We've all dug ourselves into some holes that were hard to dig out of, especially at the urging of good friends. She knocked on my door to my room, which she never does. So I knew something was up and she was like, hey, wear a person down, everyone's going to go. You're going to be so upset that you missed this. That's my student, Alexis. This was the second time her friend asked her to go to a trendy new festival so she couldn't turn her down again. But as soon as she said yes, things started to go downhill. Not only did my friends not have any details about the event, but even the contact that we made with the organizers of the event seemed pretty sparse on the details as well. So I was already feeling a bit uneasy about what was happening, but it felt like I'd already made that public commitment to our group to go. We'd already paid for our flights to Miami and those are non-refundable. Even as Alexis and her friends were boarding the plane, things kept getting worse. So we got on the plane, which strike three. And I was on my phone because I found a Twitter account saying that people had started arriving and didn't have housing and didn't have any food. Turns out that, first of all, her friends were obsessing about was one of the biggest frauds of twenty seventeen fire festival. All these models, like in the Bahamas, the most insane festival the world has ever seen, an island getaway turned disaster. It became very far barren when we got to the island. Of course, as most people know now, nothing was as promised. We were not a luxury resort style. We were just in pretty damp tents, basically spending the whole time there trying to figure out how to get out. There's a name for what happened with Alexis. It's called Escalation of commitment to a losing course of action. It's when you find out you've made a bad decision, but instead of cutting your losses, you doubled down. You invest your time, your money or your identity and decisions long after it's become obvious that they're dead ends. You may not have ended up at fire festival, but I'm willing to bet that you've escalated your commitment to plenty of bad decisions. So how do you pull the plug sooner? I'm Adam Grant and this is WorkLife, my podcast with the TED Audio Collective. I'm an organizational psychologist. I study how to make work, not suck. In this show. I take you inside the minds of fascinating people to help us rethink how we work, lead and live today, why we get trapped in bad decisions and how you and your workplace can get unstuck. Thanks to Morgan Stanley for sponsoring this episode. Let's start from the beginning. My father was one of the very earliest people who started a discount store and it was very successful and he started a second one on the third one until he had a chain of stores in the late 1950s. Barista was a teenager in Southern California, and for almost a decade, he saw his dad grow his business to 15 stores and he was really doing well. And then the large national companies, they would just open a store right across the street practically and undercut all the prices. They literally drove all the independent people, all the small guys out of business. By then, Barry was in his 20s watching his father's business decline. It was slow and painful. He refused to give up. And so he kept putting more and more of his own personal money into the business until finally he had no more personal money left and it ended up closing up. So that was something that was really indelibly engraved in my psyche. Fast forward a few years and Barry was watching the American government fall into the same trap. It dawned on me that the Vietnam War was very similar to my father's experience, that we kept investing more and more. We kept having larger and larger losses, but we kept as a country refusing to admit that this was unlikely to succeed. Today, Barry is an organizational behavior professor at UC Berkeley, and he coined the concept of escalation of commitment. Escalation of commitment occurs when you're in a situation in which it is possible to add more resources to a course of action or a prior decision in order to rectify a loss. Barry is the world's leading expert on this problem, but even he can't help but fall victim to escalation from time to time. I've had some old cars and then when the warranty expires, then a bunch of little things start going wrong and then a little bit bigger things going wrong and then bigger and bigger. And I have been agonizing about whether to actually sell it and get rid of it or put more money in. It even happened in his marriage. I probably hung on longer than I should have went through years and years of marital therapy. Barry, in a moment like that, do you not realize you're in an escalation trap? I realize I'm in it, but I still realize that it is a very difficult situation. And maybe I can tell myself it might be a lie, that this might be one of the exceptions in which it actually might be rational to invest more in the situation. If this can happen to an expert on escalation of commitment, what hope is there for the rest of us? I'm painfully familiar with this phenomenon myself, like the time I wrote a whole book instead of a book proposal and had to throw away over 100000 words and start over or the time. I spent months trying to change the behavior of a toxic team member when I should have just let him go. Escalation of commitment happens in every workplace. I think about the times when you overinvested in a failing project stuck around in a miserable job. I struggled to