sunk-cost fallacy

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pages: 321 words: 92,828

Late Bloomers: The Power of Patience in a World Obsessed With Early Achievement by Rich Karlgaard

Airbnb, Albert Einstein, Amazon Web Services, Apple's 1984 Super Bowl advert, Bernie Madoff, Bob Noyce, Brownian motion, Captain Sullenberger Hudson, cloud computing, cognitive dissonance, Daniel Kahneman / Amos Tversky, deliberate practice, Electric Kool-Aid Acid Test, Elon Musk, en.wikipedia.org, experimental economics, fear of failure, financial independence, follow your passion, Frederick Winslow Taylor, hiring and firing, Internet of things, Isaac Newton, Jeff Bezos, job satisfaction, knowledge economy, labor-force participation, longitudinal study, low skilled workers, Mark Zuckerberg, meta-analysis, Moneyball by Michael Lewis explains big data, move fast and break things, move fast and break things, pattern recognition, Peter Thiel, Sand Hill Road, science of happiness, shareholder value, Silicon Valley, Silicon Valley startup, Snapchat, Steve Jobs, Steve Wozniak, sunk-cost fallacy, theory of mind, Tim Cook: Apple, Toyota Production System, unpaid internship, upwardly mobile, women in the workforce, working poor

(New York: Cambridge University Press, 2000). The sunk-cost fallacy is: Daniel Friedman et al., “Searching for the Sunk Cost Fallacy,” Experimental Economics 10, no. 1 (2007): 79–104. opportunity cost: John W. Payne, James R. Bettman, and Mary Frances Luce, “When Time Is Money: Decision Behavior Under Opportunity-Cost Time Pressure,” Organizational Behavior and Human Decision Processes 66, no. 2 (1996): 131–52; Robert Kurzban et al., “An Opportunity Cost Model of Subjective Effort and Task Performance,” Behavioral and Brain Sciences 36, no. 6 (2013): 661–79. That’s how beholden we are to the sunk-cost fallacy: Interesting to note—and good for late bloomers—older adults are possibly less subject to the sunk-cost fallacy than younger adults: “Older adults were less likely than younger adults to commit the sunk-cost fallacy.”

That’s how beholden we are to the sunk-cost fallacy: Interesting to note—and good for late bloomers—older adults are possibly less subject to the sunk-cost fallacy than younger adults: “Older adults were less likely than younger adults to commit the sunk-cost fallacy.” JoNell Strough et al., “Are Older Adults Less Subject to the Sunk-Cost Fallacy Than Younger Adults?,” Psychological Science 19, no. 7 (2008): 650–52. “Assume that you have spent”: Hal R. Arkes and Peter Ayton, “The Sunk Cost and Concorde Effects: Are Humans Less Rational Than Lower Animals?,” Psychological Bulletin 125, no. 5 (1999): 591. “cognitive dissonance”: Dan Ariely in Stephen J.

We all possess cognitive biases that hinder our ability to abandon a miserable job or fruitless activity. These biases can best be defined through two economic concepts: the sunk-cost fallacy and opportunity cost. The first, sunk cost, deals with the past. Sunk cost is the money, time, or effort we’ve already put into a project or direction in life. The more and the longer we invest in something, the more difficult it is to let it go. The sunk-cost fallacy is when we tell ourselves that we can’t quit because of all the time or money we’ve already spent. The second economic concept is opportunity cost. Unlike sunk cost, this concept deals with the future.


pages: 355 words: 81,788

Monolith to Microservices: Evolutionary Patterns to Transform Your Monolith by Sam Newman

Airbnb, business process, continuous integration, database schema, DevOps, fault tolerance, ghettoisation, inventory management, Jeff Bezos, Kubernetes, loose coupling, microservices, MVC pattern, price anchoring, pull request, single page application, software as a service, source of truth, sunk-cost fallacy, telepresence

If they aren’t, you may need to do something about it. Ignoring what your people are telling you in favor of relying entirely on quantitative metrics is a great way to get yourself into a lot of trouble. Avoiding the Sunk Cost Fallacy You need to be aware of sunk cost fallacy, and having a review process is part of keeping you honest and, hopefully, helping you avoid this phenomenon. Sunk cost fallacy occurs when people become so invested in a previous approach to doing something that even if evidence shows the approach isn’t working, they’ll still proceed anyway. Sometimes we justify it to ourselves: “It’ll change any minute!”

Other times we may have excreted so much political capital within our organization to make a change that we can’t backpedal now. Either way, it’s certainly arguable that sunk cost fallacy is all about emotional investment: we’re so bought into an old way of thinking that we just can’t give it up. In my experience, the bigger the bet, and bigger the accompanying fanfare, the harder it is to pull out when it’s going wrong. Sunk cost fallacy is also known as the Concorde fallacy, named for the failed project backed at great expense by the British and French governments to build a supersonic passenger plane.

component-driven UIs, And mobile applications consistency (ACID transactions), ACID Transactions Constantine's law, On Coupling and Cohesion consumer-driven contracts (CDCs), Use consumer-driven contracts content-based router, using to intercept messaging calls, Content-based routing continuous delivery (CD), Deployment coupling Continuous Delivery (Humble and Farley), Deployment coupling contracts, Breaking Changesconsumer-driven, Use consumer-driven contracts one microservice exposing two contracts, Give consumers time to migrate Conway's law, Modeled Around a Business Domain copying code from the monolith, Cut, Copy, or Reimplement? core competency, teams structured around, Shifting Structures correlation IDs (CIDs), Choreographed sagas, Tracing costsavoiding the sunk cost fallacy, Avoiding the Sunk Cost Fallacy cost-effective scaling for load, Scale Cost-Effectively for Load of change, Cost of Change-Easier Places to Experimenteasier places to experiment, Easier Places to Experiment reversible and irreversible decisions, Reversible and Irreversible Decisions couplingabout, Coupling and cohesion, balancing, On Coupling and Cohesion deployment, Deployment coupling domain, Domain coupling implementation, Implementation coupling temporal, Temporal coupling credentials, separate, for database access, The Database as a Public Contract credit derivative pricing, comparing using parallel run, Example: Comparing Credit Derivative Pricing culture (organizational)anchoring new approaches in the culture, Anchoring New Approaches in the Culture and adaptability to change or process improvements, Being Open to New Approaches customer-installed software, Customer-Installed and Managed Software D dark launching, parallel run pattern and, Dark Launching and Canary Releasing data consistency, As a Fallback Mechanismeventual consistency, Data Synchronization, Synchronizing the data in ACID transactions, ACID Transactions in move foreign key relationship to code pattern, Data Consistencycheck before deletion, Check before deletion deciding how to handle deletion, So how should we handle deletion?


Playing With FIRE (Financial Independence Retire Early): How Far Would You Go for Financial Freedom? by Scott Rieckens, Mr. Money Mustache

Airbnb, cryptocurrency, effective altruism, financial independence, index fund, job satisfaction, McMansion, passive income, remote working, sunk-cost fallacy, Vanguard fund

Page 56, I used the “Latte Factor Calculator” created by Financial Mentor: “Latte Factor Calculator,” Financial Mentor, accessed August 29, 2018, https://financialmentor.com/calculator/latte-factor-calculator. Chapter 5: BMWs and Boat Clubs Page 62, Economists call this the “sunk cost fallacy”: “Sunk Cost Fallacy,” behavioraleconomics.com, accessed August 29, 2018, https://www .behavioraleconomics.com/resources/mini-encyclopedia-of-be /sunk-cost-fallacy. Page 68, As Mr. Money Mustache points out in his article “Top 10 Cars”: “Top 10 Cars for Smart People,” Mr. Money Mustache, March 19, 2012, https://www.mrmoneymustache.com/2012/03/19/top -10-cars-for-smart-people.

But with FIRE, every expense had to be put on the chopping block. The frustrating part was that I’d already sunk $6,000 to pay for the initial membership, which was a one-time cost in addition to the monthly fee. If I walked away from my membership, that was wasted money. Economists call this the “sunk cost fallacy.” Definition: The Sunk Cost Fallacy Beyond helping me recognize sunk costs, the FIRE framework provided a powerful decision point for any outlier purchase: Do I want this boat club, BMW, gym accessory, or drone, or do I want to be financially independent in ten years? Is this item or service a priority for my life and my happiness, and if so, is it more important than becoming financially independent within our target date?

It was a beautiful BMWS AND BOAT CLUBS The “sunk cost fallacy” is a common misconception for people new to the FIRE journey. People want to spend less on gas, but they don’t want to sell their gas-guzzling truck because of how much it has depreciated. Or people want to move to a smaller and cheaper apartment, but they refuse to move because they just bought new furniture that wouldn’t fit in a smaller apartment. Maybe you have a $200 jacket hanging in your closet that doesn’t fit you anymore, and you can’t bear to get rid of it because of how much you spent on it. The sunk cost fallacy is what happens when you assign value to an item based on money that you’ve already spent but that is not reflected in the item’s actual market value or what it will be worth in the future.


pages: 654 words: 191,864

Thinking, Fast and Slow by Daniel Kahneman

Albert Einstein, Atul Gawande, availability heuristic, Bayesian statistics, Black Swan, Cass Sunstein, Checklist Manifesto, choice architecture, cognitive bias, complexity theory, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, delayed gratification, demand response, endowment effect, experimental economics, experimental subject, Exxon Valdez, feminist movement, framing effect, hedonic treadmill, hindsight bias, index card, information asymmetry, job satisfaction, John von Neumann, Kenneth Arrow, libertarian paternalism, loss aversion, medical residency, mental accounting, meta-analysis, nudge unit, pattern recognition, Paul Samuelson, pre–internet, price anchoring, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, Robert Metcalfe, Ronald Reagan, Shai Danziger, sunk-cost fallacy, Supply of New York City Cabdrivers, The Chicago School, The Wisdom of Crowds, Thomas Bayes, transaction costs, union organizing, Walter Mischel, Yom Kippur War

They do know that she does not carry the same mental accounts and is therefore better able to ignore the sunk costs of past investments in evaluating current opportunities. The sunk-cost fallacy keeps people for too long in poor jobs, unhappy marriages, and unpromising research projects. I have often observed young scientists struggling to salvage a doomed project when they would be better advised to drop it and start a new one. Fortunately, research suggests that at least in some contexts the fallacy can be overcome. The sunk-cost fallacy is identified and taught as a mistake in both economics and business courses, apparently to good effect: there is evidence that graduate students in these fields are more willing than others to walk away from a failing project.

But nobody pressed me and there was no discussion; we tacitly agreed to go on without an explicit forecast of how long the effort would last. This was easy to do because we had not made such a forecast to begin with. If we had had a reasonable baseline prediction when we started, we would not have gone into it, but we had already invested a great deal of effort—an instance of the sunk-cost fallacy, which we will look at more closely in the next part of the book. It would have been embarrassing for us—especially for me—to give up at that point, and there seemed to be no immediate reason to do so. It is easier to change directions in a crisis, but this was not a crisis, only some new facts about people we did not know.

What would be your baseline prediction? How many of these cases succeed in court? How many settle? What are the amounts? Is the case we are discussing stronger or weaker than similar claims?” “We are making an additional investment because we do not want to admit failure. This is an instance of the sunk-cost fallacy.” The Engine of Capitalism The planning fallacy is only one of the manifestations of a pervasive optimistic bias. sid to adtions of aMost of us view the world as more benign than it really is, our own attributes as more favorable than they truly are, and the goals we adopt as more achievable than they are likely to be.


pages: 240 words: 65,363

Think Like a Freak by Steven D. Levitt, Stephen J. Dubner

Albert Einstein, Anton Chekhov, autonomous vehicles, Barry Marshall: ulcers, call centre, Cass Sunstein, colonial rule, Edward Glaeser, Everything should be made as simple as possible, food miles, Gary Taubes, income inequality, Internet Archive, Isaac Newton, medical residency, Metcalfe’s law, microbiome, prediction markets, randomized controlled trial, Richard Thaler, Scramble for Africa, self-driving car, Silicon Valley, sunk-cost fallacy, Tony Hsieh, transatlantic slave trade, éminence grise

Keep the insults to yourself . . . Why you should tell stories . . . Is eating fat really so bad? . . . The Encyclopedia of Ethical Failure . . . What is the Bible “about”? . . . The Ten Commandments versus The Brady Bunch. 9. The Upside of Quitting Winston Churchill was right—and wrong . . . The sunk-cost fallacy and opportunity cost . . . You can’t solve tomorrow’s problem if you won’t abandon today’s dud . . . Celebrating failure with a party and cake . . . Why the flagship Chinese store did not open on time . . . Were the Challenger’s O-rings bound to fail? . . . Learn how you might fail without going to the trouble of failing . . .

The first is a lifetime of being told by Churchill wannabes that quitting is a sign of failure. The second is the notion of sunk costs. This is pretty much what it sounds like: the time or money or sweat equity you’ve already spent on a project. It is tempting to believe that once you’re invested heavily in something, it is counterproductive to quit. This is known as the sunk-cost fallacy or, as the biologist Richard Dawkins called it, the Concorde fallacy, after the supersonic airplane. Its two patrons, the British and French governments, suspected the Concorde was not economically viable but had spent too many billions to stop. In simpler times, this was known as throwing good money after bad—but money is hardly the only resource that people toss into the sunk-cost trap.

This suggests one way to make a premortem even more useful: offer anonymity. It seems safe to say that failure is not necessarily the enemy of success, as long as it’s given its due. But what about quitting outright? It’s all well and good for us to preach the upside of quitting, to point out opportunity cost and the sunk-cost fallacy. But is there any actual evidence that quitting leads to better outcomes? Carsten Wrosch, a psychology professor at Concordia University, helped run a series of small studies to see what happens when people give up “unattainable” goals. Granted, deciding whether a goal is unattainable is probably 90 percent of the battle.


pages: 244 words: 58,247

The Gone Fishin' Portfolio: Get Wise, Get Wealthy...and Get on With Your Life by Alexander Green

Albert Einstein, asset allocation, asset-backed security, backtesting, borderless world, buy and hold, buy low sell high, cognitive dissonance, diversification, diversified portfolio, Elliott wave, endowment effect, Everybody Ought to Be Rich, financial independence, fixed income, framing effect, hedonic treadmill, high net worth, hindsight bias, impulse control, index fund, interest rate swap, Johann Wolfgang von Goethe, Long Term Capital Management, means of production, mental accounting, money market fund, Paul Samuelson, Ponzi scheme, risk tolerance, risk-adjusted returns, short selling, statistical model, stocks for the long run, sunk-cost fallacy, transaction costs, Vanguard fund, yield curve

But, according to Shermer, mental accounting makes us reluctant to make the effort to save money when the relative amount we’re dealing with is small. Or take the sunk-cost fallacy. Objectively, a company with lousy business prospects is not worth holding, no matter what you paid for it. Yet many investors will hold on to a losing stock for years, even when it’s clearly unprofitable. Shermer correctly points out, “Rationally, we should just compute the odds of succeeding from this point forward.” Yet investors who have sunk a lot into a stock—including a fair amount of ego—have trouble doing this. Mental accounting and the sunk-cost fallacy are just the tip of the iceberg. Shermer shows that consumers and investors also fall prey to cognitive dissonance, hindsight bias, self-justification, inattentional blindness, confirmation bias, the introspection illusion, the availability fallacy, self-serving bias, the representative fallacy, the law of small numbers, attribution bias, the low aversion effect, framing effects, the anchoring fallacy, the endowment effect, and blind spot bias.

