Early in my career, I was given the opportunity to obtain Six Sigma Black Belt certification through a company training program. (For the uninitiated, Six Sigma is a set of management techniques that promise to improve business processes by reducing the probability that defects will occur. . . and if you think that sounds inhuman and soul-suckingly boring — you’re right, it is!)
My boss nominated me for the program and made it clear that this certification was my path to untold career success. All I had to do was complete a year long training program and pass an exam.
The year spent in training was taxing. I had to move across the country to a place where I didn’t know anyone. The training itself was intense and I struggled to keep up with the statistics-laden curriculum. In fact, as the year came to a close, I realized I didn’t really like the work involved with being a Six Sigma consultant at all.
But I pushed through, managing to complete all of my training and pass my final exam by the slimmest of margins.
At the conclusion of the program, I was in fact offered a job in the company working as a Six Sigma consultant. Having recently come to the realization that this was clearly not what I wanted to do with my life, did I decline the offer?
Of course not!
I took the job and, in a shocking turn of events, I mostly hated it. Two years later I was desperately looking for a way out.
What was going on here? If I knew I didn’t want to do that kind of work, why continue down that path?
I had fallen victim to the sunk cost fallacy.
What are sunk costs?
Imagine you buy a new sofa for $1,500.
Only, you don’t actually buy it. Each one is handmade, so you pick out the fabric and put down a $500 deposit on it in the store and wait 6 weeks for it to be delivered.
In the meantime, you see a nearly identical sofa in a different store. In fact, you think you like the look of this one a little bit more and it’s definitely more comfortable.
It costs $700 and you can take it home today.
Of course, if you buy it, you’d have to call and cancel the one you already ordered, forfeiting that $500 deposit.
What do you do?
Almost all of us would pass on the $700 sofa and hold out for our original purchase to be delivered.
But why? The total cost of buying the $700 sofa and forfeiting the deposit is $1,200. It’s actually the cheaper of the two options and you get the sofa you prefer.
The answer is sunk costs.
On paper it’s pretty clear what to do, but our decisions are tainted by our past emotional and financial investments. The more we invest in something, the harder it becomes to abandon it. This is the sunk cost fallacy.
The best decision makers only consider what is going to happen in the future. They are emotionally detached from past investments. They know that those losses are irrelevant to what comes next.
The best decision makers ignore sunk costs.
Sunk costs and your career
Making the wrong choice on a sofa purchase is one thing, but failing to ignore sunk costs at work can derail your career.
Realizing you don’t want to be a lawyer, but continuing to do it anyway because you spent years (and thousands of dollars) in law school. Staying in a job you hate because you pushed for the promotion for years. Never starting your own business because don’t want to throw away the last 7 years of relationships you built at your current company.
In each instance, the only things you should be weighing are the projected costs and benefits of staying in your current situation compared with making the move — the past is irrelevant.
But what about all the sacrifices? All the late nights and years of surviving on ramen noodles to get your law degree.
That was past you. Future you shouldn’t care.
Thinking about yourself as two very different people (which of course, you are) can help make it easier to ignore sunk costs.
Or you can pretend you’ve just been hit on the head with a rock, resulting in amnesia. You can’t remember anything that happened up to this point, only that you have a decision to make: practice law or work with children.
The answer should be obvious.
You’re human, it won’t be easy
Sunk costs don’t cloud the judgment of robots. Or sea otters.
It’s just us fallible humans that get tripped up by fallacies.
I recently found myself fighting through a 900 page novel. I had lost interest in the story somewhere around page 400, but I hate not finishing books once I start them, so I kept forcing myself to read it.
Eventually I realized those first 400 pages were a sunk cost and I returned the book to the library. I hesitated for a not insignificant amount of time as I dropped it into the return slot.
The other day I spent $10 on a ticket to a networking event. The day of the event I had multiple fires pop up on various projects that I needed to tend to. Going to the event would mean falling severely behind on a few things and potentially damaging some important professional relationships.
And yet, it was incredibly hard to pass on the event. All because I was going to “lose” a whopping $10!
Ignoring sunk costs is hard work, but so is having a great career.
It takes discipline to learn how to walk away. It takes practice to do so eagerly and without regret.
Ignore sunk costs.
(Your future self will thank you.)
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