walk away from an abusive boss or a toxic culture or even away from work. Poured your heart and soul into a romantic relationship that clearly wasn't working. So why don't we know better? Why do we fall into the same trap again and again, pouring more and more of ourselves into a bad decision, even when all the evidence points us the other way? The most common answer, people give sunk costs, we've already invested our time or money, and we want to do everything in our power to get a return on that investment, just like a Lexus at fire festival. Sunk costs are part of a story, but decades of research show that the most powerful forces aren't economic, they're emotional. Escalation is where people make errors because of their ego and their emotions. It's not just a cold calculation of the loss of money or time. It's the hot pain of threats to our sense of self. They're afraid to admit a mistake and they end up justifying a decision to themselves. In a case like this, I'm trying to protect my ego to convince myself that I didn't make a bad choice. I'm also trying to protect my image, to convince others that I made a good choice, because otherwise I might end up having people think that I'm not a good decision maker or I'm a loser. I'm not somebody who's to be trusted. The more we've invested in a decision, the more attached we become to it and the more attached it becomes to us. This is where an awful lot of the real disasters happen in terms of business decisions. People don't want to admit errors because their work identity has become linked with the course of action. People may even label the thing saying, Oh , that project, that's Jim's baby or that's Mary's project. And you become so identified with it that if the project fails, your career is down the tubes. Ironically, the very steps we take to defend our egos and images end up making us look worse. One of the places Berry studied this was the NBA. You'd think coaches would give the most playing time to the best players, like how many points you score, how many steals you make and how you rebound and so forth. And there is some effect of that, obviously. But there's also a very significant effect of how high you were in the draft. Even if top draft picks weren't playing well, coaches still kept them in the game. They made a big bet on this guy, so they wanted to prove they made the right decision and hadn't blown millions beyond ego and image. There's another emotional factor that fuels these kinds of escalation traps anticipated regrette. You're worried you'll wish you hadn't pulled the plug in. The NBA managers were afraid of giving up too soon on a potential star. They're thinking about maybe trading a particular athlete to another team, but then they're thinking, oh my God, he's not done very well with us. But what if he suddenly blooms? But I'm watching him on the other team, then I'm going to feel even worse. You probably know that voice inside your head, what are you doing? You can't give up too soon. Everyone's going to think you're a quitter and a failure, a failure. You won't find a better opportunity at some point. You just have to say it's over. Let it go. But that's easier said than done. Just ask Janice Burch. I was so scared, I don't ever remember being so scared to do anything then to tell my supervisor that I wanted to quit. Janice has one of the most practical strategies I've seen for escaping escalation of commitment. But she didn't discover it overnight. She's been working at a software company for a couple of years and for almost that entire time, she was unhappy, but she couldn't bring herself to leave. She started out with high hopes when I saw this job advertised. I definitely felt like this. One hundred percent is my dream job. The company was well respected. The benefits were amazing. This customer support job was perfect for Janice, at least on paper. It offered room to grow personal responsibility for managing a team and a culture of flexibility and freedom, I guess kind of be like invited into what seemed like this like exclusive club of awesomeness. But pretty soon reality crashed the party. I would say the honeymoon was over for me when I went to a meetup and I found out that someone that I had been interviewed by and I really admired had been let go. And not very many people knew about it and everyone was upset about that. And I guess it's just like in regular relationships and you talk about the honeymoon phase, you always say, oh, there were all these red flags and you're just like, oh, well, I just I couldn't see them because I was just so blinded by love. It's kind of the same thing. A few months into the job, Janice had some concerns and she heard other people complaining, but she didn't feel that she could speak up. She also felt that the company had a serious lack of diversity, Janice said that when she started she was the only black employee and that did not improve much over time. But she'd invested so much in this job, so instead of rethinking her commitment, Jannis escalated it by investing more energy and time and stayed in the job for two more years. She told herself that since her co-workers were reluctant to speak up, she might be able to change the company. I'm going to be the person to, like, jump in and make this change where others, you know, may be hesitant or whatever it is like I'm going to be the one. And so I was going to take it in and try to help. And how did it feel putting so much energy into a job and a culture that you knew deep down was not right? It's almost like you're