Sometimes, we don't know when to throw in the towel. As a project unfolds, it becomes clear that things aren't working out as planned, that it will cost too much or take too long, or that someone else will beat you to the punch. But instead of moving on to new opportunities, we continue to devote our time, energy, and money to doomed projects (or even doomed relationships), digging a deeper hole rather than trying to climb our way out of it.
Why? The most likely culprit is our overwhelming aversion to sunk costs - the resources that we've put into an endeavor that we can't get back out. We worry far too much about what we'll lose if we just move on, and not nearly enough about the costs of not moving on - more wasted time and effort, and more missed opportunities.
But thanks to recent research by Daniel Molden and Chin Ming Hui, there is a simple way to be sure you are making the best decisions when your endeavor goes awry: focus on what you have to gain, rather than what you have to lose.
Psychologists call this adopting a promotion focus. When Molden and Hui had participants think about their goals in terms of potential gains, they became more comfortable with accepting the losses they had to incur along the way. When they adopted a prevention focus, on the other hand, and thought about their goals in terms of what they could lose if they didn't succeed, they were much more sensitive to sunk costs.
If you make a deliberate effort to refocus yourself prior to making your decision, reflecting on what you have to gain by cutting your losses now, you'll find it much easier to make the right choice.
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