Ethan Underhill, NYU Stern full-time class of 2016

If you have lived every moment of your life in total accordance with your moral and intellectual values, congratulations. You can stop reading this article and go found a religion or write a best-selling self-help book. For the rest of us, the psychological theory of cognitive dissonance comes into play. Cognitive dissonance is the mental discomfort we experience after performing an action we perceive as incongruent with our (typically positive) self-perception.

Consider, for example, objectively risky behaviors like gambling, heavy drinking, or unprotected sex. People aware of and worried about the associated risks still partake in these activities – sometimes in a single night. Afterwards, with lightened wallets, throbbing headaches, and perhaps a distressing rash, they experience cognitive dissonance, the twinge of mental inconsistency between their view of themselves and performing actions that they usually regard as foolish.

The unfortunate souls described above need to relieve this dissonance in the same way that a hungry person needs nourishment. Intuitively, three avenues of mitigation are available to minimize cognitive dissonance: altering behavior (the “I’ll never drink again!” approach), justifying behavior by altering one of the dissonant cognitions (the “It’s not THAT bad” approach), or justifying the behavior by incorporating new cognitions consistent with dissonant behavior (the “It just helps me relax” approach).

Everyone has experience justifying actions they would rather not have taken. Researchers studying the cognitive dissonance of heavy smokers found that those who had tried and failed to quit developed lower perceptions of the dangers of smoking in order to rationalize both the continuation of the habit and the inability to stop. Justification, even at the expense of reality, allows us to tolerate deviations from behavior that we deem acceptable, with a combination of hubris and distortion.

Justification permeates the attitudes and actions of individuals and groups. Psychological research has borne out what we know from common sense – people place greater value on things they endured significant hardship to achieve. A 1959 experiment conducted by Elliot Aronson and Judson Mills found that people expressed greater enjoyment of a purposefully dull pre-recorded discussion in direct correlation with the arduousness of the screening process they endured to hear the discussion. This phenomenon, which Aronson and Mills appropriately termed “effort justification,” helps account for the esprit de corps members of military organizations feel after undergoing strenuous and unpleasant training.

The finding goes hand-in-hand with cognitive dissonance theory – after all, we think, we are smart, rational people. If we were willing to endure hardship for an outcome, than that outcome must be worth it, otherwise it would not have been smart and rational (which we are, remember) to tolerate the discomfort.

How does cognitive dissonance and the thirst for justification apply to the business world? Ask a compulsive gambler how difficult it is to do the sane thing and walk away from the table and cut his losses instead of throwing his car keys into the pot and hoping for a big payoff. The introduction of a new product involves a significant gamble by a corporation – a gamble of money, effort, and reputation.

Under the stewardship of CEO John Sculley (1985-1993), Apple spent $100 million on the development of unwieldy Newton platforms, the world’s first personal digital assistants (PDAs) and the precursors of modern tablets. Sculley touted the platform as the next step in consumer electronics evolution long before its release. The original Newton MessagePad, released in 1993, weighed 1.4 pounds (387% more than an iPhone 6), ran on woefully inadequate AAA batteries, featured dubious handwriting recognition software as the sole user input, and retailed for $700. Sluggish sales plagued the device (only 50,000 units sold in the first four months), and it became a famous misstep in the history of the company. Yet the Newton product line limped along through five years and two CEOs, with hundreds of millions of dollars more sunk into it. One speculates that the much-hyped line continued partly for very human reasons – to avoid embarrassment.

Apple_Newton

Innovation requires risk, and Newton platforms paved the way for later, more popular devices. But the timing was demonstrably wrong, as reflected in pitiful sales volumes. For a company suffering from falling market shares in its core computer business, the continued investment in Newton was a costly, near-disastrous mistake, even though brand diversification in the very same company was the right move years later with the iPod. Companies aiming to innovate expect setbacks, but they fall into an abyss when pursuing dead ends for far too long, sometimes all the way to financial ruin.

Notorious flops by perennial powerhouse corporations such as the Ford Edsel and New Coke have become grim warnings for generations of MBA students, like skeletons shackled to cavern walls in a pirate film. Decision-makers, like the just-one-more-gambler, must cultivate a willingness to cut their losses on some projects, even after a significant investment of time, money, and energy. They must recognize the insidious growth of justifications for dissonant views of themselves (“I’m a great executive, my decisions are always sound”) and their companies (“There’s no way we could make a failed product”). The ability to recognize and respond to poor timing is as critical as, though less sexy than, the prescience to anticipate perfect timing. Both rely on rationality over rationalizing.

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