gaslighting yourself, like you're telling yourself. No, no. Like all of the evidence around you is not correct. There's just you just have to do this one one little thing or do more. Barista knows the feeling at a certain point when the evidence is overwhelming. You have to ask yourself, is this grit or is it blindness or is it just my own ego that's getting in the way? When you reach that point, you might find that an antidote to escalation of commitment is another commitment. But to go the opposite way, a plan to pull the plug. And Janis created a clever strategy, a one year exit plan. I basically created three simple steps. These are the things that I'm going to do to, like, actually build myself up and give myself the courage to leave this toxic relationship. The first point was that I was going to build relationships outside of the company. So try to like meet up with people and just build relationships with people who can help me in whatever my next phase of life was going to be. Second on the list, stop engaging in what Janice calls energy zaps. Yeah, energy zaps, not interacting with, you know, what I call problematic people to go back to the relationship comparison. I guess I became emotionally unavailable at work. Her third step was to leverage her company's perks, to broaden her horizons is basically just trying to max out what was available to me then. One in particular is that we got to go to conferences. And so culture was obviously something that I was really interested and engaged with. So I've got a culture conferences and again, try to build relationships with people. It almost sounds like you had a strategy for disinvesting yourself. Yeah, that's exactly what it was. And about a year after she made this plan, she left. When I look back and I think about why I held on so much to that job in that position, I think it's because deep down, I have thought, like, this is as good as it gets. The beauty of a one year exit plan is that it gave Janice time to explore different paths and to detach emotionally instead of ripping off the Band-Aid. Janice now runs two coaching firms, works for flow and before diversity, her main regret is that she didn't make her exit plan sooner. One of my favorite ways to avoid that mistake is to identify your deal breakers, just like you probably have a list of nonstarters in her romantic partner, you can create a similar list for what's unacceptable in a job, a boss or a culture. If you figure them out up front, you can keep yourself honest. I've often advised students to do this and they report that it helps them re-evaluate their decisions and avoid escalation. But what if the escalation is bigger than you? What if your team, your boss or your entire company makes a habit of staying the course in a very bad course? More on that after the break. OK, this is going to be a different kind of that I play a personal role in selecting the sponsors for this podcast because they all have interesting cultures of their they're out today. We're going inside the workplace at Morgan Stanley. I am a big believer in, you know, standing on the shoulders of others, I am my ancestors, you know, from Nigeria and Ghana, West Africa, I am their wildest dreams, you know, to whom much is given, much is required. And so I believe that that's tattooed on my soul and my heart. Meet Mandele Crowley. Ever since he was a kid, Mandela is understood how important it is to have someone in your corner. Our childhood was one where we were raised by our grandparents. We had a little bit of adversity losing our parents relatively early. We were fortunate in that we had our grandparents because we were at risk of going into the foster care system. But my grandparents stepped in and they were amazing, particularly my grandmother. She was everything. Unfortunately, she passed from cancer. From that moment on, I literally started taking care of myself when I was 16 years old. But Mandela wasn't just taking care of himself. He also had his younger brother to look after. I had a younger brother who was 14 at the time where I essentially had to become his parent. And then I started to think about things that I had to do to make sure that both he and I were OK. It was around that time that he heard about an internship at Morgan Stanley. I was one of five kids that got to interview Adam. I showed up in a gold suit, black shirt, black and gold tie, and I got the job that opened the door for him. And then as Mandela was nearing the end of his internship, his colleagues opened another door. My colleagues knew my personal situation and they essentially put it out there that, hey, if you can figure out how to balance your school schedule with work, we'd love to keep you on. So Mandela started working at a trading desk during the day and attending college at night. He's now been with the firm for almost 30 years. And it all goes back to that first high school internship when his colleagues saw his potential and helped him achieve it. The guy who hired me on the desk was still a very dear friend and mentor of mine to this day, and he was pretty hands on in terms of helping to coach and mentor and all that stuff. Then he was offered his first leadership job, and that is when I came to appreciate my superpower, and that is motivating and mobilizing talent. Mandela rose to become the head of private wealth management, and now he's Morgan Stanley's chief human resources officer. Thing that really comes to mind when I think about why this firm was different. For me, it's really been the diversity