Sunk Costs

"Rage, rage against the dying of the light"
Dylan Thomas

Seth has started a firestorm on the blogosphere with his post on "Ignore sunk costs".

When making a choice between two options, only consider what's going to happen in the future, not which investments you've made in the past. The past investments are over, lost, gone forever. They are irrelevant to the future.

Sunk costs refers to the reevaluation of a decision ignoring the time, effort and money you have already devoted to a project. (i.e. You open a restaurant (cost= $200,000), the health of the business is poor ($100,000 loss, since you opened twelve months ago), the prospects are even worse (projected $150,000 loss in the next twelve months).

You have $10,000 to invest. Do you:

A) Continue to finance the losses of your business by investing the $10,000 you have and find other financing for the remainder of the loss because you have already invested $300,000.00 plus your time, lifestyle, heart and soul into this business (Sunk Costs), and there is no other option but to keep fighting until your last dying breath.

B) Liquidate your business today for nothing, take a complete loss on your (Sunk Costs) . Take the $10,000 that you have and invest in something else.

C) Do nothing and hope!

Sunk costs is a lighting rod because all successful people are members of a group. The group consists of those who have persevered against some obstacle. There is the age old wisdom about the gold mine that existed one foot from where the miners stopped digging and gave up. The miners had dug deep into the mine, being tired, desolate and vanquished they surrendered before their last dying breath and the object of their quest lay only one foot in front of them.

Brian Tracy advises to look at every aspect of your life and ask yourself, "knowing what I now know would I make this decision?" If the answer is yes keep digging, if the answer is no stop and go home.

Ultimately the decision is one that impacts your life forever. I believe that you rage against the dying of the light.