ShmoopTube

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Finance allah shmoop What are sunk costs Mother sunk there

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gone There been no money back guarantee kind of costs

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Gold diggers No different kind of gold digger Real ones

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heading to a far off land in a politically unstable

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country Where this week you happen to believe that american

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relationships with whatever stand will be Oh just great forever

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You spend fifty million bucks shipping tractors trucks granola bars

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anti diarrheal medicine hard hats and twenty thousand of those

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little pan thing is that you you know paying for

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golden You know those All right Well you just start

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digging and well there's a coup and the prime minister

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of whatever stand is overthrown by rebels and you have

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to leave or die What to do what to do

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what to do Well so yep That's Fifty billion bucks

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sunk Gone No money back Cia Fifty mil Those dollars

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sunk But some costs aren't just about costs that were

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you know gone and never to be gotten back They

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also relate to project started where you can't get your

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initial outlay back Like when a large corporation are twelve

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Newly minted mba is for their corporate finance department And

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nine get fired within the first two years Could you

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have saved a million box and just hired the three

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Good ones instead No why Because you never know who

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the good ones will be in advance until they've been

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you know tested on the field of financial battle the

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nine fails or a sunk cost of the business You

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can also think about typical sunk costs as revolving around

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the decision whether you should continue to produce a product

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like when you're managing a company you really need to

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ignore sunk costs For example think about our little lemonade

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stand prototype Here we use the best granite and reclaimed

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wood and we're selling lemonade for a buck a glass

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and are variable costs or in fifteen cents give or

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take We spent a million dollars on a lemonade stand

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Is that million dollars considered when we decide whether or

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not we gotta work tomorrow We'll know it's a sunk

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cost or nothing we can do about it It doesn't

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affect whether we go to work tomorrow or not side

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in fact pair so sunk costs are costs which big

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boys and big girls know are never recoup a ble

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there indem it parts of doing business as capital is

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risked on ventures that may or may not have positive

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Payback But hopefully your payback is better than the payback 00:02:26.313 --> [endTime] because this guy got

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