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whoyg2967 on Thursday, November 12, 2009 9:16:31 PM
Compared with the connections between lifelong colleagues like GM's Wagoner and Henderson, the
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connections in our studies were incredibly subtle. In one of our
studies, new decision makers were simply told that they shared the same
birthday month and school year as the previous decision maker. In other
studies, we asked participants to try to empathize with their departed
colleague. We compared these participants against those without a
psychological connection, i.e., those with a different birthday, or
baseline decision makers not asked to feel empathy. Even under these,
the subtlest of conditions, psychologically connected decision makers
made much greater investments in an old decision maker's losing
decisions.
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In one study, the participants
learned that the prior decision maker had dug himself into an
unwinnable auction. After taking over for this person, the only way
participants could salvage the auction and prevent the bleeding of
their own compensation was to stop bidding immediately. Those who
ostensibly shared the same birthday lost a remarkable 285% more of
their own money in the auction than those with a different birthday. In
another study, the
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prior decision maker had invested research-and-development funds in one
of two divisions, which had subsequently performed worse than the
other. Participants asked to empathize with the original decision maker
dedicated $1.42 million, or 37%, more to the underperforming division
than did baseline participants. Surprisingly, these effects held even
when our participants faced a direct financial cost to themselves, and
even among economics majors specifically trained in the irrationality
of honoring sunk costs.
Our research offers a new twist in the
debate about how to turn around failing enterprises, and it does so by
building on decades of psychological evidence that suggests humans are
social beings driven to find connections to others. Psychologists have
long shown that people consistently seek out and
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share natural psychological connections, and once such connections
form, people are more likely to cooperate and favor one another
financially. Our research demonstrates that psychologically connected
individuals are also more likely to perpetuate each other's failures,
vicariously flushing away their own money and time.