Pulling the plug

We make decisions and defend them with our lives, rarely if ever admitting that we might have taken the wrong road even when it is evident to other folk. In management terms it is what probably leads to escalation of commitment which simply put, means throwing good money after bad.

Defined as the "Tendency to invest additional resources in an apparently losing proposition, influenced by effort, money, and time already invested." 


This is always a managerial quandary and some of the spectacular failures of the recent past are The Lockheed L 1011 fiasco and the Washington Public Supply System debacle (commonly referred to as WHOOPS) are spectacular examples of organizational failure. Decisions to persist with these crippled ventures caused enormous losses. Closer home many of India's welfare schemes may fall in this category, where enormous funds have been wasted in unproductive and wasted schemes that yielded no results though the initial thought that triggered the decision might have held a germ of truth.


While escalation of commitment is an interesting phenomenon and I'm sure that many people do understand its implication, the decision to pull the plug on a failed project is always difficult. For many managers justifying the lost resources is difficult and it is easier to pretend that things are hunky dory and coast.

Escalation of commitment is a cognitive bias.The fear of change, failure, the fear of admitting we were wrong, the fear of wasting time, money, and energy, can all be enough, even on a subconscious level, to keep people motivated and working hard at something that is false and untrue. On occasion I ponder as to why seemingly intelligent people follow sadhus, clerics and other such religious nuts  who lead them up the garden path both in organized and unorganized religion.

Sometimes the best thing we can do is accept our wrong decision, cut our losses while we can, and get a move on.  This is often more frightening, especially when the stakes are high.  But we need to be able to learn how to cut our emotional attachment out of the equation and look at the objective reality.  Do the math with your head, not your heart. 

Escalation of commitment can be very dangerous when we try to manage impression. This particularly holds true in adolescent youngsters and manifests itself as peer pressure where a destructive course is charted and navigated just to confirm.

We need to be able to admit defeat and admit that we are wrong on occasion and simply pull the plug !

A Monkeys Paw!

The Monkey's Paw is rather a scary story over a 100 years old, which talks about not being able to escape fate and that every wish carries a cost.The story involves Mr. and Mrs. White and their adult son Herbert. Sergeant-Major Morris, a friend of the Whites who has been part of the British Army in India, leaves them with the monkey's paw, telling of its mysterious powers to grant three wishes, and of its journey from an old fakir to his comrade, who used his third and final wish to wish for death.
Mr. White wishes for £200. Their son is killed by machinery at his company, and they get compensation of £200.Sad compensation, indeed.

Apparently monkeys are trapped in South East Asia, buy inducing the animal to dip its paw into a bottle of peanuts. The greedy monkey clutches at the nuts and is sadly unable to get its paw out of the bottle. It does not have the intelligence to let go and run, either.As panic sets in, fear clouds its judgment and its freedom is lost, as the hunter picks it off the anchored bottle.

How like humans? We are trapped in a vicious materialistic spiral and have little inclination of letting go, to move on to better things in life. In management parlance it is called 'Escalation of Commitment', where precious resources chase useless pursuits, as people and organizations refuse to let go and move on!

A Nut's tale!

During my travels in the city of Bengaluru, I see many signboards on house gates. The commonest being, 'Do not park in front of the gate'. I also see, 'Beware of Dog'. However, the other day, I saw a sign which said, 'Beware of Coconuts'. I was amused and looked up to see a couple of towering trees, arching into the road! The amusement turned to concern, as a couple of days ago, as a nut, falling from a height of about thirty feet, almost smashed into the roof my Honda City. I was, shaken, to the core of my stubby feet, thinking, as to the cost of repairs, should the nut have found its mark. Bangalore, is one city where, folk have planted coconut trees, rather indiscriminately & found much to their chagrin, that eventually, it would be cheaper to buy a nut rather than pluck one from the tree.Though much of the population have come to realize this fact, they are chary of getting rid of the tree! Why? The only explanation, I can think of is as follows, called Escalation of Commitment.