(money manager performance research) Social pressure, impact Social Security income source maintenance problems SPDR DJ Wilshire Total Market ETF Spending, tracking Standard & Poor’s(S&P) decline outperformance performance portfolio, comparison Stein, Ben Stock market fluctuation growth, hypothesis increase investing performance volatility Stocks investment returns, superiority volatility Stocks for the Long Run (Siegel) Style drift Sunk-cost fallacy Swenson, David (investment research) Take On the Street (Levitt) Taxes liabilities payment reduction Taxes in the Mutual Fund Industry (Lipper study) Tax-managed portfolio, impact Templeton, John advice Templeton Growth Fund Total nominal return indices Total returns, average Treasuries, taxable income Treasury bills, returns Treasury Inflation-Protected Securities (TIPS) tax inefficiency Trust fund Uncertainty, elimination U.S. large-cap stocks U.S. multinational firms, international exposure U.S. small-cap stocks U.S. stocks allocation short-term corporate bonds, relationship Value Line Fund, market lag Vanguard Emerging Markets ETF description holdings Vanguard Emerging Markets Stock Index Fund description expenses holdings investment policy management minimums risk attributes Vanguard European ETF description holdings Vanguard European Stock Index Fund description expenses holdings investment policy management minimums risk attributes Vanguard funds Vanguard Gold and Precious Metals Fund, closure reasons Vanguard Group costs, reduction expense ratio fees funds ownership mutual funds, usage no-load characteristic Vanguard High-Yield Corporate Fund description expenses holdings investment policy management minimums risk attributes Vanguard Inflation-Protected Securities Fund description expenses holdings investment policy management minimums Vanguard Inflation-Protected Securities Fund, investment Vanguard Intermediate-term Tax-Exempt Investor Shares, investment Vanguard Pacific ETF description holdings Vanguard Pacific Stock Index Fund description expenses holdings investment policy management minimums risk attributes Vanguard Precious Metals and Mining Fund description expenses holdings investment policy management minimums risk attributes Vanguard REIT ETF description holdings Vanguard REIT Index Fund description expenses holdings investment policy management minimums risk attributes Vanguard Short-Term Corporate Bond Fund, purchase (avoidance) Vanguard Short-Term Investment Grade Fund description expenses holdings investment policy management minimums risk attributes Vanguard Small-Cap ETF description holdings Vanguard Small-Cap Index Fund description expenses holdings investment policy management minimums risk attributes Vanguard Total Bond Market ETF description holdings Vanguard Total Stock Market ETF description holdings Vanguard Total Stock Market Index Fund description expenses growth holdings investment policy management minimums performance redeeming risk attributes Volatility, elimination Wealth, accumulation Wealth Without Risk (Givens) Wellington Management Company What Wall Street Doesn’t Want You to Know (Swedroe) Yale Endowment, investment system 1 “Vanguard” is a trademark of The Vanguard Group, Inc. © 2008 The Vanguard Group, Inc.


pages: 533 words: 125,495

Rationality: What It Is, Why It Seems Scarce, Why It Matters by Steven Pinker

affirmative action, Albert Einstein, autonomous vehicles, availability heuristic, Ayatollah Khomeini, backpropagation, basic income, butterfly effect, Cass Sunstein, choice architecture, clean water, coronavirus, correlation coefficient, correlation does not imply causation, Covid-19, COVID-19, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Attenborough, delayed gratification, disinformation, Donald Trump, effective altruism, en.wikipedia.org, Erdős number, Estimating the Reproducibility of Psychological Science, feminist movement, framing effect, George Akerlof, germ theory of disease, high batting average, index card, Jeff Bezos, job automation, John Nash: game theory, John von Neumann, libertarian paternalism, longitudinal study, loss aversion, Mahatma Gandhi, meta-analysis, microaggression, Monty Hall problem, Nash equilibrium, New Journalism, Paul Erdős, Paul Samuelson, Peter Singer: altruism, Pierre-Simon Laplace, placebo effect, QAnon, QWERTY keyboard, Ralph Waldo Emerson, randomized controlled trial, replication crisis, Richard Thaler, scientific worldview, selection bias, Stanford marshmallow experiment, Steve Bannon, Steven Pinker, sunk-cost fallacy, the scientific method, Thomas Bayes, Tragedy of the Commons, twin studies, universal basic income, Upton Sinclair, urban planning, Walter Mischel, yellow journalism, zero-sum game

It’s captured in the saying “Don’t throw good money after bad” and in the First Law of Holes: “When you’re in one, stop digging.” One of the most commonly cited human irrationalities is the sunk-cost fallacy, in which people continue to invest in a losing venture because of what they have invested so far rather than in anticipation of what they will gain going forward. Holding on to a tanking stock, sitting through a boring movie, finishing a tedious novel, and staying in a bad marriage are familiar examples. It’s possible that people fall prey to the sunk-cost fallacy as a spillover from playing Escalation (and Chicken), where a reputation for standing one’s ground, no matter how costly, could convince the other player to back down first.

They include long-running labor strikes, dueling lawsuits, and literal wars of attrition, in which each nation feeds men and matériel into the maw of the war machine hoping the other side will exhaust itself first.14 The common rationale is “We fight so that our boys will not have died in vain,” a textbook example of the sunk-cost fallacy but also a tactic in the pathetic quest for a Pyrrhic victory. Many of the bloodiest wars in history were wars of attrition, showing once again how the infuriating logic of game theory may explain some of the tragedies of the human condition.15 Though persisting with a certain probability may be the least bad option once one is trapped in an Escalation Game, the truly rational strategy is not to play in the first place.

See availability heuristic intransitivity, 176, 185–88 irrelevant alternatives, sensitivity to, 177–78, 188–92, 350n8 loss aversion, 192–94 mañana fallacy, 101 Meadow’s fallacy (multiplying probabilities of interdependent events), 129–30, 131 money pump, 176, 180, 185, 187–88 monocausal fallacy, 260, 272–73 motte-and-bailey tactic (moving the goalposts), 88 moving the goalposts (motte-and-bailey), 88 myopic temporal discounting, 52–56, 54 myside bias, 294–96, 297, 312–13, 316, 317, 357n73 mythology mindset, 301–9 no true Scotsman fallacy, 88 openness to evidence, lack of, 310–11, 356–57n67 outrage, communal, 123–27 overconfidence, 20, 29–30, 33, 115, 216, 255, 323 paradoxical tactics, 58–62 paradox of the heap, 101 post hoc probability, 141–48, 160, 321 preference reversal, 52–53, 55 probability neglect, 11, 28, 321 propensity confused with probability, 21–22, 118, 139–40, 198, 216 prosecutor’s fallacy, 140–41 questionable research practices, 145–46, 160 regression to the mean, unawareness of, 254–56, 320, 353n13 regret avoidance, 17, 190 representativeness heuristic, 27, 155–56 resistance to evidence. See openness to evidence, lack of selective exposure, 290–91 sexism, 19–20 slippery slope fallacy, 100–101 so-what-you’re-saying-is, 88 special pleading, 88 stereotyping, 99–100, 108–09. See also representativeness straw man, 88, 291 sunk cost fallacy, 237–38, 320, 323 System 1 thinking. See cognitive reflection, lack of taboos, 62, 124, 166. See also forbidden base rates; heretical counterfactuals; taboo tradeoffs taboo tradeoffs, 62–64, 184, 350n15 Texas sharpshooter fallacy, 142–46, 160, 321 Tragedy of the Rationality Commons, 298, 315–17 tu quoque (what-aboutery), 89 unreflective thinking, 8–10, 311 virtus dormitiva, 11–12, 53, 89 what-aboutery (tu quoque), 89 Winner’s Curse, 256 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A B C D E F G H I J K L M N O P Q R S T U V W X Y Z INDEX The page numbers in this index refer to the printed version of this book.


Logically Fallacious: The Ultimate Collection of Over 300 Logical Fallacies (Academic Edition) by Bo Bennett

Black Swan, butterfly effect, clean water, cognitive bias, correlation does not imply causation, Donald Trump, equal pay for equal work, Richard Feynman, side project, statistical model, sunk-cost fallacy, the scientific method

Contents Preface Introduction Reasoning Arguments Beliefs Fallacies On Reason and Rationality Collecting Fallacies Being a Smart-Ass Format and Style of this Book The Fallacies Accident Fallacy Ad Fidentia Ad Hoc Rescue Ad Hominem (Abusive) Ad Hominem (Circumstantial) Ad Hominem (Guilt by Association) Ad Hominem (Tu quoque) Affirmative Conclusion from a Negative Premise Affirming a Disjunct Affirming the Consequent Alleged Certainty Alternative Advance Appeal to Accomplishment Appeal to Anger Appeal to Authority Appeal to Celebrity Appeal to Common Belief Appeal to Common Folk Appeal to Coincidence Appeal to Consequences Appeal to Definition* Appeal to Desperation Appeal to Emotion Appeal to Extremes Appeal to Faith Appeal to Fear Appeal to Flattery Appeal to Force Appeal to Heaven Appeal to the Moon Appeal to Nature Appeal to Novelty Appeal to Pity Appeal to Popularity Appeal to Possibility Appeal to Ridicule Appeal to Tradition Ambiguity Fallacy Anonymous Authority Argument by Emotive Language Argument by Fast Talking Argument by Gibberish Argument by Personal Charm Argument by Repetition Argument from Age Argument from Fallacy Argument from Hearsay Argument from Ignorance Argument from Silence Argument of the Beard Argument to Moderation Avoiding the Issue Argument to the Purse Base Rate Fallacy Begging the Question Biased Sample Fallacy Blind Authority Fallacy Broken Window Fallacy Causal Reductionism Cherry Picking Circular Reasoning Commutation of Conditionals Complex Question Fallacy Conflicting Conditions Confusing an Explanation with an Excuse Conjunction Fallacy Conspiracy Theory Definist Fallacy Denying the Antecedent Denying a Conjunct Denying the Correlative Disjunction Fallacy Distinction Without a Difference Equivocation Etymological Fallacy Exclusive Premises Existential Fallacy Extended Analogy Failure to Elucidate Fallacy of Composition Fallacy of Division Fallacy of Four Terms Fallacy of Necessity Fallacy of (the) Undistributed Middle Fake Precision False Attribution False Conversion False Dilemma False Effect Far-Fetched Hypothesis Faulty Comparison Gambler’s Fallacy Genetic Fallacy God Wildcard Fallacy* Hasty Generalization Having Your Cake Hedging Historian’s Fallacy Homunculus Fallacy Hypnotic Bait and Switch Hypothesis Contrary to Fact If-By-Whiskey Illicit Contraposition Illicit Major Illicit Minor Illicit Substitution of Identicals Inconsistency Inflation of Conflict Jumping to Conclusions Just Because Fallacy* Just In Case Fallacy Least Plausible Hypothesis Limited Depth Limited Scope Logic Chopping Ludic Fallacy Lying with Statistics Magical Thinking Meaningless Question Misleading Vividness Missing Data Fallacy* Modal (Scope) Fallacy Moralistic Fallacy Moving the Goal Posts Multiple Comparisons Fallacy Naturalistic Fallacy Negative Conclusion from Affirmative Premises Negating Antecedent and Consequent Nirvana Fallacy No True Scotsman Non Sequitur Notable Effort Overwhelming Exception Package-Deal Fallacy Poisoning the Well Political Correctness Fallacy Post-Designation Prejudicial Language Proof by Intimidation Proving Non-Existence Quantifier-Shift Fallacy Quantum Physics Fallacy* Questionable Cause Rationalization Red Herring Reductio ad Absurdum Reductio ad Hitlerum Regression Fallacy Reification Relative Privation Retrogressive Causation Retrospective Determinism Scapegoating Selective Attention Self-Sealing Argument Shoehorning Slippery Slope Special Pleading Spiritual Fallacy* Spotlight Fallacy Statement of Conversion Stereotyping Stolen Concept Fallacy Strawman Fallacy Style Over Substance Subjectivist Fallacy Subverted Support Sunk-Cost Fallacy Suppressed Correlative Texas Sharpshooter Fallacy Tokenism Two Wrongs Make a Right Unfalsifiability Unwarranted Contrast Use-Mention Error Weak Analogy Willed Ignorance Wishful Thinking B-List Fallacies Abductive Fallacy Accent Fallacy (fallacy of prosody) Amazing Familiarity Ambiguity Effect Ambiguous Assertion Appeal to Closure (more specific form of argument from ignorance) Appeal to Coincidence Appeal to Complexity Appeal to Convenience Appeal to Luck (good or back luck) Appeal to Envy (Argumentum ad invidiam) Appeal to Equality Appeal to Intuition Appeal to Privacy Appeal to Stupidity Appeal to Utility Argument by Dismissal Argument by Laziness Argument by Pigheadedness Argument by Rhetorical Question Argument by Selective Reading Argument by Uniformed Opinion Argument from Design Argument from Inertia Argument from Omniscience Argument To The Future Argumentum ad Captandum Argumentum ad Exemplum (Argument to the Example) Barking Cat Big Lie Technique Blood is Thicker than Water (Favoritism) Bribery (Material Persuasion, Material Incentive, Financial Incentive) Burden of Proof Fallacy (onus probandi, shifting the) Chronological Snobbery Confesses Under Torture Contextomy Damning with Faint Praise Double Bind Double Standard Emphasis Fallacy Essentializing Fallacy Exaggeration Exception That Proves The Rule Failure to State Fallacy of Multiplication Fallacy of Opposition Fallacy of Quoting Out of Context Fallacy of the Crucial Experiment Fantasy Projection Faulty Sign Finish the Job Fallacy Galileo Wannabe Golden Hammer Fallacy Hifalutin' Denunciations I Wish I Had a Magic Wand In a Certain Respect and Simply Intentional Fallacy Invincible Ignorance Fallacy Knights and Knaves Lack of Proportion Latino Fallacy* Lies (Misrepresentation) Lip Service Lump of Labor Fallacy (Lump of Jobs Fallacy) Mind Projection Fallacy Monopolizing the Question Norm of Reciprocity Not Invented Here Outdated Information Packing the House Paralogism Paralysis of Analysis (Procrastination) Pigeonholing Pious Fraud Pragmatic Fallacy Preacher’s We Probabilistic Fallacy Psychologist's Fallacy Redefinition Reductionism Sanctioning the Devil Scope Fallacy Self-Deception Self-Fulfilling Prophecy Self-Righteousness Sherlock Holmes Fallacy Sly Suggestions Snow Job Sour Grapes Spin Doctoring Taboo Tautology There Is No Alternative Too Broad Too Narrow Undoability Weasel Wording Word Magic Top 25 Most Common Fallacies Bo's Original Fallacies About the Author Preface Several years back, while entering some kind of early-stage, intellectual, mid-life crisis, I became passionate about science, philosophy, and religion, which eventually led to my starting a debate website called DebateGod (http://www.debategod.org), as a way to help me understand how other people think, and come to the conclusions they do.

Exception: If the argument is preceded with a declaration that the phenomenon does occur, then what would be the subverted support is simply a reason given. The firmament, a tent-like structure that kept the “waters above” from flooding the earth as described in the Bible, once covered the earth. It is no longer there today because it was destroyed during Noah’s flood. Sunk-Cost Fallacy (also known as: concorde fallacy) Description: Reasoning that further investment is warranted on the fact that the resources already invested will be lost otherwise, not taking into consideration the overall losses involved in the further investment. Logical Form: X has already been invested in project Y.

