Facing the Mirror: Looking Good or Doing Good?
Barry Staw is a world-renowned organizational behavior professor at the University of California at
Berkeley, and he has spent his career trying to understand why people make bad decisions in
organizations. In an ingenious study, Staw and Ha Hoang collected data on all 240-plus players who
were picked in the first two rounds of the NBA draft between 1980 and 1986, in hopes of seeing what
effect draft position had on a player’s career. They measured each player’s performance with a series
of different metrics: scoring (points per minute, field goal percentage, and free throw percentage),
toughness (rebounds and blocks per minute), and quickness (assists and steals per minute). Staw and
Hoang controlled for each player’s performance on all of these metrics, as well as for the player’s
injuries and illnesses, whether the player was a guard, forward, or center, and the quality of the
player’s team based on win/loss records. Then they examined how much time on the court the players
received and how long their teams kept them before trading them, to see if teams made the mistake of
overinvesting in players just because they drafted them early.
The results produced a devastating conclusion:
teams couldn’t let go of their big bets
. They stuck
with the players whom they drafted early, giving them more playing time and refusing to trade them
even if they played poorly. After taking performance out of the equation, players who were drafted
earlier still spent more minutes on the court and were less likely to be traded. For every slot higher in
the draft, players were given an average of twenty-two more minutes in their second season, and their
teams were still investing more in them by their fifth season, when each draft slot higher accounted
for eleven more minutes on the court. And for every slot higher in the draft, players were 3 percent
less likely to be traded.
This study is a classic case of what Staw calls escalation of commitment to a losing course of
action. Over the past four decades, extensive research led by Staw shows that once people make an
initial investment of time, energy, or resources, when it goes sour, they’re at risk for increasing their
investment. Gamblers in the hole believe that if they just play one more hand of poker, they’ll be able
to recover their losses or even win big. Struggling entrepreneurs think that if they just give their start-
ups a little more sweat, they can turn it around. When an investment doesn’t pay off, even if the
expected value is negative, we invest more.
Economists explain this behavior using a concept known as the “sunk cost fallacy”: when
estimating the value of a future investment, we have trouble ignoring what we’ve already invested in
the past. Sunk costs are part of the story, but new research shows that other factors matter more. To
figure out
why and when escalation of commitment happens
, researchers at Michigan State University
analyzed 166 different studies. Sunk costs do have a small effect—decision makers are biased in
favor of their previous investments—but three other factors are more powerful. One is anticipated
regret: will I be sorry that I didn’t give this another chance? The second is project completion: if I
keep investing, I can finish the project. But the single most powerful factor is ego threat: if I don’t
keep investing, I’ll look and feel like a fool. In response to ego threat, people invest more, hoping to
turn the project into a success so they can prove to others—and themselves—that they were right all
along.
In one study led by Staw, when
California bank customers defaulted on loans
, the managers who
originally funded the loans struggled to let go and write off the losses. “Bankers who have been
closely associated with decisions to fund problem loans are the ones to show the greatest difficulty in
acknowledging the subsequent risks of these loans and the likelihood of default,” Staw and colleagues
write. The study showed that when managers who originally funded the problem loans left the bank,
the new managers were significantly more likely to write the loans off. The new managers had no
personal responsibility for the problem loans, so their egos weren’t under threat; they didn’t feel
compelled to justify the original decisions as wise.
Research suggests that due to their susceptibility to ego threat, takers are more vulnerable to
escalation of commitment than givers. Imagine that you’re running an aircraft company, and you have
to decide whether or not to
invest $1 million in a plane
that’s invisible to radar technology. You find
out that the project is not doing well financially, and a competitor has already finished a better model.
But you’ve made significant investments: the project is 50 percent complete, and you’ve already spent
$5 million and eighteen months working on it. How likely are you to invest the extra $1 million?
In this study by Henry Moon at London Business School, before making their investment
decisions, 360 people completed a questionnaire that included giver statements such as “I keep my
promises” and taker statements such as “I try to get others to do my duties.” The takers were
significantly more likely to invest the extra $1 million than the givers. They felt responsible for an
investment that was going bad, so they committed more to protect their pride and save face. As
University of South Carolina management professors Bruce Meglino and Audrey Korsgaard explain,
“although the organization itself might be better off if the decision were abandoned, such action
would cause the decision maker to incur significant personal costs (e.g., loss of career mobility, loss
of reputation). Because escalating his or her commitment allows the decision maker to
keep the
prospect of failure hidden
, such behavior is personally rational” from the perspective of a taker.
The givers, on the other hand, were primarily concerned about protecting other people and the
organization, so they were more willing to admit their initial mistakes and de-escalate their
commitment. Other studies show that people actually make more accurate and creative decisions
when they’re
choosing on behalf of others
than themselves. When people make decisions in a self-
focused state, they’re more likely to be biased by ego threat and often agonize over trying to find a
choice that’s ideal in all possible dimensions. When people focus on others, as givers do naturally,
they’re less likely to worry about egos and miniscule details; they look at the big picture and
prioritize what matters most to others.