of experiences that I've been able to have. I've had a series of careers at every step of his journey. He's made time to keep opening doors. I view it as a real responsibility, not just because of my day job, but I just feel like it's a fundamental responsibility that I have. Being a mentor doesn't just bring satisfaction and meaning. Research reveals that he can have surprising career benefits. People who spend time mentoring others are more likely to get promoted, in part because mentoring helps them develop and demonstrate their leadership skills. So there is a collegiality to the culture here. When you're a young person coming up the ranks and you need advice irrespective of who that person is or where they sit in the firm's ecosystem, you're going to get that meeting. I'm always making time for young folks or up and coming folks who are trying to figure out this thing called a career because you win in life with people. Mendell has opened doors for many up and coming employers, but there's one who stands out. He's a Puerto Rican kid from Paterson, New Jersey, first in his family to go to college. I end up hiring him. Two years later, I get promoted and I get to bring one analyst with me. Guess who I bring with me? I bring him. He's just got promoted to managing director. He's just an incredible human being. He's a great person. I'm the godfather of his son. You know, it's one of those classics, you know, when friends become like family, he's very much in that category. Collaboration and inclusion are core values in Morgan Stanley's culture, and they're shaping its future. Learn more Morgan Stanley dotcoms, people. Extracting ourselves from our own bad decisions is hard enough. Our ego and our image are in danger, but escalation is even worse when it happens. An entire teams or organizations. You know, Kodak was the industry leader in photography. They pioneered research into the digital camera, but then they shelved it and escalated their commitment to film. Bad decisions and then the decision to stick with them don't happen in a vacuum. The culture and structure of an organization can propel us straight into escalation of commitment. But research shows there are tangible steps organizations can take to protect us to make it easier to take a clear eyed look at the course we're on and even change direction. Berry style identified one of those steps in research on banks. It's very common for banks to loan money and to and to lose money. Banks fall victim to escalation of commitment when they keep expecting people who have defaulted on loan payments to come through instead of writing them off as uncollectable, Barry and his colleagues analyzed data from nearly all the banks in California over nine years. They found that banks were more likely to de-escalate their commitment to problem loans after senior executives left. The executives who had approved the original loans were motivated to keep justifying their decisions. When new executives took over, they quickly recognized that someone who's missed 17 payments probably isn't going to come through a number 18 if you move the loan decision from the original people who made the loan just like going to an objective third party, it's more likely that you will start to recognize the losses. So if I'm a CEO, are you saying I should fire all my executives so that people are finally willing to cut their losses? Well, I wouldn't maybe go that far. If you don't have turnover inside your organization, you at least need an outside perspective, somebody who can look at things with a kind of a cold eye and say, this is what I would do if I were facing this situation. This is the first of three important steps organizations can take to prevent escalation of commitment, separate the decision from the initial decision maker. There's an organization that does exactly this, its acts also known as Google's Moonshot Factory, it's where inventors and entrepreneurs build and launch new projects that seem out of this world, like self-driving cars and balloons, beaming Internet to remote communities. My name is Cathy Qanoon and I was formerly a rapid evaluator at X Rapid Evaluator. Is that a job? Is a job rapid evaluators at X? Our role is to find new opportunities for X. . So what are the things X should work on next? Are you a rapid evaluator in other parts of your life? Do you just show up at a restaurant and immediately know what to order? I think that a lot of my rapid evaluative tendency is just consumed in my professional life so much that in my personal life I'm like to my husband, can you please just can you decide what we're going to have for dinner? You decide I'm fine with whatever. In other parts of Google and Alphabet, escalation has been a problem. They took eight years to abandon their failed attempt at social networking. Remember Google Plus? And they waited too long to recognize that Google Glass was not going to make it as a consumer product. So it xts rapid evaluators like Cathy were tasked with offering an outside perspective on bold ideas, looking for reasons to pull the plug, even if the project in question was their own. So Cathy would always ask, what is the thing that will bring it down back in 2013? Cathy learned about an idea that could disrupt the oil industry. She'd been looking for a climate project, so she got excited about this new study she read. What if we could further this research, figure out how to commercialize it, and then combine that carbon dioxide with renewable hydrogen to make hydrocarbons, which is just