Table of Contents eBook Cover Title Page Contents Preface Introduction Reasoning Arguments Beliefs Fallacies On Reason and Rationality Collecting Fallacies Being a Smart-Ass Format and Style of this Book Accident Fallacy Ad Fidentia Ad Hoc Rescue Ad Hominem (Abusive) Ad Hominem (Circumstantial) Ad Hominem (Guilt by Association) Ad Hominem (Tu quoque) Affirmative Conclusion from a Negative Premise Affirming a Disjunct Affirming the Consequent Alleged Certainty Alternative Advance Appeal to Accomplishment Appeal to Anger Appeal to Authority Appeal to Celebrity Appeal to Common Belief Appeal to Common Folk Appeal to Coincidence Appeal to Consequences Appeal to Definition* Appeal to Desperation Appeal to Emotion Appeal to Extremes Appeal to Faith Appeal to Fear Appeal to Flattery Appeal to Force Appeal to Heaven Appeal to the Moon Appeal to Nature Appeal to Novelty Appeal to Pity Appeal to Popularity Appeal to Possibility Appeal to Ridicule Appeal to Tradition Ambiguity Fallacy Anonymous Authority Argument by Emotive Language Argument by Fast Talking Argument by Gibberish Argument by Personal Charm Argument by Repetition Argument from Age Argument from Fallacy Argument from Hearsay Argument from Ignorance Argument from Silence Argument of the Beard Argument to Moderation Avoiding the Issue Argument to the Purse Base Rate Fallacy Begging the Question Biased Sample Fallacy Blind Authority Fallacy Broken Window Fallacy Causal Reductionism Cherry Picking Circular Reasoning Commutation of Conditionals Complex Question Fallacy Conflicting Conditions Confusing an Explanation with an Excuse Conjunction Fallacy Conspiracy Theory Definist Fallacy Denying the Antecedent Denying a Conjunct Denying the Correlative Disjunction Fallacy Distinction Without a Difference Equivocation Etymological Fallacy Exclusive Premises Existential Fallacy Extended Analogy Failure to Elucidate Fake Precision Fallacy of Composition Fallacy of Division Fallacy of Four Terms Fallacy of Necessity Fallacy of (the) Undistributed Middle False Attribution False Conversion False Dilemma False Effect Far-Fetched Hypothesis Faulty Comparison Gambler’s Fallacy Genetic Fallacy God Wildcard Fallacy* Hasty Generalization Having Your Cake Hedging Historian’s Fallacy Homunculus Fallacy Hypnotic Bait and Switch Hypothesis Contrary to Fact If-By-Whiskey Illicit Contraposition Illicit Major Illicit Minor Illicit Substitution of Identicals Inconsistency Inflation of Conflict Jumping to Conclusions Just Because Fallacy* Just In Case Fallacy Least Plausible Hypothesis Limited Depth Limited Scope Logic Chopping Ludic Fallacy Lying with Statistics Magical Thinking Meaningless Question Misleading Vividness Missing Data Fallacy* Modal (Scope) Fallacy Moralistic Fallacy Moving the Goal Posts Multiple Comparisons Fallacy Naturalistic Fallacy Negative Conclusion from Affirmative Premises Negating Antecedent and Consequent Nirvana Fallacy No True Scotsman Non Sequitur Notable Effort Overwhelming Exception Package-Deal Fallacy Poisoning the Well Political Correctness Fallacy Post-Designation Prejudicial Language Proof by Intimidation Proving Non-Existence Quantifier-Shift Fallacy Quantum Physics Fallacy* Questionable Cause Rationalization Red Herring Reductio ad Absurdum Reductio ad Hitlerum Regression Fallacy Reification Relative Privation Retrogressive Causation Retrospective Determinism Scapegoating Selective Attention Self-Sealing Argument Shoehorning Slippery Slope Special Pleading Spiritual Fallacy* Spotlight Fallacy Statement of Conversion Stereotyping Stolen Concept Fallacy Strawman Fallacy Style Over Substance Subjectivist Fallacy Subverted Support Sunk-Cost Fallacy Suppressed Correlative Texas Sharpshooter Fallacy Tokenism Two Wrongs Make a Right Unfalsifiability Unwarranted Contrast Use-Mention Error Weak Analogy Willed Ignorance Wishful Thinking B-List Fallacies Top 25 Most Common Fallacies Bo's Original Fallacies About the Author Footnotes


pages: 417 words: 103,458

The Intelligence Trap: Revolutionise Your Thinking and Make Wiser Decisions by David Robson

active measures, Affordable Care Act / Obamacare, Albert Einstein, Alfred Russel Wallace, Atul Gawande, availability heuristic, cognitive bias, corporate governance, correlation coefficient, cuban missile crisis, Daniel Kahneman / Amos Tversky, dark matter, deliberate practice, dematerialisation, Donald Trump, Flynn Effect, framing effect, fundamental attribution error, illegal immigration, Isaac Newton, job satisfaction, knowledge economy, lone genius, meta-analysis, Nelson Mandela, obamacare, pattern recognition, price anchoring, Richard Feynman, risk tolerance, Silicon Valley, social intelligence, Steve Jobs, sunk-cost fallacy, the scientific method, theory of mind, traveling salesman, ultimatum game, Y2K, Yom Kippur War

The statements mean exactly the same thing, but people are more likely to endorse the statement when it is presented in the gain framing; they passively accept the facts as they are given to them without thinking what they really mean. Advertisers have long known this: it’s the reason that we are told that foods are 95 per cent fat free (rather than being told they are ‘5 per cent fat’). Other notable biases include the sunk cost fallacy (our reluctance to give up on a failing investment even if we will lose more trying to sustain it), and the gambler’s fallacy – the belief that if the roulette wheel has landed on black, it’s more likely the next time to land on red. The probability, of course, stays exactly the same. An extreme case of the gambler’s fallacy is said to have been observed in Monte Carlo in 1913, when the roulette wheel fell twenty-six times on black – and the visitors lost millions as the bets on red escalated.

Some initial answers come from the work of Wändi Bruine de Bruin at Leeds University. Inspired by Stanovich’s research, her team first designed their own scale of ‘adult decision-making competence’, consisting of seven tasks measuring biases like framing, measures of risk perception, and the tendency to fall for the sunk cost fallacy (whether you are likely to continue with a bad investment or not). The team also examined over-confidence by asking the subjects some general knowledge questions, and then asking them to gauge how sure they were that each answer was correct. Unlike many psychological studies, which tend to use university students as guinea pigs, Bruine de Bruin’s experiment examined a diverse sample of people, aged eighteen to eighty-eight, with a range of educational backgrounds – allowing her to be sure that any results reflected the population as a whole.

‘I must seem like an ostrich who forever buries its head in the relativistic sand in order not to face the evil quanta’, he once wrote to his friend, the quantum physicist Louis de Broglie. But he continued on his fool’s errand, and even on his deathbed, he scribbled pages of equations to support his erroneous theories, as the last embers of his genius faded. All of which sounds a lot like the sunk cost fallacy exacerbated by motivated reasoning. The same stubborn approach can be found in many of his other ideas. Having supported communism, he continually turned a blind eye to the failings of the USSR, for instance.51 Einstein, at least, had not left his domain of expertise. But this single-minded determination to prove oneself right may be particularly damaging when scientists stray outside their usual territory, a fact that was noted by the psychologist Hans Eysenck.


pages: 254 words: 79,052

Evil by Design: Interaction Design to Lead Us Into Temptation by Chris Nodder

4chan, affirmative action, Amazon Mechanical Turk, cognitive dissonance, crowdsourcing, Daniel Kahneman / Amos Tversky, Donald Trump, en.wikipedia.org, endowment effect, game design, haute couture, Ian Bogost, jimmy wales, Jony Ive, Kickstarter, late fees, loss aversion, Mark Zuckerberg, meta-analysis, Milgram experiment, Monty Hall problem, Netflix Prize, Nick Leeson, Occupy movement, pets.com, price anchoring, recommendation engine, Rory Sutherland, Silicon Valley, Stanford prison experiment, stealth mode startup, Steve Jobs, sunk-cost fallacy, telemarketer, Tim Cook: Apple, trickle-down economics, upwardly mobile

The cost has now outweighed any future benefit, but irrational escalation of commitment keeps you going because you feel you can still win and recoup some of your losses. You basically continue to bid because of how much you’ve already bid. This is the sunk cost fallacy. Augenblick collected data from six different penny auction sites and showed that auctions are less likely to end, and bidders are less likely to leave an auction as they make more bids. Both behaviors are indicative of sunk cost fallacy behavior, and both drive up the cost of the auctioned item. In the case of these penny auctions, irrational escalation of commitment is thankfully short-lived for most bidders.

Because each bid costs you money regardless of whether you eventually win the product, total expenditure on the site can easily be more than the retail value of the products you end up “winning.” A couple of interlinked psychological and economic principles are at work here: irrational escalation of commitment and the sunk cost fallacy (a form of loss aversion). You place a couple of bids on an auction in its later stages, and now you are in the game. Soon you realize that your 50-cent bids are raising the price by only 1 cent each time. You’ve spent quite a bit of money and bidding is still quite active, extending the time of the auction.


pages: 249 words: 77,342

The Behavioral Investor by Daniel Crosby

affirmative action, Asian financial crisis, asset allocation, availability heuristic, backtesting, bank run, Black Swan, buy and hold, cognitive dissonance, colonial rule, compound rate of return, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, disinformation, diversification, diversified portfolio, Donald Trump, endowment effect, feminist movement, Flash crash, haute cuisine, hedonic treadmill, housing crisis, IKEA effect, impact investing, impulse control, index fund, Isaac Newton, job automation, longitudinal study, loss aversion, market bubble, market fundamentalism, mental accounting, meta-analysis, Milgram experiment, moral panic, Murray Gell-Mann, Nate Silver, neurotypical, passive investing, pattern recognition, Ponzi scheme, prediction markets, random walk, Richard Feynman, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, science of happiness, Shai Danziger, short selling, South Sea Bubble, Stanford prison experiment, Stephen Hawking, Steve Jobs, stocks for the long run, sunk-cost fallacy, Thales of Miletus, The Signal and the Noise by Nate Silver, Tragedy of the Commons, tulip mania, Vanguard fund, When a measure becomes a target

Our tendency to overvalue physical objects under our care makes sense when considered in a certain light, but it also extends to the ways that we evaluate decisions on which we have spent time and money. In a cruel twist, the more time and attention we give a decision, the more warped our sense of what is right may become. This sunk cost fallacy, as it is known, means that the larger the past resource invested in a decision, the greater the inclination to continue the commitment in subsequent decisions. The member of a gym he has never once visited may not cancel his monthly membership fee because to do so would mean that the whole thing had been a waste.

The billion dollars spent on the Manhattan Project is viewed as contributing to Truman’s decision to use atomic weapons against Japan in World War II. Had the bombs not been used to end the war, the resources devoted to the project would likely have been viewed as wasted. While certainly not as consequential as the examples mentioned above, investment managers commonly fall prey to the sunk cost fallacy when making buy and sell decisions. Consider the seemingly reasonable impulse to want your investment manager to do in-person site visits with potential investment targets. For starters, you begin with a sort of optimism bias about the whole affair because no investor ever vetted a deal he didn’t believe to be worthwhile.

I can’t, I can’t, I can’t stand losing There are many paths to conservatism – avoidance of regret, privileging of what we own, the consideration of sunk costs – but all have an aversion to loss at their core. Regret aversion is fundamentally about avoiding the loss of perceived competence. The endowment effect is an evolutionary land grab designed to keep us from being taken advantage of. And the sunk cost fallacy is rooted in a fear of wasting time and resources. All paths to conservatism, it would seem, run through some form of loss aversion. It is perhaps the most widely disseminated finding of behavioral finance that our risk and reward preferences are asymmetrical and that we care far more about avoiding loss than we do about achieving gain.


pages: 244 words: 73,700

Cultish: The Language of Fanaticism by Amanda Montell

"side hustle", barriers to entry, cognitive dissonance, coronavirus, Covid-19, COVID-19, Donald Trump, en.wikipedia.org, epigenetics, financial independence, hive mind, Jeff Bezos, Jeffrey Epstein, Kickstarter, late capitalism, loss aversion, Lyft, passive income, Ponzi scheme, prosperity theology / prosperity gospel / gospel of success, QAnon, Ronald Reagan, Sapir-Whorf hypothesis, Search for Extraterrestrial Intelligence, Silicon Valley, Skype, Stanford prison experiment, Steve Jobs, sunk-cost fallacy, the scientific method, uber lyft, women in the workforce, Y2K

Irrationally, we tend to stay in negative situations, from crappy relationships to lousy investments to cults, telling ourselves that a win is just around the corner, so we don’t have to admit to ourselves that things just didn’t work out and we should cut our losses. It’s an emotional example of the sunk cost fallacy, or people’s tendency to think that resources already spent justify spending even more. We’ve been in it this long, we might as well keep going. As with confirmation bias, not even the smartest, most judicious people are immune to loss aversion. It’s deeply embedded. I’ve been in my fair share of toxic one-on-one relationships, and noticing the similarities between abusive partners and cultish leaders has been, to say the least, humbling.

As I continued to traverse Scientology’s Bridge to Total Freedom (the path to going clear), I’d come to learn about supernatural concepts like Xenu the galactic overlord and invisible “body thetans” (spirits of ancient aliens that cling to humans and cause destruction). It would have been lunacy. But I’d have to keep going. The sunk cost fallacy and loss aversion would tell me I can’t quit. Not this far in. Plus, my superiors would insist, if I leave right now in the middle of an upper level of auditing, I could pull in misfortune. I could pull in disease, even death. One ex-Scientologist named Margery Wakefield, a longtime officer in the OSA (Office of Special Affairs, Scientology’s “intelligence agency”), wrote about how she was off-loaded (kicked out) in the early ’80s for her perceived decline in mental state.

Confirmation bias allowed fans to interpret Choudhury’s blatant lies (he gloated about winning yoga competitions that never even took place) and statements of grandeur (“I don’t even sleep thirty hours a month,” “I’m the smartest man in the world you ever met,” “I’m the only friend you’ve had in your life”) as “childlike” rather than disturbed. The sunk cost fallacy told them he’d make their careers if they just attended one more training. During his hot yoga workshops, Choudhury’s pupils were known to pass out, suffer dehydration, and develop upper respiratory infections. Because they were conditioned to trust their beloved guru as all-knowing, they learned to disregard their own pain and gut instincts.


Super Thinking: The Big Book of Mental Models by Gabriel Weinberg, Lauren McCann

affirmative action, Affordable Care Act / Obamacare, Airbnb, Albert Einstein, anti-pattern, Anton Chekhov, autonomous vehicles, bank run, barriers to entry, Bayesian statistics, Bernie Madoff, Bernie Sanders, Black Swan, Broken windows theory, business process, butterfly effect, Cal Newport, Clayton Christensen, cognitive dissonance, commoditize, correlation does not imply causation, crowdsourcing, Daniel Kahneman / Amos Tversky, David Attenborough, delayed gratification, deliberate practice, discounted cash flows, disruptive innovation, Donald Trump, Douglas Hofstadter, Edward Lorenz: Chaos theory, Edward Snowden, effective altruism, Elon Musk, en.wikipedia.org, experimental subject, fear of failure, feminist movement, Filter Bubble, framing effect, friendly fire, fundamental attribution error, Gödel, Escher, Bach, hindsight bias, housing crisis, Ignaz Semmelweis: hand washing, illegal immigration, income inequality, information asymmetry, Isaac Newton, Jeff Bezos, John Nash: game theory, lateral thinking, loss aversion, Louis Pasteur, Lyft, mail merge, Mark Zuckerberg, meta-analysis, Metcalfe’s law, Milgram experiment, minimum viable product, moral hazard, mutually assured destruction, Nash equilibrium, Network effects, nuclear winter, offshore financial centre, p-value, Parkinson's law, Paul Graham, peak oil, Peter Thiel, phenotype, Pierre-Simon Laplace, placebo effect, Potemkin village, prediction markets, premature optimization, price anchoring, principal–agent problem, publication bias, recommendation engine, remote working, replication crisis, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, ride hailing / ride sharing, Robert Metcalfe, Ronald Coase, Ronald Reagan, school choice, Schrödinger's Cat, selection bias, Shai Danziger, side project, Silicon Valley, Silicon Valley startup, speech recognition, statistical model, Steve Jobs, Steve Wozniak, Steven Pinker, sunk-cost fallacy, survivorship bias, The future is already here, The Present Situation in Quantum Mechanics, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Tragedy of the Commons, transaction costs, uber lyft, ultimatum game, uranium enrichment, urban planning, Vilfredo Pareto, When a measure becomes a target, wikimedia commons

Similarly, by walking away after a sure but small gain, you may be missing out on a potentially better opportunity. When it comes to losses in particular, you need to acknowledge that they’ve already happened: you’ve already spent the resources on the project to date. When you allow these irrecoverable costs to cloud your decision making, you are falling victim to the sunk-cost fallacy. The costs of the project so far, including your time spent, have already been sunk. You can’t get them back. This can be a problem (fallacy) when these previous losses influence you to make a bad decision. An instance where sunk costs lead to an escalation of commitment is sometimes called the Concorde fallacy, named after the supersonic jet whose development program was plagued with prohibitive cost overruns and never came close to making a profit.

An instance where sunk costs lead to an escalation of commitment is sometimes called the Concorde fallacy, named after the supersonic jet whose development program was plagued with prohibitive cost overruns and never came close to making a profit. Ask yourself: Is my project like the Concorde? Am I throwing good money after bad when it is better to just walk away? Everyday sunk cost fallacy examples can run from less consequential decisions, such as finishing a movie or book that you don’t like, to larger ones, such as investing more money into a failing business or staying in a career or relationship that is turning sour. You need to avoid thinking, We’ve come too far to stop now.

