The Reality of Sunk Costs Stinks

Jason Fried and David Heinemeier Hansson, founders of 37signals, have authored a thought provoking and fun to read book called REMOTE, Office Not Required, a book that asks “Do you truly need office space?”. These guys debunk assumptions about the benefits of traditional office environments to help build the case for working remotely.

Here is one example of a section that I found profound titled We Paid A Lot Of Money For This Office!

“This probably ranks up there for the most foolish excuse to forbid working remotely, but that hasn’t prevented it from being aired from time to time. You really shouldn’t have to dignify it with a response, yet you might just have to, so here we go.

If someone has run a business well enough to be able to afford a fancy office, you’d think they’d familiar with the idea of “sunk cost.” But hey, we all look at the Kardashians and think, How on earth did they get where they are? Just summon that feeling, suspend your disbelief, and strap on your tweed blazer for a lesson in Business 101.

Sunk cost means that the money spent on the office is already spent. Whoever paid for it is not getting it back, whether it’s being used or not. So, rationally, the only think that matters regarding where to work is whether the office is a more productive place or not. That’s it.

If you want to get all mathematical about it, take out a napkin and jot down a few numbers. Say you can get four productive hours out of the office (ha!) and six productive house out of working from home. Thats a 20 percent more productively by working in your living room. Who’s going to argue against that?

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