HomeMy WebLinkAbout3/7/2023 Item 6d, Cross
Brett Cross <
To:E-mail Council Website
Subject:Item 6d. AWARD NORTH CHORRO NEIGHBORHOOD GREENWAY PROJECT,
SPECIFICATION NO. 1000036
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Dear Council Members,
I think is important for you to have a good understanding of the concept of Sunk Cost. Here's a short summary but there
are more in-depth articles and examples online by searching for Sunk Costs.
I believe the concept needs to be understood in the context of the Greenway Project. This project has gotten very
expensive and the benefits specific to this routing and specific marginal increases in bicycle trips through the Anholm
neighborhood has never been really quantified. I don't want to get into Cost-Benefit analysis too deeply but that concept
should also be something you're thinking about when deciding to go forward with this particular project as opposed to
other routing through this neighborhood or other City bicycle project.
Anyway, here a short discussion regarding Sunk Cost and why it's important to understand the principle in decision
making.
"
What is the sunk cost fallacy?
The sunk cost fallacy is our tendency to continue with an endeavor we’ve invested money, effort, or
time into—even if the current costs outweigh the benefits. And while the term sounds like technical
jargon, it’s a common decision-making pitfall in both life and business. The sunk cost fallacy can
describe trivial things like continuing to watch a boring movie you’ve purchased, or more serious
matters like refusing to pull out of a failing business investment. In common terms, the sunk cost
fallacy is often called “throwing good money after bad.”
Whenever we fall prey to the sunk cost fallacy, we make irrational decisions that are against our best
interest. And since this tendency is so deeply ingrained in human behavior, it’s important to
understand how the sunk cost fallacy works so we can make good decisions based on logic—not dig
ourselves into a deeper and deeper hole.
What is a sunk cost?
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In economics, a “sunk cost” is an expense that’s already been incurred and can’t be recovered. Think
of a sunk cost as a past cost you can’t get back, like money you’ve put into a business project or time
you’ve spent in a relationship. In a logical world, sunk costs aren’t relevant to our future decisions.
That’s because our decisions should be based purely on estimated future costs and business goals,
not old investments that can’t be reversed. "
Sincerely,
Brett Cross
San Luis Obispo, CA 93405
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