Use the Pareto principle to find the 80/20 in any activity and increase your leverage at every turn. Recognize when you’ve hit diminishing returns and avoid negative returns. Use commitment and the default effect to avoid present bias, and periodic evaluations to avoid loss aversion and the sunk-cost fallacy. Look for shortcuts via existing design patterns, tools, or clever algorithms. Consider whether you can reframe the problem. 4 Becoming One with Nature BEFORE THE INDUSTRIAL REVOLUTION, most peppered moths in Manchester, England, were light-colored, using trees covered with pale bark and lichens as camouflage to avoid becoming prey for birds.


pages: 287 words: 80,050

The Wisdom of Frugality: Why Less Is More - More or Less by Emrys Westacott

Airbnb, back-to-the-land, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, carbon footprint, clean water, Community Supported Agriculture, corporate raider, critique of consumerism, Daniel Kahneman / Amos Tversky, dark matter, Diane Coyle, discovery of DNA, Downton Abbey, dumpster diving, financial independence, full employment, greed is good, happiness index / gross national happiness, haute cuisine, hedonic treadmill, income inequality, invisible hand, Isaac Newton, loss aversion, McMansion, means of production, move fast and break things, move fast and break things, negative equity, New Urbanism, paradox of thrift, Ralph Waldo Emerson, salary depends on his not understanding it, sunk-cost fallacy, Thales and the olive presses, Thales of Miletus, the market place, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, Upton Sinclair, Veblen good, Zipcar

He won’t allow the first to reason about or examine anything except how a little money can be made into great wealth. And he won’t allow the second to value or admire anything but wealth and wealthy people or to have any ambition other than the acquisition of wealth or whatever might contribute to getting it.8 The “sunk cost” fallacy: Research by psychologists Daniel Kahneman and Amos Tversky in the 1970s led them to conclude that for most human beings a concern to avoid losses is a more powerful motivator than the desire to realize gains. Many other psychologists have followed in their footsteps and investigated the phenomenon of loss aversion.

Instead of simply asking which choice would produce most future pleasure, they apparently took into account the “sunk cost” of the ticket, which from a rational, utilitarian point of view seems to be irrelevant.9 Arkes and Blumer suggest that underlying this preference is an aversion to waste, which is, of course, a characteristic trait of the frugal zealot. Conceivably, then, a constant concern for living frugally renders one more susceptible to the sunk cost fallacy, at least in situations involving money. Ungenerosity: We saw in earlier chapters how often frugality has been associated with other moral virtues and with good character in general. Yet we should remember that our list of terms related to the notion of frugality included several with decidedly negative connotations, such as “parsimonious,” “illiberal,” “stingy,” “closefisted” and “ungenerous.”

See also pleasure Simpson, Wallis, 154 Sinclair, Upton, 121 Singer, Peter, 173–75 Skidelsky, Edward and Robert, 91, 154, 242, 245–46 Slocum, Joshua, 185 Smith, Adam, 159, 177, 216 Smith, Zadie, 94 Social Progress Index, 219 Socrates, 16, 29, 60, 62, 63, 75, 120, 138, 180; in Plato’s Gorgias, 18, 58–59, 93, 102, 185, 215; in Plato’s Republic, 54, 37, 229 Solomon, 147 Solon, 63 Soylent, 29 Sparta, 28, 32, 53–55, 56 Spartans. See Sparta Specter, Michael, 262 Spinoza, Baruch, 32, 64 stagnation, 145–47 Stiglitz, Joseph, 151, 220 Stoicism, 284. See also Stoics Stoics, 8, 23–24, 50–51, 55, 60, 67, 73, 75, 88, 89, 98, 101, 105, 107, 108, 128, 141, 148, 154, 171, 272 sunk cost fallacy, 144–45 Taoism, 128 technological change, 17–18, 206, 228, 280–83 technology, 254; as solution to environmental problems, 269–71; and simplicity, 22–23, 34; and work, 80 Thales of Miletus, 48 Thoreau, Henry David, 7, 19, 21, 24–27, 29, 34, 79, 88, 117, 120, 131, 137, 166, 248, 253 thrift, 2, 13; etymology of “thrift,” 10.


pages: 153 words: 45,721

Making Work Visible: Exposing Time Theft to Optimize Workflow by Dominica Degrandis, Tonianne Demaria

cloud computing, cognitive bias, DevOps, Elon Musk, en.wikipedia.org, informal economy, Jeff Bezos, loose coupling, microservices, Parkinson's law, sunk-cost fallacy, transaction costs

Some people have difficulty killing projects that have started because of a desire to avoid losing whatever time and money have already been sunk into the project. The more people invest in a project, the harder it becomes to abandon it, even when a more rational decision based off of future value would be better. This is known as sunk cost fallacy. In The Principles of Product Development Flow, Donald Reinertsen suggests we should only consider the incremental investment needed to finish the project in comparison to its economic return.3 Purging low-value jobs from the work queue makes sense whenever a surplus of high-value jobs is in progress.

SMOKE TEST: A test to ensure that code functions as expected after a build is completed. SOURCE CONTROL: A place where developers check in their code for safe keeping. STAND-UP: A brief (usually 15 minutes) meeting where a team discusses issues. Because it’s only 15 minutes, people stand up for it. SUNK COST FALLACY: When you keep doing something because you’ve put a lot of effort into it and you don’t want to waste that effort. SYSTEM: A network of interdependent components that work together to try to accomplish a goal; includes the people doing the work and the impacting rules and tools. SYSTEMS THINKING: A holistic view of the system where the goal is to optimize the whole system versus just individual functions or silos.


pages: 572 words: 94,002

Reset: How to Restart Your Life and Get F.U. Money: The Unconventional Early Retirement Plan for Midlife Careerists Who Want to Be Happy by David Sawyer

Airbnb, Albert Einstein, asset allocation, beat the dealer, bitcoin, Cal Newport, cloud computing, cognitive dissonance, crowdsourcing, cryptocurrency, David Attenborough, David Heinemeier Hansson, Desert Island Discs, diversification, diversified portfolio, Edward Thorp, Elon Musk, financial independence, follow your passion, gig economy, hiring and firing, index card, index fund, invention of the wheel, knowledge worker, loadsamoney, low skilled workers, Mahatma Gandhi, Mark Zuckerberg, meta-analysis, mortgage debt, passive income, passive investing, Paul Samuelson, pension reform, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, Silicon Valley, Skype, smart meter, Snapchat, stakhanovite, Steve Jobs, sunk-cost fallacy, Tim Cook: Apple, Vanguard fund, Y Combinator

[201] “what you should and shouldn’t do”: “The Life-Changing Magic of Tidying: A simple, effective way to banish...” toreset.me/201, p. 4. [202] Writing in the Washington Post: “I was getting buried in clutter. Here’s how I finally got free. – The...” 17 Jan. 2018, toreset.me/202. [203] article in The Atlantic: “An Economist’s Guide to Tidying Your Apartment – The Atlantic.” 13 May. 2015, toreset.me/203. [204] sunk cost fallacy: “Sunk cost fallacy – Behavioraleconomics.com | The BE Hub.” toreset.me/204. [205] status quo bias: “Status quo bias – Behavioraleconomics.com | The BE Hub.” toreset.me/205. [206] changed their life: “Customer Review – Amazon.com.” toreset.me/206. [207] (discard lots and organise what’s left): “The Life-Changing Magic of Tidying: A simple, effective way to banish...” toreset.me/207.

In an article in The Atlantic[203], former staff writer and ex-Freakonomics editor Bourree Lam (liberally citing Financial Times journalist Tim Harford) argues that the reason Marie Kondo’s book is such a worldwide phenomenon is because it highlights human beings’ mental fallacies, draws on powerful economic ideas and makes us look at our belongings anew. Take my climbing gear (don’t try, I wouldn’t let you). That’s an example of the sunk cost fallacy[204]. I paid at least £2,000 for my rack 15 years ago and I’m not giving it away for peanuts, even if I never use it again. No way is that going, Marie Kondo or no Marie Kondo. Then there’s status quo bias[205], which, when applied to your cluttered house (not the rock band, to which I am in no way biased) means that most of your belongings stay because you can’t think of a good reason to get rid of them.


pages: 406 words: 109,794

Range: Why Generalists Triumph in a Specialized World by David Epstein

Airbnb, Albert Einstein, Apple's 1984 Super Bowl advert, Atul Gawande, Checklist Manifesto, Claude Shannon: information theory, Clayton Christensen, clockwork universe, cognitive bias, correlation does not imply causation, Daniel Kahneman / Amos Tversky, deliberate practice, Exxon Valdez, Flynn Effect, Freestyle chess, functional fixedness, game design, Isaac Newton, Johannes Kepler, knowledge economy, lateral thinking, longitudinal study, Louis Pasteur, Mark Zuckerberg, medical residency, meta-analysis, Mikhail Gorbachev, Nelson Mandela, Netflix Prize, pattern recognition, Paul Graham, precision agriculture, prediction markets, premature optimization, pre–internet, random walk, randomized controlled trial, retrograde motion, Richard Feynman, Richard Feynman: Challenger O-ring, Silicon Valley, Stanford marshmallow experiment, Steve Jobs, Steve Wozniak, Steven Pinker, sunk-cost fallacy, Walter Mischel, Watson beat the top human players on Jeopardy!, Y Combinator, young professional

A recent international Gallup survey of more than two hundred thousand workers in 150 countries reported that 85 percent were either “not engaged” with their work or “actively disengaged.” In that condition, according to Seth Godin, quitting takes a lot more guts than continuing to be carried along like debris on an ocean wave. The trouble, Godin noted, is that humans are bedeviled by the “sunk cost fallacy.” Having invested time or money in something, we are loath to leave it, because that would mean we had wasted our time or money, even though it is already gone. Writer, psychology PhD, and professional poker player Maria Konnikova explained in her book The Confidence Game how the sunk cost mindset is so deeply entrenched that conmen know to begin by asking their marks for several small favors or investments before progressing to large asks.

“People said, ‘This is going to take too long because you have no fundamental knowledge in this area and you’re going to be behind people who have already done their master’s there,’” she told me. To clarify: the advice she received was to stick in an area she knew she didn’t like because she had already started, even though she wasn’t even that far in. It is the sunk cost fallacy embodied. When she entered the professional world with 3M, she dared to switch focus again, this time away from her PhD research, and for a personal reason: her husband was coming to 3M from the same Clarkson lab, and she didn’t want to occupy the spot he might apply for. So she branched out.

., 25 Simon, Julian, 216–18 Simonton, Dean Keith, 33, 212, 221, 281n, 288 Sloboda, John, 65–67 Smith, Gregory White, 127, 167 Smith, Johnny, 70–71 Smithies, Oliver, 269–272, 281 soccer, 7–8 Socrates, 85 Southern, Edwin, 271–72 Soviet Union predictions/forecasts regarding, 220–21 premodern villagers of, 40–44, 46–47 spelling bee competitors, 133, 134, 135 The Sports Gene (Epstein), 9 standardization covenant, 155 StarCraft video games, 28–29 stents (coronary), 266 Storm King Mountain fire, 246 strategic thinking, 22–23, 28–29 struggling, benefits of, 88, 89 sunk cost fallacy, 143 Super Bowl, 2018, 8 superforecasters, 258 Superforecasting (Tetlock and Gardner), 220 surgeons and surgical teams, 6, 32, 210–11 Suzuki Method, 76 Swanson, Don, 179–180, 189, 206 Swanson, Judy, 180–81 Syed, Matthew, 6 Talent Is Overrated (Colvin), 18 Taylor, Alva, 208–10 teachers, 91–92, 132 teams innovation in, 209–10 of specialists in “kind” learning environments, 210–11 tech companies, founders of, 11 technological inventors, 9 tennis, 31 ten-thousand-hours rule of expertise, 5, 32 test-and-learn model for exploring options, 163–64 testing/self-testing, 87–88, 89, 96 Tetlock, Philip, 218–223, 225, 228, 230, 231, 256 Thrale, Hester, 56 Tiger parents, 64–65, 275 Tillman Foundation, 10, 13 Togelius, Julian, 28–29 tools and Air Force pararescue jumpers, 250–55, 258 and cultural congruence/incongruence, 255, 256–57 in medical world, 266–67 and NASA’s quantitative culture, 241–45, 247–48, 249, 254, 257, 258 and overlearned behavior, 248, 250 and reliance on trusted methods/beliefs, 246–47, 265–67 in wilderness firefighting, 245–47, 248 Toynbee, Arnold, 51, 267 Treffert, Darold, 27 Tucker, Ross, 9 Tu Youyou, 272 Tversky, Amos, 108 University of Chicago, 49 University of Washington, 50 Unusual (or Alternative) Uses Task, 198 U.S.


pages: 389 words: 112,319

Think Like a Rocket Scientist: Simple Strategies You Can Use to Make Giant Leaps in Work and Life by Ozan Varol

Affordable Care Act / Obamacare, Airbnb, airport security, Albert Einstein, Amazon Web Services, Andrew Wiles, Apple's 1984 Super Bowl advert, Arthur Eddington, autonomous vehicles, Ben Horowitz, Cal Newport, Clayton Christensen, cloud computing, Colonization of Mars, dark matter, delayed gratification, different worldview, discovery of DNA, double helix, Elon Musk, fear of failure, functional fixedness, Gary Taubes, George Santayana, Google Glasses, Google X / Alphabet X, Inbox Zero, index fund, Isaac Newton, James Dyson, Jeff Bezos, job satisfaction, Johannes Kepler, Kickstarter, knowledge worker, late fees, lateral thinking, lone genius, longitudinal study, Louis Pasteur, low earth orbit, Marc Andreessen, Mars Rover, meta-analysis, move fast and break things, move fast and break things, multiplanetary species, obamacare, Occam's razor, out of africa, Peter Thiel, Pluto: dwarf planet, Ralph Waldo Emerson, Richard Feynman, Richard Feynman: Challenger O-ring, Ronald Reagan, salary depends on his not understanding it, Sam Altman, Schrödinger's Cat, Search for Extraterrestrial Intelligence, self-driving car, Silicon Valley, Simon Singh, Steve Ballmer, Steve Jobs, Steven Levy, Stewart Brand, sunk-cost fallacy, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Upton Sinclair, Vilfredo Pareto, We wanted flying cars, instead we got 140 characters, Whole Earth Catalog, women in the workforce, Yogi Berra

What’s more, the more time you spend building the pedestal, the harder it becomes to walk away from moonshots that shouldn’t be pursued. This is called the sunk-cost fallacy. Humans are irrationally attached to their investments. The more we invest time, effort, or money, the harder it becomes to change course. We continue to read a terrible book because we already spent an hour reading the first few chapters or pursue a dysfunctional relationship because it has dragged on for eight months. To counter the sunk-cost fallacy, put the monkey first—tackle the hardest part of the moonshot up front. Beginning with the monkey ensures that your moonshot has a good chance of becoming viable before you’ve poured massive amounts of resources into a project.

The monkey-first attitude requires developing a set of “kill metrics,” as X calls them, a set of go/no-go criteria for determining when to press ahead and when to quit.88 The criteria must be defined at the outset—when you’re relatively clearheaded—before your emotional and financial investments might trigger the sunk-cost fallacy and cloud your judgment. This approach shut down a project called Foghorn at X.89 The venture seemed promising at first. A member of X had read a scientific paper about taking carbon dioxide out of seawater and turning the carbon dioxide into affordable, liquid fuel with the potential to replace gasoline.


pages: 511 words: 132,682

Competition Overdose: How Free Market Mythology Transformed Us From Citizen Kings to Market Servants by Maurice E. Stucke, Ariel Ezrachi

affirmative action, Airbnb, Albert Einstein, Andrei Shleifer, Bernie Sanders, Boeing 737 MAX, Cass Sunstein, choice architecture, cloud computing, commoditize, corporate governance, Corrections Corporation of America, Credit Default Swap, crony capitalism, delayed gratification, disinformation, Donald Trump, en.wikipedia.org, Garrett Hardin, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Google Chrome, greed is good, hedonic treadmill, income inequality, income per capita, independent contractor, information asymmetry, invisible hand, job satisfaction, labor-force participation, late fees, loss aversion, low skilled workers, Lyft, mandatory minimum, Mark Zuckerberg, market fundamentalism, mass incarceration, Menlo Park, meta-analysis, Milgram experiment, mortgage debt, Network effects, out of africa, payday loans, Ponzi scheme, precariat, price anchoring, price discrimination, profit maximization, profit motive, race to the bottom, Richard Thaler, ride hailing / ride sharing, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Shoshana Zuboff, Silicon Valley, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Stanford prison experiment, Stephen Hawking, sunk-cost fallacy, surveillance capitalism, The Chicago School, The Market for Lemons, The Myth of the Rational Market, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Davenport, Thorstein Veblen, Tim Cook: Apple, too big to fail, Tragedy of the Commons, transaction costs, Uber and Lyft, uber lyft, ultimatum game, Vanguard fund, winner-take-all economy, Yochai Benkler

With drip pricing, a former chief economist of the UK competition authority noted, “Consumers feel they’ve already made the decision to purchase [which] creates loss aversion—consumers have committed time and effort to the search before being hit with extra charges.”33 A third weakness is something we often perceive as a strength, namely commitment and consistency. Here, after having invested a lot of time and effort into this purchase, we want to see the purchase through to its end.34 Economists call this the sunk cost fallacy. Finally, drip pricing taps into brain fatigue. Each Las Vegas hotel on the Strip offers many different types of rooms, with varying square footage, number of beds and bathrooms, and views. Each type of room has a different room rate, with different promotions for rewards club members. If you want to bring your parrot, check in early, or check out late, additional fees apply.

