it cost $1300 to fix. (Well, theft of tires, battery, &c. contributed to the cost, also.) But I was left with the decision of whether I wanted to pay $1300 for the same car I considered a steal at $1000 just a year ago. The fact that I would have spent $2300 total on the car, though brought up to me by friends, is neither here nor there. It includes the costs of outrageous fortune, which, if added to this particular car, must be added to any alternative car I would consider. No, the cost of that car, at that point, was $1300, and it was well worth it. I still drive it today, and it has needed only a ~$300 tuneup since.

My other example is having to pay $80 for breaking a lawnmower A. just bought for $60. Maybe the lawnmower isn't worth $140, but at the point of my decision of whether to pay the $80, the $60 was a sunk cost.

Back to the Concorde fallacy: by all accounts, and a good account is available here, the Concorde could very well have turned a profit. I think it's sad that the fate of the plane is so verbally tied to a logically fallacy, when it was likely other fallacies of human judgment that are ultimately responsible for its demise. Of course, what I think could fill a warehouse.

Excerpt From an Email

Concerning my recent travels:

[To A., with affection,] it all started this morning, when I dropped some serious flow on the cherriest of all shoes. By which I mean when my puddle-jumper from Inverness to Edinburgh was, like, 15 minutes late. As my layover in Edinburgh was only 30 minutes, this slight delay in Inverness made me miss my flight to London, and made me six hours late for arriving at M.'s place. The deal in Edinburgh wasn't too bad for a missed flight - my luggage went God-knows-where but stayed inside the airport and was recovered for me (a disappointment, actually, considering the bags were heavy and I of course now had plenty of walking to do, prefacing a later mix-up); the people at the counter were slow; I had to walk back and forth with my heavy-ass bags between the ServiceAir desk and the British Airways check-in because the latter was confused as to whether my new London-Madrid flight was operated by British Airways or Iberia (a word which still makes me shudder). What was certain was that my new flight would go through Heathrow and not Gatwick, as had been originally planned. It did not occur to me for a moment that this deal would have been important for M.'s plans of retrieving me in Madrid, but it was. My flight arranged, I called you but you couldn't hear me; I emailed M., whose phone number I didn't know, and told her my new flight number and arrival time (but not issuing airport). The plane was near to boarding when I checked my luggage ticket stub and it revealed a different incoming flight than that which I had told M. (Iberia, a word which makes me heave, dryly, and not British Airways). So I quickly logged back on and told her that dreaded incoming flight number - fortunately the internet stations were near the gate. Unfortunately, I could have emailed her my underwear size for all the good it did in getting me more easily to my destination. I flew to London Heathrow, a confusing place, where I checked my email to discover my flight-change warning letters unanswered. I then waited an extraordinary length of time behind about ten people checking in with Iberia (several unfortunate ones of whom were in the process of missing their flight to Barcelona; they were delayed only an hour and a half or so). But I made it on the plane. I got off and was quickly approved into Madrid Barajas (a name which renders me, as you well know, powerless to stop short-periodic onslaughts of exasperating diarrhea). I walked towards the baggage reclaim and heard my name, for the first time in an airport, over the loudspeaker. The Spaniards stress the second syllable of my middle name, as if to assure listeners that I am, in fact, not the Hooker. My luggage was not on the plane. I was not worried; they assured me it would arrive at the airport that night or in the morning, and that they would deliver it to the address at which I was staying. As I (importantly, for oncoming bits of this story) did not know M.'s address, I assured them she would call them and tell them it. The disappearance of my bags was a gigantic blessing. M. was not waiting for me where I thought she would be. I tried to use an internet machine that would not make contact with my credit card's bank. The phones were no more receptive to the same, so I withdrew 50 Euros, bought a Coke, and put change into the telephone, which phone was very difficult, for me, to follow. Even once I discovered the number for information I was quickly drained of my coins without any leads as to what M.'s phone number might be. The guy didn't speak English, but he asked if I spoke French, to which I replied, stutteringly, "Oui, un peu." But by which time I was so entrenched in my poor-Spanish mode that I found it impossible to switch into my poor-French mode, so I blathered "Necessito el numero de telefono de M. Ma. de Madrid," at which point a recorded message rattled off a string of numbers, too quickly for me to take down, and hung up on me, not giving any change. My eyes burned with anguish and anger. I bought a train ticket and headed towrds Pio XII. A nice guy on the train reminded me how they work in Madrid (color-codedly, a system for which I, as you know, am at a distinct disadvantage). He also offered me the use of his cell phone, but said he didn't have access to directory assistance. I thanked him profusely and made my transfer from the 4 train (lavender) to the 9 (navy). The similarity of these colors was enough such that it escaped me that the platform signs were color-coded with the correct train color and that the transfer signs were written with words, so it took me walking up and down some escalators for a good ten minutes before I decided which train I needed to be on (invariably, the one that was just leaving). Eight minutes later I was on the number 9. One stop down the track, I got off at Pio XII and relied on my memory to get me to M.'s apartment. This is where the lost luggage really worked out well for me - I walked around for over an hour looking for it. I remembered to cross the street and turn right (to the north), then left. I turned left after I was sure I had gone at least far enough, and explored the three or four blocks to the south of M.'s place like a moron. There were buildings that reminded me of the place sufficiently that I rang doorbells (no one answered, fortunately). A porter let me in and we combed the residents list for the names Ad. or Ma., to no avail. I saw a telephone book behind his desk and pointed to it, and asked for the "libro de telefono," to which the man explained that the name I was searching for was not on the residents list. I tried to convey my clear understanding of that, and that I wished to see the "libro de telefono" so that I might retrieve the number for someone who lives outside this apartment complex. He either didn't understand or refused to let me see it, so I thanked him as rudely as possible and left. (M. later explained to me that the term for "phone book" is "guilla (guia?) de telefono" but agreed that my intent should have been decipherable, if not to the porter, then to the convenience store clerk or to the hotel concierge, on both of whom I tried the same term.) Idealess, I got the idea that perhaps I hadn't gone far north enough; I blessedly encountered an unmistakable doorway with a note from M., including her phone number, telling me to stay put, as she had gone back to the airport. For the fourth time, it turns out - the details of which trips are opaque to me except that she was at least part of the time waiting in the wrong place, having expected me to arrive from Gatwick. But I'm here, and I have this great (to me, if no one else) story to append to my long list of Iberia-related mishaps (a word I use in order to avoid hyperbole, especially with respect to air travel).

I love you and I'll see you soon!