Welcome back to the 1st Law Newsletter - Friday Edition.

In this email:

• Its never too late to pivot

• Experiencing life through other people

• Be inspired by those around you

The sunk cost fallacy

The sunk cost fallacy is our tendency to continue to invest our time, money and effort into pursuits whose costs outweigh their benefits. The phenomenon whereby a person is reluctant to abandon a strategy or course of action because they have invested heavily in it, even when it is clear that abandonment would be more beneficial. This tendency stems from human nature; it is hard to cut ties with something - especially if it has been a losing endeavor and we have already invested heavily into it. We always cling to the slim possibility that we will recover it all and that it will be worth it in the end. This applies to all aspects of life including your relationships, friendships, career, investments, and hobbies.

The ideal scenario is to have a mindset of no sunk costs. No matter how much we have already invested in a losing venture, as soon as we realize it is not worthwhile anymore and we see an opportunity elsewhere, we need to cut ties and move on. The concept of opportunity cost refers the potential gains missed by not taking advantage of new opportunities. If we adopt the mindset of cutting ties quickly and not clinging to our sunk costs, we will be better off in the long run. The sunk costs we have incurred shall be lost, but more importantly, our opportunity costs will be preserved. We will be able to spend our precious resources (time, money, energy) on something more worthwhile and promising. To internalize this concept, consider the following examples.

• You've been working on a business plan for 2 months, but suddenly you get new information that invalidates the business plan, or you simply get a better idea. Ideal action to take: cut ties and move on immediately, the opportunity cost is too high.

• You are halfway through a book that you don't love, but you feel committed to finishing it. What you should do: stop reading immediately and find a better book. This one is important because there are soooo many amazing books to read, don't waste time on average books.

• A stock you hold is down 50%. This one can be tricky because it is very dependent on how irrational the market is at the time and the future prospects of the company. However, you should realize that to regain your sunk costs, the stock will have to go up 100%. If you do not see this happening in the short term, and you identify another attractive investment, you should sell, accept the loss, and move on to a new investment.

"No matter how far you've gone down the wrong road, turn back."— Turkish proverb

Living Vicariously Through... Anybody but Ourselves

As technology becomes more advanced, real world experiences become less novel and unique, and as a result become less desirable. If we can watch someone else do something, it lessens the want for us to go out and experience that thing for real. If we can lie in our bed, put a VR headset on and go travel the world, why would we go through all the pain and discomfort of real life travel? Advances in these sorts of tech have resulted in young people becoming late bloomers in nearly all aspects of life: jobs, driving, sex, kids, marriage, travel, risk taking. We are all too often content with settling for watching the experience rather than the actual experience. We live through other people doing things rather than living our own lives.

Quote I Want To Share

I do this often when I am on a walk and need to clear my mind. I just think about people in my life and pick out their best trait and appreciate it. Try it for yourself. You could even try it with people you dislike. Everyone has at least one redeeming quality. To take it a step further, you can ponder why and how they exhibit this trait and how you could adopt small bits of it into yourself.

Thanks for reading!

Lucas