Escalation of commitment was first described by Barry M. Staw in his 1976 paper, "Knee deep in the big muddy: A study of escalating commitment to a chosen course of action". More recently the term sunk cost fallacy has been used to describe the phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the decision was probably wrong. Such investment may include money, time, or — in the case of military strategy — human lives. The phenomenon and the sentiment underlying it are reflected in such proverbial images as Throwing good money after bad and In for a dime, in for a dollar (or In for a penny, in for a pound). The term is also used to describe poor decision-making in business, government, information systems in general, software project management in particular, politics, and gambling. The term has been used to describe the United States commitment to military conflicts including Vietnam in the 1960s - 1970s and in Iraq in the 2000s, where dollars spent and lives lost justify continued involvement. Alternatively, irrational escalation (sometimes referred to as irrational escalation of commitment or commitment bias) is a term frequently used in psychology, philosophy, economics, and game theory[citation needed] to refer to a situation in which people can make irrational decisions based upon rational decisions in the past or to justify actions already taken. Examples are frequently seen when parties engage in a bidding war; the bidders can end up paying much more than the object is worth to justify the initial expenses associated with bidding (such as research), as well as part of a competitive instinct.

A friends family, went through a horrendous experience, when, a person they had hired to pluck nuts, got into their home & threatened them with the chopper, for money! The family, then spent, a good twenty grand on having the offending trees uprooted & carted off!As for the intended thief, he was picked up by the cops, a few days later, putting an end to what seemed to be the first 'Coconut Thief', that Bengaluru had seen.

When my Dad built, a house, the first, discussion centred around where the Coconut trees, should be put. On relocating, a few years later, we resisted the strong urge to have Coconut trees again....now, with, all the talk about cholesterol and such, the omnipresent Coconut has all but disappeared from our diet.The good old nut has really fallen from grace!

I'm sure this bit would get your attention: "Falling coconuts kill 150 people worldwide each year, 15 times the number of fatalities attributable to sharks," said George Burgess, Director of the University of Florida's International Shark Attack File and a noted shark researcher.

Analyzing the force at which falling coconuts might hit a person,it is true that one can be injured, and in some cases killed by falling coconuts because the trees are tall, and the falling velocity of the coconut accelerates. It would essentially be the equivalent of dropping a coconut, in many cases, off a ten-story building.



How nutty can we get?

Food for thought!

A couple of days ago, I had the most exhilarating, ride to the southern suburb of Koramanagala, here in Bangalore, on the pillion of a friends bike.After transacting, the business, that we were there for, feeling ravenously hungry, I scouted around for a bite, and not finding anything appropriate, settled for a packet of Haldiram's Moong Dal.

Post quenching the fires in my belly, while attempting to dispose, the wrapper, the name Haldiram struck a chord.Why? Read on & you shall comprehend!

Haldiram Bhujiawala proprietor Prabhu Shankar Agarwal was sentenced to life imprisonment along with four others by a fast track court for conspiring to kill a tea stall owner, whose shop came in the way of a food plaza he was building, a few days ago.

Agarwal, owner of the multi-crore food and confectionery chain, which has outlets in many cities and also in London and elsewhere, had failed to persuade tea stall owner Satyanarayan Sharma in Burrabazar area of Kolkata to move out as the shop would spoil the facade of the food plaza he was constructing.

His hired goons who threatened the tea stall owner & had then raided the shop looking for Satyanarayan, but not finding him, shot his nephew Pramod Sharma, injuring him seriously on March 30, 2005. These acts followed attempts to reason with Sharma and as this cut no ice, Agarwal tried to buy him off.Sharma would not budge.
The rather bizarre behavior displayed by Agarwal, is not uncommon & in Psychological parlance termed as 'Escalation of Commitment'.

An example.......After a heated and aggressive bidding war, Robert Campeau ended up buying Bloomingdale's for an estimated 600 million dollars more than it was worth. The Wall Street Journal noted that "we're not dealing in price anymore but egos". Campeau was forced to declare bankruptcy soon afterwards.

Escalation of commitment, is a phenomenon where decision making turns seemingly irrational piggybacking on rational decisions, because you do not want to cut your losses & admit that you were wrong in the first place.The phenomenon of escalation can be described in the following fashion. First, a decision-maker performs a choice under conditions of uncertainty. Later, the decision-maker learns that another course of action is more advantageous (this different course may be as simple as the termination of the original project). At this stage the decision-maker has an option of altering the original decision. Having received the negative feedback, however, the decision-maker escalates the original commitment, thus becoming "locked in the losing course of action" (Staw, 1981).

