Clean Thinking

Just keep going: Irrational escalation bias

This is also called the sunk cost fallacy: justifying additional time and effort in something just based on the amount of time and effort you’ve already put into it, despite information telling you that the path you’re on is wrong. 

Re-read the italics. That’s the important part.

Many start-ups behave this way. They’ve been able to secure their first and second rounds of funding, but some of the their fundamental assumptions were actually wrong, and by the time they are preparing to launch, it’s “too late” to change course once they get the bad news, so they forge ahead, planning on course corrections later that will “fix” things. They’ve promised X, Y, and Z to their investors, and they can’t possibly admit that their original assumptions were wrong.

New company leadership can fall into this trap, too. Huge transitions at the top, and the new leadership has a philosophy that he or she “sold” the Board of Directors on, so they run with it. But if all indicators are pointing to a fail, the new leadership may have a hard time saying, “I was wrong. This is will be better instead, and here is why…” No, they are often compelled to stay the course because well, they’ve come this far, and that is exactly what they said they’d do.


What is the worst that can happen? A total and complete FAIL? Millions of dollars lost or “wasted”? A tarnished reputation?

Sunk cost fallacy will get you there anyway.

No, the worst that can happen is that the company could have thrived, a fantastic product could have been introduced to the market, people’s jobs could have been saved, a ton of value could have been put out into the world… and it wasn’t.

That’s the worst case scenario.

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