Escalation of Commitment: How Cognitive Biases Influence Business Decisions
June 13, 2025Categories: Business Psychology, Podcast Episode
The Biased Brain Podcast with Owen Hawthorne
Explore the intriguing world of cognitive biases and human cognition in this engaging podcast. Discover how bias in decision making shapes our perceptions and influences our choices. Join us as we delve into the science behind critical thinking and biases, providing practical insights to enhance your understanding and control over your thought processes. Whether you're a psychology student or curious observer, this podcast offers valuable tools to help you unveil the hidden biases in your mind.
Why We Keep Throwing Good Money After Bad: The Escalation of Commitment in Business
You ever notice how sometimes people, and businesses alike, just keep pouring resources into something that’s clearly not working? Like that one project or investment that everyone’s pretty sure is a sinking ship, yet no one wants to admit it. That, my friend, is called the escalation of commitment, and it’s one of the sneakiest traps we fall into when making decisions.
Here’s the thing: as much as we like to think of ourselves as logical beings, human cognition isn’t always on our side. Our brains are wired with all kinds of cognitive biases that cloud our judgment. Especially when money, pride, or reputation is on the line, our bias in decision making can lead us to stick with failing courses of action instead of cutting our losses.
Imagine a business that launches a new product. It tanks. Sales are down, customers hate it, yet the leadership keeps investing more into marketing, redesign, or production instead of scrapping it and moving on. Why? Because they’re already “invested” — emotionally, financially, and socially. Everyone wants their initial judgment to look right. This is the classic case of escalation of commitment, sometimes called the “sunk cost fallacy” in everyday terms.
Now, understanding cognitive biases like this can save a company (or a career!) from catastrophic decisions. But it's tough, right? Our biased brain doesn’t easily let go of prior commitments because that feels like admitting failure. There’s a real psychological discomfort tied to changing course, even when logic screams for it.
- Loss Aversion: We feel the pain of loss more intensely than the pleasure of an equivalent gain, so we keep throwing good resources after bad, hoping to avoid that sting.
- Confirmation Bias: We seek out information that supports our original choice, ignoring red flags or negative feedback.
- Overconfidence: We tend to believe our initial judgment was flawless, despite evidence to the contrary.
All of these biases contribute to escalation of commitment, making it so hard to pull the plug when necessary.
So, how do smart businesses and individuals avoid this trap? It’s mostly about building awareness and fostering a culture where critical thinking and biases are openly discussed and challenged. Encouraging team members to voice doubts without fear of judgment can help break the cycle. Sometimes, having "fresh eyes" review a situation or setting pre-agreed checkpoints where progress is evaluated objectively can stop escalation in its tracks.
One handy resource to better understand how your mind tricks you in situations like these is the book, "The Biased Brain" by Bo Bennett, PhD. It breaks down how bias in decision making operates and offers insights on developing sharper critical thinking skills to sidestep these mental pitfalls.
In business and in life, being aware of the escalation of commitment is like having a mental radar alerting you when you’re about to make a risky move driven by bias rather than facts. So next time you find yourself doubling down on a failing bet, pause and question: “Am I really making this decision based on sound reasoning, or just because I don’t want to admit I was wrong?”
Understanding cognitive biases and how they shape human cognition is the key step in making better, smarter choices. It’s not just about preventing financial loss — it’s about improving how we think fundamentally, which has ripple effects in every part of our lives. Explore the book and unravel the secrets of your mind today at https://www.thebiasedbrain.com to start recognizing and overcoming these biases for good.
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Mitigate the Effects of Cognitive Biases and Become More Reasonable
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