We collect cookies to analyze our website traffic and performance; we never collect any personal data. Cookie Policy
Accept
The Tycoon Herald
  • Trending
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Money
    • Crypto / NFT
  • Innovation
  • Lifestyle
    • Lifestyle
    • Food
    • Travel
    • Fashion
    • Leadership
  • Health
  • Sports
  • Entertainment
Reading: Sunk Costs And Opportunity Costs In Startups
Sign In
The Tycoon HeraldThe Tycoon Herald
Font ResizerAa
Search
  • Trending
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Money
    • Crypto / NFT
  • Innovation
  • Lifestyle
    • Lifestyle
    • Food
    • Travel
    • Fashion
    • Leadership
  • Health
  • Sports
  • Entertainment
Have an existing account? Sign In
Follow US
© Tycoon Herald. All Rights Reserved.
The Tycoon Herald > Business > Sunk Costs And Opportunity Costs In Startups
BusinessLeadership

Sunk Costs And Opportunity Costs In Startups

Tycoon Herald
By Tycoon Herald 4 Min Read
Share
SHARE

Understanding sunk costs and opportunity cots is vital for avoiding the worse trap in startups – the … [+] land of the living dead.

getty

The worst outcome of a startup project isn’t failure. If failure is quick and cheap, the value of the gained insight might outweigh the cost of the failure.

The worst outcome is to join the so-called ranks of the living dead – startups that are not growing fast enough to become self-sustaining businesses of sufficient scale, yet manage to survive for extended periods. Getting stuck in the limbo in-between success and failure could become extremely costly professionally and personally.

This is not a cost that is represented by money lost (as is the case with outright failure), but by all the resources that have gone into a project that doesn’t manage to show sufficient potential.

Founder of Angel List and investor Naval Ravikant advises entrepreneurs to pick an hourly rate for themselves – something that feels absurdly high, in order to quantify and comprehend the real value of time, especially of people with the ambition and potential to build valuable companies. He originally picked a $5k hourly rate for himself.

Imagine if Naval is the founder of a startup that is struggling to survive and failing to grow for one year. Even if this company technically isn’t losing money, it is losing Naval’s time, which is extremely expensive. The reason the absurd $5k per hour figure isn’t as far removed from reality as you might think is that while he is working on this project that fails to bear fruit, he isn’t building Angel List or investing in promising startups, which means he is foregoing millions of dollars worth of value generation.

Understanding opportunity costs well would let you value your time enough to be able to let mildly successful projects go in order to chase projects that can realize your full potential. This, in turn, would help you avoid the trap of the land of the living dead.

MORE FOR YOU

Another economic concept useful for startups that has a similar effect is sunk costs. Sunk costs are simply money that has been spent and cannot be recovered. The reason the concept is interesting is psychological, rather than economic. The sunk cost fallacy is the tendency to over-invest resources in a certain project because you have already invested in it. It is a fallacy because if new information reveals that this project is not the best use of your resources, it is rational to divest from it rather than invest further in it.

In the land of startups, the sunk cost fallacy can result in losing a lot more resources than you have to in your bad bets. Needless to say, dealing with bad bets gracefully is a crucial skill in startups. When you are playing a high-risk high-reward game, it is important to be able to make multiple bets as cheaply and quickly as possible in order to find the winning bet before you run out of resources. Moreover, learning from your failures and adapting to market feedback are crucial skills, and the sunk cost fallacy is an obstacle for this process.

This is why “fail fast” is a common mantra in the valley, and why internalizing the opportunity cost and sunk cost concepts as mental models can be crucial for your long-term success as a startup founder.

