Sunk costs are time and money (and other resources) you have already spent on a project, investment or some other effort. They have been sunk into the effort and most likely you cannot get them back.
Of course this doesn't just apply to businesses, but to everyday life. I just have to look around the house, in my closet, at my bookshelves, my sewing stash (though most of it came to me free) and my
The important thing about sunk costs is when it comes time to make a decision about the project or investment, you should NOT factor in the sunk costs in that decision. You should treat them as gone already and make the decision based on what is in front of you in terms of costs and opportunities.
He goes on with another business example, but I know this whole idea of Sunk Costs haunts people when they think about clearing out their clutter. They punish themselves for clothing mistakes, hang onto books they feel they 'should' re-read, treat magazines as a source of encyclopedic knowledge to be treasured. A downside of being interested in re-fashioning is that every lovely piece of fabric looks like it has 'potential'. (Have you worked out yet that for 'They', read 'Shelley'?).
Several major blessings of late have been that Bill's son and son-in-law have each got interested in running, so I could easily pull out all the Runners World magazines for re-distribution. The local community centre where I go sewing is having a book sale in a few months. As all our books had to be boxed up in preparation for Bill's painting project. The process of re-placing those books in the shelves has presented the perfect opportunity for re-assessing ownership. Even Bill has been culling his collection. I have been offering my books to the sewing ladies first, in return for all the nice books and fabrics they have given me, then the rest go to the centre. The ladies often read their selections and bring them back for donation the following week.
It has just occurred to me that, having decided that I don't do cross-stitch projects any longer, I could go through that drawer and pull out some items that a few of the sewing ladies would enjoy! I might get over those Sunk Costs yet!
Do you look around and see a lot of Sunk Costs?