The Concorde Fallacy

By Annett Koegler, Co-founder at Santex

Why we finish movies we aren’t enjoying, stay in bad relationships, hold on to investments that are underperforming.

 

When you lose something permanently, it hurts.

In order to avoid this negative feeling we do irrational things. You probably have been to a restaurant and ordered something terrible, but you ate it anyway. You didn’t want to waste the money, so you suffered through it. Or you went to a concert even though you did not feel like or something else was more interesting. You still went in order to justify spending money you knew you could never get back. If you can identify with any of these stories, you fell victim to the sunk cost fallacy, also known as the Concorde fallacy.

The Concorde was a joint development program of the British and French governments that continued when the economic benefits of the project were no longer possible. It was designed to be a supersonic passenger aircraft but its lasting legacy resides mostly in game theory, where it has been adopted as a description of irrational behavior.

image-concorde presentation

The fallacy is known for valuing a project based on how much you’ve invested, its “sunk costs”, rather than on its real present value.

If its value is negative and future costs outweigh future benefits, you should abandon it, regardless of how much you’ve already invested. No decision can influence what you’ve already spent, and only future costs and benefits should be allowed to affect decisions.

It is difficult to overcome our own irrationality, we take general good rules and misapply them. We tend think of money we’ve already lost as being ‘still on the table,’ and if only we increase the commitment, we could get it back. To leave would force us to admit our mistake and deal with the cost.

“Pride goeth before destruction” – Proverbs 16:18

Why?

One explanation is the reward that is placed to fall pray of the fallacy by our institutions. In politics for example we do not pay the price for being wrong individually, since not one person decides the election. We usually make voting decisions that are biased and ill-informed. Unlike politics, the market does often punish those who fall for the sunken cost fallacy. Companies are rewarded for overcoming people’s biases, while vote-seeking politicians are rewarded for gratifying them.

Another explanation is loss aversion. From a psychological point most people prefer to keep their losses low, even if it means enduring a bad experience.

We humans are unique. We like to hang on to investments that we know are going to fail, in an effort to recuperate the money already invested.

We stay in careers that make us unhappy, since we are already with the company for 10 years and it has to get better as some point.

We don’t realize that the time and money you’ve sunk is irrelevant, because it is a backward looking decisions.

The exact reasons why people pay attention to sunk costs are not clear, but the smartest choice is most likely to walk away and cut your losses, something most are not will to do. Our decisions should be for the future and not for justifying the past.

“After a crisis we tell ourselves we understand why it happened and maintain the illusion that the world is understandable. In fact, we should accept the world is incomprehensible much of the time.’” -Daniel Kahneman

About the Author – Annett Koegler is the co-founder of Santex. Former web developer and now managing the global financial affairs of Santex. Growing up in Communist East Germany, building a company in the United States, Argentina and Peru, and living across multiple continents, her life is far from basic. If you can’t find her behind her desk or on the next airplane, she is running, paddle boarding or exploring some undiscovered parts of this world.

5 WWDC ’16 Announcements Every Software Development Company Needs to Know

By Coleman Miller – iOS Developer at Santex

wwdc16

Apple made a lot of announcements last month in its annual World Wide Developer Conference, and introduced the latest versions of its operating systems and developer tools. Here is a breakdown of the most important announcements that will affect software development companies moving forward.

1. SiriKit

In my opinion, this is the most sought-after functionality developers and clients alike have requested over the years. Well, its finally here. Apple is providing a public API so third parties can develop iOS extensions that trigger in response to Siri. The only drawback is that it is limited to the following categories:

  • Audio or video calling
  • Messaging
  • Payments
  • Searching photos
  • Workouts
  • Ride booking

In addition to these new features, its worth mentioning that Siri already supports automotive control features with CarPlay, and HomeKit has allowed allowed Home Automation with Siri since iOS 8. This new API is going to help usher in a wave of innovation and new categories of mobile apps we haven’t seen before. It will also greatly improve the UX of existing apps like Uber and WhatsApp.

2. Swift 3

Although this should be #1 on this list, I believe Swift will bring more changes to software industry in the long term, but short term, Swift 3.0 is a huge improvement from 2.3. One of the biggest breaking changes is Apple adding “Swift Overlays” to its frameworks (some of which were originally written in Objective-C in the 90s) to make Swift a first-class citizen for iOS development. Another breaking change that will affect every single iOS app (with any Swift code), is the move by Apple to forgo classes in favor of structs and value types in its Foundation framework. This is more than a simple API change, it’s in fact, a huge paradigm change for current Apple Developers and programmers coming from other languages like Java, C#, and JavaScript. C developers should feel at home though. Unlike last year, Apple is letting developers chose between Swift 3.0 and Swift 2.3 for publishing apps to the App Store, so developers can take their time migrating to the new version of Swift.

3. Home App

When HomeKit was announced in iOS 8, it took a while for companies to make their existing IoT products HomeKit-compatible. Fast forward 2 years, and now HomeKit is a first-class citizen of iOS, even shipping a beautiful `Home.app` on your home screen. HomeKit’s goal is the unification of IoT and Home Automation products by adopting an Apple-defined protocol so they can easily talk to each other. This allows you to control the lights in your house via Siri, and setup home automation rules (Apple calls them “Scenes”) similar to what IFTTT does with apps. While Apple has accomplished this goal protocol-wise (by providing both HTTP and Bluetooth variations of its HomeKit Accessory Protocol to encompass all manner of devices), besides the Siri integration, Apple provided no user interface for HomeKit, and on the app side, that experience was fragmented. With the new Home app, centralized home automation is easier than ever, and you won’t need to download the specific third-party apps for each HomeKit accessory you purchase. This should boost HomeKit’s popularity and demand with hardware developers.

4. WatchOS GPU-accelerated Games

WatchOS is in a special category of iOS development due to the lack of native APIs like OpenGL and UIKit. While most attribute the App Store’s success to the proliferation of mobile games, that innovation and boom would have not been possible had the iPhone only allowed Web apps like Steve Jobs originally planned. Due to the issue of battery life, the Apple Watch provides a very limited API for native apps, in fact, its more limited then making an average website. One way Apple wants to lure developers to its WatchOS platform is by allowing them to make OpenGL accelerated 2D and 3D games with its SpriteKit and SceneKit frameworks. Since this is what many developers have asked for since day one, it will promote a boom of WatchOS games, like we see on the iOS and tvOS platforms. One drawback is the fact that those platforms can use OpenGL and natively port their code from Android, to iOS. WatchOS game developers will have to rewrite their rendering code for Apple’s platform.

5. Message and Map Extensions

With the introduction of iOS extensions in iOS 8, Apple has allowed third party apps to embed a part of their app in Apple’s stock apps (e.g. Contacts, Photos) and other third party apps. Now in iOS 10, developer’s can write extensions for the Message and Map stock apps. This will allow users to use apps like Uber and Yelp in the stock `Maps.app` without having to switch between contexts. The Message extensions allow all manner of custom content in the stock iOS messaging app, again, allowing for a new category of mobile apps.

About the AuthorColeman Miller is an experienced iOS Developer at Santex,  passionate about his work.  Coleman is continuously learning and training to investigate new technologies.