Saturday, February 15, 2014

Happy Valentine's Day

Best definition of sunk costs: here.

(graphic via Greg Mankiw)


  1. They will be together forever until one or both of them will have an affair and then they will get a divorce and fight over the kids.

  2. "Sunk costs drive wars, push up prices in auctions and keep failed political policies alive. The fallacy makes you finish the meal when you are already full. It fills your home with things you no longer want or use. Every garage sale is a funeral for someone’s sunk costs."

  3. Sunk cost is exactly what made me walk away from a half million dollar building I bought in 06, at the height of real estate bubble(that I was contractually obligated to buy) , in 09'.

    I had two appraisers within $15k of each other come in $465 & 485 in 06. The last valuation I had in 09' was $280,000. I was upside down well over $100k and my business was falling apart with overhead piling on.

    I walked away and relocated my business(and saved it) to another building and drastically reduced my overhead. It was the best decision I made in difficult times, but it took my attorney to slap me around a bit before coming to it because I was in an emotional shit hole and trying to make too many people happy at my own expense.

    5 years later the building remains empty and unsold. BB&T got a judgement against my no asset property holding LLC but won't foreclose....a variation on their extend and pretend scheme so they avoid mark to market I'm sure.