Last month I wrote about my compulsion to complete tasks even when I don’t want to—A Completionist’s Guide to Not Completing. I linked this to my inability to say no when I was in the midst of an activity I didn’t want to perform, like watching every episode of a television series regardless of whether its any longer enjoyable. Upon further reflection (and a less-than-fortunate blackjack incident), I’m feeling less like someone who can’t say no, and more like a victim of sunk cost fallacy.
Sunk cost fallacy is the idea that you should continue to spend money on an initiative, project, product, etc. so as to not waste the money or effort you have already put into it. It’s like sitting at a blackjack table after losing too much money because that next hand will be the one that makes it all worthwhile… hypothetically speaking, of course.
This happens in the workplace all the time. We stress and strain to roll out a new marketing campaign/recruitment tool/equity source only to find it did not have the impact we were anticipating. It’s not necessarily damaging anything (besides the drain on resources), but if it were to disappear tomorrow, no one outside of your team would remember it ever existed. Yet, because so many resources and so much energy went into it, we cannot bear to put it out of its misery, so we expend more resources and energy.
We fall victim to sunk cost fallacy because we are emotionally invested in whatever it is we are trying to accomplish. We’ve spent our departmental budgets, political capital, and precious manpower. We’ve ignored other promising opportunities so we could focus on this project. And we’ve put our reputations on the line. Quitting now would surely make us a loser…wouldn’t it?
I use to think this way—make a mistake and double down until lady luck turns in my favor. Then, in a week-long period, four things happened that changed my view.
- I spoke with a leader who incentivizes her team to quit projects midstream if they are going the wrong way. She bonuses failure. Her philosophy is that it is cheaper and more efficient to abandon a dud then to continue pouring resources into it. Time is better spent exploring a new option that actually works.
- I finished yet another television show whose first three episodes made me think there would be a payoff to finish the series. There wasn’t.
- I re-discovered a research article from Psychological Bulletin where the authors found that the misconceptions associated with sunk cost are something we develop as we get older. Compared to adults, children are much less likely to let unjustifiable optimism take hold because they exhibit more normatively correct behaviors.
- And to really hit the point home on sunk cost, I sat down at the wrong blackjack table.
Free yourself from the burden of carrying around an impending fiasco. Conduct frequent assessments to ensure the initiative will have the anticipated results needed to make it worthy of you and your team. Foster a culture where others can tell you that it is going in the wrong direction without having to admit weakness, errors, or ineptitude. Write out pros and cons lists to ensure the pros side remains substantially denser. And, most of all, ignore the blackjack dealers in your life who swear your luck will turnaround when the facts clearly show otherwise.