Sunk Cost Fallacy – How It Affects Career Decision-Making

The sunk cost fallacy describes our tendency to follow through on an endeavor if we have already invested time, effort, or money into it, whether or not the current costs outweigh the benefits. In economic terms, sunk costs are costs we’ve already incurred which cannot be recovered.  The sunk cost fallacy can be seen in big life decisions (staying in an expensive graduate program because we are already paid for the first year) as well as small day-to-day decisions (continuing to watch a movie to the end even if it is boring and unenjoyable).   In career terms, the sunk cost fallacy often looks like individuals committing to career paths despite new data that it is no longer the right fit.

We often hear trainees fall prey to the sunk cost fallacy. Many postbacs will say, “I was a pre-med major so I must go to medical school.” Similarly, we often hear graduate students and postdocs say, “I have researched this topic for over five years; I can’t stop now because I have invested so much time into this work.”

These are all examples of a sunk cost. This often occurs because we as humans are not purely rational decision-makers. We are often highly influenced by our emotions and our own commitment bias, when we continue to support our past decisions and recommit to them even in spite of new evidence suggesting this isn’t the best course of action. This leads many people to a decision fallacy where decisions are based on past costs instead of future and present costs and gains.  This mode of decision making often leads to suboptimal outcomes.

This could happen in part because of loss aversion, where losses tend to feel much worse to us than the impact of gains. People are more likely to try to avoid losses than seek out gains. The unfortunate truth of the sunk cost fallacy is that it becomes a reinforcing cycle. The more time you commit to something the more loss you will feel walking away and making a new decision.

There is no way to completely avoid the sunk cost fallacy when making decisions, but it can help to recognize its power within your own thought process. If you feel a career path is no longer a good fit for you, cut your sunk cost and walk away. It is okay to make a new decision based on new data and personal evidence.

Topics like this one are addressed in our workshop The Psychology of Career Decision-Making. You can also read more about the Sunk Cost Fallacy at The Decision Lab.