The Disposable Startup?



Many years ago I was debating whether or not to finish my PhD dissertation. One of the people I talked to about this decision was Prof. Thomas Malone, whose office was next to the oversized closet that I shared with one other graduate student. I brought up the sunk cost fallacy and Tom looked deeply at me before saying something to the following effect: “When evaluating life choices don’t treat them on the basis of financial principles. Your time and effort are something deeply personal and not like fungible dollars.” This really stuck with me (thank you, Tom).

Years later, I am reminded of this conversation as I watched a video on quitting that also mentions the sunk cost principle as if it should be applied to life decisions. What then is a better way to make these choices? One talk that I have referred a lot of people to is by the philosopher Ruth Chang and it is called “How to make hard choices.” I highly recommend watching it in its entirety but the upshot is that we should see ourselves as the authors of our lives and ask what do we want this chapter to read like. This turns out to be a powerful framing and one I have applied repeatedly myself.

Now more recently I have heard a lot of investors bring up the sunk cost fallacy when it comes to backing startups. There is of course an old adage in venture “Don’t (Read more...)