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Sunk-cost bias

The Concorde jet was an incredible feat in aeronautical engineering. First flown in 1969, Concorde entered service in 1976, making it possible to fly from London to New York in as little as two hours, fifty-two minutes (and fifty-nine seconds, to be precise). It also proved, however, to be an enormous financial failure – losing money for more than four decades. Yet each time it went over budget the French and British governments poured more and more money into the project, despite knowing that the chance of recouping their continued investment was miniscule.

Sunk-cost bias is the tendency to continue to invest time and money, or energy into something we know is a losing proposition simply because we have already incurred, or sunk, a cost that cannot be recouped.*

In a football context, sunk-cost bias is apparent when an expensive signing doesn’t work out and we find it hard to let go (often for a fraction of the initial deal). Often the more we invest, the harder it is to let go – paralysed by our determination to make it work, or the embarrassment at having made a poor decision. We may also experience the feeling of sunk-cost when academy talents don’t make it through to the first team, despite spending  years nurturing them through the system.

In reality, previous outlay (like how much you spent on a player) has nothing to do with future economic outcomes (like what that player is worth today). That’s tough to accept, but it’s true.

A good way to decide whether it’s time to cut your losses – ask yourself: if I could go back in time and sign that player again, would I?

 

*This definition of sunk-cost bias and the Concorde example were taken from Greg McKeown’s bestseller: Essentialism  

About Blake Wooster

Blake Wooster has created 66 entries.