Not long ago, I wrote about a concept known as “sunk cost.” The Sunk Cost Fallacy is a cognitive bias that compels us to cling to an investment even after there is little to no chance of a beneficial return. We feel an unnecessary commitment to decisions of the past, even where we’ve lost our initial investment, and so we keep pouring more resources into it. For example, continuing to invest in a failed business or clinging to a relationship even after it's gone bad.
I’ve heard Annie Duke, a World champion poker player, discuss the Sunk Cost Fallacy, and I’m fascinated by her lessons on sunk cost, loss aversion and Decision Science. She recently wrote a blog about supermarket lines and sunk cost. There are valuable lessons for manufacturers in her blog when you consider the amount of money you spend on infrastructure.Read More