Building pedestals worsens the effect of sunk cost fallacy

 

I am midway through Annie Duke's latest book Quit: The Power of Knowing When to Walk Away. If you are not already familiar with Annie's background, she was a very successful professional poker player who applied the lessons she learned from playing poker to writing and consulting on improving how we make decisions.

Her latest book tackles the challenges we face with knowing when it is the right time to quit.

While her book provides lots of good advice with supporting case studies, two had particular applicability to project delivery.

The first is the well known phenomenon of sunk cost fallacy.

While decisions regarding whether to continue investing in a project or product should ignore the effort or costs incurred to date, this rarely happens in practice. The fact that we have spent that money and time reduces our ability to evaluate the go/no go decision in an unbiased manner. And, as Annie rightly points out in her book, you can't Jedi Mind Trick your way into evaluating the decision with fresh eyes.

But to make matters worse, there is the impact of juggling monkeys!

This metaphor was developed by Astro Teller who heads up Alphabet's "moonshot" X company. You would like to hold a show in which a monkey juggles flaming torches while it stands on a pedestal. There are two main deliverables for this project beyond getting a monkey: training the monkey and getting a pedestal.

The first deliverable is challenging as it requires you to train the monkey to juggle multiple torches, to help the monkey overcome its fear of fire and finally to convince the monkey to juggle on demand. The second deliverable is simple as you can hire someone to build a pedestal or you can buy a ready-made one from a store.

Given the relative difference in difficulty between these deliverables, it would be advisable to first tackle the monkey training as completing that will significantly de-risk the venture. And if it becomes apparent after a couple of days of training that this is impossible, you can cut your losses.

Unfortunately, teams will often pick the easier deliverable first. This pushes out the timeframe for tackling the riskiest aspects of the project. Not only does this provide a false sense of progress, but it also increases the effort and costs spent which in turn worsens their ability to ignore sunk costs when deciding whether or not to keep going.

It doesn't matter whether you are using a predictive or adaptive life cycle for your project. Early de-risking is a good way to avoid getting a monkey on your back!