Barry Staw’s 1976 paper, “Knee-Deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action,” explored the phenomenon of Escalation of Commitment. Staw’s study found that individuals become increasingly committed to a decision or course of action, even when it no longer makes sense to do so. This is driven by a combination of psychological and social factors, including the sunk cost effect, self-justification, loss aversion, and social identity.

The sunk cost fallacy is a specific example of the escalation of commitment phenomenon, where individuals become trapped in a cycle of investing more resources into a decision or course of action, simply because of the resources already committed. This can lead to a waste of resources, a lack of innovation, and poor decision-making. By understanding the psychological and social factors that drive the sunk cost fallacy, individuals and organizations can take steps to avoid this phenomenon and make more informed decisions.

The sunk cost fallacy can have significant implications for product development and decision-making. When we become overly invested in a particular product or feature, we may continue to pour resources into it even when it’s no longer viable. This can lead to a waste of resources and poor decision-making.

From a product perspective, the sunk cost fallacy can lead to a failure to pivot or adjust course when necessary, resulting in a product that is no longer competitive or relevant. This can be due to a desire to justify past investments of time and effort, or to avoid admitting defeat. As a result, valuable resources are wasted on a product or feature that may never see the light of day or provide value to users.

The sunk cost fallacy can manifest itself in many areas. We may continue failing marketing campaigns, maintain insecure or buggy code bases, add new features to failing products, and double down on poor business strategies simply because of the resources already committed, even if it’s no longer serving our needs.

By recognizing the sunk cost fallacy and taking steps to avoid it, we can make more informed decisions and ensure that our products are meeting user needs and providing value.