Apr 12, 2016

Sunken Costs and Sausages

Last week I went to a client conveniently located in a fantastic tourist destination and I had great opportunity to add some weight while having good times. I was recommended a restaurant serving fantastic one-in-the-world sausages and one evening I took the walk to get there. It was bit off the tourist and business tracks and soon I got to a part of the city where nothing much was happening and I was expecting a quiet and tasty dinner. However, to my surprise the restaurant was crowded as an Apple store on a release of a new iPhone! People were standing with a beverage and plate of sausage so close to each other that even basic activities as checking Facebook seemed impossible. My companions were all "See how good is this place!". But was it really the food that kept people in?


The nearest good restaurant offering similar food and prices was at least 15 min walk. Getting to the popular venues would also take 20 minutes and people there looked  hungry. Despite I did not go in I am sure the sausages were at least as great as anything else I had in that city but it was not the thing keeping the restaurant busy.The combination of location, good food and adequate presence on the tourist guides obviously helps a lot but the it was also what is around that has a decisive impact on number of people in the venue. So we had a classical textbook case of sunken cost. It got me thinking about how well we know the mental biases when we read about them and often we forget them. As a analytical practitioner I often see how often people overlook even the most well-known shortcomings of our analytical abilities. You can indulge your curiosity with the full list of biases here.

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