this post was submitted on 17 Jul 2024
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Lets supposed instead of real estate one fancies themself a world-renowned collector of antique radiator caps, as many of us dreamed of being when we were kids.
Two years ago you were able to acquire a radiator cap signed by Edward Jones Miscellania, a respected local automobile mechanic, for $300,000. Two years later, an appraisal places the true value at a disappointing $75,000.
Then a fellow collector offers you $150,000. Okay, now you have a choice. You can say "Don't be ridiculous! I already have $300,000 invested in this radiator cap."; Or you can correctly reason: What I have personally invested does not matter. The only thing I should consider is whether the $150,000 is a good price for my radiator cap.
If you opt for the second choice and pocket the $150,000, you've learned a key secret to life:
What you personally have invested never matters
It's the sunk cost fallacy.