Walking Away and the Sunk Cost Fallacy
Throwing good money after bad!
It’s 5 in the afternoon, you’re finishing work and have had a hell of a day. Your phone pings a notification reminding you that you have the movie tonight. The movie you bought tickets for a month ago and then forgot. Something that you’ve not really any interest in and don’t really feel like doing. Today was exhausting and you just want to rest. Still, you’re going to go, tired, uninterested, and not feeling it. Why because you already bought the tickets. So, you’re going to invest time and effort into going to the movie because you’ve already paid for it.
If this sounds familiar, then you’re looking at the very common issue that most people experience in our ability to not walk away. This is also commonly known as the sunk-cost fallacy, and it’s effectively the reality that we as people don’t walk away from projects or strategies or similar even though doing so would be more beneficial to us.
Sunk Cost Fallacy – Oxford Dictionary
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.
Impacts, Resource and Pride
Most of will have been in situations where we’ve on our own or as part of a project realized that continuing down the path outlined was not going to be a good idea. To realize that it was better to cut our losses and change course. This could have happened in our own life, or in our professional lives, it would have happened to us ourselves realization or as part of a team lead by others. The fact that this is something that happen in almost every context is worth noting, it’s not just a business, or professional reality. This can be a problem for your personal time as well. Going on a vacation you don’t want too, or the movie example above. Taking a night class in some subject you’ve realized isn’t that interesting or similar. It doesn’t have to be just a cost of money either. Time and effort are resources and can just as easily be victim of the sunk cost fallacy. Let’s keep going to the classes maybe the teacher will get better later, instead of moving on.
So why do we continue doomed projects, efforts, and similar steps? Often its rooted in our own phycology.
Lack of awareness
To realize that we are working on or participating in some form of project that has little chance of returning a good result, we must understand the status of the project. We must know the project is in trouble, and that awareness might simply not be on our mind. Specifically, regarding the projects that we’re invested in we may be blind to the actual progress or impact. Simply keeping the head in the trenches with no visibility of the overall status and the direction. You may not even know that the project is failing or not going to work. Often time is the resource that we invest due to a lack of awareness. This is common where effort is pushed into a project to push it forward. However, it can be hard to stop and reconciliate the actual reality of where you are on any given activity.
Check Points
How do we mitigate a lack of awareness. Build status checks into your projects and engagements. Build moments into your process to check where you are, the level of effort you have done and left and then make the conscious decision to continue or stop. This can be as simple as taking a breath before doing an action to understand if this is still worth it. Stop and orientate, then proceed eyes open.
Pride
You’ve pushed for a project at work, and finally got the resources to go ahead. Now your weeks into the activity and you’re not seeing the results you expected, Budget and timeline are not your friends, and you suspect that it’s going to be a mess. Do you stop, reconcile this status, or do you push ahead, full speed. It would be very common response to plow ahead, and a common reason would be Pride.
The fact, that we have proposed, build, set up and started some effort and given it our time focus, money, and other resources, only to see it might be fruitless is hard. For many people having to admit that the effort, was in vain, or needs to be adjusted, or stopped, is not easy. This is completely normal and very human. It’s also a very common reason why many projects run for too long or fail spectacularly. People having to admit or face the reality of failure or reticule is commonly a reason to simply push forward. Politics and corporations will commonly in my experience seem to be a common place for this reason driving projects well beyond the point of no return. Due to the real or suspected risks of losing face the project leaders, and sponsors run projects to their epic collapse rather than face the consequence of projects failure or adjustment.
Humility – Sense check
Pride is a tough emotion to push through as this can be the basis of much of our personality, and a kick in the pride can do much to shake our own identity. I would caution all creators and leaders to be too prideful. It should be within us to realize that we have room to adjust and modify our efforts without this representing a failure or critique of yourself. Think of taking moments to adjust and confirm the status of your work and projects, as a moment to check your understanding, and adjusting your projects and scope to a more like to succeed direction is a way to show your own ability to take feedback and leadership instead of a kick in the pride of possible failure. Additionally keep in mind that most projects and efforts can come a part for many reasons more than just your own efforts. The stop of a project or walking away from a false start doesn’t need to have any reflection on your efforts.
It’s my baby!!
Your small business is looking at adding a new product line to its catalogue. This means more training, new equipment, and product development. Time spends on inventory, warehousing, and sales training. We’re working on this and it’s looking good, only issue, is we’ve not check if there is a market for our product. Looking at the market it looks like interest in this product is low. This is the next big thing for your business and there is a lot of money, effort and time invested in this launch. Now what do we do?
If you say walk away, you would be braver than most, as many in that situation will continue with the project to completion. Run the project plan out to its end and roll the dice. This commonly comes with an expectation that the situation will turn around, the sales will come in despite evidence to the contrary, we’ll defy expectation simply because of course we will.
Of course, this may or may not happen but it’s pushing forward in the face of reality is brave and silly, so why do so many projects get pushed forward due to this. Because it’s your baby, the attachment we feel to some projects and activities is common reason for continuing to proceed when good advice says otherwise. We feel the ownership and identify with the project as being part of us. We draw identify from and into the projects meaning that we will less willing and able to see flaws or take feedback that is contrary to what we want to hear.
This causes us to believe that things will work out, a confirmation bias that will let us believe that all things will succeed simply because we wish it to. We personify our projects especially when they are important to our businesses, and future. It’s hard to walk away from our baby.
Starting of right
Emotional attachment to the project in many situations is completely understandable. Especially in situations where we have started and developed the scope and project ourselves. These are probably the hardest projects and actions to see failing and will be those that we will often remember. That’s why whenever possible it’s best to start a project with a clear understand that this project doesn’t reflect on you as a person. Take a moment when putting your ideas together to understand that why we’re doing it. Setting a goal that this project isn’t linked to your personal identity will help you separate from it later should it fail for whatever reason. Ensuring that the project and you are different will give you more ability to critically look at the project and understand if it will be worth continuing.
Summary
Look at your projects, current and future ones, and see them for what they are, where they are in their life span, and remember that it’s both a professional and personal risk to throw time money and effort after bad ideas.
Build into your method good lessons that will allow you to look at your projects critically and without personal attachment be it pride or fear.
Start projects with a sense of disconnect from your identity, you’re doing something for a reason, but it’s not changing you. Don’t let success or failure of the project, reflect on your own identity. Also don’t let the projects continue and push further simply based on the fear of failure. Be ready to pull out of activities or projects that are not looking successful, and don’t let fear of the consequences draw out the time, effort and money invested.
Finally remember that having a fixed set of check points, build into your method where you critically ask yourself, or your team, is this project worth continuing. Do we have a good plan, good feeling, does it make sense to continue. This can you quickly asking yourself, in your head if you really want to go to that movie, we spoke about above, or having a project meeting toll gate that kicks the tires of your whole project. Building check points into your method whose only question to ask is should I continue this effort is a good way to ensure that you’re in control and you’re making the best decisions.
You now will be ready to walk away from a project, or activity without using more resources.
Thank you for your time and if you have projects you think are struggling and need some extra eyes on them, or if you have an idea that you would like help turning into a project with clear steps, please reach out to us on Instagram or by email at timh@department45.eu.
Best regards
Tim H.
