P a n e l
That Sunk
Feeling
D i s c u s s i o n
by Don Moyer
The only thing less likely to make a right than two wrongs is one wrong mulishly pursued. We
pick an option, make a decision, chart a course. And then it turns out that we have picked,
made, or charted incorrectly. What should we do?
When a better choice presents itself, the rational act is to cut our losses and—as the game
board dictates—Return to Start. Often, we choose to stick it out instead. That’s because we are
influenced by ”sunk costs”: investments of time and money that we can’t get back. Having
made a deposit, the prospect of ”no return“ becomes untenable.
A stake in the past should not affect decisions about the future. ”Making a mistake and not
admitting it is just hurting yourself twice,“ David Friedman reminds us in Hidden Order: The
Economics of Everyday Life. That holds true even when the stake is considerable. As Ralph
Waldo Emerson almost put it, a foolish consistency is the hobgoblin of big investments.
Don Moyer can be reached at [email protected]
October 2004
HARVARD BUSINESS REVIEW