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This chapter analyses the opening phases of the Project Taurus story, focusing on how and why organizations become involved in decision debacles in the first place. According to the social-psychological theory, escalation begins with bright but illusory prospects. Then, once a decision takes shape, psychological and social pressures induce persistence. Proponents of decision dilemma theory basically suggest the opposite. This chapter examines the London Stock Exchange's (LSE) persistence with Project Taurus following the collapse of the initial proposal to build a central register design known as Taurus 1. The actions of players other than the ‘decision-maker’, mainly the Siscot Committee and the wider securities industry, are considered. This chapter suggests that escalation is most probable when those with most power to influence a decision have least responsibility for its outcome. This category is defined as the market overshadowed by the Group of Thirty and the Bank of England, followed by Siscot, and lastly the technical team.

The London Stock Exchange (LSE) invested over five years and 80 million pounds in Project Taurus. The market allegedly spent 400 million pounds in preparation for dematerialization plus countless hours of executive time spent in meetings and reading copious documentation. On March 12, 1993 the LSE publicly admitted that it had all been for nothing. This chapter examines the LSE board's decision to accept chief executive Peter Rawlins's recommendation to cancel Taurus. The actions of other players, including the market and the Taurus monitoring group, are also considered. The role of power in this decision is discussed. The resolution of the story is important because most of the escalation literature concentrates on persistence as distinct from withdrawal. Decision dilemma theory predicts that market forces eventually curb unwarranted persistence, while social-psychological theory asserts that market forces are often slow to act, that decision-makers persist with failing projects long after the rational point for withdrawal has been reached.

This chapter examines escalation in decision-making concerning Project Taurus. The analysis is based on the propositions of social-psychological theory and decision dilemma theory. The basic research question was whether persistence in a failing course of action results from decision errors or is basically an economically prudent response to difficult circumstances. More specifically, it was expected that escalation would either be characterized by irrational behaviour stemming from fear of failure, or that it would be a function of the decision-maker's information. Conversely, it was expected that withdrawal would result either when the costs of persistence overrode social and psychological pressures or when such pressures weakened. Alternatively, withdrawal would result when decision-makers' information clearly indicated that further investment in the project was futile. This chapter explores Project Taurus in the context of the city of London and the London Stock Exchange's role in the city. It considers what escalation is, the root cause of escalation, and the factors associated with escalation.