Of the many biases leaders fall prey to, perhaps none is more common than the Sunk Cost Fallacy. This insidious error refers to the tendency for leaders to follow through on something if they have already invested a lot of time, energy, or money into it. They do this even when the cost-benefit is no longer in their best interest, so as to not to forfeit the investment they have already made. Academics who study decision-making like to point out how easy it is for leaders to slip into the trap of the Sunk Cost Fallacy and how it undermines quality decisions in the process.
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The Sunk Cost Fallacy Applies to People
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Of the many biases leaders fall prey to, perhaps none is more common than the Sunk Cost Fallacy. This insidious error refers to the tendency for leaders to follow through on something if they have already invested a lot of time, energy, or money into it. They do this even when the cost-benefit is no longer in their best interest, so as to not to forfeit the investment they have already made. Academics who study decision-making like to point out how easy it is for leaders to slip into the trap of the Sunk Cost Fallacy and how it undermines quality decisions in the process.