The Ontario Broker - Volume 20, Issue 1 - 41
ARE YOU DIVING AFTER
SUNK COSTS?
If you're questioning an investment,
examining your thought process
will help clarify how you should
proceed, one way or the other.
With HMV, it's easy to see where they went wrong.
But it's also a perfect illustration of why the sunk
cost fallacy is so dangerous. Not only does it lead
Have you invested a
lot of time or money?
to throwing good money after bad, it's often
at the expensive investment of time or money
into other, potentially better, areas. Doing the
mental calculation of whether to continue with a
flagging investment, we don't factor in the loss of
If you left now would you
lose all your investment?
alternative options not chosen-or in economist
speak, the opportunity cost.
When you decided to sit through the second half
of Glass, you were asking yourself, will this end
up being good or bad, but what you should have
asked yourself is, if I leave is there something
else I'd enjoy doing more? You could've gotten a
drink with a friend or stared at a mailbox or done
any number of other things that might have been
better.
There are a lot of other psychological factors at
play in these situations. Accepting a sunk cost as
a loss causes us psychic pain. We have to accept
"Leaving a bad
investment
prematurely
isn't a waste,
particularly
in business,
because it can
allow your
company to
survive when
it otherwise
might not have."
Is the only way to make your
investment worthwhile to invest
more resources?
Have you considered the
other potential opportunities
that you would miss out on
by proceeding?
that it might've been a waste. But it's worth
remembering that leaving a bad investment
prematurely isn't a waste, particularly in business,
because it can allow your company to survive
when it otherwise might not have. There's also
If you could go back would you
make the same investment?
real value in the lessons learned from mistakes
made-hopefully you didn't have to pay too much
for them.
If justifying a past investment plays a large role
in a decision, it's a worthwhile exercise to try to
look at it again with fresh eyes. And if you have to
accept a sunk cost as lost, your best bet might be
trying to recognize the value in the experience.
Volume 20 | Issue 1
IB AO.ORG
41
http://www.IBAO.ORG
The Ontario Broker - Volume 20, Issue 1
Table of Contents for the Digital Edition of The Ontario Broker - Volume 20, Issue 1
In This Issue
The Ontario Broker - Volume 20, Issue 1 - Cover1
The Ontario Broker - Volume 20, Issue 1 - Cover2
The Ontario Broker - Volume 20, Issue 1 - In This Issue
The Ontario Broker - Volume 20, Issue 1 - 4
The Ontario Broker - Volume 20, Issue 1 - 5
The Ontario Broker - Volume 20, Issue 1 - 6
The Ontario Broker - Volume 20, Issue 1 - 7
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The Ontario Broker - Volume 20, Issue 1 - 9
The Ontario Broker - Volume 20, Issue 1 - 10
The Ontario Broker - Volume 20, Issue 1 - 11
The Ontario Broker - Volume 20, Issue 1 - 12
The Ontario Broker - Volume 20, Issue 1 - 13
The Ontario Broker - Volume 20, Issue 1 - 14
The Ontario Broker - Volume 20, Issue 1 - 15
The Ontario Broker - Volume 20, Issue 1 - 16
The Ontario Broker - Volume 20, Issue 1 - 17
The Ontario Broker - Volume 20, Issue 1 - 18
The Ontario Broker - Volume 20, Issue 1 - 19
The Ontario Broker - Volume 20, Issue 1 - 20
The Ontario Broker - Volume 20, Issue 1 - 21
The Ontario Broker - Volume 20, Issue 1 - 22
The Ontario Broker - Volume 20, Issue 1 - 23
The Ontario Broker - Volume 20, Issue 1 - 24
The Ontario Broker - Volume 20, Issue 1 - 25
The Ontario Broker - Volume 20, Issue 1 - 26
The Ontario Broker - Volume 20, Issue 1 - 27
The Ontario Broker - Volume 20, Issue 1 - 28
The Ontario Broker - Volume 20, Issue 1 - 29
The Ontario Broker - Volume 20, Issue 1 - 30
The Ontario Broker - Volume 20, Issue 1 - 31
The Ontario Broker - Volume 20, Issue 1 - 32
The Ontario Broker - Volume 20, Issue 1 - 33
The Ontario Broker - Volume 20, Issue 1 - 34
The Ontario Broker - Volume 20, Issue 1 - 35
The Ontario Broker - Volume 20, Issue 1 - 36
The Ontario Broker - Volume 20, Issue 1 - 37
The Ontario Broker - Volume 20, Issue 1 - 38
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The Ontario Broker - Volume 20, Issue 1 - 40
The Ontario Broker - Volume 20, Issue 1 - 41
The Ontario Broker - Volume 20, Issue 1 - 42
The Ontario Broker - Volume 20, Issue 1 - 43
The Ontario Broker - Volume 20, Issue 1 - 44
The Ontario Broker - Volume 20, Issue 1 - 45
The Ontario Broker - Volume 20, Issue 1 - 46
The Ontario Broker - Volume 20, Issue 1 - 47
The Ontario Broker - Volume 20, Issue 1 - 48
The Ontario Broker - Volume 20, Issue 1 - 49
The Ontario Broker - Volume 20, Issue 1 - 50
The Ontario Broker - Volume 20, Issue 1 - 51
The Ontario Broker - Volume 20, Issue 1 - 52
The Ontario Broker - Volume 20, Issue 1 - 53
The Ontario Broker - Volume 20, Issue 1 - 54
The Ontario Broker - Volume 20, Issue 1 - 55
The Ontario Broker - Volume 20, Issue 1 - 56
The Ontario Broker - Volume 20, Issue 1 - 57
The Ontario Broker - Volume 20, Issue 1 - 58
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The Ontario Broker - Volume 20, Issue 1 - 60
The Ontario Broker - Volume 20, Issue 1 - 61
The Ontario Broker - Volume 20, Issue 1 - 62
The Ontario Broker - Volume 20, Issue 1 - Cover3
The Ontario Broker - Volume 20, Issue 1 - Cover4
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