As humans our instinct is to defend and justify our actions as successful. This instinct predisposes us to ignore information that contradicts what we want to believe about our plans. If we elect a particular course of action, we will seek information that justifies its success, and disregard facts that demonstrate it is failing, or attribute evidence to external circumstances. Instead of making adjustments and learning from setbacks, we reflexively double down on the failing strategy to assuage our ego.
The cognitive bias that applies here is called Irrational Escalation, or the phenomenon where people justify increased investment in a decision, based on cumulative prior judgment, despite new evidence suggesting that the decision was probably wrong. Another bias is System Justification, or the tendency to defend and bolster the status quo. Existing arrangements tend to be clung to, and changes rejected, even when performance suffers.
Strategic errors of this type have tragic consequences when applied to national security policy. U.S. policy makers doubled down on poor strategies in the wars in Vietnam and the second Iraq war. They blamed external actors (the media, the Soviets, people who questioned the strategy) for set-backs that were deemed temporary. The price was steep in blood, treasure, and U.S. security objectives. Alternatively, some U.S. Presidents have had the intestinal fortitude to cut bait.
After 234 Marines were killed in Lebanon on 23 October 1983 in their barracks by a suicide truck bomber, it became clear that international peacekeeping mission objectives were both unclear and unattainable; President Reagan summarily withdrew them. And when Operation Restore Hope foundered on its mission to provide relief to starving Somali people, and the mission crept into fighting a war with local strongmen, President Clinton ended the negative spiral by halting offensive military operations against war lords; six months later U.S. participation in UNISOM II was effectively ended. President Clinton had the wisdom to recognize that humanitarian mission objectives had been doomed by an unattainable desire to avenge U.S. losses and destroy Somali tribal politics, accompanied by a pointless and violent spiral of revenge.
Our business enterprises are more than mere investments of money, but investments of our passion and worth. We have a hunger to prove our decisions right. We know that only by persisting through tough times can we ultimately succeed. At the same time, we must have the wisdom to recognize when our original plans must be adjusted and even abandoned. The logic of sunk costs is false logic. How should we accurately identify the difference?
First, we must actively seek data that contradicts program justification. This means giving more credence to evidence of failure since our instinct is to dismiss that evidence. Second, we must assume that the source of problems is systemic and a product of our strategy until proven otherwise to be externally driven, unlikely to repeat, or outliers. Third, we should ask objective and experienced third parties to review the entire case and assess effectiveness. Someone not emotionally attached to our own assessment will, at the very least, bring in new perspectives and possibly new data to provide a clearer picture of what is actually happening on the ground.
In the end, making mistakes is not the problem. There will always be some plan aspect that does not turn out exactly like we thought it would. The fatal problem is refusing to recognize errors and compounding them by chasing good money after bad.