Learn more about economics with this collection
How to set clear objectives
How to follow up after a meeting
How to manage time effectively
But what if this behaviour was not always a mistake—what if, in certain situations, this “fallacy” were actually an optimal decision-making strategy?
Human beings—even rational ones—have a limited capacity to remember the original reasoning behind their decisions. If that capacity is exceeded, the information could be lost—so we need a mental placeholder that can remind us of why we decided something, just as tying a string around your finger reminds you that you need to pick up milk on the way home from work. This kind of ad hoc “memory device” is called a mnemonic.
19
204 reads
MORE IDEAS ON THIS
Any student of economics knows this basic rule, which states that rational agents should not take irrecoverable or “sunk” costs into account when making decisions about present or future investments. Nevertheless, human beings break this rule all the time, succumbing to a cognitive bias known as ...
26
450 reads
The Sunk Cost fallacy, then is a useful mental shortcut passed down to us by our savannah-dwelling ancestors.
We call it the ‘theory of the second best': The more you can remember, the better it is, and you don’t have to commit this fallacy at all. But if it’s a common feature of human bei...
19
148 reads
Read & Learn
20x Faster
without
deepstash
with
deepstash
with
deepstash
Access to 200,000+ ideas
—
Access to the mobile app
—
Unlimited idea saving & library
—
—
Unlimited history
—
—
Unlimited listening to ideas
—
—
Downloading & offline access
—
—
Personalized recommendations
—
—
Supercharge your mind with one idea per day
Enter your email and spend 1 minute every day to learn something new.
I agree to receive email updates