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You suffer from the sunk cost fallacy when your decision to do a thing is influenced by the time, money or resources you have already spent on doing that thing.

"Individuals commit the sunk cost fallacy when they continue a behavior or endeavor as a result of previously invested resources (time, money or effort)." — Arkes & Blumer, 1985

Don't Go On Vacation In A Snow Storm #

My family and I were reminded of this hard lesson this past President's Day Weekend. We jumped in the car Friday morning, the dogs, the kids, my wife and I. We were fired up to get to Lake Tahoe to play in the snow. It's been a heck of a winter. Tons of rain and snow. We make it smoothly up to the beginning of the Sierra Nevada mountain range. As soon as we hit snow, traffic stops. Google Maps says we're going to be delayed an hour. That's not too bad really. We expect some traffic. I mean it's Lake Tahoe on President's Day Weekend after all. Trouble is, we're inching along, looking at our phones trying to get road condition updates and all we see is a continued one hour delay on Google Maps. Six hours later and we're still making inch by inch progress. Turns out, we covered about two miles in six or seven hours. We finally called it quits, turned around and found a motel somewhere around Sacramento. We suffered handily from the Sunk Cost Fallacy. "We've made it this far. May as well keep on going."

With 20 Years Of Experience, You Finally Learn About Web Development Sunk Costs #

My job as a web developer involves the sunk cost fallacy almost every day. I often encounter clients who have committed so much to a web venture that they can no longer see the reality of their situation. Often they have committed so much to their web development platform that they are loathe to make a change for the better. They find themselves in a situation where they could be achieving web reliability, a state where a website is reliably generating revenue and generally staying out of the way of other business processes. But instead of achieving that, they continue to labor along, trying to slog through a life with a bad CMS or crummy web hosting or a lackluster web development team.

Sunk Costs And Humans #

One of the biggest impediments to achieving web reliability, that state of website nirvana where the web property makes money and stays out of the way, is the human side of sunk costs. We've all been on a team with someone who under-performs. They don't stand up and deliver what everyone else on the team does. But over time, so much has been invested in such a person that a bias develops that prevents the team from seeing that person for what they are; not a good fit.

"Hey Mike is such a great guy. He never really delivers on deadline and he costs a lot of money due to his wastefulness, but he's been on the team for years now. We can't just drop him!"

Turn Around And Go Back The Other Way #

When people fall down, don’t they get up again?
When they discover they’re on the wrong road, don’t they turn back?
Jeremiah 8:4 NLT

Often we think of web development as left brained, rational and objective. It's not. It's every bit as human an endeavor as anything else we humans try to do. Web development suffers from the sunk cost fallacy perhaps more often then other fields. One likely reason is due to the complexity and relative opacity of the discipline. When you are a client of a web development project, so much of what your agency is doing is invisible and mysterious. The work is highly complex and you are being shielded from the complexity in a lot of cases. It's just like our little problem trying to get to Tahoe in a snow storm. We were making a little progress, nice and steady, but we could never see the big picture. We never got to see just how bad, how complex our situation was. If we could have seen the complexity of the problem from above, we would have turned around and parked the car well before we sunk six-seven hours into the effort.

Be Transparent, Be Reliable #

Over the years, we at Solspace have absorbed the sunk cost fallacy and made sense of it. We have learned that there are antidotes. Information is one of the best antidotes against sunk cost bias. When we engage with a client, we almost always are engaging in something highly complex with them. We're walking into the woods with someone, sometimes without a complete map. The more information we can extract from the situation, the more accurate a map we will have to guide our client and ourselves through the process.

There are two central things that we do at Solspace to shield the overall team from the sunk cost fallacy as well as other pitfalls. One, we conduct paid discovery exercises. We write up a contract that gives us and the client permission to say, "There are some known unknowns and some unknown unknowns. For the next four weeks we are allowed to ask dumb questions, look stupid and embarrass ourselves while we stumble around trying to develop a map of the problem we're going to solve." Two, we communicate clearly and transparently at all times. We have learned over the 20 years we have been in business that in the long run, developing good relationships with our clients is not only fun and nourishing, but an excellent hedge against slow motion project disaster. When you have put the time and courage necessary into building a real, authentic relationship with another human being, you have created a situation where the truth can be told as soon as the truth is known. Facing a client and telling them that you have inadvertently guided them down the wrong road, perhaps into a snow storm, is much easier when you have grown accustomed to telling that person the truth as soon as you realize the truth.

When the goal is to be a reliable asset to a client, being transparent and truthful at all times is one of the greatest habits to develop. Being honest with someone else as a habit has a favorable side effect. You end up also being honest with yourself at all times. One of the best things you can do is truthfully face reality and say, "I think we made the wrong choice. Let's turn around and go back."