See also CoreCivic Costco and other club stores, 102–3 cream skimming, 169–70, 175, 183–87 credit card industry, 68, 69, 70–71, 75–77 credit default swaps, 128 criminal sentencing, 80–81, 176–77 crony capitalism, 160, 163, 230, 285 Cruz, Ted, 266 cultural conditioning college as route to social mobility, 29–30 competition delivers quality at a low price, 47–48, 49 competition is always good, x, 284 embarrassment for gullibility, 70 and escalation paradigm, 35–36 lifelong superior achievement goal, 32–33 to love competition, 125 to not compete, 122 self-interest, 71, 235–36 and status competition, 28 See also human nature culture, x–xi Dalai Lama, 253 Dale, Stacy, 36–37 D’Angelo, Jonathan, 112–13 Dartmouth College, 25 Darwin, Charles, 39 data for Amazon’s personal recommendations, 105–6, 107 analytical power of, 218–19 children’s data gleaned for advertisers, 193–95 college scorecard data, 300–304, 318n86 on consumers’ behavior, 87–91, 204–5, 207–9 Gamemakers attract bidders/advertisers, 207–9 Gamemakers’ harvesting techniques, 194, 203–7 in Las Vegas, 87–91 dating services, online overview, 108–9 competition levels, 109–12, 111 InterActiveCorp, 109–11, 111, 115–16 and marriage, 114–15 profiting from choice overload, 113–14, 115–16 slow dating, 117 deadbeat customers, 70–71 Dear Genevieve effect, 12–15, 16, 19–20, 38–39 death bonds, 245 decision aids for choice overload, 101–2 de-escalating the arms race colleges and universities, 25–27, 40, 133–34 collegiate sports, 134–38, 140–41 students and parents, 27–34, 40 Deloitte, 277 deregulation of banks, 126–30 derivatives market, 261–63 diaper apps, 197 digital ad market, 210 diminishing returns, 96–97 dissent, noncompliance, and change, 284–87 divergence of individual and collective interests, 12–20, 39–40, 242–43, 263 DOJ (US Department of Justice), 128, 172–73, 174, 232 do not track features on mobile phones, 212–13 Dostoyevsky, Fyodor, 71 drip pricing overview, 147 and anchor value, 80–81 and brain fatigue, 81–82 Caesars opposition to, 84–87 casino lobbyists combat FTC’s plan, 150–52 vs. consumer’s ability to compare prices, 155–57 consumers’ loss aversion, 81 countries with laws against, 148 FTC attempt to legalize, 148–50 in hotels, 78–80, 82–84, 147, 148–54 lobbyists use competition ideology, 150–52 and sunk cost fallacy, 81 Duhigg, Charles, 227 Duke University, 16–17, 24 dynamic ads, 204–5 Easterbrook, Frank H., 234–35 Economist, 197 Eliot, T. S., 20 Elliott, Chris, 46–47 Ellis, George, xi–xii, 256–58, 257 Enron, 246–47 ethical values. See social, moral, and ethical values Ethiopia, 242–43 Europe, 51, 252, 287.

See social, moral, and ethical values Southeastern Conference (SEC) 137 number of varsity sports compared to NESCAC, 138 participation of student athletes compared to NESCAC and Ivy League, 138 Spielberg, Steven, 36–37 sporting event with injured player metaphor, 270 Stanford University, 15, 25 status competition, 28 Steven Spielberg effect, 36–37 Stigler, George, 236 Stiglitz, Joseph, 231 stock market, 260 Stucke, Liz, 14 Stucke, Maurice E., x subprime mortgages, 128, 129, 130 sunk cost fallacy, 81 surveillance capitalism, 195 Survivor (reality show), 192–93 Sweden, 52 switching costs, reducing, 110 Tawney, R. H., 252–53 Thaler, Richard, 237 Thatcher, Margaret, 187 Theory of Moral Sentiments, The (Smith), 236–37 Theory of the Leisure Class (Veblen), 248 time-limited offers, 82 Tinder.com, 108 Tiny Lab Productions, Lithuania, 194–95, 199, 202–3, 223 Toma, Catalina, 112–13 toxic competition overview, 40, 122, 227–28, 254, 255 and antitrust laws, 103 collegiate sports programs, 139–40 deregulation of the financial industry, 129–30 economic waste caused by, 23–25 escalation of problems, 9–10 factors that lead us to, 281–84 four conditions leading to, 49–65 Gamemakers, 192–93, 203, 206–7, 220–22, 223 incremental steps disguise the movement toward darkness, 282–83 lack of awareness and/or control, 6 misallocation of resources, 24 NHL pre-helmet law scenario, 4–5 of online dating services, 116 paying less and getting much less, ix–x, xii–xiii quality and integrity as cost of, 178–79 regaining your power to change it, 284–87 in school ranking systems, 7–9 sellers’ inability to limit customer choices, 102, 103 See also choice overload; competition machine; exploiting human weakness; race to the bottom tracking software of Gamemakers, 204–7, 217, 222 traditional barriers, 110 transaction costs, 110 transparency in online dating, 109–10 Travelers Group Inc., 128 Travel Troubleshooter blog, 79 Trimega Laboratories, United Kingdom, 181 Trinity School, New York, 32–33 Trump, Donald, 174, 263 Trump administration deregulating as much as possible, 159 First Step Act, 169 and FTC, 157 increasing private prisons, 175 and online gambling, 153 rolling back consumer financial protections, 268–69, 285–86 Trump International Hotel Las Vegas, 147, 149 Trump International Sonesta Beach Resort, 149–50, 176 Truth in Hotel Advertising Act (2016), 153–54 Tulane University, 12–14, 21, 22–23, 38 Tyrie, Andrew, 291 UAB (University of Alabama at Birmingham), 138–39, 140–41 UK Forensic Science Service (FSS), 177–80 UK National Health Service (NHS), 183–87 Ultimatum Game, 237–39, 240 unethical behavior as cost of zero-sum competition, 246–47 unions as anticompetitive, 232 United Kingdom competition machine explosion, 41–45, 44 fuel shortage incidents on airlines, 57 horsemeat scandal, xii, 41–42, 45–47 investigating drip pricing on hotel booking sites, 148 National Health Service and cream-skimming, 183 privatizing the UK Forensic Science Service, 177–83 privatizing water, 52–53, 58–59, 68, 162, 187 school ranking system effects, 7–8 self-regulation in food industry, 273–74 United Nations, 229–30, 271 United States bankruptcies and their causes, 270 deterioration of the American Dream, 231–32 job satisfaction levels, 227 kudzu-ing drip pricing, 148–53 oregano fraud, 52 school ranking system effects, 8–9 wealth inequality, 229–30 Universal Declaration of Human Rights, 271 universities race to woo and reject applicants, xii.


pages: 346 words: 89,180

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel, Stian Westlake

"Robert Solow", 23andMe, activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, Andrei Shleifer, bank run, banking crisis, Bernie Sanders, business climate, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, cognitive bias, computer age, corporate governance, corporate raider, correlation does not imply causation, creative destruction, dark matter, Diane Coyle, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Glaeser, Elon Musk, endogenous growth, Erik Brynjolfsson, everywhere but in the productivity statistics, Fellow of the Royal Society, financial innovation, full employment, fundamental attribution error, future of work, Gini coefficient, Hernando de Soto, hiring and firing, income inequality, index card, indoor plumbing, intangible asset, Internet of things, Jane Jacobs, Jaron Lanier, job automation, Kenneth Arrow, Kickstarter, knowledge economy, knowledge worker, laissez-faire capitalism, liquidity trap, low skilled workers, Marc Andreessen, Mother of all demos, Network effects, new economy, open economy, patent troll, paypal mafia, Peter Thiel, pets.com, place-making, post-industrial society, Productivity paradox, quantitative hedge fund, rent-seeking, revision control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Sand Hill Road, Second Machine Age, secular stagnation, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, software patent, sovereign wealth fund, spinning jenny, Steve Jobs, sunk-cost fallacy, survivorship bias, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, total factor productivity, Tyler Cowen: Great Stagnation, urban planning, Vanguard fund, walkable city, X Prize, zero-sum game

For example, as McKinsey4 points out, promoters of the Vancouver Expo 86 kept refusing to cancel the project even as the costs ballooned by twenty times, from the original Can$78 million in 1978. This “sunk-cost fallacy” can be particularly fatal to good decision making when linked with other cognitive biases, such as confirmation bias, in this case massively overinflated forecasts of visitor numbers. We might expect managers of businesses who have sunk lots of money into intangible investments like R&D or setting up new business units to overestimate their value and to be more reluctant to let them go. Indeed, a world in which this behavior was common would see an unsettling psychological shift. Because of the sunk-cost fallacy, we might expect to see more businesses sticking with bad investments that they were better off drawing a line under.


pages: 324 words: 93,175

The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home by Dan Ariely

Alvin Roth, assortative mating, Bear Stearns, Burning Man, business process, cognitive dissonance, corporate governance, Daniel Kahneman / Amos Tversky, end world poverty, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, George Akerlof, happiness index / gross national happiness, hedonic treadmill, IKEA effect, Jean Tirole, job satisfaction, knowledge economy, knowledge worker, loss aversion, Peter Singer: altruism, placebo effect, Richard Thaler, Saturday Night Live, second-price auction, software as a service, sunk-cost fallacy, The Wealth of Nations by Adam Smith, ultimatum game, Upton Sinclair, young professional

They never completely cease to influence me (this is something to keep in mind as you attempt to become a better decision maker). Third, after investing years of time and effort into making my hand function as best it can, living with the daily pain, and figuring out how to work with these limitations, I’m a victim of what we call the sunk cost fallacy. Looking back at all my efforts, I’m very reluctant to write them off and change my decision. A fourth reason is that, twenty-some years after the injury, I have been able to rationalize my choice somewhat. As I’ve noted, people are fantastic rationalizing machines, and in my case I have been able to tell myself many stories about why my decision was the right one.

., 4–5 Shrek, 154 Simon game, 23, 24, 34 Sinclair, Upton, 38 Singer, Peter, 242n Sisyphus, myth of, 69 Skinner box, 60–62 Slovic, Paul, 239–41, 246–48 Small, Deborah, 239–41, 246–48 Smith, Adam, 77–78, 79 sneakers, designing your own, 95 social contract, 128 social hierarchy, see assortative mating social loans, 234 social pressure, 42–46 anticipatory anxiety and, 45 cockroach experiment and, 45–46 public speaking and, 42–43 “Some National Stupidities” (Twain), 107–8 Something from the Oven (Shapiro), 86 Sony, 120–21 sour grapes theory, 198–99, 200, 201, 203 speed dating: in experiment on assortative mating and adaptation, 205–10 for older adults, 229 standard process of, 206–7 virtual dating and, 226–27 Spiller, Stephen, 109–10, 303–4 Spock-like state of mind, 231, 246, 247, 248 Stalin, Joseph, 238–39 Stanford University, 37 state of flow, 49 statistical victims, apathy toward plight of, 238–41, 242, 246, 247–49, 252–53 status quo bias, 285, 286 Stills, Stephen, 197, 211–12 stress, 38, 43, 50 bonus situations and, 31, 32–33, 36, 47, 51 “clutch” abilities and, 39–41 loss aversion and, 32–33 striatum, 126 Stringer, Sir Howard, 120 sunk cost fallacy, 287 Surowiecki, James, 120 “survivor” rhetoric, 241–42 Szent-Györgi, Albert, 248–49 T Talmud, 255 Taylor, Frederick Winslow, 78–79 technological development: division and meaning of labor and, 79–80 mismatch between evolution and speed of, 8–9 Teresa, Mother, 239 Tesla, Nikola, 117 texting, 7–8 while driving, 6, 7, 8 tickling oneself, 188 Tierney, John, 110 time, passage of: hedonic adaptation and, 171–74 transience of emotions and, 257, 261, 270 vengeful feelings and, 151, 153 TiVo, 181n Tomasello, Michael, 127 tooth drilling, adaptation to pain and, 161–62 transient experiences, happiness derived from, 187–88 trust, 127–29, 153 rebuilding of, neglected in wake of financial meltdown of 2008, 131 trust game, 125–26, 127 bailout plan from perspective of, 130 tuberculosis, 250, 251 TV commercials, 181n Tversky, Amos, 32n Twain, Mark, 107–8, 116, 151 U ultimatum game, 265–77 after dissipation of original emotions, 270–71 gender differences and, 275–76 incidental emotions introduced into, 268–70 with participants in role of senders, 271–74 rational economics and, 266, 267 United Nations (UN), 255 University of Massachusetts Medical School, 152 unpredictability, enjoyment heightened by, 188 V vacuum cleaner sounds, adaptation to, 177–79 vagueness, empathy and, 244 Vanderbilt, Cornelius, 154 Viégas, Fernanda, 225 virtual dating, 225–30, 231 explanations for success of, 227–30 speed-dating event and, 226–27 visual system, adaptive ability of, 159 vividness, empathy and, 243n, 244, 245, 254 W Wachtel, Claire, 65 Wall Street implosion of 2008, see financial meltdown of 2008 Waxman, Henry, 128–29 Wealth of Nations, The (Smith), 77–78 Weckler, Walter, 151 Weiner, Ina, 168–69 Weisberg, Ron, 101 work, see labor world problems experiment, 109–16 World War II, 167 writing: blogging and, 65 deriving meaning from, 64–65 Y yentas (matchmakers), 213 Yerkes, Robert, 18–20, 22, 31, 47 Young, Jim, 201, 203 “Yours Is a Very Bad Hotel,” 140–41, 146 Z Zajonc, Robert, 45–46 About the Author Dan Ariely is the James B.


pages: 340 words: 91,416

Lost in Math: How Beauty Leads Physics Astray by Sabine Hossenfelder

Albert Einstein, Albert Michelson, anthropic principle, Arthur Eddington, Brownian motion, clockwork universe, cognitive bias, cosmic microwave background, cosmological constant, cosmological principle, crowdsourcing, dark matter, double helix, game design, Henri Poincaré, income inequality, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Johannes Kepler, Murray Gell-Mann, random walk, Richard Feynman, Schrödinger's Cat, Skype, Stephen Hawking, sunk-cost fallacy, the scientific method

But there are other cognitive and social biases affecting science that are not as well-known.14 Motivated cognition is one of them.15 It makes us believe positive outcomes are more likely than they really are. Do you recall hearing that the LHC is likely to see evidence for physics beyond the standard model? That these experiments likely will find evidence for dark matter in the next couple of years? Oh, they are still saying that? Then there is the sunk cost fallacy, more commonly known as throwing good money after bad. The more time and effort you’ve spent on supersymmetry, the less likely you are to call it quits, even though the odds look worse and worse. We keep on doing what we’ve been doing long after it’s stopped being promising, because we already invested in it, and we don’t like to admit we might have been wrong.

perturbation theory and, 193 problems with, 70–72 qubits and, 191 spectral geometry and, 158 string theory and, 36, 188–189 symmetry groups for, 142–144 technical naturalness of, 78–79 ugliness of, 152 steady state universe, 29 Steinhardt, Paul, 101 Strassler, Matt, 70 string theory, 172 beauty of, 181–182 black holes and, 175, 182, 184–185 controversy surrounding, 188–190 cosmological constant and, 173 development of, 172 economics compared with, 225 eternal inflation and, 104 failure of, 166 gauge-gravity duality and, 175–176, 182, 184–185, 228–229 general relativity and, 188–189 gravity and, 147–148, 172, 174 LHC and, 173–174 non-empirical theory assessment and, 33–34 nuclear physics and, 173–174 standard model and, 36, 188–189 strong nuclear interaction and, 172, 174 supersymmetry and, 36, 172–175 String Theory and the Scientific Method (Dawid), 33 string theory landscape, 104–105, 173 strong CP problem, 71–72, 203–204 strong nuclear interaction, 26, 53, 140 axions and, 203–204 CP symmetry and, 71 in gauge theory, 83–84, 83 (fig.) perturbation theory and, 193 string theory and, 172, 174 symmetry group for, 142 SU(2), 142, 239 SU(3), 142, 239 SU(5), 142–144, 152–153 sunk cost fallacy, 230 super-LHC, 82 superpartners Higgs boson and, 63–64 lack of detection of, 12 Lisi bet on, 165–166 naturalness and, 38–39 string theory and, 36 supersymmetric grand unification, 72 supersymmetry, 10, 235 attractiveness of, 11, 74–75 beauty of, 145, 180 convictions behind, 12–13 cosmological constant and, 181 dark matter and, 12, 60, 145 discoveries necessary for, 11–12 elegance of, 145 elementary particles and, 11 fine-tuning and, 65–66, 80, 150 gauge couplings in, 82 grand unification and, 143–145 Higgs mass and, 38, 63–64 lack of evidence for, 62, 149–150 LHC and, 80–81 mathematical proof and, 13 naturalness and, 14–15, 36–38, 145, 150 new colliders for, 82 particle detection for, 13 should be part of nature, 63 social feedback and, 157 sociology and, 75 split susy, 80 string theory and, 36, 172–175 vagueness of predictions of, 109 WIMPs and, 200–201 Susskind, Leonard, 101, 157, 229 susy.


