How the Sunk Cost Fallacy Is Holding You Back (& What You Can Do About It)




The Sunk Cost Fallacy


If you've ever felt like you had to do something you really didn't want to do because you invested so much money, time, or energy in it, you've been a victim of the 'sunk cost fallacy' (SCF for short).


A common example of SCF is when someone gets a university degree (especially if it's in a specialized field such as nursing, law, medicine, accounting) and then feels like they have to "use" it because their education may have cost thousands, if not hundreds of thousands, of dollars. Not to mention the blood, sweat, and tears shed in the process.


Christopher Olivola, assistant professor of marketing at Carnegie Mellon's Tepper School of Business, says, "The sunk cost effect is the general tendency for people to continue an endeavor, or continue consuming or pursuing an option if they’ve invested time or money or some resource in it. That effect becomes a fallacy if it's pushing you to do things that are making you unhappy or worse off." Professor Olivola is the author of a 2018 paper on the topic published in the journal Psychological Science.


Expensive degrees are not the only thing that causes some people to keep doing something that they really dislike, sometimes even hate, doing. Have you ever worked in a soul-crushing job that's making you miserable? Or stayed in a bad relationship (romantic or otherwise) because it was easier than breaking it off? Or even something less intense like signing up for an expensive course and realizing you're getting no value out of it but you keep doing it anyway?


At some point, I bet you have.


Don't worry. You're not alone. We've all been there. I know I have.



Feeling like you've wasted money can cause you to get stuck in a career you hate

When I graduated with a degree in Health Information Management and started working in the field, I quickly came to the dreaded realization that I had made a mistake in my career choice. To say I didn't like what I was doing is an understatement. But I felt like I couldn't give up because I had spent so much damn money, time, and effort getting that degree. I worked two jobs to pay for tuition on top of all my other living expenses. I felt really guilty for not loving my chosen path.


Fortunately, after about a year of feeling unhappy and unfulfilled, I accepted the fact that the money I spent on college wasn't going to be recouped. It was gone. And I could either stay stuck in a career I didn't enjoy, or I could do something else.


I chose to do something else. I went back to get a degree in nursing and never looked back. In retrospect, the investment I made in that health management degree wasn't a total loss. Far from it. I did learn a lot, had an amazing experience at the university, met some lifelong friends, and was able to apply at least some of my learnings in my new career as a nurse.


And here's another example of a time when I let SCF creep in. I was working in an organization for almost two years when I decided it was time for a change. (I have a shelf-life of around 24-36 months when it comes to staying in the same job with the same company). There wasn't anything wrong with my job per se. I enjoyed the work and had an amazing team of people around me. I was just antsy to explore new opportunities. I resigned from that job and moved to another organization where I thought I could make a bigger difference.


After only a couple of months in my new position, I got that familiar feeling in my gut. The one that makes you go, "Oops. I have definitely made a mistake. This is not what I signed up for."


But, I thought to myself, I really can't leave after being here for such a short time, can I? It took me a lot of time and effort to get hired for the role. I had to update my CV (painful), write a cover letter (antiquated), call on my references (it's me....again!), and quit my current job (guilt). And, to be honest, I was concerned about what others would think of me for quitting. We all suffer from worrying too much about what others think which can also hold us back (a topic for another post).


I knew that by staying in that role I would only be giving in to the SCF. I ended up resigning but negotiated to stay on as an independent contractor in a consultant role. It was a much better fit for me and one that felt right.


If I would have stayed in the role because I thought I had already sunk too much time and energy into getting the job in the first place, I would still be doing what I was doing and getting what I was getting. Instead, I threw caution to the wind and made a big, scary move that got me to where I really wanted to be.


Are you a victim of SCF?


What are you still doing that's no longer serving you well but you keep doing it anyway?


Is guilt causing you to keep chugging along in a career that isn't fulfilling? Are you staying in a dead-end job because you've been there so long it feels too hard to leave? Do you reluctantly still wear an ugly dress that looks like a potato sack because it was really expensive and, at the time, uber-trendy? Might you be avoiding doing something creative - like learning a new language or playing a new instrument - because you're afraid you'll "waste" your time and money if you don't enjoy it?


Chances are, you can think of at least one thing that is causing you to be a victim of SCF and keeping you stuck in the status quo.


Do whatever it is that makes you happy.

What You Can Do


If you're stuck because of SCF, here's what you can do:

  1. Let go of the guilt. Think of the positives of whatever it is you spent time, money, and effort on. You learned a lot at university and met lifelong friends (even if you don't love your degree). You tried something new (even if that something wasn't right for you). You took a chance (even if it didn't work out).

  2. Accept what you can't change or take back. Whether it's time, energy, or money, be at peace with the fact that you can't get these things back. But you can make a decision not to dwell on them and move on.

  3. Make a change! If you let guilt or fear guide your decisions, you're going to stay stuck.

Think about that. You can keep doing what you're doing and nothing will change. You still spent the money. You still exerted the time and effort. Yet you're still unhappy or unfulfilled.


The good news is, you don't have to stay stuck. You can make that big, scary change and do whatever it is that makes you happy and moves you towards your vision. Even if it's uncomfortable. Even if it takes more time/money/energy. Even if you're worried about what others will think (News flash - most people aren't thinking too much about you. They're thinking about themselves!).


So what are you waiting for? Don't get bogged down by the SCF. Head over to crystalpolson.com to access a free guide to help you get started. It's time for a change.