As I finally managed to dispose the 'Moong Dal' wrapper, I wistfully thought- What if our friend Agarwal, had heard about escalation of commitment? In the managers world, it is imperative that we understand, EOC.

j accuse......................a trial that tore a nation apart.

Yesterday, after a long day at the office, I flopped down on my favourite chair in front of the TV and was audience to the most bizarre talk show, that I've been privy to in recent times. This was a talk show with the following, on Times News.....
.Rahul, the anchor.
.Mahesh Bhat- Movie Mogul and known to sympathize with minorities.
.Pooja Bhat- Mahesh Bhat's daughter.
.Oza- Head of some kind of fringe group operating in Gujarat.
.Naveen/Nikhil ( ? )- Spokesperson for the BJP, in Gujarat.

The talk show was about, yesterday's vandal attacks on movie houses across Gujarat, screening Bhat's new release 'Tum Mile'. The vandals apparently are encouraged by the likes of Mr.Oza, who appeared to be a top level functionary in the group.
Why? Because Bhat's son Rahul ( Not the anchor )is in some way connected to a Headley who is connected to the LET which carried out the attack on the Hotel Taj, at Mumbai, last November. Everybody had their say. Mahesh, alternatively called Oza, a joker, a badmash, a gentleman, a scourge on the collective conscience of India and rounded it off by calling him Oza Saab. Pooja, kept referring to some mirror & was very verbose. Much of her talk went above my head and frankly she looked a wee bit tipsy. Mr.Oza, was amazing. He kept referring to the Mahabharat & Dritrashtra in particular.Left me flumoxxed. The anchor, Rahul, was pretty aggressive himself and had his share.
The crux of the story is that Rahul Bhat is being condemned even before he is proven to be guilty much to the sorrow of his family............I lost track after a while because dinner was served & I had to leave.... ( No TV while eating )
The sad story remind me of another amazing one, played out in France about a 100 years ago....... Capt. Dreyfus, a young, military officer in the French Army was accused of spying for the German's and sentenced to prison.........at Devil's Island French Guiana. Dreyfus was innocent, but the problem was that he was a JEW & at the height of anti Semitism, you did not want to be a Jew in Europe, in the 19th Century. Before being sentenced to prison, Capt.Dreyfus was cashiered and court martial led in public.
The drill...
His cap was removed & thrown on the ground. His eapulets ( badges ) were torn off & thrown. His decorations removed. His regimental stripes stripped off. His sword broken in two. All this in full view of his regiment. It leaves an officer naked. The tragedy of the episode was that there was mounting evidence that Dreyfus was innocent but French counter intelligence refused to look at it and in term fabricated fresh evidence to prove that Capt.Dreyfus was guilty. This is called escalation of commitment. An interesting OB theory, wherein you make a commitment, realize, it is wrong but continue on the course, because you cannot admit that you were wrong and cut your losses.
The Dreyfus affair grew steadily worse.................. Two years later, in 1896, evidence came to light identifying a French Army major named Esterhazy as the real culprit. However, high-ranking military officials suppressed this new evidence and Esterhazy was unanimously acquitted after the second day of his trial in military court. Instead of being exonerated, Alfred Dreyfus was further accused by the Army on the basis of false documents fabricated by a French counter-intelligence officer, Hubert-Joseph Henry, seeking to re-confirm Dreyfus's conviction, and uncritically accepted by Henry's superiors. Finally....... Word of the military court's framing of Alfred Dreyfus and of an attendant cover-up began to spread largely due to a vehement public protestation in a Paris newspaper by writer Émile Zola, in January, 1898. The case had to be re-opened and Alfred Dreyfus was brought back from Guiana in 1899 to be tried again. Eventually, all the accusations against Alfred Dreyfus were demonstrated to be baseless. Dreyfus was exonerated and reinstated as a major in the French Army in 1906. He later served during the whole of World War I, ending his service with the rank of Lieutenant-Colonel.He was an old & tired man. The spirit in him was gone for ever.......
I hope Rahul Bhat, fares better & the larger point that I'm attempting to make is that as a manager, if you have made a mistake, own up & correct course. Do not escalate commitment.....................
As for Gujarat, the mind boggles...............