Why do we like to cling to failing plans?

People learn to double down on failing choices as planning ability grows, then ease off as it declines later

Featured faculty: Jessica Kwong
Written by Joanne Madrid

Lots of praise has been given to persistence, highlighting the eventual rewards of never giving up. Walking away is often harder than doubling down when eyes are on a target, especially considering the time and effort spent. After all, failure is a success in progress, as the famous saying goes.

Any resources are considered gone when they’re spent in personal and business endeavours, no matter the outcome. Economists call this unrecoverable spending sunk costs. A rational mind should not account for sunk costs when facing setbacks and know when to stop, but many real-world cases have shown otherwise.

For example, Kodak invested heavily in marketing its film business for years and refused to embrace the digital camera it once invented before filing for bankruptcy. The British and French governments kept operating Concorde jet despite the skyrocketing costs, and it took decades for them to finally decommission it.

Most people have, at some point, stuck with a bad decision longer than they should have, either holding a losing investment or continuing with a plan even as results disappoint. Behavioural scientists name such stubbornness as escalation of commitment and attribute it to irrational decision-making tendencies or escalation bias.

However, Jessica Kwong, Professor of Marketing at the Chinese University of Hong Kong (CUHK) Business School, has another perspective. “Rather than reflecting stubbornness on poor judgment or irrational decision making, the escalation of commitment can arise even as people become better at planning and coordinating choices.”

In collaboration with Wong Kin-fai of the Hong Kong University of Science and Technology, Professor Kong’s latest study, The development of escalation bias across the life span: A multi-level adaptive learning approach, finds that escalation of commitment is formed as a strategy to execute a series of plans with some room to tolerate failures.

“Rather than reflecting stubbornness on poor judgment or irrational decision making, the escalation of commitment can arise even as people become better at planning and coordinating choices.”

Professor Jessica Kwong

Is escalation of commitment irrational or tactical?

People normally continue a behaviour after positive reinforcement, but quit after negative feedback. However, the researchers highlight that people also escalate their efforts when encountering obstacles instead of giving up quickly, especially when the expected results are rewarding.

Professor Kwong finds that, from a natural learning experience, people build decision strategies or game plans to achieve their goals by conducting a series of actions with different methods, and then evaluating whether the strategies succeed or fail after a certain number of attempts. The strategies that deliver more positive outcomes are more likely to be deployed again.

Therefore, what appears to be irrational persistence may instead reflect a deliberate choice to tolerate short-term failures in pursuing longer-term goals, or, as Professor Kwong calls it, an escalation strategy.

“Once an individual adopts an escalation strategy, they allow themselves the space or possibility to absorb some short-term setbacks,” she adds. “It’s akin to long-term investing. After carefully choosing a stock, reacting to every short-term price swing can undermine the original rationale for the investment.”

Professor Kwong further discovers that such tolerance grows as our metacognitive capacity, or the ability to plan, monitor and coordinate multiple decisions, evolves across the lifespan.

How tolerance to failures changes as people age

Existing literature shows that escalation bias tends to increase as children grow into teenagers, then decreases from young adulthood into old age. To understand more about it, Professor Kwong and her collaborator use three computer simulations to examine escalations in different settings.

A virtual experiment is chosen because testing the metacognitive ability of multiple individuals over long periods not only requires extensive time but could also be unethical. Each simulation consisted of 15,000 virtual participants or programmes designed to act and learn over time like humans, with each participant going through 1,000 decision-making moments.

The results confirm that increasing metacognitive capacity from infancy to adolescence leads to greater tolerance for short-term failures, but this tolerance weakens as people age with shrinking metacognitive capacity. This pattern creates an inverted U-shaped tendency of escalation commitment, which starts low in youth, peaks during employment years, and then declines as people retire.

Increased metacognitive capacity allows people to engage in more complex decision planning and fuel escalation bias. This study offers new insights into how natural learning experiences can progress into persistence to invest in failing projects.

Drawing the fine line between grit and stubbornness

This finding may explain why simply telling an employee in their productive age to stop pursuing a failing project may not be enough to change their minds. Their desired final goals are laid out in their master plan involving an escalation strategy, rather than a lack of awareness.

At the top strategic level, on the contrary, escalation of commitment bias can be fatal or disastrous when it is not backed by a higher-level decision strategy. Acknowledging it and pivoting would save the company’s life, just as Mark Zuckerberg did when rebranding Facebook to Meta in 2021 to develop metaverse-based social media, only to move on to AI a couple of years later, after realising his idea was a flop.

Companies can proactively set up systems that encourage critical re-evaluation of projects, especially when signs of counterproductive escalation appear. This might involve having independent teams review struggling initiatives or establishing clear stop points based on objective, helping employees overcome their natural tendency to keep pushing a losing hand.

Google’s Moonshot Factory is particularly adept with this. The factory is created to invent new technologies and cultivates a culture that celebrates killing promising ideas early, ensuring that the hardest parts of a project are tested first, rather than delaying potential failure. For companies that rely on research and development, perhaps a system to address escalation bias is no longer an option.