‘You’ve bought it now. The money’s gone.’ That snarky comment made by thousands of parents (mine included) to their reckless child encapsulates the meaning of sunk cost. Once you met the cost, it’s gone: sunk. You’ve sunk it into the investment for good or for ill.
This, then, could be the shortest Big Ideas article yet. Sunk Cost is a familiar and easy concept.
Why is the Pocketblog writing about ‘the worst of humanity’? Because nothing is fixed. But if you don’t know how Confirmation Bias works, you are powerless to deal with it.
Confirmation Bias is just one of many cognitive biases and thinking traps our giant, yet lazy, brains are prey to. But it is the one that is responsible for the most ills in the world. And it is also responsible for bad judgments in business, politics, and public administration.
So, we think it falls very much within the scope of our Big Ideas series. Unless you understand the big idea of what confirmation bias is, you cannot take it on with the simple tools that are available to you.
Your brain is wired to think fast. So, to do this, it needs to take shortcuts, that psychologists call heuristics. But these shortcuts don’t always give the right answer. They give rise to cognitive bias.
Cognitive bias is the result of the shortcuts. If every car door you’ve ever encountered opens outwards, it’s a good bet that the next one you encounter will too. That’s a bias in your assumptions. Usually, it serves you well. One day, it may let you down.
But the cognitive biases that we need to worry about are those that are baked into our mental operating system. We make the mistakes without realising it. They lead to bad decisions – sometimes to catastrophe.
