Let's start by reviewing some concepts.
1. Escalation of commitment
I remember back when I started business school at Kellogg, one of the first things I learned was the concept of escalation of commitment. What that means is that "negative consequences may actually cause decision makers to increase the commitment of resources and undergo the risk of further negative consequences." as described by Barry M. Staw in his 1976 paper.(1)
Relate to this concept, later when studying microeconomics we also read about sunk cost fallacy. The phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the cost, starting today, of continuing the decision outweighs the expected benefit.
2. Confirmation Bias
In the same course during my first weeks in business school, we also discussed this psychological phenomenon that explains why people tend to seek out information that confirms their existing opinions and overlook or ignore information that refutes their beliefs. (2)
Now, after the years since I graduated from Kellogg, I have seen people falling in those traps several times. Let's analyse a "real" example...
SPOILER ALERT: Game of Thrones Season 5 details discussed.
Most recent example that have caught my attention was the saga of Stannis Baratheon during the fantasy series Game of Thrones from HBO.
Stannis displayed classical confirmation bias when ignoring the data (winter is here, enemy knows how to fight during winter, the Wildlings did not join his army) and advice from Davos Seaworth ("it's not the right time to march to Winterfell"). And on the other hand whatever Melisandre told him something that confirmed what he wanted (take the Iron Throne), Stannis would take it as truthful, so much so it led him to burn his own daughter alive!
The escalation of commitment also caught Stannis. For example, despite refusal from Jon Snow and the Wildlings to join him, he didn't change his mind about marching into Winterfell. Then the snow started and despite the snow and harsh weather, he continued his escalation and marched into Winterfell. His troops were dying and sick during the journey and still he didn't adapt his strategy. Then Ramsay raided his camp and burned his food and horses, but also that didn't change the plans and he killed his daughter instead. Half of his men left with all horses and he went to battle and ultimately demise.
Why did this happen? and why so many projects and business managers can fall into the same situation? The fact is that it's indeed hard to stop a commitment that it's escalating. Once it has began it's like a snowball rolling down a mountain...keeps getting worse and bigger. Ultimately this is happening because people still believe that the future gains are achievable ("in the end I will get the Iron Throne"). They also become irrationally optimistic and ignore the facts (as with Stannis). And last but not least, they are public committed - it's hard to change the course or stop a project when you have been bragging about it to everyone.
One of the ways to avoid the escalation of commitment is to get outside perspective (and Davos tried...)...finally sometime we need to stop put emotions aside and think rationally. Stannis should have asked himself " Given what I know now (lost half of my man, have no horses, no supplies, winter is here) would I have marched into Winterfell?"
"If at first you don't succeed, try, try again. Then quit. There's no point in being a damn fool about it."
WC Fields
(1) "Knee deep in the big muddy: A study of escalating commitment to a chosen course of action"
(2) http://www.investopedia.com/terms/c/confirmation-bias.asp#ixzz3dJ2fSPQd
1. Escalation of commitment
I remember back when I started business school at Kellogg, one of the first things I learned was the concept of escalation of commitment. What that means is that "negative consequences may actually cause decision makers to increase the commitment of resources and undergo the risk of further negative consequences." as described by Barry M. Staw in his 1976 paper.(1)
Relate to this concept, later when studying microeconomics we also read about sunk cost fallacy. The phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the cost, starting today, of continuing the decision outweighs the expected benefit.
2. Confirmation Bias
In the same course during my first weeks in business school, we also discussed this psychological phenomenon that explains why people tend to seek out information that confirms their existing opinions and overlook or ignore information that refutes their beliefs. (2)
Now, after the years since I graduated from Kellogg, I have seen people falling in those traps several times. Let's analyse a "real" example...
SPOILER ALERT: Game of Thrones Season 5 details discussed.
Most recent example that have caught my attention was the saga of Stannis Baratheon during the fantasy series Game of Thrones from HBO.
Stannis displayed classical confirmation bias when ignoring the data (winter is here, enemy knows how to fight during winter, the Wildlings did not join his army) and advice from Davos Seaworth ("it's not the right time to march to Winterfell"). And on the other hand whatever Melisandre told him something that confirmed what he wanted (take the Iron Throne), Stannis would take it as truthful, so much so it led him to burn his own daughter alive!
The escalation of commitment also caught Stannis. For example, despite refusal from Jon Snow and the Wildlings to join him, he didn't change his mind about marching into Winterfell. Then the snow started and despite the snow and harsh weather, he continued his escalation and marched into Winterfell. His troops were dying and sick during the journey and still he didn't adapt his strategy. Then Ramsay raided his camp and burned his food and horses, but also that didn't change the plans and he killed his daughter instead. Half of his men left with all horses and he went to battle and ultimately demise.
Why did this happen? and why so many projects and business managers can fall into the same situation? The fact is that it's indeed hard to stop a commitment that it's escalating. Once it has began it's like a snowball rolling down a mountain...keeps getting worse and bigger. Ultimately this is happening because people still believe that the future gains are achievable ("in the end I will get the Iron Throne"). They also become irrationally optimistic and ignore the facts (as with Stannis). And last but not least, they are public committed - it's hard to change the course or stop a project when you have been bragging about it to everyone.
One of the ways to avoid the escalation of commitment is to get outside perspective (and Davos tried...)...finally sometime we need to stop put emotions aside and think rationally. Stannis should have asked himself " Given what I know now (lost half of my man, have no horses, no supplies, winter is here) would I have marched into Winterfell?"
"If at first you don't succeed, try, try again. Then quit. There's no point in being a damn fool about it."
WC Fields
(1) "Knee deep in the big muddy: A study of escalating commitment to a chosen course of action"
(2) http://www.investopedia.com/terms/c/confirmation-bias.asp#ixzz3dJ2fSPQd
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