Simple and Usable Web, Mobile, and Interaction Design by Giles Colborne

call centre, Firefox, HyperCard, Menlo Park, slashdot, Steve Jobs, Steven Levy, sunk-cost fallacy

One objection to removing half-baked features or content is that the time and effort that has gone into creating them will be wasted. No matter how poor the item, if it’s been paid for, no one wants to get rid of what they have. In the words of Jack Moffett, “Broken gets fixed. Shoddy lasts forever.” Economists call this the “sunk costs fallacy.” In reality, the cost of creating the feature can’t be recovered, so the only way to judge the feature is on how much good it is doing and how much more it will cost to keep. Features and content always place a mental load on users (“Do I look at this or not?”) and always cost something to maintain (someone will have to keep the content up to date or make sure the feature still works).


pages: 461 words: 106,027

Zero to Sold: How to Start, Run, and Sell a Bootstrapped Business by Arvid Kahl

"side hustle", business process, centre right, Chuck Templeton: OpenTable:, continuous integration, coronavirus, Covid-19, COVID-19, crowdsourcing, domain-specific language, financial independence, functional programming, Google Chrome, hockey-stick growth, if you build it, they will come, information asymmetry, information retrieval, inventory management, Jeff Bezos, job automation, Kubernetes, minimum viable product, Network effects, performance metric, post-work, premature optimization, risk tolerance, Ruby on Rails, sentiment analysis, Silicon Valley, software as a service, source of truth, statistical model, subscription business, sunk-cost fallacy, supply-chain management, trickle-down economics, web application

Even when a feature is clearly damaging in terms of economic impact, we don't remove it immediately. Why is that? What makes us so hesitant to remove what we can see isn't working? It's the thing that makes an entrepreneur great: boundless optimism. Here, it's just applied the wrong way and mixed with an unhealthy dose of the sunk-cost fallacy. That fallacy states that we perceive something as more valuable than it is when we have spent considerable resources in creating or attaining it. We would rather "see it through until the end" than counting our losses and getting rid of it. If you have a feature that no customer uses, remove it.

You thought you could use this eventually, and you'd better already have it in the product before you need it. Maybe you intend to eventually partner with a service, so you build an integration ahead of time. And then the partnership falls through, and you never need it. Many technical founders then fall prone to the sunk cost fallacy, thinking that since they already invested their time, the functionality needs to stay there. You're trying to capitalize on trends. Ever implemented social-media-like functionality even if your customers never interact? I built a Facebook-like social stream with messages and comments for farmers who never took the time to use it because they were too busy harvesting their vegetables.


pages: 384 words: 118,572

The Confidence Game: The Psychology of the Con and Why We Fall for It Every Time by Maria Konnikova

attribution theory, Bear Stearns, Bernie Madoff, Bluma Zeigarnik, British Empire, Cass Sunstein, cognitive dissonance, coherent worldview, Daniel Kahneman / Amos Tversky, endowment effect, epigenetics, hindsight bias, lake wobegon effect, lateral thinking, libertarian paternalism, Milgram experiment, placebo effect, Ponzi scheme, post-work, publish or perish, Richard Thaler, risk tolerance, side project, Skype, Steven Pinker, sunk-cost fallacy, the scientific method, tulip mania, Walter Mischel

But the weight of the cost loomed too heavy after ground was first broken. As one senator put it in discussions of another project, the Tennessee-Tombigbee Waterway, “To terminate a project in which $1.1 billion has been invested represents an unconscionable mishandling of taxpayers’ dollars.” Thaler termed the phenomenon the sunk-cost fallacy. The sunk-cost effect gives us a continued, strong motivation to believe in something even when the landscape has changed significantly since we first invested ourselves in it. In theory, we should only care about new, incremental costs. What we’ve already put into something shouldn’t matter: it’s lost anyway, whatever “it” happens to be—time, money, energy, whatever else.

To someone invested in a specific task or engrossed in the drama of the confidence game, it is essentially invisible. In 1985, Hal Arkes and Catherine Blumer published a series of ten studies to illustrate sunk costs in action and thus shed light on what was driving the irrational-seeming behavior. What if they spelled it all out and made the red flags and errors clear? What did the sunk-cost fallacy mean in a practical scenario? It would be the equivalent of pointing the Bureau of Reclamation’s leader at every bit of evidence and calling out the potential for trouble, or laying out a list of reasons, complete with documentation, for Ann Freedman as to why Glafira Rosales might not be what she said, and then looking to see if their behavior would change.


pages: 500 words: 145,005

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

"Robert Solow", 3Com Palm IPO, Albert Einstein, Alvin Roth, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, Berlin Wall, Bernie Madoff, Black-Scholes formula, business cycle, capital asset pricing model, Cass Sunstein, Checklist Manifesto, choice architecture, clean water, cognitive dissonance, conceptual framework, constrained optimization, Daniel Kahneman / Amos Tversky, delayed gratification, diversification, diversified portfolio, Edward Glaeser, endowment effect, equity premium, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, George Akerlof, hindsight bias, Home mortgage interest deduction, impulse control, index fund, information asymmetry, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, Kenneth Arrow, Kickstarter, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, market clearing, Mason jar, mental accounting, meta-analysis, money market fund, More Guns, Less Crime, mortgage debt, Myron Scholes, Nash equilibrium, Nate Silver, New Journalism, nudge unit, Paul Samuelson, payday loans, Ponzi scheme, Post-Keynesian economics, presumed consent, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, random walk, randomized controlled trial, Richard Thaler, risk free rate, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, South Sea Bubble, Stanford marshmallow experiment, statistical model, Steve Jobs, sunk-cost fallacy, Supply of New York City Cabdrivers, technology bubble, The Chicago School, The Myth of the Rational Market, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, ultimatum game, Vilfredo Pareto, Walter Mischel, zero-sum game

Maya Bar-Hillel started calling me the world’s only clinical economist. (After her quilt purchase she became my first client.) I may or may not have deserved that title, but I was hardly the only economist to recognize that Humans have trouble with this concept. In fact, the mistake is so common it has an official name—the sunk cost fallacy—and the fallacy is often mentioned in basic economics textbooks. But many people, even if they understand the concept in principle, can find it difficult to follow the advice to ignore sunk costs in practice. Driving to the game in the blizzard, or playing tennis in pain, are mistakes no Econ would make.

But Posner was not in Lott’s line of sight, so I saw him angrily asking people around him what had happened. I quickly moved on to another topic. The fact that the strongest resistance to behavioral economics came from those who had the greatest investment in building up the rational actor model raised an amusing possibility. Might their objections be more evidence in support of the sunk-cost fallacy? Of course, I could not say to my critics that by clinging to their beloved theories they were merely paying attention to sunk costs, but I could introduce the one bit of new experimental data we had included in the paper. The data came from a version of the Ultimatum Game. In the usual version of the Ultimatum Game, the experimenter provides the money that the participants divide.


pages: 177 words: 54,421

Ego Is the Enemy by Ryan Holiday

activist fund / activist shareholder / activist investor, Airbnb, Ben Horowitz, Berlin Wall, Bernie Madoff, Burning Man, delayed gratification, Google Glasses, Jeff Bezos, Joan Didion, Lao Tzu, Paul Graham, Ponzi scheme, Ralph Waldo Emerson, Richard Feynman, side project, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, sunk-cost fallacy, Upton Sinclair

This is all perfectly fine; it’s what being an entrepreneur or a creative or even a business executive is about. We take risks. We mess up. The problem is that when we get our identity tied up in our work, we worry that any kind of failure will then say something bad about us as a person. It’s a fear of taking responsibility, of admitting that we might have messed up. It’s the sunk cost fallacy. And so we throw good money and good life after bad and end up making everything so much worse. Let’s say the walls feel like they’re closing in. It might feel as if you’ve been betrayed or your life’s work is being stolen. These are not rational, good emotions that will lead to rational, good actions.


Bulletproof Problem Solving by Charles Conn, Robert McLean

active transport: walking or cycling, Airbnb, Amazon Mechanical Turk, asset allocation, availability heuristic, Bayesian statistics, Black Swan, blockchain, business process, call centre, carbon footprint, cloud computing, correlation does not imply causation, Credit Default Swap, crowdsourcing, David Brooks, Donald Trump, Elon Musk, endowment effect, future of work, Garrett Hardin, Hyperloop, Innovator's Dilemma, inventory management, iterative process, loss aversion, meta-analysis, Nate Silver, nudge unit, Occam's razor, pattern recognition, pets.com, prediction markets, principal–agent problem, RAND corporation, randomized controlled trial, risk tolerance, Silicon Valley, smart contracts, stem cell, sunk-cost fallacy, the rule of 72, the scientific method, The Signal and the Noise by Nate Silver, time value of money, Tragedy of the Commons, transfer pricing, Vilfredo Pareto, walkable city, WikiLeaks

It is the failure to seriously consider the antithesis to your thesis, ignoring dissenting views—essentially picking low hanging mental fruit. Anchoring bias is the mistaken mental attachment to an initial data range or data pattern that colors your subsequent understanding of the problem. Loss aversion, and its relatives, the sunk cost fallacy, book loss fear, and the endowment effect, are a failure to ignore costs already spent (sunk) or any asymmetric valuing of losses and gains. Availability bias is use of an existing mental map because it is readily at hand, rather than developing a new model for a new problem, or just being influenced by more recent facts or events.


pages: 1,351 words: 385,579

The Better Angels of Our Nature: Why Violence Has Declined by Steven Pinker

1960s counterculture, affirmative action, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, availability heuristic, Berlin Wall, Bonfire of the Vanities, British Empire, Broken windows theory, business cycle, California gold rush, Cass Sunstein, citation needed, clean water, cognitive dissonance, colonial rule, Columbine, computer age, conceptual framework, correlation coefficient, correlation does not imply causation, crack epidemic, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Brooks, delayed gratification, demographic transition, desegregation, Doomsday Clock, Douglas Hofstadter, Edward Glaeser, en.wikipedia.org, European colonialism, experimental subject, facts on the ground, failed state, first-past-the-post, Flynn Effect, food miles, Francis Fukuyama: the end of history, fudge factor, full employment, Garrett Hardin, George Santayana, ghettoisation, Gini coefficient, global village, Henri Poincaré, Herbert Marcuse, Hobbesian trap, humanitarian revolution, impulse control, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of the printing press, Isaac Newton, lake wobegon effect, libertarian paternalism, long peace, longitudinal study, loss aversion, Marshall McLuhan, mass incarceration, McMansion, means of production, mental accounting, meta-analysis, Mikhail Gorbachev, moral panic, mutually assured destruction, Nelson Mandela, open economy, Peace of Westphalia, Peter Singer: altruism, QWERTY keyboard, race to the bottom, Ralph Waldo Emerson, random walk, Republic of Letters, Richard Thaler, Ronald Reagan, Rosa Parks, Saturday Night Live, security theater, Skype, Slavoj Žižek, South China Sea, Stanford marshmallow experiment, Stanford prison experiment, statistical model, stem cell, Steven Levy, Steven Pinker, sunk-cost fallacy, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, theory of mind, Tragedy of the Commons, transatlantic slave trade, Turing machine, twin studies, ultimatum game, uranium enrichment, Vilfredo Pareto, Walter Mischel, WikiLeaks, women in the workforce, zero-sum game

In the case of a war of attrition, one can imagine a leader who has a changing willingness to suffer a cost over time, increasing as the conflict proceeds and his resolve toughens. His motto would be: “We fight on so that our boys shall not have died in vain.” This mindset, known as loss aversion, the sunk-cost fallacy, and throwing good money after bad, is patently irrational, but it is surprisingly pervasive in human decision-making.65 People stay in an abusive marriage because of the years they have already put into it, or sit through a bad movie because they have already paid for the ticket, or try to reverse a gambling loss by doubling their next bet, or pour money into a boondoggle because they’ve already poured so much money into it.

