Finally! A GAAP Concept PMs Can Get Behind!

When I was taking accounting in graduate school, my professor had a pretty cool story illustrating the concept of the sunk cost fallacy. Proceeding from the price of San Francisco’s iconic Golden Gate Bridge, which was around $35M USD in the early 1930s (about $777M in 2026 USD), he proposed an alternate ending to its construction, where an inventor appears and proposes to build a 100% safe and reliable transporter-like device that would do the exact same job as the massive bridge, but cost only $3M to deliver and operate in toto. Our fictional inventor appears on the scene with this proposal and device when there’s only two months left before bridge completion, and it has already incurred $30M in costs. In short, the alternative solution would ultimately save $2M in total costs, but would, of course, leave this monumental almost-completed bridge in-place. What’s the right decision here?
Well, if we’re respecting the proper use of the sunk costs rule, we would go with the inventor and his teleportation device. My professor was quick to point out that, since the decision-makers were politicians, and the optics of a massive almost-complete bridge being what they were, that their decision would almost certainly be to elect to complete the bridge, but we all saw his point. The sunk cost argument should always be considered to be invalid when used to support a strategic decision about which projects to finish, and which to abandon.
A much less fanciful example can be seen in the history of the Iowa class battleships of World War II. The U.S.S. Kentucky was ordered and laid down in 1942, the same year as the key naval battles of the Coral Sea and Midway. At those battles, where none of the opposing surface vessels laid eyes on the other, the utility of the aircraft carrier as the primary naval vessel over the battleship became apparent, and aircraft carriers became a priority for naval construction capacity. The Kentucky was to have been the sixth and final Iowa class battleship, but various delays in her construction led to the circumstance where she was still being built at the completion of hostilities, in September 1945. Various changes in her design were proposed to make her more compatible with the post-WW II Navy, but none of them were carried out to completion. She was cancelled at around 73% complete, and ultimately sold for scrap in June 1958.[i]
The cost of an Iowa class battleship in the 1940s was $100M USD[ii], which is approximately $1,995,411,042 in 2026 dollars.[iii] Staying in 1942 money, at 73% complete, Kentucky’s cumulative Earned Value would have been $73M, meaning it had a Budgeted Cost of Work Remaining of $27M. Based on what we know of her fate, had anybody asserted the argument that the “remaining” budget of $27M should have been spent in order to avoid “wasting” the $73M already committed, that person was (rightfully) ignored. I have to admire those in the U.S. Government who arrived at AND implemented that decision. The optics must have been terrible, like leaving the Golden Gate bridge just short of completion, but they made that decision anyway. I can only imagine how furious I would have been had I been the PM of that effort. Of course, some of the $73M was recovered. Kentucky’s propulsion system was removed and used in other naval vessels, and the steel was sold for its commodity value[iv]. But, for the most part, the decision to build her in the first place, with the aid of 20/20 hindsight, was a mistake.
Returning to the present-day, I can’t help but to wonder how many of today’s Projects would fall by the wayside if sponsors and executives alike had a more finely-tuned and robust maintain-or-suspend/cancel algorithm in our business models, based on the recognition that the sunk costs argument is a fallacy. In the news recently have been stories on some prominent automobile manufacturers cancelling their Electric Vehicle (EV) lines, including Ford, Honda, Kia, Nissan and Volkswagen.[v] I would speculate that, like the Kentucky, this could not have been a painless decision, given the amount of unique infrastructure that must have gone into creating those lines in the first place.
Note that I am NOT advocating for Projects to be able to show an acceptable Return on Investment (ROI) to be considered a candidate to continue when the continue/cancel decision has to be made. ROI is predicated on the estimated Gain from Investment, a hopelessly subjective parameter when it comes to evaluating Projects within a portfolio.
But I do have two takeaways when it comes to the decision to pull the plug on a given Project: (1) anyone who invokes the sunk costs argument should absolutely be ignored, and (2) we PMs need to be able to muster the courage to know when the scope we’re pursuing has lost its efficacy.



[i] Retrieved from https://en.wikipedia.org/wiki/USS_Kentucky_(BB-66) on March 16, 2026, 20:13 MDT.
[ii] Retrieved from https://nationalsecurityjournal.org/the-navys-best-decision-ever-100000000-for-an-iowa-class-battleship/ on March 18, 2026, 19:55 MDT.
[iii] Retrieved from https://www.in2013dollars.com/us/inflation/1942?amount=100000000 on March 18, 2026, 19:57 MDT.
[iv] Retrieved from https://en.wikipedia.org/wiki/USS_Kentucky_(BB-66) on March 18, 2026, 20:52 MDT.
[v]Retrieved from https://www.autoblog.com/carbuying/these-18-automakers-are-walking-away-from-ev-plans on March 18, 2026, 20:17 MDT.