The importance of seeing sunk costs

As Seth Godin has reminded us, the value of your eclipse sunglasses as of today is zero. Not almost zero. Absolutely zero. 

Sunk costs, in economic terms, is money that was spent in the past on projects/people/systems/software/materials/etc. that are no longer needed or have much faster/better/cheaper alternatives on the marketplace. It is money that was spent and is now gone. Simple as that.

Many people and corporations make one of the biggest mistakes you can make in business: holding onto ideas and processes because “that’s what we developed and it cost us a ton of money.”

Past methodologies, old software and hardware, employees that cost a ton to train but then left (maybe because they saw the embracing of sunk costs around them) … are all sunk costs.

The amount of capital plowed into JCPenney, Kmart, Target, and Walmart to try to counter Amazon unsuccssfully … sunk costs.

The time you spent developing talents that you used to possess, but those talents have waned over the years … sunk costs.

The software a wine retailer bought for $100,000 in 2005 only to be replaced by an open source software package seven years later … sunk cost.

All that matters is what you do going forward. What you spent to get where you are is gone.

Don’t let your sunk costs slow down your thinking.

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