You Might Also Like

Leadership Coaching for the Actual World

Leadership Coaching for the Actual World

Leadership Coaching for the Actual World

Leadership Coaching for the Actual World

Leadership Coaching for the Actual World

TAGGED:BusinessThe Forbes Journal
Share This Article
Facebook Twitter Email Copy Link Print
Blake Vigorous to be Deposed Subsequent Week in Justin Baldoni Case
Entertainment

Blake Vigorous to be Deposed Subsequent Week in Justin Baldoni Case

Blake Vigorous To Be Deposed Subsequent Week Amid Baldoni Authorized Drama Revealed July 7, 2025 4:13 PM PDT Blake Vigorous is prepared for a serious improvement in her ongoing authorized…

By Tycoon Herald 2 Min Read
The markets simply don’t imagine Trump on tariffs
July 8, 2025
At present on Sky Sports activities Racing: Lingfield, Brighton and Uttoxeter host Tuesday’s reside conferences
July 8, 2025
Why Most Self-Assist Recommendation Makes You Really feel Worse (And What Works As a substitute) | FashionBeans
July 8, 2025
Kris Jenner Debuts New Bob and Snatched Look Throughout Paris Outing
July 8, 2025

You Might Also Like

Joseph Safina’s Driven Becomes Amazon Bestseller, Blending High Finance with High Speeds
BusinessTrending

Joseph Safina’s Driven Becomes Amazon Bestseller, Blending High Finance with High Speeds

By Tycoon Herald 6 Min Read
Leadership Coaching for the Actual World
Leadership

Leadership Coaching for the Actual World

By Tycoon Herald 2 Min Read
5 SMART Aim-Setting Rules
Leadership

5 SMART Aim-Setting Rules

By Tycoon Herald 1 Min Read

More Popular from Tycoon Herald

MEET THE FATHER OF COADUNATE ECONOMIC MODEL
BusinessTrending

MEET THE FATHER OF COADUNATE ECONOMIC MODEL

By Tycoon Herald 2 Min Read
Woman Sentenced to 7 Days in Jail for Walking in Yellowstone’s Thermal Area

Woman Sentenced to 7 Days in Jail for Walking in Yellowstone’s Thermal Area

By Tycoon Herald
Empowering Fintech Innovation: Swiss Options Partners with Stripe to Transform Digital Payments
InnovationTrending

Empowering Fintech Innovation: Swiss Options Partners with Stripe to Transform Digital Payments

By Tycoon Herald 7 Min Read
Entertainment

Ex-Princeton Soccer Participant Tiger Bech Killed In New Orleans Terrorist Assault

Former faculty soccer standout Tiger Bech was killed within the New Orleans terrorist assault early Wednesday…

By Tycoon Herald
Business

Kohl’s beats earnings estimates, raises EPS steering; shares rise By Investing.com

Kohl's (NYSE:) reported better-than-expected second-quarter earnings on Thursday, regardless of a decline in gross sales, and…

By Tycoon Herald
Trending

U.S. Blew Up a C.I.A. Post Used to Evacuate At-Risk Afghans

A controlled detonation by American forces that was heard throughout Kabul has destroyed Eagle Base, the…

By Tycoon Herald
Leadership

Northern Lights: 17 Best Places To See Them In 2021

Who doesn’t dream of seeing the northern lights? According to a new survey conducted by Hilton, 59% of Americans…

By Tycoon Herald
Real Estate

Exploring Bigfork, Montana: A Little Town On A Big Pond

Bigfork, Montana, offers picturesque paradise in the northern wilderness. National Parks Realty With the melting of…

By Tycoon Herald
Leadership

Leaders Need To Know Character Could Be Vital For Corporate Culture

Disney's unique culture encourages young employees to turn up for work with smiles on their faces.…

By Tycoon Herald
The Tycoon Herald

Tycoon Herald: Your instant connection to breaking stories and live updates. Stay informed with our real-time coverage across politics, tech, entertainment, and more. Your reliable source for 24/7 news.

Company

  • About Us
  • Newsroom Policies & Standards
  • Diversity & Inclusion
  • Careers
  • Media & Community Relations
  • WP Creative Group
  • Accessibility Statement

Contact Us

  • Contact Us
  • Contact Customer Care
  • Advertise
  • Licensing & Syndication
  • Request a Correction
  • Contact the Newsroom
  • Send a News Tip
  • Report a Vulnerability

Terms of Use

  • Digital Products Terms of Sale
  • Terms of Service
  • Privacy Policy
  • Cookie Settings
  • Submissions & Discussion Policy
  • RSS Terms of Service
  • Ad Choices
© Tycoon Herald. All Rights Reserved.
Welcome Back!

Sign in to your account

Lost your password?