When making decisions, leaders should focus on the potential win or loss, not the sunk cost

It’s not easy for leaders to admit they lost.

The decision to pull American troops from Afghanistan was more than just a reminder of how polarized U.S. society has become. It’s also a testament to our flawed relationship with failure. Ending a disastrous project is viewed as failure, even if it means cutting our losses.

It takes a big person to admit their mistakes, but saying they’re wrong feels impossible for most leaders. As a workplace culture consultant, I witness this behavior more often than not. Leaders stick to their guns despite ample data showing how bad the future will play out.

They think never admitting fault makes them look stronger.

The Pentagon Papers, the saga that put The Washington Post in the spotlight, exposed how multiple American administrations chose to ignore facts rather than admitting they were wrong. Classified materials documented the cover-up of the Vietnam War’s inevitable outcome.

Everyone knew that the U.S. would never win. However, they decided to continue fighting to avoid being blamed for ending a fruitless conflict – no one wanted to be remembered as the president who lost the war.

Admitting Mistakes Is Not A Weakness, or Is It?

It’s not easy to admit when you’re wrong.

There is a school of thought that leaders should not admit to making mistakes because they lose credibility and power. They prefer to dance through all kinds of hoops and excuses to avoid blame – and the political consequences.

Acknowledging a mistake feels like a sign of weakness, making us feel vulnerable, flawed, and exposed.

That’s why we celebrate overconfident leaders (“winners”) over those who are self-aware, vulnerable, and humble.

In politics, admitting a mistake can cause even pure partisans to doubt their loyalties.

As Daniel W. Drezner wrote in this Washington Post article, “Although opponents of that political leader might be happy to see that kind of candor, they are not going to switch their vote just because a president they dislike acknowledged being wrong. So from a political perspective, a public admission of error generates zero political upside and risks alienating one’s base.”

Humans are psychologically inclined to believe they’re correct, even if facts prove the contrary. We love being right. However, our every day is full of illusions, memory failures, neurological deficits, and irrational beliefs. The conviction that we are right leads us into error.

Error Blindness is a term coined by Kathryn Schulz. She believes that we don’t have an internal cue to know we are wrong about something until it’s too late.

As the author explains in Being Wrong: Adventures in the Margin of Error, this delusional mindset goes through three phases.

First, we are wrong but don’t realize it yet. We feel over-confident – and fail to double-check facts – because we assume we own the truth. Second, when we realize we were wrong  – either by introspection or because new evidence is introduced – we feel vulnerable and under attack. Finally, we become defensive and deny being wrong.

Lack of self-awareness produces skilled incompetence – clueless leaders care more about protecting their ego than making the right call. By sticking to the course of action, losses keep mounting.

Narcissists don’t learn from their mistakes because they don’t think they make any, according to a study by Oregon State University.

They neither take advice from other people, nor trust others’ opinions. “Narcissists do this way more because they think they’re better than others,” the researchers explain.

“You can flat-out ask, ‘What should you have done differently?’ And it might be, ‘Nothing, it turned out; it was good.'”

Our society idealizes winning and grit, making things worse ¬– it encourages leaders to make decisions based on popularity, not evidence.

We confuse being stubborn with persistence. When someone keeps fighting – regardless of being stuck and not making any progress – we see it as a sign of superiority and strength. This popular quote from football coach Vince Lombard sums up our obsession with willpower, “Winners never quit and quitters never win.”

Success requires more than just winning – willpower will get you so far. Eventually, all leaders fail. We need to learn from errors rather than seeing them as a defeat of sorts. Admitting we are wrong helps us focus and improve our game instead of protecting our ego.

Sometimes, the best win is acknowledging you lost.

The Sunk Cost Trap

When is enough, enough?

There’s a huge difference between giving up and realizing when it’s time to quit.

As Dr. Lynn Margolies wrote in Psych Central, “This psychological defense enables people to continue to hold on to the magical belief that somehow this time they can make things turn out differently — refusing to let go of unfounded hope. What looks like constructive tenacity or grit is actually a disguise for the inability to flexibly respond and change course when needed.”

Rather than strength, stubbornness can become a liability for leaders – they keep fighting to protect their reputation, not for what’s right.

Why do most leaders find it difficult to change their minds even when evidence keeps telling them they should? They fall into the sunk cost trap.

In The Psychology of Sunk Cost, professor Hal Richard Arkes explains this phenomenon in which the more money, time, or effort has been spent, the more we want to continue investing in the endeavor. The psychological justification for this behavior is based on the desire not to appear wasteful – or a loser.

A study showed that customers who overpaid for a season subscription to a theater series attended more plays than those who paid a fair price. They wanted to justify a bad decision.

That’s the reason many leaders fail to learn and adapt. Why? Because they don’t want to ‘waste’ the time and money that they’ve already spent. Instead, they stick to outdated strategies or bad decisions for far too long.

In another study by Arkes, participants were asked to decide whether or not to invest one million dollars in a plane that can elude conventional radar. Everyone was informed that a competitor had just launched a better version of the plane.

Only one out of six participants decided to invest more money. However, among a control group, almost 85% chose to invest in the project simply because they were told that the project was 90% completed.

Sunk costs play a crucial role in decision-making processes. Rather than cutting our losses and changing course, we throw good money after bad.

The highest sunk cost is emotional: admitting one was wrong – especially when making the right call – has consequences.

The immediate aftermath of the U.S. retreat from Afghanistan was packed with blame, not reflection. Who should we blame for an adverse outcome? The president who started the war, those who stuck to it, or the one who ended it?

Usually, the leader who steps up suffers the fallout from saying “enough is enough.”

How to Tell It’s Time to Cut Your Losses

Fearless leaders make the right choices even if it costs them.

Quitting can be an easy way out. However, when quitting becomes the harder choice, it’s a sign that you should cut your losses short.

Use the questions below to reflect on the projects or decisions that might be going nowhere – stop fighting a lost cause.

Does the cost/ effort of continuing to fight outweigh the potential win?

Will the losses be hard to overcome?

Does the reason the project started no longer make sense?

Have your company even over priorities changed?

Is the context different, making the original decision obsolete?

Have you/ your team/ organization stopped believing in that cause?

Is the project still aligned, or not, with your company purpose?

Was the solution meant to solve a problem that no longer exists?

Was it a mistake from day one?

Did you or your team jump into action too quickly? Does the decision need to be revisited or canceled?

Can you no longer support/ fund the initiative?

Was it made by you or someone else based on inaccurate data/ evidence?

Was the original decision based on popularity versus doing the right thing?

When at a crossroads, reflect on the path forward – are you staying the course because it’s the right thing to do or to protect your reputation?

Rather than continue supporting a decision you made in the past, realize when it’s time to change direction. Be open to admitting you were wrong and cutting your losses.

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Are you ready to lead from a place of courage, even if it means admitting you were wrong? Join the Fearless Leader program and develop the meta-skills to successfully lead in the 21st Century.