2025-06-16 18:23 Tags:Mentol Models
https://fs.blog/tag/sunk-cost-effect/
The Art of Thinking Clearly
Guarding Against Survivorship Bias
People systematically overestimate their chances of success. Guard against it by frequently visiting the graves of once-promising projects, investments, and careers. It is a sad walk but one that should clear your mind.
Pattern Recognition
When it comes to pattern recognition, we are oversensitive. Regain your scepticism. If you think you have discovered a pattern, first consider it pure chance. If it seems too good to be true, find a mathematician and have the data tested statistically.
Fighting Against Confirmation Bias
[T]ry writing down your beliefs — whether in terms of worldview, investments, marriage, health care, diet, career strategies — and set out to find disconfirming evidence. Axing beliefs that feel like old friends is hard work but imperative.
Dating Advice and Contrast
If you are seeking a partner, never go out in the company of your supermodel friends. People will find you less attractive than you really are. Go alone or, better yet, take two ugly friends.
Think Different
Fend it off availability bias by spending time with people who think different than you do—people whose experiences and expertise are different from yours.
Guard Against Chauffeur Knowledge
Be on the lookout for chauffeur knowledge. Do not confuse the company spokesperson, the ringmaster, the newscaster, the schmoozer, the verbiage vendor, or the cliche generator with those who possess true knowledge. How do you recognize the difference? There is a clear indicator: True experts recognize the limits of what they know and what they do not know.
The Swimmer’s Body Illusion
Professional swimmers don’t have perfect bodies because they train extensively. Rather, they are good swimmers because of their physiques. How their bodies are designed is a factor for selection and not the result of their activities. … Whenever we confuse selection factors with results, we fall prey to what Taleb calls the swimmer’s body illusion. Without this illusion, half of advertising campaigns would not work. But this bias has to do with more than just the pursuit of chiseled cheekbones and chests. For example, Harvard has the reputation of being a top university. Many highly successful people have studied there. Does this mean that Harvard is a good school? We don’t know. Perhaps the school is terrible, and it simply recruits the brightest students around.
Peer Pressure
A simple experiment, carried out in the 1950s by legendary psychologist Solomon Asch, shows how peer pressure can warp common sense. A subject is shown a line drawn on paper, and next to it three lines—numbered 1, 2, and 3—one shorter, one longer, and one the same length as the original one. He or she must indicate which of the three lines corresponds to the original one. If the person is alone in the room, he gives correct answers because the task is really quite simple. Now five other people enter the room; they are all actors, which the subject does not know. One after another, they give wrong answers, saying “number 1,” although it’s very clear that number 3 is the correct answer. Then it is the subject’s turn again. In one-third of cases, he will answer incorrectly to match the other people’s responses
Rational Decision Making and The Sunk Cost Fallacy
The sunk cost fallacy is most dangerous when we have invested a lot of time, money, energy, or love in something. This investment becomes a reason to carry on, even if we are dealing with a lost cause. The more we invest, the greater the sunk costs are, and the greater the urge to continue becomes. … Rational decision making requires you to forget about the costs incurred to date. No matter how much you have already invested, only your assessment of the future costs and benefits counts.
Avoid Negative Black Swans
But even if you feel compelled to continue as such, avoid surroundings where negative Black Swans thrive. This means: Stay out of debt, invest your savings as conservatively as possible, and get used to a modest standard of living—no matter whether your big breakthrough comes or not
Disconfirming Evidence
The confirmation bias is alive and well in the business world. One example: An executive team decides on a new strategy. The team enthusiastically celebrates any sign that the strategy is a success. Everywhere the executives look, they see plenty of confirming evidence, while indications to the contrary remain unseen or are quickly dismissed as “exceptions” or “special cases.” They have become blind to disconfirming evidence.
Why are we likely to continue with an investment even if it would be rational to give it up?
Individual effects
Relationships
Believe it or not, the sunk cost fallacy can significantly impact our personal relationships. Imagine you’re with a long-term partner who no longer makes you happy, but you hesitate to end things because of the time and emotional energy you’ve already invested into the relationship. Rather than focusing on the potential for a healthier and more fulfilling future, you might find yourself clinging to the past, fearing that leaving your partner would mean all your previous efforts were wasted.
Investments
The sunk cost fallacy is particularly prevalent in the world of investments. Whether it’s in the stock market, real estate, or even a business venture, investors often fall into the trap of holding onto underperforming assets because they’ve already sunk so much money into them. For example, you might continue pouring money into a declining stock, hoping it will bounce back, rather than cutting your losses and reallocating your resources to a more promising opportunity.
Career Choices
Another area where the sunk cost fallacy can have a profound effect is in career choices. Many of us find ourselves stuck in a job or career path that no longer aligns with our goals or interests but hesitate to make a change because of the time, effort, or education we’ve already put into it.
How to avoid it
Setting Clear Goals
One effective way to avoid the sunk cost fallacy is by setting clear, well-defined goals from the outset.
Making Data-Driven Decisions
Another strategy to counter the sunk cost fallacy is to rely on data-driven decisions. When you base your choices on objective statistics rather than emotions or past investments, you’re more likely to make rational decisions that serve your best interests. By consistently reviewing relevant outcomes, you can more easily recognize when it’s time to pivot or abandon a failing course of action.
Using Decision Matrices
A decision matrix can be a powerful tool to help you avoid the sunk cost fallacy.14 By systematically evaluating various options within a structured framework, this approach allows you to weigh the potential future benefits against the past costs, helping you to move past any irrational attachment to sunk costs and focus on what will truly benefit you in the long run.
The sunk cost fallacy and AI
Reducing the impact of the sunk cost fallacy may be facilitated by the use of AI machine learning tools. Artificial intelligence tools can help us to determine when a project is worth giving up and when it is worth pursuing. Not influenced by emotion, AI can accurately predict what strategies will likely work and what should be abandoned.
Reflection:
- When it comes to sunk cost fallacy, there is a vivid example in my personal life:
- I quit med school, residency training, and a promising graduate degree. When I was in med school, I realized this is not my thing. I was not good at it. I tried to figure out why — is it because I kept telling myself I’m not good at it, and then it became true? What if I just tried to like it and worked hard? You know, being a doctor seems not bad at least.
- But actually, I couldn’t. I suffered a lot. After years, I finally decided I couldn’t continue anymore. I needed to get out of it. People were surprised by my decision — especially because quitting meant “wasting” my Gaokao score. I got good scores in Gaokao, so I didn’t need to pass any other exams or apply for anything; I could just go straight to a graduate program.
- Literally, almost no one supported my plan. Everyone thought it was a pity to give it up. But I applied for a foreign program. One year later, I’m writing these words, and I feel like I really made a great decision. I’m much happier, more content, and more peaceful than before. I’ve learned a lot during this one-year journey abroad. I am a brave person for choosing a new adventure.
- Be Brave(I can do it) and Be honest with myself.