The LIMS Sunk Cost Fallacy is the misconception that, because you already invested a lot in your LIMS, that you should invest yet more. It’s the gambler’s mindset.

LIMS Sunk Cost Fallacy Background

There are plenty of projects that have been canceled because of projects overruns. It’s not the norm but also not uncommon to stop a LIMS project and restart it. This might be either with the same product brand or an entirely different one. Likewise, there are also plenty of truly disastrous projects out there that continue to be implemented long past the guides of common sense would dictate.

The “sunk cost fallacy” is this – you have sunk so much time and money into something that you can’t stop it and lose all that you have put into it. It’s not just incorrect but it makes it appear that you’re making a rational decision.

Picture this: you’re a gambler who has lost most of your money but you won’t stop gambling until you win it all back, even if you continue to lose everything and possibly to go into debt. That’s exactly what you’re doing when you’re making these types of project decisions.

Let’s suppose that you’re using an external services group to continue to get your project completed. Their goal is to keep working until it’s all done. They want a “win” as a good reference. Plus, selling you more services is good for them. Some of them might caution you that you’re digging your hole deeper. With that said, I don’t think there are any that will insist on a work stoppage.

For More Information on the Sunk Cost Fallacy and Other Number-Related Bad Choices

I frequently write about how we misinterpret numbers. Just one example is Numbers are Liars, As Usual. When we get marketing numbers, we insist they mean things that we have no proof of. We see an increase and immediately label an increase with some positive aspect that we desire.

Human beings can make some good estimates when we’re talking about simpler numbers. Distances or cost amounts would be common examples. However, we have a terrible track record with statistics or other more complex situations. Project overruns comes into that category.

If you’re interested in learning more about why we’re so optimistic yet so wrong so consistently, here’s a book that gives lots of detail and examples. It’s not an easy read but I found that it does a great job of explaining and illustrating the issues:

Thinking Fast and Slow, by Daniel Kahneman

If you’re only interested in the LIMS Sunk Cost Fallacy, not numeric estimation issues, in general, then this book will not be a good choice for you. The Sunk Cost Fallacy is one small topic. However, overall, where better understanding of why we see so many ridiculous claims about numbers or to stop yourself from doing it, this is the right book.

How You Got to the LIMS Sunk Cost Fallacy

As with so many things in life, when bad managers aren’t sure what to do they keep doing what they’ve been doing. Continuing a project that has entirely gone off the rails is one of those situations. The “hey, we don’t know what to do so let’s keep doing the same thing in case we get lucky” strategy is fine if you have unlimited resources. But even the pharmas, who are some of the richer groups in our industry, even they don’t actually have unlimited budgets.

The other problem is that too many managers rely on outside people to be responsible for their projects. It’s easy for us all to say we’re project experts when we’re selling our products and services to you. But that doesn’t make it true.

Here’s the usual LIMS industry car analogy: If you bought a car and the sale rep claimed it was great but the car then barely ran, wouldn’t you try to return the car? Aren’t you responsible for where your money goes? Well, it’s the same for laboratory software and projects. You’re responsible for ensuring what you bought is what you’re getting, which is an operational system.

Yet More Thoughts

Of course, this blog post ignores the issue that, in some companies, if you admit to making a mistake, then your career is over. In those cases, letting the project continue might not be a bad strategy. Maybe you can get promoted before anyone realizes it’s a problem and you can foist it onto the person who takes over your old job and blame them for the failure.

Possibly you should be more savvy about buying from people who offer silly things like “turnkey” systems and other fictitious items.

Do you think I’m being cynical? Or just realistic? I would say it’s both because I’m telling you that I’ve seen a wide variety of what I’ve just suggested. Some of what I’ve seen has been recent, too, so it still continues.

2 Thoughts to “LIMS Sunk Cost Fallacy”

  1. Would be interested to balance this concept with the settled counterpart in business: don’t throw good money after bad money. Where is the ending/beginning of applicability of both ideas, and, does the definition of good versus bad money require a LIMS first?!?! 🙂

    1. David, EVERYTHING requires a LIMS, first! 😉

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