We have a big software problem in our psyches. It’s powerful, hard to recognize and even harder to overcome. And it’s universal. It’s part of our encoding, and when it comes to business, it can be costly. But, ironically, we don’t feel the pain in its full reality, until it’s too late.
Sunk-cost bias is a well-known and observed phenomena: We spent the time and money, so we become emotionally committed to a cause, a person, a project, a system or whatever we have vested ourselves into.
It’s why there’s pushback when you try to make changes in your organization. That report you always use may have made sense 10 years ago, but now it’s rote tradition rather than sensible and useful.
If you started a project that once had enthusiasm and made an impact, but it is dead and going nowhere, it can be hard to shut it down. After all, it can feel like failure, or your mind is still on the past. Sometimes it’s just hard to be honest and stop holding out on hope.
Sunk-cost bias can ruin you and it often takes some cold water in the face or an outsider to help you see it for what it is.
With the speed of change today, you have to watch out for the pitfall of sunk-cost bias. I like to question everything and constantly prune. It’s a habit that is both pleasurable and keeps what is relevant right in front of you. Most things don’t make sense or carry the importance they once did. Reality changed.
When something’s not working, it’s great to ask, “If I started this relationship/project/business/tool today, would I invest?” That’s objective. It breaks the other question you naturally and subconsciously ask, “How much have I spent, and what’s it worth?” That’s subjective and digs you deeper into a hole.
It’s a daily fight. But you’ll be much more free and profitable if you recognize the trap and practice objectivity in your decision making.
So, what’s not working that once did? How about cutting bait now?