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‘Sunk cost’ madness on a massive scale

We learnt yesterday how the sunk cost fallacy leads investors to throw good money after bad.

Well, here’s what I read in a leading business daily that talks about the impending financial crisis in the western world:

“An apocalyptic Lehman-style moment seems unlikely right now, because US legislators will likely come to some sort of a deal that will allow the federal government to resume borrowing, while Europe has invested too much in the integration project to let things collapse in the first episode of stress.”

Note the words – “invested too much…to let things collapse”.

Now, this is a case of ‘sunk cost fallacy’ on a massive scale.

Pity the poor taxpayer!

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

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