a scientific way of saying make fuels out of it? So you're trying to turn seawater into fuel shorthand? Yes, that's what we would say, is it's turning seawater into fuel. Cathy immediately saw this as a crucial environmental breakthrough for Extra to fund. So she went all in foghorn. That's what they named the project was going to be her baby. But as someone whose job was to protect other people from escalation, Cathy knew she needed to be wary of it at the outset. Is it truly as good of an idea as it seems? It can take years to find out whether a project has succeeded or failed. Luckily at Beristain, his colleagues have discovered a workaround long before you know the outcome of a decision. You can create metrics to evaluate the quality of your decision process and process. Accountability is that you should be accountable for making a reasonably good decision, not in terms of how it turns out, but that you've been reasonably conscientious in terms of assessing alternatives and not biasing the data process accountability. That's a second step for avoiding escalation. The important thing with this is setting your targets and your benchmarks in advance. One way of holding people accountable for a good decision process is to establish kill signals. A kill signal was a mechanism for keeping ourselves honest, so at the beginning of the project, we tried to think like, what could we see that would tell us, all right, this just isn't going to work. So in our case with popcorn, we really wanted to make commercial fuel. We needed a path to be able to make it for under five dollars a gallon because our thinking was if it's much higher than that, there just won't be a market for it. Kill signals are process boxes to check gates, you need to make it through in order to keep going. Maybe your kill signal is we don't want to have to tackle huge regulatory problems. That seems like something every team should do in every workplace. Yeah, I mean, even just thinking about what would your kill signal be, it tells you a lot about the problem you're trying to solve. It also seems like it's more it has broader applications. So I should I should take a new job and have a kill signal around. OK, here's what would need to happen in order for me to decide that it's time to leave this job or time to walk away from this culture. I totally agree. It's almost like principles, right? It's like what are my values and principles that I don't want to compromise on? And it's it's very helpful to have some sort of moral compass or some sort of fixed point in terms of one's value system to guide you when the decisions become very fraught. So Foghorn gets the green light. Kathee sets her kill signal for this project to be successful in today's market, they cannot go over five dollars a gallon and they get to work. We were tackling things, were fixing them. It's great. But then we realize just the pumping energy alone. To pump all the water you would need to get the CO2 out is too much like it's an astronomical cost. Her kill signal starts flashing. She knows this is not good for the future outcomes of the project, but they're on a roll. What if they invest just a little bit more? It was like, OK, yeah, pumping costs. That's a challenge. But like, look at all this stuff we're figuring out. I think we were making so much progress on making the prototype work better that it gave us some hope, hope, even a sliver of hope can keep a failing project alive. So Kathy decides to send a message. I just sat down at my desk at X and just wrote an email acknowledging here was the vision and here were all the amazing things that we accomplished. But here are the challenges. And given where we are now and everything we've learned, I'm inclined to proceed by suggesting that this doesn't continue. Wait, you shut down your own project? I did. I recommended that it be shut down. Who does that? Apparently I do. All it took was a spreadsheet. I just realized the number, like the dollar numbers that I would have to ask for to make meaningful progress, given all the challenges, combined with the risk that we would not achieve our goals because of all of the complexity and the unknowns, even with the five dollars a gallon example by when. Right. It's possible we'll get there by 2050. But clearly that's not what the kill signal meant. It felt like wishful thinking. You know, it's like in my heart of hearts, I kind of knew it was more likely not to succeed. You know, there's a lot of opportunity cost for everyone, and it just seemed cleaner to shut it down. Kathy wasn't just focused on her own goals. She was thinking about what was best for the team and coming up with the most honest assessment that I could think would put the team as individuals in the best position going forward, because no one wants to work on something that's not going to work. Research shows that when we consider our responsibilities to others, we're less prone to escalation. Shifting attention away from our own egos and images and toward the greater good can allow us to make a more balanced assessment to free people from ego and image concerns. Organizations need to think differently about incentives to make failure acceptable. So even though the project hasn't worked out, if the person has been very diligent in looking at what the best prospects were, that person should still be rewarded and be given a good future in the company. That's a third step for de-escalation, taking the stigma out of admitting a failure. It's created an annual ceremony to recognize people who have