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Comment by thinkpad20 | Hacker News Reader

The only thing that comes to mind is the sunk costs fallacy. Although it's hard to imagine Theranos ever becoming a success (and certainly, I won't be rooting for it), it might be harder for those who poured millions into the company to let go. That's my guess anyway.

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Why stop operating when you can continue until bankruptcy and beyond? Serious question...if there's no reputation left to lose and everyone is still getting paid, what incentive do they have to stop?

If you're an investor, do you want to get some pennies back on the dollar, or do you want to get 0 pennies back on the dollar? If they liquidate they can take that cash and pay out something, at least to some class of investors.

I would imagine writing the whole thing off as a loss is better from a tax perspective.

Please excuse my ignorance, but I don't understand this.

Scenario 1: I have $100 in gains this year. I owe $30 in taxes. I am left with $70. (Say $100 is 30% bracket)

Scenario 2: I have $100 in gains this year. I write off a $10 loss. (Say $90 is 25% bracket). I owe $22.5 in taxes. I am left with $67.5.

Is it the case that writing off the loss is better, if you can be bumped so far down the brackets that (gains - loss)(1-lower_tax_rate) > (gains) (1 - higher_tax_rate)?

No, it's continuous with no edge effects like this because only income within a bracket is taxed at that bracket.

I don't think it'd ever be better because you're always writing off the loss, the difference is the size of the loss. It's better to, e.g., get 10K back out of 100K investment and claim a 90K loss, versus getting back 0K with a 100K loss claimed. You're only getting back your taxes from that 10K difference in losses, versus getting the 10K back. The delta would always be there.

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