Armed with this understanding, it’s worth revisiting the story of Stu Inman. As a giver, although he
felt invested in the players he drafted first, he felt a stronger sense of responsibility to the team. “Stu
was a kind person, considerate of other people’s feelings,” Wayne Thompson told me. “But he never
let that influence selections. If he didn’t think a guy could play, he put his arm around him and wished
him well.” Inman wasn’t the one responsible for keeping Sam Bowie on board; Inman left the Blazers
in 1986, just two years after drafting Bowie. A taker might have continued to defend the bad decision,
but Inman admitted his error in choosing Bowie over Jordan. “All our scouts thought Bowie was the
answer to our problems, and I did, too,” Inman said, but “it was a mistake.”
*
Inman didn’t escalate his commitment to LaRue Martin either. Although the Blazers kept Martin
for four seasons, Inman and his colleagues took early action in response to Martin’s poor
performance. In his rookie season, when there were clear signs that Martin was floundering, a taker
might have given him extra playing time in an effort to justify choosing him ahead of Bob McAdoo
and Julius Erving. But this wasn’t what happened. The Blazers granted the starting center position to
the hardworking Lloyd Neal, who was just 6'7'', putting Martin at backup. In his rookie season,
Martin averaged less than thirteen minutes per game on the court, compared with thirty-two for
McAdoo and forty-two for Erving. In his second season, Martin continued to underperform, and
instead of escalating commitment by giving him more time on the court, the Blazers gave him less—
under eleven minutes per game, whereas McAdoo played forty-three and Erving played over forty.
Inman and his colleagues managed to overcome the temptation to keep betting on Martin.
A major reason why givers are less vulnerable than takers to escalation of commitment has to do
with responses to feedback, as demonstrated in research by Audrey Korsgaard, Bruce Meglino, and
Scott Lester on how givers and takers react to information about their performance. In one study,
people filled out a survey indicating whether they were givers or takers and made ten decisions about
how to solve problems. Then, all participants received a performance score and a suggestion to
delegate their authority more when making decisions. The score was randomly assigned so that half of
the participants learned that their performance was above average, whereas the other half were told
that they were below average. Then, all participants made ten more decisions. Would they use the
suggestion to delegate more?
When they believed they were above average, the takers followed the suggestion, delegating 30
percent more often. But when they believed they were below average, the takers only delegated 15
percent more often. Once they felt criticized, they were less willing to accept the recommendation for
improvement. They protected their pride by refusing to believe that they made poor decisions,
discounting the negative feedback. The givers, on the other hand, accepted the criticism and followed
the suggestion. Even when they received negative feedback indicating that they were below average,
the givers delegated 30 percent more often.
In escalation situations, takers often struggle to face the reality that an initial choice has gone bad.
Takers tend to “discount social information and performance feedback that does not support their
favorable view of themselves,” write Meglino and Korsgaard, whereas givers “may be more apt to
accept and act on social information without carefully evaluating the personal consequences.” Givers
focus more on the interpersonal and organizational consequences of their decisions, accepting a blow
to their pride and reputations in the short term in order to make better choices in the long term.
This receptivity to negative feedback helped Stu Inman recognize when he had made a bad
investment. Inman was admired around the league for his openness to criticism. Many coaches “took
issue with my more incendiary critiques,” writes reporter Steve Duin, but “they never bothered
Inman,” who was “patient and generous,” and “one of the most gracious men ever associated with the
NBA.” When LaRue Martin underperformed, the Blazers coach at the time, Jack McCloskey, voiced
his concerns to Inman. “He worked hard and was a very nice young man, but he wasn’t skilled. It was
that simple. I tried to develop his skills around the basket, and he wasn’t an outside player. He didn’t
have the skills to be the number-one pick.” A taker might have rejected the negative feedback, but
Inman listened to it.
After Martin’s second season, in 1974, the Blazers landed the first pick in the draft again. Having
de-escalated their commitment to Martin, they needed another center to replace him, so Inman drafted
one, a young man from UCLA named Bill Walton. In his rookie season, Walton was the starting center,
averaging thirty-three minutes a game, roughly twice as many as Martin in the backup position. This
arrangement continued for another year, after which Inman unloaded Martin.
The next season was 1976–1977, and Walton led the Blazers to the NBA championship over the
Philadelphia 76ers, who were led by Julius Erving. Walton was the Finals MVP, and the next year, he
was the league MVP. After he retired, he made the Basketball Hall of Fame and was named one of the
fifty greatest players in NBA history. Inman was the architect of the 1977 championship team, which
had been last in the division the previous year, and remains the only team in the Blazers’ four-decade
history to win the title. According to Jack Ramsay, who coached the winning team, Inman was “never
in the spotlight, and never taking proper credit for the team he assembled.”
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