the wisdom to pull the plug, because even if it wasn't the breakthrough they'd hoped for, their time and resources were still well spent. That day is all about celebrating the project that are no longer with us and recognizing them for everything that they gave X, and just like how X has benefited from them. And I do think that it would be too much to say people are happy when their projects are killed or it's a positive experience. Certainly not like everyone is human, but at least it normalizes it. Beyond throwing a party to celebrate the value of a failed project, Cathy's boss went further. He ended up giving us a bonus. And what? Yeah, you got a bonus for admitting that your project wasn't promising and shutting it down? We did. It only solidified that culture that he was already creating. Didn't that mean admitting failure, though ? Well, my job as a rapid evaluator was to evaluate and this was my evaluation. So I didn't see it that way because it's like if you punish failure and you simultaneously know it's inevitable, then you are creating an environment where people are inclined to hide it or misrepresent it. Yeah, I mean, if if you punish people for failing, they will do everything in their power to try to convince themselves and others that their project is not a failure. And then they'll identify with the project and attach their ego to it in a way that's very stressful for everyone. And then it's no longer as possible to separate. I'm a failure from this idea that I was pursuing isn't going to work, which are two very obviously different things, but don't always feel very different. I'm smiling here because you just described that as if you've spent the past 10 years reading the psychology of escalation of commitment, which I can't say that I have, but maybe I've lived it a little bit. We don't need to celebrate failure. We just need to normalize it. What you're highlighting here is that if you had plunged more of your time, energy and resources into foghorn, you might have missed out on a much bigger possibility. Yes, I absolutely agree. I mean, it's like maybe this is a bad analogy, but it's like the friend who's dating the person that everyone kind of knows isn't the right match. And even the friend isn't very happy. But they're worried that if they break up with that person, there won't be any other person for them. That is the exact same phenomenon. It's like you have to have this belief that there is something out there worth finding. And so if what you're doing now is mediocre, it's worth stopping to find that thing. That's not. If you normalize failure in your organization, it can help people de-escalate their commitment to bad decisions and focus their energy on better opportunities, because Kathy pulled the plug on Foghorn. She was able to pursue a new project which eventually launched her career as an entrepreneur. And I am the founder and president of Dandelion Energy, a geothermal startup. Every time I talk about escalation of commitment, whether it's with startup founders or military generals or students, there's one question that always comes up is one person's escalation, another's heroic persistence. If you think about it, most of our Hollywood movies, they usually have the protagonists experiencing a long series of setbacks, but then they have stuck to it and they've refused to admit failure. And in fact, everyone around them has told them that whatever is happening is a failure and everyone around them is dropped off and they have hung in there and they are ultimately successful. And yeah, grit can be a good thing. We need people with the will to persist and triumph in the face of obstacles. But when you're channeling your inner Katniss Everdeen, Inigo Montoya or Forrest Gump, it's worth pausing to see if you're on the wrong path because you might be Wile E. Coyote chasing a road runner you'll never catch. Next time on Work Life, it was incredibly humbling because I would submit job after job after application after application and would hear nothing. It took an entire year to get a full time job. Everyone's face career turbulence. The current recession is jeopardizing millions of careers right now. But we've been here before and there are lessons we can learn from past recessions. WorkLife is hosted by me, Adam Grant, it shows produced by Ted with Transmitter Media. Our team includes Colin Helmes Credico and Dan O'Donnell, Joanne DeLuna, Grace Rubenstein, Michelle Quint, Ben Ben Chang and Anna Feeling. This episode was produced by Constanza Gallardo, our shows mixed by Rick Juan. Our fact checker is Paul Durbin, original music by Hartsdale Sue and Alison Layton. Brown had stories produced by Pineapple Street Studios special thanks to our sponsors LinkedIn, Logitech, Morgan Stanley, Sappi and Verizon for their research on escalation of commitment. Thanks to Cigale Bastide, Dustin Slesin and Don Connellan, Jerry McNamara, Jonathan Miles, Clough's Mozer and colleagues Henry Moon and of course, Barry stock for the audio from Fire Festival. The Greatest Party That Never Happened. Documentary is courtesy of Netflix and for the intro to Kathee and the insights on gratitude to Courtney Hoan. I hope to get a recording of this, so the next time I need to decide whether I should keep that old car of mine or whatever, I will not fall into the same traps that I have spent my research career trying to create lessons about how to avoid that. I think there's there's no better person to be persuaded by than someone you know well and trust a lot yourself. Thank you.
