Seth godin has a few examples of sunk costs. I believe these examples better represent true sunk costs than some of the examples given here (such as the movie ticket).
For example, suppose you have paid 50 dollars for a Bruce Springsteen concert. You have searched long and hard for tickets this cheap. Suddenly, somebody offers you 500 dollars for the ticket. Do you sell it? The ticket is now worth $500 to you, and you would have never paid $500 for a ticket in the first place.
If you could teleport, you wouldn't need to pack, or book a hotel for that matter...
Yes, and if there was a utility lever that you could pull to gain utility, you would spend your entire life pulling the lever. But there isn't. And you cannot teleport, nor will you be able to in the foreseeable future. So Alicorn will have to continue taking the burden of travel into account when deciding whether or not to visit a place he would like to have visited.
I would personally love to see more cross-fertilization between that sub-community and LW, "dark arts" or no. (At least, I think I would; I don't know the community well and might be mistaken.) We need to make contact between abstract techniques for thinking through difficult issues, and on the ground practical strategicness. Importing people who've developed skilled strategicness in any domain that involves actual actions and observable success/failure, including dating (or sales, or start-ups, or ... ?), would be a good way to do this. If you could link to specific articles, or could create discussion threads that both communities might want to participate in, mattnewport, that would be good.
I second that. Here in the LW/OB/sci-fi/atheism/cryonics/AI... community, many of us fit quite a few stereotypes. I'll summarize them in one word that everybody understands: we're all nerds*. This means our lives and personalities introduce many biases into our way of thinking, and these often preclude discussions about acting rationally in interpersonal situations such as sales, dating etc. because we don't have much experience in these fields. Anything that bridges this gap would be extremely useful.
*this is not a value judgment. And not everybody conforms to this stereotype. I know, I know, but this is not the point. I'm talking averages here.
There's an extent to which we live in such a world. Many people believe you can achieve your wildest dreams if you only try hard enough, because by golly, all those people on the TV did it!
But many poor/middle-class people also believe that they can never become rich (except for the lottery) because the only ways to become rich are crime, fraud, or inheritance. And this leads them to underestimate the value of hard work, education, and risk-taking.
The median rationalist will perform better than these cynics. But his average wealth will also be higher, assuming he accurately observes his chances at becoming succesful.
Another reason for honoring the sunk cost of the movie ticket (related to avoiding regret) is that you know yourself well enough to realize you often make mistakes. There are many irrational reasons why you would not want to see the movie after all. Maybe you're unwilling to get up and go to the movie because you feel a little tired after eating too much. Maybe a friend who has already seen the movie discourages you to go, even though you know your tastes in movies don't always match. Maybe you're a little depressed and distracted by work/relationship/whatever problems. Etc.
For whatever reason, your past self chose to buy the ticket, and your present self does not want to see the movie. Your present self has more information. But this extra information is of dubious quality, and is not always relevant to the decision. But it still influences your state of mind, and you know that. How do you know which self is right? You don't, until after you've seen the movie. The marginal costs, in terms of mental discomfort, of seeing the movie and not liking it, are usually smaller than the marginal benefit of staying home and thinking about what a great movie it could have been.
The reasoning behind this trivial example can easily be adapted to sunk cost choices in situations that do matter.
The sunk cost fallacy is easy to understand and to point out to others, but I caution against using it too often. The point of the fallacy is to show that only future costs and benefits matter when making a decision. This is true, but in reality those costs and benefits (and especially their probabilities) are hard to define. It is not clear whether the extra information that was received after 'sinking' the cost has an impact on the cost and benefit probabilities. You also know that, in any case, if the decision to sink the cost in the first place was the right one after all, the decision to continue is even more rational as a large part of the cost has already been spent. You can go see a movie for free that other people still have to pay for.
Hmm... minus 2 karma. If my post's just cluttering the blog, I should kill it now to save reader time.
Did the post fail to illustrate the point in the first paragraph? Would you rather have your 2 minutes back? If so, out the window it goes, with my apologies!
Your post definitely illustrates your point, by misleading otherwise well-informed LW readers for at least a few paragraphs.*
Therefore, I believe it's a useful post. However, as you can see in the comments, the temptation to write lame follow-up jokes is just too big. Don't expect too much serious discussion here.
*unless they were previously familiar with the joke, of course.
Not to mention the many people who die each year because of DHMO inhalation.
Those people died after ingesting impure DHMO, which is 'watered down' by relatively unharmful minerals, making it only fatal after ingesting large amounts. 100% pure, distilled DHMO is actually extremely dangerous even in small quantities, as it leeches essential nutrients from your body through a nefarious process called 'reverse osmosis'.
[EDIT: this is actually not true, according to the wisdom of the interwebs. Thank you, extremely expensive European public school system, for filling my young impressionable mind with this untrue factoid. Nevertheless, the dangers and risks of DHMO ingestion remain poorly understood.]
I mean that if we're to know the evidential weight of winning the lottery to the theory that we're on the holodeck, we need to know P(L|H), so that we can calculate P(H|L) = P(L|H)P(H)/(P(L|H)P(H) + P(L|¬H)P(¬H)).
I get your point now. But all we need to know is whether P(L|H) > P(L|~H)*.
If this is the case, then if an extremely unlikely (P(L/~H) -> 0) event L happens to you, this evidently increases the chance that you're in a holodeck simulation. In the formula, P(L|H) equates to (almost) 1 as P(L|~H) approaches zero. The unlikelier the event (amazons on unicorns descending from the heavens to take you to the land of bread and honey), i.e. the larger the difference between P(L|H) and P(L|~H), the larger the probability that you're experiencing a simulation.
This is true as long as P(L|H) > P(L|~H). If L is a mundane event, P(L|H) = P(L|~H) and the formula reduces to P(H|L) = P(H). If L is so supremely banal that P(L|~H) > p(L|H), the occurence of L actually decreases the chance that you're experiencing a holodeck simulation.
Indeed, I believe that was the point of the original post.
The core assumption remains, of course, that you're more likely to win the lottery when you're experiencing a holodeck simulation than in the real world (P(L|H) > P(L|~H)).
I'm not well-versed in Bayesian reasoning, so correct me if I'm wrong. Your posts have definitely helped to clarify my thoughts.
*I don't know how to type the "not"-sign, so I'll use a tilde.
Strictly speaking you need to know the probability that you'll win the lottery given that you're on the holodeck to complete the calculation.
The person controlling the holodeck (who presumably designed the simulation) needs to know the probability. But the person being simulated, who experiences winning the lottery, does not need to know anything about the inner working of his (simulated) world. For the experience to seem real enough, it'd be best, even, not to know every detail of what's going on.
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It sounds like your fellow students understood the concept of a guessing penalty, but did not realise that the guessing penalty was too low in this case. One approach to convince them might have been:
Assume you get -0.0001 points for guessing an incorrect answer. Obviously, you should answer every question, because the penalty for guessing is so low. Now, assume that the guessing penalty is -20 points. Again, you obviously shouldn't guess. What would the penalty have to be where you're indifferent between guessing and not guessing? Obviously, when the penalty is -1 point. You guess two answers, one is correct and the other not, and your expected score is 0. In this case the penalty is -0.5, which is closer to -0.0001 than to -20, therefore you should always guess.
NB At my university, multiple choice exams always feature four possible answers, and you lose .33 for guessing incorrectly. Every student understands this concept perfectly. If they had to take your exam, they would've guessed every single time. It's strange to see that there are universities where the guessing penalty is not well calibrated. It seems like an elementary thing to do.