A situation like that is described as involving an escalation of commitment. And it can be very costly.

Tell me if you relate to any of these stories:

I once spent a month collecting data I knew half way through I won’t be using but I continued by convincing myself, maybe one day I will.

I once spent days collecting a list of leads to contact and when I started reaching out it was clear that I was contacting the wrong fit but I convinced myself to continue, maybe someone will listen. Looking back, maybe some people would have listened if I changed my approach.

I once spent over a year and many thousands of dollars building a product no one bought.
And even little things like

  • Forcing a meal down our throats just because we’re almost done, or
  • Doing a task just because we added it to our to do list a week or two earlier even though we know it won’t contribute to our goals, or
  • Continue to pay for a product just because we’d been buying it for years.

That’s escalation of commitment and most of us fall in the trap of investing resources in what we gradually realize is a losing investment.

Why would a rational person sink resources into a project, relationship, idea, task, or product with a goal to mount costs?

I think that you’d agree with me that although we may not accurately project the outcome of a decision, we should be able to cut losses soon, no?

It turns out, it’s not that easy. Research on the escalation of commitment explains this behavior by 4 factors:

1. Feeling of responsibility. We may be hesitant to make a decision but once made, we tend to stick with it and feel personally responsible to deliver.

2. Efforts invested in making the decision. As I said earlier, we may be hesitant to decide but when we do, especially for big decisions, it’s usually after a lot of thinking and planning. So when a decision is made, we tend to avoid beginning the decision making process all over again.

3. Concern about the personal brand. Related to the first factor, most of us don’t enjoy admitting a mistake and would rather associate failure to external factors: I did what I was supposed to do, I’m not sure what happened.

4. Desire to justify choice. If enough time was invested in the decision-making process and things don’t work out, we go back to why we made this decision in the first place and once again convince ourselves that we had gathered all the evidence so it’s not necessarily our fault.
It is hard to quantify the consequence of the escalation of commitment bias but take a minute to think about a situation where you have invested resources for which you had several opportunities to revise your decision. Chances are you have wasted hundreds of hours over the years and this applies to everyone even trained people.

The four steps I am going to share with you below helped me optimize my decisions by at least 50%. If you’re wondering about the other half, the reality is, no human being can be totally immune to all cognitive errors.

First and foremost, learn about cognitive biases. If you can’t analyze your decisions like a psychologist, you won’t understand why you’re really making them in the first place. When you understand the reason, you’ll start to make better decisions.

For instance, in the case of entrepreneurships. Most aspiring entrepreneurs are wantrepreneurs. Those are people with interest in entrepreneurship but hope that a business venture will get them fast results. The truth is, building a successful business is a marathon and one of the main reasons why you hear your friends stop talking about their ideas is because they realized how challenging it can be to turn it into a successful and profitable business, so they let go.

Had these wantrepreneurs understood their real intentions, they would have focused their energies perhaps on finding good investment opportunities instead of attempting to build their own companies.

Had I known that my decision to continue collecting the data, contacting the wrong leads, pursing an idea and more were based on the escalation of commitment bias, I would have stopped and invested my resources elsewhere.

I mean imagine if Trump builds “The Wall” just because he feels he’s too emotionally invested to quit now?

Self-awareness is the first and most important step and it starts through understanding of the different biases.

Download the 15 most common biases below.

Researcher Robert Baron says:

“It is important to note that the goal of such techniques would certainly not be that of making [people] entirely resistant to all cognitive sources of error—of turning them into totally rational beings like Mr. Spock of “Star Trek” fame. Such a goal is clearly unattainable: decades of research on human cognition suggest that our cognitive systems have too many limitations for this to ever be the case (e.g., Barsalou 1992).

The goal of studying the role of cognitive mechanisms is primarily that of formulating means for holding errors stemming from the cognitive mechanisms in check, so that the decisions reached and the strategies adopted, have increased chances of success.”

Second, know your opportunity cost. In other words, for every decision you make, where else could your resources go?

I trust that most of us do their homework before making an important decision. Sometimes, a decision leads to good results over the short term but as opportunities arise, a return on investment may be higher by switching focus.

For instance, assume you have decided to commit to social media marketing to grow your business. Two months later, you start to earn a good return on your investment in time and money. Some time later, an opportunity to partner with another person or team is presented and chances are it will yield better results but requires a focus shift.

Most people will get comfortable and say something along the lines of: I have my marketing plan already set for the year, I’ve built a good momentum in social media and I don’t want to break it, I will circle back in the future, etc.

What’s common is not just resistance to change, it’s making decisions without considering the opportunity cost: “the loss of potential gain from other alternatives when one alternative is chosen.”

And because we’re not machines,

Third, always be asking questions. If I had to choose between not eating for two days and instead, use the money to invest in someone who’s been in my shoes and who can tell me exactly what I’m doing wrong and what needs to be done for me to accomplish my goals faster and sooner, I would choose the latter every single time.

The longer we try to figure something out, the smaller our pool of options gets. This is because we tend to unintentionally focus on what we believe is true and propose different solutions to satisfy our own conditions. In this case, instead of thinking, we should listen.

Many of us have some people that we look up to and call for help and advice. This time last year, I listed all the things that went right and wrong. 90% of what went wrong was because I made bad assumptions. When I estimated the cost of the things that didn’t go as planned, I stopped counting at $50,000 in time wasted, opportunity cost, useless investments, etc.

Back then, I had some people I called when I needed advice. The problem was that they weren’t experts in my field so their recommendations have always been very broad. So I decided to put a list of experts in my area and seek their interest in advising me every now and then. As I expected, 90% never replied back and the remaining 10% answered my emails once a month with just a sentence or two.

I saw that most of them had some sort of training and mentoring program that gave members full access to their material and advice when needed. Costs for the programs ranged between $500 and $2,000. To put a number on my decision, I said, would I rather waste another half year and tens of thousands of dollars or invest a thousand or two to get some experts’ guidance and mentoring whenever I want? I chose the latter and I truly regret not making this decision earlier in my career.
Here are some statistics about the power of mentoring in business.

Fourth, evaluate frequently. Steve Blank says that Larry Ellison would sometimes disappear for a couple of days to think and return recharged with a pile of ideas.

Get used to taking a moment or a day off to clear your mind and rearrange your thoughts. The lean startup approach suggests following a build-measure-learn feedback loop. I think this applies to every project in any field and will help you maximum your output. The shorter the loop, the less likely you are to fall in the escalation of commitment trap because you’ll know if you’re doing the wrong thing sooner.

To summarize, what you need to do is become your own psychologist and consultant.

  1. Write down and prioritize your goals from most to least important.
  2. Estimate the resources you are investing to accomplish each goal.
    • If you’re not committing the most resources to the most important goals, make changes.
    • If you’re not committing the most resources to the product/service with the highest returns, make changes.
    • If you’re spending resources on tasks and tools that are not yielding the expected results, make changes.
    • Consider everything that’s not contributing to your goals as slack.
  3. Seek experts’ feedback and suggestions. Marc Zuckerberg was mentored by Steve Jobs, Benjamin Graham mentored Warren Buffet who later mentored Bill Gates.
  4. Evaluate quickly.

Right now, below, tell me your experience with the tendency to escalate commitment.

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