? Heuristic of the Day: Escalation of Commitment
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Why would someone invest more in a plummeting stock? Mental shortcuts save time, but at what cost?
Putting in a sustained effort just because you’ve already invested effort/money is a common justification for nurturing relationships or carrying on with long-drawn projects. In many cases, it leads to wasted effort, time and money because the additional effort does not help us reach our goals or ends up becoming too costly.
Escalation of Commitment can be particularly detrimental in both business and personal decisions. Staying in a job that you hate, making bad financial decisions, and sticking to unproductive business strategies are all examples of how this bias can impact a person’s life.
As humans, we want our behaviors—past, present, and future—to align with our attitudes, beliefs, and values. Because we crave consistency, we feel that our actions must align with what we’ve said and done in the past.
While consistency is generally thought of as a good characteristic, the need to stick to a past course of action, despite negative signals, may compromise our ability to make reasonable decisions.
Now, letting go is not easy. To make it easy, declare your goals and stop putting in the effort the moment you realize you are moving away from your goals. Then revisit your goals and work toward them. Eventually, the time, effort, and money you save by not escalating your commitment can give you enough energy to take the first steps toward something more promising.