Sunk cost bias - Data Edition

The sunk cost bias describes humans' poor ability to make rational decisions when we’ve invested meaningful time, energy, or money into something.

We make irrational decisions because we don’t want to “waste” the time, energy, and money we’ve invested, and so we continue on.

Even when abandoning the activity would better serve them.

Sunk cost bias is fundamentally a backward-looking problem. It betrays how heavily humans rely on the past to make decisions about the future.

• I need to stick with this career path because I’ve spent x years and $y on education.

• As bored as I am with this book, I should finish it because I bought it for $15 and spent a few hours already reading it.

The question we miss is this: Is the future of this path still the one I want?

This shows up in data teams all the time.

• We invested thousands of dollars in on-prem servers a couple of years ago. Despite how good moving to the cloud would be for our business, we don’t want to waste our investment.

• I’ve spent three days trying to get this code to work. I found an easier framework to use, but it would require rewriting the whole thing and I don’t want to waste the time I spent over the last three days.

• We sent out the whole team to get training on XYZ Shiny new data tool. It would be a shame to waste the thousands of dollars we spent on training, even though now it seems like the tool may not be the best fit for us.

Reducing the effects of sunk cost bias (I doubt you can ever eliminate it) requires a resilient forward-looking commitment. It’s never too late to change course.

What is the best next step now?

I’m here,

Sawyer

from The Data Shop​

p.s. It can be really hard to see your own sunk cost bias. Inviting outside voices into the equation is often the most effective option.