The dangers of competitive escalation
In today's Learning Lab "The Paradox of Success: Learning From Failure," presenter Kerry Stackpole used a very interesting exercise: He offered to auction off a $20 bill. Anyone in the room could bid, with one twist--the second-place bidder would have to pay the winner's bid.
The auction started off slowly, but rapidly gained momentum. In the end, the second place finisher paid $26 for the $20 bill (proceeds went to charity). Kerry said that he's used this exercise many times, and the all-time high he's reached was $240. For a $20 bill.
He used this exercise to illustrate the dangers of competitive escalation--when you, or a group (like your board) makes irrational decisions because they feel like they're trapped in a particular course of action and must keep moving forward. The auction Kerry ran created a situation where the second-place bidder might have continued to escalate his or her bids, in order to get out of second place and hopefully avoid paying for the $20 bill. Your association could get into a similar situation where you could continue to double-down your investment in a particular project or program in an effort to make it successful--and hopefully to avoid losing the investment already made.
The question I'd like to learn more about is: How do you pull a group out of a competitive escalation tailspin?
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Comments
When I've read about this study before the emphasis hasn't been on people feeling trapped in a situation, but has focused more on how our desire to win often trumps all logic. I can't remember the citation for the original study but it can probably be found online.
Posted by: Jeffrey Cufaude | August 19, 2008 5:54 PM
Good point, Jeffrey--Kerry also talked about the desire to win during his presentation. The competitive aspects were really clear during the actual demonstration--you could hear it in people's voices as they called out their bids ...
Posted by: Lisa Junker | August 19, 2008 9:41 PM