Harvard Business Review Guides Ultimate Boxed Set (16 Books)

Chapter 19

Don’t Throw Good Money (or Time) After Bad

by Jimmy Guterman

You approved the development of a high-profile new product for your company a year ago—but now things aren’t going well. Despite previous forecasts that customers needed your product, the market has changed, and the response is uncertain at best. But you’re not going to give up and throw away $10 million, are you?

Actually, spending another dime on a doomed product is the wrong decision. Yet chasing after sunk costs (investments that are no longer recoverable) is a common error. Just another couple hundred thousand dollars, you say to yourself, and we’ll be able to recoup our investment.

Don’t fall for that line of reasoning. True managerial wisdom lies in a kind of forgetfulness—the ...