How The Sunk Cost Fallacy Is Keeping You Stuck
Ep. 122
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    This week we talk about the Sunk Cost Fallacy and how it may be holding you back from your goals. The fallacy points out the irrational ways humans tend to stick with a behavior based on the amount of previous investment (time, money, effort, etc.) rather than what actually serves their goals. So the more you invest in something (ie a career, a relationship, a project, etc) the more likely you are to pursue it even to your own detriment. We are programmed to have an aversion to loss. However, once you know it, you can start spotting when you’re doubling down on something that has actually run it’s course. This is one of the biggest blocks I see keeping so many people in a career they hate. In this episode, we dive deep into the Sunk Cost Fallacy to help you spot it and move past it to focus on the opportunities ahead of you.
Show Transcript
Hey friends. Welcome to another episode. I'm so excited to have you here. How are we all doing? I am great. I just closed the doors to my program last week and I cannot wait to start with this group over the next three months. I'm also super excited to bring you guys a lot more content about how to figure out what you should be doing and set the goals that you want. So lots of good stuff coming. Obviously, the state of the world is less than ideal, but that is pretty much always the case I think right now is definitely heightened. And I know next week is the election. I actually might do a special episode on how to deal with that because my episodes come out on Tuesday. So we'll see next week, what happens, but I hope you all are doing what you need to do to take care of yourself mentally and physically and thrive.

So that was just a little random aside about today's episode. Today, we are going to talk about the sunk cost fallacy. This is a huge stumbling block from people wanting to leave their careers and start something new. I always say it's like the biggest problem. And I think I say that with everything, but there are like four or five repetitive issues that we all deal with and we all think it's just us, but we all have the same problems. And this is one of the biggest ones. And one thing I want you to understand before we even jump in is that human beings are not rational. We think that we are so rational. We are logical. We use our brain to make decisions and come up with the best answers. And this has just been obviously proven over and over again to not be true.

What's funny is that we convince ourselves or we justify it. And we really do think we're making the rational decision, but with a little bit of investigation, you start realizing how untrue that is. And that is part of the reason why I'm so obsessed with studying the mind and mindset and really realizing where we have these faulty thinkings because that is what trips up. So many of us in so many aspects of our lives. So today we're going to speak specifically about the sunk cost fallacy. So taking a step back, a sunk cost, it comes from an economics term, okay. It's used in business decision-making and it means a cost that has already been incurred and cannot be recovered. Okay? So in business, it could be things like when you buy machinery or you have a lease that doesn't really get counted in your business decisions, moving forward for like how to price your product, right?

