In 1956, the British Supersonic Transport Aircraft Committee met to discuss building a supersonic aeroplane, the Concorde.
French and British engineers and governments were involved in the project, that was estimated to cost almost $100 million.
When Concorde's first commercial flight took place in 1976, the venture was already plagued by prohibitive cost overruns.
By the time the last Concorde flew in 2003, this financial misadventure had become legendary.Everyone involved followed through on the project ‘because' they had already made significant financial (and time) investments.
But they accepted their mistake almost 30 years (and lots of taxpayer's money) too late.
Why would two countries waste so much money over so long?
Blame it on the 'Sunk Cost Fallacy'
This is a mistake in reasoning, where the cost already incurred on an activity (instead of future costs and benefits) is considered when deciding whether to continue it or not.
Also known as, ‘throwing good money after bad.’
“The difficulty lies not in the new ideas, but in escaping the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds."
Sunk cost is everywhere.
It shows up all the time in our small, everyday decisions.
"I’m full, but I might as well keep eating because I’ve paid for the food,”
“This book is boring, but I’ve already read 100 pages so I might as well finish it.”
This thinking also affects big life decisions like;
“I’ve invested so much into this business venture that I might as well keep pouring money into it,”
“This career isn't fulfilling to me, but I’ll stick to it because I've invested so much time and money into education,"
"This relationship is bad for both of us, but we’ve been together for so long that it wouldn't sense to leave."
Falling prey to the sunk cost fallacy is a psychological trap.
Because we're not purely rational decision-makers and are often influenced by our emotions and past decisions.
If we've invested in a choice, we're likely to feel guilty (or regretful) if we don't follow through.
A vicious cycle.
The more we invest, the more we feel obliged to continue, and the more resources we put in.
But we can minimise its impact if we ensure we're focusing on current and future costs and benefits, instead of past commitments.
"If I was not already doing it this way, is this how I would begin today?”
If the answer is no, quit there, ignore the sunk costs, and rethink your decisions and actions.
Quitting often seems risky.
But the riskiest thing we can do with limited time and energy, is to continue on the wrong path.
"The sunk cost fallacy keeps my people far too long in poor jobs, unhappy marriages, and unpromising research projects."