>Real life is often not as clear. We don’t know whether our costs are sunk or not.
I'm having trouble thinking of when it's not clear.
>Has the athlete who trained 7 years to get to elite status wasted her time, or is she on the brink of a series of pb’s that will rocket her into contention for gold, two months out from the olympics? It’s hard to tell.
>Should Vincent Van Gogh have stopped painting and studied a trade or a profession that would at least pay a living wage? Should his brother Theo have kept supporting him? It depends on when you do the reckoning. In Van Gogh’s case, the Art was never worth anything during his whole lifetime.
How they spent their lives so far was a sunk cost. That's clear. However, the skills they gained from those years should influence a rational choice. The years themselves are irrelevant. Even if they were perfectly rational, the athletes of today are likely to be athletes tomorrow, because it's easier for them to be an athlete tomorrow than an accountant.
The number of years they've sunk training should only come into play if it helps estimate how much further to their goals. Which means they should follow the opposite of the sunk cost fallacy: the less they've sunk so far, the better. Take your example athlete. If she had instead trained for 14 years to reach that same level of skill, even at the same age, shouldn't she see the Olympics as a less likely goal? It took twice as long to get where she is, so chances are it would also take longer to reach Olympic level.
> I'm having trouble thinking of when it's not clear.
I phrased that badly.
Past costs are always sunk. What's often not clear is whether the costs have yielded a positive return or a loss.
If you bought bitcoin at $50K, and the price today is $30K, your investment has yielded a loss.
If you bought Tesla at $100 and the price today is $700, your investment has yielded a profit.
If you've trained 7 years for the 100m freestyle, and today you're ranked fifth in the world, your training investment has gotten you to fifth in the world. Beyond that, it's difficult to assess the value.
What are your aims? What are your prospects?
Let's say your aim is to win an Olympic medal.
Should you train for another year in your quest to win an Olympic medal?
If you train for another year, will you win an Olympic medal?
The only certainty is that if you stop training, you won't win anything, and your investment has been in vain. Your costs are sunk with no return.
It's that certainty of failure by quitting, vs the uncertain but non-zero prospects of winning if you carry on and invest more, that nudges you towards the possibility of sunken costs fallacy i.e. throwing good money or time after bad, even past the point of no return.
I'm having trouble thinking of when it's not clear.
>Has the athlete who trained 7 years to get to elite status wasted her time, or is she on the brink of a series of pb’s that will rocket her into contention for gold, two months out from the olympics? It’s hard to tell.
>Should Vincent Van Gogh have stopped painting and studied a trade or a profession that would at least pay a living wage? Should his brother Theo have kept supporting him? It depends on when you do the reckoning. In Van Gogh’s case, the Art was never worth anything during his whole lifetime.
How they spent their lives so far was a sunk cost. That's clear. However, the skills they gained from those years should influence a rational choice. The years themselves are irrelevant. Even if they were perfectly rational, the athletes of today are likely to be athletes tomorrow, because it's easier for them to be an athlete tomorrow than an accountant.
The number of years they've sunk training should only come into play if it helps estimate how much further to their goals. Which means they should follow the opposite of the sunk cost fallacy: the less they've sunk so far, the better. Take your example athlete. If she had instead trained for 14 years to reach that same level of skill, even at the same age, shouldn't she see the Olympics as a less likely goal? It took twice as long to get where she is, so chances are it would also take longer to reach Olympic level.