Tip Sheet: How to Escape Misguided Decisions
A little foresight can help you avoid throwing good money after bad.
By November 5, 2013 - last reviewed on June 9, 2016published
Think about the last time you waited for 45 minutes at a restaurant. You probably should have headed elsewhere at that point, but you'd already waited so long—how could you leave? You fell into a trap called "escalation of commitment." When we invest in a choice that falls short, we're often tempted to invest more. It pays to learn how to cut our losses.—Adam Grant
Get a Neutral Opinion
It's hard to avoid being biased in favor of sticking with an old car or a struggling employee. The solution? Consult a third party. In one study, bank managers tried to save face by giving second loans to clients who had defaulted. But new managers who had no responsibility for the first loan saw it was time to sever those relationships.
Evaluate the process of making a decision, not only its outcome. Asking employees to explain their thinking can encourage them to conduct a thorough, evenhanded analysis of options. You can set advance criteria for your personal decisions, too: Before arriving at a restaurant, resolve to wait no more than 30 minutes.
Think of Others
In Mistakes Were Made (But Not By Me), psychologists Carol Tavris and Elliot Aronson present a chilling analysis of how prosecutors reject DNA evidence that proves the innocence of people they imprisoned. To avoid the pitfalls of a myopic, self-serving decision, consider its effect on others instead of thinking only of your own ego and image.
Be Careful With Compliments
Praising people for their skills can help them feel secure enough to acknowledge a mistake. But when we give positive feedback in a domain where a person has failed, we invite overconfidence. Trying to help someone get over a bad financial decision? Compliment their writing or their family—not their investing know-how.