Good morning. Have you ever gone to a movie theater and sat through an hour of a two-hour

movie and thought, this is a terrible movie? But then you still stayed the extra hour

because you paid for it. And already it invested an hour of your time. This is an example

of a microeconomic behavioral dynamic called sunk cost, which I think has large implications for us personally and for our culture in the coming decades.

And today I want to talk about sunk cost, not just as an economic term from textbooks, but as a real force shaping our lives, our homes, our careers,

as well as the way civilization reacts to the great simplification.

Okay, definition first.

A sunk cost is any past expense, time, money, effort that cannot be recovered.

And if we were totally rational as people or as a species.

Logic would suggest that sunk costs should be ignored.

We cannot regain any of what we've lost by continuing to spend more on the same thing.

And continuing with the past will only hurt us and make it even harder to change course in the future.

Instead, we should make decisions based only on our present situation, the circumstances,

and the expected future payoffs.

Of course, this is easier said than done because humans have memories and emotions and social status, all things that we've tied

our sense of identity to.

We protect past investments as if they were living things, as if they were literally us.

So sunk costs shows up in small ways all the time in our society that previously mentioned bad movie we sit through.

A huge expensive meal that you keep eating because you paid for it.

An expensive jacket that is a size too big, but we still wear it because it was pretty expensive.

We kind of chuckle at these examples because they're familiar and they also can be seen

ultimately as pretty trivial in the scheme of things.

...