The sunk cost fallacy and your career
Changing your career is a hard and confronting experience. You will be met with many unsolicited opinions and social pressure.
One thing I want you to watch out for in your thinking is what is known as the “Sunk Cost Fallacy”. A sunk cost is any past cost that has already been paid and cannot be recovered. We “should” be making rational decisions based on the future value of things, investments, and experience. The fallacy is that the more energy or resources we devote to something, the harder it is to abandon it.
Let me give you an example. You have purchased tickets to a concert but something else has come up that you really want to go to. The cost of the concert tickets shouldn’t factor into your decision-making because they are a sunk cost, they are not recoverable (assuming you can’t resell them). Your decision should be based on which event you think you would get the most enjoyment from.
A real-world example is the debacle surrounding the supersonic Concorde aircraft. The UK and French governments continued to fund the project even after it was apparent that there was no economic case for the aircraft. The governments continued to fund the project as they couldn’t admit that it has failed until a fatal crash forced it to end.
This fallacy can also apply to your career. Many of us feel that because we have invested a lot of time and potentially money studying and gaining experience in a career path that we should stick with it no matter what. We may know deep down that we aren’t suited for our current career, but we let the sunk costs fallacy influence our decision.
I have succumbed to this fallacy myself. I completed my LLB and LLM in London and I loved every single minute of it. I loved the mooting competitions and the practical knowledge I was acquiring daily. Studying in London was so much fun because the law is based on legal cases (i.e. stories) unlike the civil law system in France where the law is codified and therefore dry and boring (at least for me). I thought that I had nailed life because I was studying something I absolutely adored and therefore I should also love working at a law firm.
Then I got my first job and reality hit me. I was terrified to admit it to myself, but I hated the daily tasks of a lawyer because I had invested so much time studying. It was also a huge financial investment as university in England is not free like it is in France.
I was repressing this feeling and I changed firms like I changed my underwear. Each time I would convince myself that it was my boss that was not right, the firm was not a good fit, or the area of law was not my favourite. The list of excuses went on and on until I realised that I needed to change careers because the cost of staying outweighed the sunk costs of studying and my short legal career.
So how do you overcome the sunk cost fallacy? Do the following:
Realise that the money is already spent. There is nothing you can do about this – it’s not coming back. If you are healthy you can make it all again. Don’t dwell on it because it will paralyse you and it will end up costing you much more in the long run if you decide not to make the jump to a new career.
Acknowledge that no one can take away your education and you can transfer the skills that you have acquired to a new career path. Nothing is ever a waste. It only becomes a waste if you don’t learn anything from your experiences.
Check yourself. Are you honestly happy with your career or are you just too proud to admit that you got it wrong? There is no shame in this, and it would be crazier if you got it right the first time. It takes a strong person to follow their own path when people are telling you to take the safe option.
Be forward looking. Realise that your decisions should not be based on how much you have invested in the past but rather what you are going to gain in the future.
The Sunk Cost Fallacy could keep you in a career that is a bad fit for you for years. Now that you are aware of it and know how to deal with it, you will be able to spot it in your thinking. Although changing careers is a scary proposition for anyone it may lead you to the life you always wanted to live.