Counterintuitive Facts (28): Why Do Smart People Also Go Down Dead End Roads?

I. You invested in a project, already lost $5 million. All indicators tell you: this project is hopeless. Market environment changed, technical path was wrong, team is infighting. But instead of stopping, you borrow money everywhere and pour in another $5 million. You tell yourself: "Just invest a little more and I can break even." You tell shareholders: "If we give up now, that first $5 million goes to waste."

II. This is more than just "Sunk Cost Fallacy." This is Escalation of Commitment. If sunk cost is "reluctant to throw away spoiled milk." Then escalation of commitment is "to avoid wasting that spoiled milk, specifically buying expensive steak to go with it, then forcing yourself to eat it all, ending up hospitalized with food poisoning." This is a death spiral.

III. Why do we do th