Stack of golden George Washington dollar coins,. (c) 2007 Bill Koslosky, MD (CC BY 2.5)

McKinsey on how companies spend money

From “How Companies Spend Their Money” [PDF] (McKinsey Global Survey) A survey of executives from around the world highlights how frequently — and why — a company’s resource allocation decisions go wrong. Companies start off well, respondents say: senior executives are heavily involved in these decisions and routinely assess the prior performance of business units and the value creation protential …

Run on East Side Bank, N.Y. 1912 February 16. Bain News Service via Library of Congress.

The Abilene Paradox of Escalation of Commitment: How We Can All Agree To Go Over the Cliff

When a project starts heading south, you would think that the rats would start abandoning the ship and the sponsor would quickly pull the plug to minimize losses. But that’s not what happens. Sponsors’ commitment to projects going bad actually seems to grow. The literature is littered with examples of sponsors continuing to spend money on a project that is …