sunk cost fallacy

Definition

The irrational commitment to failing projects because you've already wasted so much time and money that stopping now would mean admitting it was all pointless. It's throwing good money after bad while calling it 'persistence.'

Example Usage

We've spent $2 million on this feature nobody wants, but the sunk cost fallacy means we'll spend $2 million more before admitting defeat.

Source: Behavioral economics and decision theory

Related Terms

Advanced

Hedge

An investment made to offset potential losses in another investment, which is basically placing a bet that your other bet might be wrong. It's the financial equivalent of bringing both sunscreen and an umbrella because you have zero faith in the weather forecast.

💰 Finance / Accounting

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aged receivables

Outstanding customer invoices categorized by how long they've been unpaid, typically in 30-day buckets. The older they get, the more they resemble wine—except instead of improving with age, they become increasingly worthless.

💰 Finance / Accounting

Advanced

subordinated

In finance, debt or claims that get paid last in the hierarchy of bankruptcy proceedings—basically the financial equivalent of standing at the back of the line. Subordinated debt holders only get paid after senior creditors are satisfied, making it riskier but typically offering higher returns. It's the 'you'll get yours if there's anything left' category of obligations.

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grant

Money given to organizations or individuals, usually with more strings attached than a marionette convention and enough paperwork to deforest a small nation. Unlike loans, grants don't require repayment—just your soul, quarterly reports, and the ability to justify every pencil purchase. In the nonprofit and academic worlds, securing grants is essentially a full-time job that determines whether your actual job continues to exist.

💰 Finance / Accounting

Beginner

Equity

The theoretical money trapped inside your walls that everyone talks about but you can never actually touch without borrowing against it. It's like Monopoly money that your house keeps score with.

💰 Finance / Accounting🏠 Real Estate

Intermediate

materiality

The threshold at which an error or omission would influence the decisions of financial statement users, essentially the line between 'oops' and 'fraud.' It's subjective, context-dependent, and endlessly debatable.

💰 Finance / Accounting

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