Mammals are extreme among animals in the amount of time, energy, and food they invest in their young, and humans are extreme among mammals. Pregnancy and birth are only the first chapter in a mother’s investment career, and a mammalian mother faces an expenditure of more calories in suckling the offspring to maturity than she expended in bearing it.108 Nature generally abhors the sunk-cost fallacy, and so we expect mothers to assess the offspring and the circumstances to decide whether to commit themselves to the additional investment or to conserve their energy for its born or unborn siblings.109 If a newborn is sickly, or if the situation is unpromising for its survival, they do not throw good money after bad but cut their losses and favor the healthiest in the litter or wait until times get better and they can try again.

death toll in Clark, Gregory clash of civilizations Clauset, Aaron Clausewitz, Karl von Clay, Henry Cleaver, Eldridge Cleveland, Robert Nasruk climate change Clinton, Bill Clockwork Orange, A (film) cluster illusion Cobden, Richard Cochran, Gregory Cockburn, J. S. code of the streets; see also honor cognitive dissonance cognitive illusions, xxiii; see also availability heuristic; cluster illusion; conjunction fallacy; loss aversion; overconfidence; positive illusions; sunk-cost fallacy Cohen, Dov Cohen, Jonathan Cold War end of interstate wars in Europe mutually assured destruction proxy wars superpower confrontations Cole, Michael Collier, Paul Collins, Randall Colombia Columbine High School commerce: Christian ideology vs. cooperation in and genocide growth of international trade and money protectionist tariffs and transportation see also gentle commerce common knowledge communality, see Community, ethic of communal violence, see intercommunal conflict communism collapse of and genocide ideology of Community, ethic of compartmentalization, moral compassion see also empathy; sympathy complex systems, science of Concert of Europe concrete operations, Piagetian stage Conflict Catalog conformity Congo, Democratic Republic of (DRC) Congo Free State conjunction fallacy conquest Conquest, Robert Conrad, Joseph conscience; see also moral sense conscientious objection consciousness conscription, see military conscription conservatism and intelligence and morality and treatment of animals see also liberalism, and conservatism Constantine, Emperor Constitution, U.S.: amendments: Second Eighth Thirteenth Nineteenth design of and gentle commerce Cool Hand Luke (film) Cooney, Mark cooperation in commerce evolution of and intelligence norms of in Prisoner’s Dilemma games and Tragedy of the Commons coordination games corporal punishment: of children and torture Correlates of War Project Cosmides, Leda cosmopolitanism and democracy and end of Cold War vs. genocidal ideologies introduction to concept and liberalism vs. macho dominance opposition to and Rights Revolutions costly signaling counter-Enlightenment Country Joe and the Fish Coupland, Reginald coups d’état Courtwright, David Cousins, Norman Cramb, J.


pages: 603 words: 182,781

Aerotropolis by John D. Kasarda, Greg Lindsay

3D printing, air freight, airline deregulation, airport security, Akira Okazaki, Asian financial crisis, back-to-the-land, barriers to entry, Bear Stearns, Berlin Wall, big-box store, blood diamonds, borderless world, Boris Johnson, British Empire, business cycle, call centre, carbon footprint, Cesare Marchetti: Marchetti’s constant, Charles Lindbergh, Clayton Christensen, cleantech, cognitive dissonance, commoditize, conceptual framework, credit crunch, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, deskilling, digital map, disruptive innovation, edge city, Edward Glaeser, failed state, food miles, Ford paid five dollars a day, Frank Gehry, fudge factor, full employment, future of work, Geoffrey West, Santa Fe Institute, George Gilder, global supply chain, global village, gravity well, Haber-Bosch Process, Hernando de Soto, hive mind, if you build it, they will come, illegal immigration, inflight wifi, intangible asset, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), intermodal, invention of the telephone, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Joan Didion, Kangaroo Route, Kickstarter, knowledge worker, kremlinology, low cost airline, Marchetti’s constant, Marshall McLuhan, Masdar, mass immigration, McMansion, megacity, Menlo Park, microcredit, Network effects, New Economic Geography, new economy, New Urbanism, oil shale / tar sands, oil shock, peak oil, Pearl River Delta, Peter Calthorpe, Peter Thiel, pets.com, pink-collar, pre–internet, RFID, Richard Florida, Ronald Coase, Ronald Reagan, Rubik’s Cube, savings glut, Seaside, Florida, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart grid, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, spinning jenny, starchitect, stem cell, Steve Jobs, sunk-cost fallacy, supply-chain management, sustainable-tourism, telepresence, the built environment, The Chicago School, The Death and Life of Great American Cities, The Nature of the Firm, thinkpad, Thomas L Friedman, Thomas Malthus, Tony Hsieh, trade route, transcontinental railway, transit-oriented development, traveling salesman, trickle-down economics, upwardly mobile, urban planning, urban renewal, urban sprawl, walkable city, white flight, white picket fence, Yogi Berra, zero-sum game

Twenty years and $15 billion later (or quite a few billion more, depending on delays, overruns, and inflation), O’Hare will be the world’s busiest airport again (or not, depending on Beijing), and yet the streams of arriving 787s will be forced to pirouette around a graveyard upon landing. In its sad attempt to be a good neighbor, the OMP unwittingly underscored the impossibility of ever truly “modernizing” O’Hare, not while the Union dead still hold a place of honor in the infield. One could make the case (and Peotone’s proponents had) that the program was the sunk cost fallacy run amok for all sorts of reasons: historical, political, and the utterly irrational. Daley and the airlines were throwing good money after bad, and the latter have threatened to stop writing checks. Fifteen billion dollars can buy you a lot of airport—building Richard the First’s island airfield in Lake Michigan would probably cost less today—but it cannot completely undo the mistakes the planners of O’Hare (or LAX or Dulles) had unknowingly made during construction.

The nearest interstate was nearly an hour’s drive away; the nearest city was ninety minutes! Its airport had nothing going for it except a lot of empty acreage and a stubby runway. As any number of economists could have told you, the state had made a classic mistake of economic stimulus, the sunk cost fallacy mentioned earlier: throwing good money after bad at the hardest-hit communities, rather than putting it to work in successful places where it could do the most good. Kasarda was surprised when they took him at his word that location didn’t matter. Maybe raw geography didn’t, he thought, but accessibility certainly did.


pages: 290 words: 76,216

What's Wrong With Economics: A Primer for the Perplexed by Robert Skidelsky

"Robert Solow", additive manufacturing, agricultural Revolution, Black Swan, Bretton Woods, business cycle, Cass Sunstein, central bank independence, cognitive bias, conceptual framework, Corn Laws, corporate social responsibility, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, disruptive innovation, Donald Trump, full employment, George Akerlof, George Santayana, global supply chain, global village, Gunnar Myrdal, happiness index / gross national happiness, hindsight bias, Hyman Minsky, income inequality, index fund, inflation targeting, information asymmetry, Internet Archive, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labour market flexibility, loss aversion, Mahbub ul Haq, Mark Zuckerberg, market clearing, market friction, market fundamentalism, Martin Wolf, means of production, Modern Monetary Theory, moral hazard, paradox of thrift, Pareto efficiency, Paul Samuelson, Philip Mirowski, precariat, price anchoring, principal–agent problem, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, shareholder value, Silicon Valley, Simon Kuznets, sunk-cost fallacy, survivorship bias, technoutopianism, The Chicago School, The Market for Lemons, The Nature of the Firm, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, Tragedy of the Commons, transaction costs, transfer pricing, Vilfredo Pareto, Washington Consensus, Wolfgang Streeck, zero-sum game

The inverse to this is automation bias: thinking that automated instructions must be correct even when common sense tells you they are wrong. A bunch of Japanese tourists drove their car into the sea because their satnav told them they were on a road. Airplane crashes have happened because pilots trusted their faulty navigation systems rather than the evidence of their eyes. 6. Sunk cost fallacy This is a combination of anchoring and loss aversion. People will keep on ploughing money into a failed investment, because they can’t face the psychological pain of admitting that it had failed, or carry on waging a war that they should have abandoned long ago, because they cannot bring themselves to admit that it was in vain. 7.


pages: 442 words: 85,640

This Book Could Fix Your Life: The Science of Self Help by New Scientist, Helen Thomson

caloric restriction, caloric restriction, coronavirus, correlation does not imply causation, Covid-19, COVID-19, David Attenborough, delayed gratification, Donald Trump, Elon Musk, Flynn Effect, global pandemic, hedonic treadmill, job satisfaction, Kickstarter, meta-analysis, microbiome, placebo effect, publication bias, randomized controlled trial, risk tolerance, selective serotonin reuptake inhibitor (SSRI), Steve Jobs, sunk-cost fallacy, survivorship bias, Walter Mischel

This self-distancing restores a less biased, more open-minded attitude. Next, repeatedly question your judgement over a situation. All that mindfulness practice you’ve put in after earlier chapters should come in helpful now, too – it seems to encourage a wiser, more rational stance, reducing errors such as the sunk-cost fallacy.2 Lastly, there is good evidence that with practice you can learn to identify your own biases and logical fallacies, so you can spot the potential for dysrationalia before you go wrong. One of the most robust tricks is to pause to consider the opposite of what you had just been thinking, actively challenging your assumptions and intuitions and looking for alternative hypotheses.


Daughter Detox: Recovering From an Unloving Mother and Reclaiming Your Life by Peg Streep

Daniel Kahneman / Amos Tversky, delayed gratification, fear of failure, hedonic treadmill, helicopter parent, loss aversion, meta-analysis, Stanford marshmallow experiment, sunk-cost fallacy, Walter Mischel

Moreover, when we contemplate change, we’re likely to frame the discussion in terms of what we already have invested instead of the possible gains we might reap from moving on. Focusing solely on our investment—which could be time, money, energy—gets in the way whether we’re thinking about leaving a marriage, another relationship, a job, or even selling a clunker car we’ve repaired again and again. The fancy name for this habit of mind is the “sunk-cost fallacy,” and we all do it. It’s called a fallacy because the investment made is long gone and can’t be recouped by either staying or leaving, but that doesn’t stop us from thinking this way. It prevents us from looking forward. The only answer, again, is conscious awareness of your automatic thought processes.


pages: 346 words: 102,625

Early Retirement Extreme by Jacob Lund Fisker

8-hour work day, active transport: walking or cycling, barriers to entry, buy and hold, caloric restriction, caloric restriction, clean water, Community Supported Agriculture, delayed gratification, discounted cash flows, diversification, dogs of the Dow, don't be evil, dumpster diving, financial independence, game design, index fund, invention of the steam engine, inventory management, lateral thinking, loose coupling, market bubble, McMansion, passive income, peak oil, place-making, Ponzi scheme, psychological pricing, risk free rate, sunk-cost fallacy, the scientific method, time value of money, Tragedy of the Commons, transaction costs, wage slave, working poor

However, perhaps you're tougher than I am--some bike commuters ride more than 15 miles each way, every day. Walking a six mile round trip daily is certainly doable. I did it daily for half a year once, but I wouldn't want to walk much farther than that; it simply takes too much time. Some may be presently bound by mortgages that are underwater (don't fall for the sunk cost fallacy) or by not having sufficient ready funds to make a deposit, in which case they may resort to just reconsidering or postponing the move. Even if you're not going to move, try going through the exercise anyway just to realize that it's possible. Don't worry, there are other ways to self-actualize and gain (self-)respect than living in expensive housing.


pages: 404 words: 95,163

Amazon: How the World’s Most Relentless Retailer Will Continue to Revolutionize Commerce by Natalie Berg, Miya Knights

3D printing, Adam Neumann (WeWork), Airbnb, Amazon Web Services, augmented reality, Bernie Sanders, big-box store, business intelligence, cloud computing, Colonization of Mars, commoditize, computer vision, connected car, Donald Trump, Doomsday Clock, Elon Musk, gig economy, independent contractor, Internet of things, inventory management, invisible hand, Jeff Bezos, market fragmentation, new economy, pattern recognition, Ponzi scheme, pre–internet, QR code, race to the bottom, recommendation engine, remote working, sensor fusion, sharing economy, Skype, Steve Bannon, sunk-cost fallacy, supply-chain management, TaskRabbit, trade route, underbanked, urban planning, WeWork, white picket fence

Spend: the average Prime member spends $2,486 – nearly five times more than non-members,16 according to Morgan Stanley. As with most subscriptions, members typically feel the need to get their money’s worth, which can lead to irrational decision making: in this case, shoppers justify the annual Prime fee by spending more with Amazon. The sunk cost fallacy works to Amazon’s advantage. Frequency: according to Consumer Intelligence Research Partners, Prime customers shop with Amazon nearly twice as often (25 times per year) as non-Prime members, making Bezos’ initial vision – using Prime as a tool to remove barriers to more frequent shopping – a reality.17 Retention: it is estimated that retention rates are higher than 90 per cent.18 Through Prime, Amazon also gets access to a treasure trove of customer data, giving them an unrivalled understanding of the online purchasing behaviour of their most important shoppers.


pages: 540 words: 103,101

Building Microservices by Sam Newman

airport security, Amazon Web Services, anti-pattern, business process, call centre, continuous integration, create, read, update, delete, defense in depth, don't repeat yourself, Edward Snowden, fault tolerance, index card, information retrieval, Infrastructure as a Service, inventory management, job automation, Kubernetes, load shedding, loose coupling, microservices, MITM: man-in-the-middle, platform as a service, premature optimization, pull request, recommendation engine, social graph, software as a service, source of truth, sunk-cost fallacy, the built environment, web application, WebSocket

With ATOM, we now need to manage our own shared state among all the workers to try to reduce the chances of reproducing effort. If you already have a good, resilient message broker available to you, consider using it to handle publishing and subscribing to events. But if you don’t already have one, give ATOM a look, but be aware of the sunk-cost fallacy. If you find yourself wanting more and more of the support that a message broker gives you, at a certain point you might want to change your approach. In terms of what we actually send over these asynchronous protocols, the same considerations apply as with synchronous communication. If you are currently happy with encoding requests and responses using JSON, stick with it.


pages: 898 words: 266,274

The Irrational Bundle by Dan Ariely

accounting loophole / creative accounting, air freight, Albert Einstein, Alvin Roth, assortative mating, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, Broken windows theory, Burning Man, business process, cashless society, Cass Sunstein, clean water, cognitive dissonance, compensation consultant, computer vision, corporate governance, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, end world poverty, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, fudge factor, Garrett Hardin, George Akerlof, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, IKEA effect, Jean Tirole, job satisfaction, Kenneth Arrow, knowledge economy, knowledge worker, lake wobegon effect, late fees, loss aversion, Murray Gell-Mann, new economy, Peter Singer: altruism, placebo effect, price anchoring, Richard Feynman, Richard Thaler, Saturday Night Live, Schrödinger's Cat, second-price auction, Shai Danziger, shareholder value, Silicon Valley, Skype, software as a service, Steve Jobs, sunk-cost fallacy, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tragedy of the Commons, ultimatum game, Upton Sinclair, Walter Mischel, young professional

They never completely cease to influence me (this is something to keep in mind as you attempt to become a better decision maker). Third, after investing years of time and effort into making my hand function as best it can, living with the daily pain, and figuring out how to work with these limitations, I’m a victim of what we call the sunk cost fallacy. Looking back at all my efforts, I’m very reluctant to write them off and change my decision. A fourth reason is that, twenty-some years after the injury, I have been able to rationalize my choice somewhat. As I’ve noted, people are fantastic rationalizing machines, and in my case I have been able to tell myself many stories about why my decision was the right one.

., 4–5 Shrek, 154 Simon game, 23, 24, 34 Sinclair, Upton, 38 Singer, Peter, 242n Sisyphus, myth of, 69 Skinner box, 60–62 Slovic, Paul, 239–41, 246–48 Small, Deborah, 239–41, 246–48 Smith, Adam, 77–78, 79 sneakers, designing your own, 95 social contract, 128 social hierarchy, see assortative mating social loans, 234 social pressure, 42–46 anticipatory anxiety and, 45 cockroach experiment and, 45–46 public speaking and, 42–43 “Some National Stupidities” (Twain), 107–8 Something from the Oven (Shapiro), 86 Sony, 120–21 sour grapes theory, 198–99, 200, 201, 203 speed dating: in experiment on assortative mating and adaptation, 205–10 for older adults, 229 standard process of, 206–7 virtual dating and, 226–27 Spiller, Stephen, 109–10, 303–4 Spock-like state of mind, 231, 246, 247, 248 Stalin, Joseph, 238–39 Stanford University, 37 state of flow, 49 statistical victims, apathy toward plight of, 238–41, 242, 246, 247–49, 252–53 status quo bias, 285, 286 Stills, Stephen, 197, 211–12 stress, 38, 43, 50 bonus situations and, 31, 32–33, 36, 47, 51 “clutch” abilities and, 39–41 loss aversion and, 32–33 striatum, 126 Stringer, Sir Howard, 120 sunk cost fallacy, 287 Surowiecki, James, 120 “survivor” rhetoric, 241–42 Szent-Györgi, Albert, 248–49 T Talmud, 255 Taylor, Frederick Winslow, 78–79 technological development: division and meaning of labor and, 79–80 mismatch between evolution and speed of, 8–9 Teresa, Mother, 239 Tesla, Nikola, 117 texting, 7–8 while driving, 6, 7, 8 tickling oneself, 188 Tierney, John, 110 time, passage of: hedonic adaptation and, 171–74 transience of emotions and, 257, 261, 270 vengeful feelings and, 151, 153 TiVo, 181n Tomasello, Michael, 127 tooth drilling, adaptation to pain and, 161–62 transient experiences, happiness derived from, 187–88 trust, 127–29, 153 rebuilding of, neglected in wake of financial meltdown of 2008, 131 trust game, 125–26, 127 bailout plan from perspective of, 130 tuberculosis, 250, 251 TV commercials, 181n Tversky, Amos, 32n Twain, Mark, 107–8, 116, 151 U ultimatum game, 265–77 after dissipation of original emotions, 270–71 gender differences and, 275–76 incidental emotions introduced into, 268–70 with participants in role of senders, 271–74 rational economics and, 266, 267 United Nations (UN), 255 University of Massachusetts Medical School, 152 unpredictability, enjoyment heightened by, 188 V vacuum cleaner sounds, adaptation to, 177–79 vagueness, empathy and, 244 Vanderbilt, Cornelius, 154 Viégas, Fernanda, 225 virtual dating, 225–30, 231 explanations for success of, 227–30 speed-dating event and, 226–27 visual system, adaptive ability of, 159 vividness, empathy and, 243n, 244, 245, 254 W Wachtel, Claire, 65 Wall Street implosion of 2008, see financial meltdown of 2008 Waxman, Henry, 128–29 Wealth of Nations, The (Smith), 77–78 Weckler, Walter, 151 Weiner, Ina, 168–69 Weisberg, Ron, 101 work, see labor world problems experiment, 109–16 World War II, 167 writing: blogging and, 65 deriving meaning from, 64–65 Y yentas (matchmakers), 213 Yerkes, Robert, 18–20, 22, 31, 47 Young, Jim, 201, 203 “Yours Is a Very Bad Hotel,” 140–41, 146 Z Zajonc, Robert, 45–46 THE (HONEST) TRUTH ABOUT DISHONESTY How We Lie to Everyone—Especially Ourselves DAN ARIELY Dedication To my teachers, collaborators, and students, for making research fun and exciting.


