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CUT YOUR LOSSES .. why we do not walk away from a bad decision

A friend forwarded a message just yesterday. The usual read and forget, stuff is what I thought. But two days letter, I am still unable to forget the message.

A husband-wife duo went to a film which was a bad choice & the husband wanted to leave but the wife didn't, because they had already 'invested' in it.

This is called the 'Concorde' effect named after the supersonic aircraft, which the Anglo-French governments continued to promote even after it became a failure.

The supersonic aircraft was noisy and extremely expensive to operate, which restricted flight availability. The fare pricing was prohibitively high for most.

Now, to admit failure is difficult for an individual, a corporation and even it seems the government and that's why time and resources are wasted in a lost cause.

This is the sunk cost fallacy at work, a thinking error! The more we invest, the greater the sunk costs are & greater becomes the urge to continue on the path.

The psychologists will say that this irrational behavior is driven by a need for consistency. For a businessman, however, this has direct implications daily.

If we decide to cancel a project halfway through, we create a contradiction: Carrying on with a meaningless project sometimes delays this painful realization.

This is irrational but ironically, the more money you lose, the more you tend to stick by it. THE SECOND OPINION helps you to shift the grain from the chaff.

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