Writer and venture capitalist Paul Graham tells the story about his friend, a successful doctor who constantly complained about her job. When she was in high school, she impulsively decided to be a doctor. She let her high school self choose her adult life and, driven solely by ambition, persisted despite it being a dull and draining experience. This is the sunk cost fallacy in motion.
The sunk cost fallacy is a cognitive bias that we all experience, causing us to make irrational decisions. It occurs when we let past investments dictate future choices. We continue to spend time, money or effort on a project that no longer serves us purely because we feel committed to our initial investment. We stay in a job we hate because we are about to get promoted. We don’t change careers because we have spent so long establishing our skills in our current profession. We hate admitting our mistakes, so we engage in behavior that is counterproductive. This needs to stop.
The first step to overcoming the sunk cost fallacy is to realize you cannot change the past. You only have from today until the end of your life, so embrace the remaining time. Develop thoughtful quit criteria. These are the conditions that, if met, mean it is time for you to move on. For example, you may require a quiet, peaceful environment free from abusive language, along with challenging work that makes you think deeply for long, uninterrupted periods of time. Define conditions that are meaningful to you, with as many specifics as possible, and then give yourself at least a few months to assess whether these criteria are being met. Journal each day and summarize your thoughts each week. After a few months, it will become obvious what you need to do next.
I remember being halfway through my engineering degree, knowing that I would never become an engineer, but the sunk cost fallacy kept me captive for several more years. I clung to my engineering degree, telling myself I had invested too much time and effort to abandon it, even though my heart wasn’t in it. Every time I thought about switching paths, I felt an overwhelming sense of embarrassment. I didn’t want to admit to friends and family that I had just wasted several years of my life. It was not until I left my corporate job that I realized clinging to the past was preventing me from choosing my work in the present. Letting go of that sunk cost was liberating, allowing me to appreciate each moment of the work that I was meant to do.
As a business owner, I also couldn’t help recognizing the grip that the sunk cost fallacy had on my journey. The countless hours, the intense effort, and the emotional investment meant that it was all too easy to stay tethered to my business out of sheer inertia. I gradually realized that every business owner will leave their business one day. The question is not if, but when and why. Will it be at the peak of your health and enthusiasm, strategically planned for optimal sale value? Or will it be a reluctant retirement, driven by necessity rather than desire? Confronting the sunk cost fallacy forced me to define my own exit strategy. It challenged me to honestly assess whether my business was fulfilling my deepest aspirations or merely holding me hostage to past decisions.
Ultimately, I recognized that while I greatly enjoyed operating the business, writing brought me more joy. Having fallen prey to the sunk cost fallacy in the past, I was better equipped to identify its subtle influence. So, I hired someone to replace me and never looked back.
Grit and determination can be useful. These qualities helped me get good grades and a highly sought-after corporate job. But the downside of grit and determination is that they are blind. Grit got me into a job that appeared impressive but felt completely meaningless. It took me some time to realize that untempered ambition is so narrowly focused that it lacks the space to listen to intuition. It coaxes us to plow forward, to surge ahead, to power through. But if you’re on the wrong path, forward motion is just applying force to a dead end.
This article is an excerpt from Chapter 7 of Choose Your Work
Footnotes
Writer and venture capitalist Paul Graham tells the story about his friend, a successful doctor who constantly complained about her job: Paul Graham, “How to Do What You Love,” Paul Graham, January 2006, https://paulgraham.com/love.html.
We don’t change careers because we have spent so long establishing our skills in our current profession: The sunk cost fallacy also applies to your identity. When you repeatedly tell yourself and others, “I’m a lawyer” or “I’m an engineer,” that identity comes with a sunk cost. One study states that organizations are “often crucial in shaping a person’s identity and personal traits.” Additionally, “people define themselves and enable others to define them based on the groups to which they belong.” As you invest more and more into building a life around that identity, it becomes increasingly difficult to let go of it, even when it no longer serves us. Before assuming an identity, carefully consider whether it is something that truly aligns with your values and aspirations. Darja Kragt and David V. Day, “Identity and Identification at Work,” Organizational Psychology Review 6, no. 3 (2016): 215–47, https://doi.org/10.1177/2041386615584009
Develop thoughtful quit criteria: For a discussion on quit criteria, or “kill criteria” as Duke puts it, see her excellent book, Quit. Annie Duke, Quit: The Power of Knowing When to Walk Away (London: Ebury Edge, 2022), 115.
Dan Dobos writes about decision making, personal growth, human potential, fulfillment and helping people choose the work that they are meant to do. He is the author of Choose Your Work.