Virtual Competition by Ariel Ezrachi, Maurice E. Stucke

Airbnb, Albert Einstein, algorithmic trading, barriers to entry, cloud computing, collaborative economy, commoditize, corporate governance, crony capitalism, crowdsourcing, Daniel Kahneman / Amos Tversky, David Graeber, demand response, disintermediation, disruptive innovation, double helix, Downton Abbey, Erik Brynjolfsson, experimental economics, Firefox, framing effect, Google Chrome, independent contractor, index arbitrage, information asymmetry, interest rate derivative, Internet of things, invisible hand, Jean Tirole, John Markoff, Joseph Schumpeter, Kenneth Arrow, light touch regulation, linked data, loss aversion, Lyft, Mark Zuckerberg, market clearing, market friction, Milgram experiment, multi-sided market, natural language processing, Network effects, new economy, offshore financial centre, pattern recognition, prediction markets, price discrimination, price stability, profit maximization, profit motive, race to the bottom, rent-seeking, Richard Thaler, ride hailing / ride sharing, road to serfdom, Robert Bork, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, smart meter, Snapchat, social graph, Steve Jobs, sunk-cost fallacy, supply-chain management, telemarketer, The Chicago School, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Travis Kalanick, turn-by-turn navigation, two-sided market, Uber and Lyft, Uber for X, uber lyft, Watson beat the top human players on Jeopardy!, women in the workforce, yield management

But self-learning algorithms and God View could make tacit collusion among more competitors likelier. The stability needed for tacit collusion is enhanced by the fact that computer algorithms, while not trusting, are unlikely to exhibit other human biases. Human biases can always be reflected in the programming code, but if some biases are minimized (such as loss aversion, the sunk cost fallacy, and framing effects), the algorithm acts consistently on more deliberative analysis, rather than intuition.14 Unlike humans, the computer does not fear detection and possible financial penalties or incarceration; nor does it respond in anger. The computer can quantify the payoffs that are likely achievable through cooperation in future games, and opt for forbearance rather than punishing small deviations.


Engineering Security by Peter Gutmann

active measures, algorithmic trading, Amazon Web Services, Asperger Syndrome, bank run, barriers to entry, bitcoin, Brian Krebs, business process, call centre, card file, cloud computing, cognitive bias, cognitive dissonance, combinatorial explosion, Credit Default Swap, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Debian, domain-specific language, Donald Davies, Donald Knuth, double helix, en.wikipedia.org, endowment effect, fault tolerance, Firefox, fundamental attribution error, George Akerlof, glass ceiling, GnuPG, Google Chrome, iterative process, Jacob Appelbaum, Jane Jacobs, Jeff Bezos, John Conway, John Markoff, John von Neumann, Kickstarter, lake wobegon effect, Laplace demon, linear programming, litecoin, load shedding, MITM: man-in-the-middle, Network effects, Parkinson's law, pattern recognition, peer-to-peer, Pierre-Simon Laplace, place-making, post-materialism, QR code, race to the bottom, random walk, recommendation engine, RFID, risk tolerance, Robert Metcalfe, Ruby on Rails, Sapir-Whorf hypothesis, Satoshi Nakamoto, security theater, semantic web, Skype, slashdot, smart meter, social intelligence, speech recognition, statistical model, Steve Jobs, Steven Pinker, Stuxnet, sunk-cost fallacy, telemarketer, text mining, the built environment, The Death and Life of Great American Cities, The Market for Lemons, the payments system, Therac-25, too big to fail, Tragedy of the Commons, Turing complete, Turing machine, Turing test, web application, web of trust, x509 certificate, Y2K, zero day, Zimmermann PGP

Now charge them all $1,000 to read your next prediction. It’s not just the (coincidental) “winners” in this process that this will work on. There’s a bunch of psychological biases like confirmation bias (“he was right all the other times, it must have been just a fluke that this one was wrong”) and the endowment effect/sunk cost fallacy (“we’ve come this far, no turning back now”) that will ensure that even the losers will keep coming back for more, at least up to a point. It terms of return on investment it’s a great way to make a return from the stock market for very little money down, you’re merely offering no-strings-attached advice so it’s not fraud (although you’d have to come up with some better method of drawing punters than spamming them), and the people taking your advice probably aren’t that much worse off than with any other prediction method they might have chosen to use.

The way an Internet café works is that you pay for a block of time, typically in fixed 15- or 30-minute segments. Once your time is up, you’re forcibly logged off the entire machine, not just your Internet session. The endowment effect (see “Psychology” on page 125) combined with other phenomena like the sunk cost fallacy, which requires “getting your money’s worth” even if it doesn’t make much sense, means that people tend to use up their entire block of time once they’ve paid for it, even if it’s just by browsing random web sites. However some subset of people will leave before their time is up, and an even smaller subset of people will forget to log out when they leave in this manner.

This works fine for government departments, whose main priority is spending their allocated budgets and (if possible) expanding [117] but commercial entities have to return a profit to their owners or shareholders, making PKI a far more difficult proposition. In this case though it’s likely that the sunk cost fallacy, covered in “Psychology” on page 125, as well as the fact that it was funded by banks with accountability measures attached to the funding meaning that something had to be shown at the end of it, precluded applying this approach. Another peculiar aspect of this PKI is that the Norwegian banks tried to monetise the investment that they’d made in smart cards for banking authentication purposes by encouraging people to use the card for other services.


pages: 1,239 words: 163,625

The Joys of Compounding: The Passionate Pursuit of Lifelong Learning, Revised and Updated by Gautam Baid

activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, Andrei Shleifer, asset allocation, Atul Gawande, availability heuristic, backtesting, barriers to entry, beat the dealer, Benoit Mandelbrot, Bernie Madoff, bitcoin, Black Swan, business process, buy and hold, Cal Newport, Cass Sunstein, Checklist Manifesto, Clayton Christensen, cognitive dissonance, collapse of Lehman Brothers, commoditize, corporate governance, correlation does not imply causation, creative destruction, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, deliberate practice, discounted cash flows, disintermediation, disruptive innovation, Dissolution of the Soviet Union, diversification, diversified portfolio, dividend-yielding stocks, Edward Thorp, Elon Musk, Everything should be made as simple as possible, financial independence, financial innovation, fixed income, follow your passion, framing effect, George Santayana, Hans Rosling, hedonic treadmill, hindsight bias, Hyman Minsky, index fund, intangible asset, invention of the wheel, invisible hand, Isaac Newton, Jeff Bezos, Joseph Schumpeter, Kickstarter, knowledge economy, Lao Tzu, Long Term Capital Management, loss aversion, Louis Pasteur, Mahatma Gandhi, mandelbrot fractal, margin call, Mark Zuckerberg, mental accounting, Milgram experiment, moral hazard, Nate Silver, Network effects, Nicholas Carr, offshore financial centre, oil shock, passive income, passive investing, pattern recognition, Peter Thiel, Ponzi scheme, price anchoring, quantitative trading / quantitative finance, Ralph Waldo Emerson, Ray Kurzweil, reserve currency, Richard Feynman, Richard Thaler, risk free rate, risk-adjusted returns, Robert Shiller, Robert Shiller, salary depends on his not understanding it, Savings and loan crisis, shareholder value, six sigma, software as a service, software is eating the world, South Sea Bubble, special economic zone, Stanford marshmallow experiment, Steve Jobs, Steven Levy, Steven Pinker, stocks for the long run, sunk-cost fallacy, tail risk, the market place, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, time value of money, transaction costs, tulip mania, Upton Sinclair, Walter Mischel, wealth creators, Yogi Berra, zero-sum game

This bias causes us to remain consistent with prior commitments and ideas, even in the face of disconfirming evidence. This includes confirmation bias—that is, looking for evidence that confirms our beliefs and ignoring or distorting disconfirming evidence to reduce the stress from cognitive dissonance. We tend to double down on our failed efforts because of the sunk cost fallacy. The more time or money we spend on something, the less likely we are to abandon it. When we have made an investment, we tend to seek evidence to confirm that we made the right decision and to ignore information that shows we made the wrong one. As Buffett has said, “What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.”2 The more publicity a decision receives, the less likely it is that we will change it.


pages: 579 words: 183,063

Tribe of Mentors: Short Life Advice From the Best in the World by Timothy Ferriss

23andMe, A Pattern Language, agricultural Revolution, Airbnb, Albert Einstein, Bayesian statistics, bitcoin, Black Swan, blockchain, Brownian motion, Buckminster Fuller, Clayton Christensen, cloud computing, cognitive dissonance, Colonization of Mars, corporate social responsibility, cryptocurrency, David Heinemeier Hansson, dematerialisation, don't be evil, double helix, effective altruism, Elon Musk, Ethereum, ethereum blockchain, family office, fear of failure, Gary Taubes, Geoffrey West, Santa Fe Institute, Google Hangouts, Gödel, Escher, Bach, haute couture, helicopter parent, high net worth, In Cold Blood by Truman Capote, income inequality, index fund, Jeff Bezos, job satisfaction, Johann Wolfgang von Goethe, Kevin Kelly, Lao Tzu, Law of Accelerating Returns, Lyft, Mahatma Gandhi, Marc Andreessen, Marshall McLuhan, Mikhail Gorbachev, minimum viable product, move fast and break things, move fast and break things, Naomi Klein, non-fiction novel, Peter Thiel, profit motive, Ralph Waldo Emerson, Ray Kurzweil, Saturday Night Live, side project, Silicon Valley, Skype, smart cities, smart contracts, Snapchat, Steve Jobs, Steven Pinker, Stewart Brand, sunk-cost fallacy, TaskRabbit, Tesla Model S, too big to fail, Turing machine, uber lyft, web application, Whole Earth Catalog, Y Combinator

A second piece of advice would be to seek out mentors constantly and without shame (and mentor others). This requires adhering to the above point, of course, but it highlights a vulnerability and asymmetry. Always be a student and always be a teacher. As for advice to ignore: Too often, I hear people effectively given advice that is consistent with sunk cost fallacies. I certainly heard it a lot. “You’ve spent X years learning Y, you can’t just up and leave and now do Z,” they say. I think this is flawed advice because it weighs too heavily the time behind you, which can’t be changed, and largely discounts the time in front of you, which is completely malleable.


pages: 631 words: 177,227

The Secret of Our Success: How Culture Is Driving Human Evolution, Domesticating Our Species, and Making Us Smarter by Joseph Henrich

agricultural Revolution, capital asset pricing model, Climategate, cognitive bias, Daniel Kahneman / Amos Tversky, delayed gratification, demographic transition, disinformation, endowment effect, experimental economics, experimental subject, Flynn Effect, impulse control, Monkeys Reject Unequal Pay, Nash equilibrium, out of africa, phenotype, placebo effect, profit maximization, randomized controlled trial, risk tolerance, side project, social intelligence, social web, Steven Pinker, sunk-cost fallacy, The Wisdom of Crowds, theory of mind, ultimatum game

In many contexts, but not all, we humans make systemic logical errors, see illusory correlations, misattribute causal forces to random processes, and give equal weight to small and large samples. Not only do humans often fall systematically short of these standard benchmarks, we actually often don’t do appreciably better than other species—like birds, bees, and rodents—on these tests. Sometimes, we do worse.22 We, for example, suffer from the Gambler’s fallacy, Concorde (or sunk cost) fallacy and Hot-hand fallacy, among others. Gamblers believe they are “due” at the craps tables (they’re not), movie goers continue watching painfully bad movies even if they know they’d have more fun doing something else (e.g., sleeping), and basketball betters see certain players get the “hot-hand,” even when they are actually seeing lucky streaks that are consistent with the player’s typical scoring percentage.


pages: 1,737 words: 491,616

Rationality: From AI to Zombies by Eliezer Yudkowsky

Albert Einstein, Alfred Russel Wallace, anthropic principle, anti-pattern, anti-work, Arthur Eddington, artificial general intelligence, availability heuristic, backpropagation, Bayesian statistics, Berlin Wall, Build a better mousetrap, Cass Sunstein, cellular automata, cognitive bias, cognitive dissonance, correlation does not imply causation, cosmological constant, creative destruction, Daniel Kahneman / Amos Tversky, dematerialisation, different worldview, discovery of DNA, disinformation, Douglas Hofstadter, Drosophila, effective altruism, experimental subject, Extropian, friendly AI, fundamental attribution error, Gödel, Escher, Bach, hindsight bias, index card, index fund, Isaac Newton, John Conway, John von Neumann, Long Term Capital Management, Louis Pasteur, mental accounting, meta-analysis, money market fund, Monty Hall problem, Nash equilibrium, Necker cube, NP-complete, P = NP, pattern recognition, Paul Graham, Peter Thiel, Pierre-Simon Laplace, placebo effect, planetary scale, prediction markets, random walk, Ray Kurzweil, reversible computing, Richard Feynman, risk tolerance, Rubik’s Cube, Saturday Night Live, Schrödinger's Cat, scientific mainstream, scientific worldview, sensible shoes, Silicon Valley, Silicon Valley startup, Singularitarianism, Solar eclipse in 1919, speech recognition, statistical model, Steven Pinker, strong AI, sunk-cost fallacy, technological singularity, The Bell Curve by Richard Herrnstein and Charles Murray, the map is not the territory, the scientific method, Turing complete, Turing machine, ultimatum game, X Prize, Y Combinator, zero-sum game

Most people answer this kind of question by thinking about whether “shy” matches their stereotypes of those professions. They fail to take into consideration how much more common salespeople are than librarians—seventy-five times as common, in the United States.9 Other examples of biases include duration neglect (evaluating experiences without regard to how long they lasted), the sunk cost fallacy (feeling committed to things you’ve spent resources on in the past, when you should be cutting your losses and moving on), and confirmation bias (giving more weight to evidence that confirms what we already believe).10,11 Knowing about a bias, however, is rarely enough to protect you from it.


Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen

3Com Palm IPO, accounting loophole / creative accounting, Airbus A320, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, big-box store, Black-Scholes formula, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, Carmen Reinhart, carried interest, collateralized debt obligation, compound rate of return, computerized trading, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-subsidies, discounted cash flows, disintermediation, diversified portfolio, equity premium, eurozone crisis, financial innovation, financial intermediation, fixed income, frictionless, fudge factor, German hyperinflation, implied volatility, index fund, information asymmetry, intangible asset, interest rate swap, inventory management, Iridium satellite, Kenneth Rogoff, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, prediction markets, price discrimination, principal–agent problem, profit maximization, purchasing power parity, QR code, quantitative trading / quantitative finance, random walk, Real Time Gross Settlement, risk free rate, risk tolerance, risk/return, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, Silicon Valley, Skype, Steve Jobs, sunk-cost fallacy, Tax Reform Act of 1986, The Nature of the Firm, the payments system, the rule of 72, time value of money, too big to fail, transaction costs, University of East Anglia, urban renewal, VA Linux, value at risk, Vanguard fund, yield curve, zero-coupon bond, zero-sum game, Zipcar

As Congress debated whether to cancel the program, supporters of the project argued that it would be foolish to abandon a project on which so much had already been spent. Others countered that it would be even more foolish to continue with a project that had proved so costly. Both groups were guilty of the sunk-cost fallacy; the money that had already been spent by NASA was irrecoverable and, therefore, irrelevant to the decision to terminate the project. Beware of Allocated Overhead Costs We have already mentioned that the accountant’s objective is not always the same as the investment analyst’s. A case in point is the allocation of overhead costs.