Tag: sunk cost fallacy

• Risk perception

  Here is an interesting way of looking at risk (via Seth Godin):

  If you’re trying to reduce risk, do the hard part first. That way, if it fails, you’ll have minimized your time and effort. On the other hand, if you’re looking for buy-in and commitment so you can get through the hard part, do it last. People are terrible at ignoring sunk costs, and the early wins and identity shifts that come from the easy successes at the beginning will give you momentum as you go.

  He’s not wrong. We are generally bad at ignoring sunk costs, which is why they have to tell you in business school that you need to ignore sunk costs. It doesn’t come naturally.

  We are also victims of temporal myopia. Meaning, we tend to emphasize short-term items and discount things that are in the future. So if two things are equally risky, we’ll likely perceive the immediate one as more risky than the one that will occur in a few years.

  Some things to keep in mind as we go about managing risk.

  2023.11.28

• Choice over convenience

  “Change makes us uncomfortable. Sunk costs are hard to ignore. Possibility comes with agency, and agency comes with risk.” –Seth Godin

  This is a quote from a recent blog post by Seth Godin talking about choice vs. convenience. His overarching argument is that we tend to go with convenience over choice when making decisions, and that means forgoing many/most of the options that we actually have available to us. Life inertia is a thing, which is why we often require big and meaningful events to shake us out of the conveniences of complacency.

  I think that is one of the reasons why you’re hearing talk of a “great resignation.” This pandemic has shocked many people into thinking about whether or not they’re truly happy doing what they’re doing. And for many people, that has translated into going out and starting their own business. Fred Wilson recently argued that what we’re living through right now isn’t actually a great resignation, it’s a great formation.

  I have never been a huge fan of new year’s resolutions for the simple fact that I don’t think you should wait until the new year to do something you allegedly want to do today. If you want it, do it now. But there is no denying that this week is probably the slowest week of the year. And this slowness has a way of freeing up cognitive capacity. Perhaps it’s just enough breathing room to encourage more choice over convenience. Whatever the choice may be.

  2021.12.28