You price certain things based on maybe the expenses that you have for that product and what the profit margin is. And yes, you have to look at what it costs to be in business, but certain things are considered sunk costs, and they get calculated a different way than other costs for your business decisions. So that is what a sunk cost comes from. But when we talk about it in everyday life, eight is something that you have invested, whether that be your time, your money or your energy, that you're not going to get back a common one, obviously in the arena that we're talking about, about leaving your career, you know, is something like my degree. For me, I went to law school. I spent three years of my life going to law school and arguably I spent many more years studying to get to law school.
So, you know, however, So, you know, however you want to calculate that either my entire life up until that point or, you know, a total of like seven years of college and law school. And I spent over a hundred thousand dollars to get that law degree. I'm not getting back that money or that time or that energy or the frustration and everything else that went along with getting that degree as human beings, we don't like wasting things. So we're more likely to stick with something in proportion to the amount of time, money, and energy that we've already invested. So the more we invest, the more likely we are to stick with it, even if it is not beneficial to us anymore, or we don't want it. It's just because we have put in that in investment, that is what the sunk cost fallacy is a way that our brain works is we have this faulty thinking that because I put in this time and money or energy or whatever it is I have to follow through, or I have to keep doing this, or I have to use it all up or whatever the case may be.
So that it's not a quote-unquote waste of my investment, but what happens and the reason it's a fallacy and the reason its faulty thinking is because you continue to waste your future time or your money or your energy or anything else on something that no longer serves you like that money, time, energy, that investment is gone. If we were making a rational decision, we would basically start at zero every and say like, what is going to be the best use of my time and energy and money and my future. But we don't, we're constantly looking back at like, well, what have I already put? I don't want this to go to waste. So I should keep doing this thing. Even if it's actually detrimental to us. An easy example of this obviously is things like you know, you go to a movie and before COVID, when we could go to movies, or let's say you rent a movie through, you know, you buy a movie through Apple or Netflix or what, I mean, whatever, you start that movie and halfway through you realize that it's terrible and you hate it.
But so many of us continue to watch because you think like I've already wasted an hour. I should see how it finishes or I've wasted my money buying this ticket to this movie. So I just have to sit through it, right? You don't want that first half to be a quote-unquote waste, but in doing so, you then waste the second hour. If you would only watch one hour of that movie and realized it was terrible and got up and left, you could have had another hour to go do something worthwhile, right? And, and you would have spent the same amount of money, but now you've also wasted two hours, right? We do this with all sorts of things. Like you start a book and you hate the book when you read it the whole way. And so, because you don't wanna waste the money you spent on that book, even with, you know, let's say a meal, you buy, you buy a meal.
You've spent that money. That money is gonna go either way. And let's say, you've eaten three-fourths of it. And you are full, but there are some left, right? The money is gone. Maybe it's not enough for you to get it to go box, right? So you feel like you have to finish that meal in order for the money to be quote-unquote, worth it for you. But then you end up feeling horrible. Like we literally put ourselves into physical pain because at least, Hey, I finished it. And that somehow makes it worth it. Again, this isn't rational thinking because you paid for that meal to fill you up, to get the taste right. To eat whatever. And whether you finish it or not, shouldn't matter, you should eat it till you are failed. And in fact, it would be much more beneficial to you to only eat until you are full, but that's not the way our brains think.
We think we have to get everything we can out of whatever we invest, even if it is to our detriment. So now obviously talking about a two-hour movie or one meal, it doesn't matter. It's not that big of a deal. You waste another hour. Okay, fine. We've wasted tons of time in our life anyway, who cares? But it's not just with small things. It's with huge things in our life. And in fact, the more that you invest be that time, money or energy, the more you are likely to stick with it. We do this in everything. We do it with relationships. We all know people, or maybe we are people who have kept relationships, whether it's friends or romantic relationships for way too long, because we had already invested the time and energy into it. Right. We were hoping it turns around like, yes, there are other things involved too.
And maybe there's love for that person. But instead of just acknowledging what it is and acknowledging, maybe this has run its course, maybe this chapter is over. And it's time for me to move on to the next chapter and open myself up to maybe a better experience or somebody that's more aligned with me or a friend that's more supportive or whatever. We feel like guilt and shame. And we double down and we end up spending years and years in things that we all kind of know what should have ended a long time ago. Right? And obviously, we do this with our careers and our degrees. So many people that I talked to start sentences or are coaching with. Like, if I could start over, I would have gone into whatever. And I'm always like, okay, but you can't start over. Let's just live in reality and not live in fantasy land.
We're not going back to when we were 18. So we're starting now. So why not start now? And it's always some kind of thought about the amount of time they've either spent climbing that corporate ladder, the amount of money they've spent on the degree, and they don't want to waste everything that they have worked for and what I'd like to point out the heck. They hate to everything that they worked for. Right. They've gotten to this place. They've tried that they, it's not what they want, but they're grasping with both hands because God forbid they let go of this thing that they don't want because they spent so much time on it. And I'm not in any way judging. I, my brain does the same exact thing. I thought this for the longest time, I would say I have spent my whole life getting here because for me it really was my sole focus from when I was a child to become a lawyer.
So it was more than just the undergrad and grad degree and the money I spent on my law degree. It was who I was fundamentally who I thought I was, my identity was wrapped in that. And I had set it for so long and I had invested so much of myself in becoming this lawyer that I truly thought like, there is no way I can walk away from this. And I really had to reckon with the fact that I don't like it, quote-unquote, here, like this is not what I want to do for the rest of my life. It took my husband, you know, in our conversations. And I've mentioned this before on the podcast, him saying, wait, so let's say you've wasted 10 years to get here. You're going to waste another 30. So that 10 wasn't for nothing. Again, when you speak rationally, it doesn't make sense.
Right? I was like, well, why you have to go and make sense? Now, of course, that logic doesn't work. It's just this dealing with the disappointment that it didn't work out the way that I wanted it to work out. Every one of us said this, every one of you is probably doing this. Now is the questions about what you should do with your future are not solely based on what is the best thing for you? What is the thing that's going to help you grow the most? What is the thing that's going to make you the most fulfilled? What is the thing that maybe will even be better for you financially? The question is like, I've spent so much time building this and if I walk away from this, it will be a waste, right? And I want to point out to faulty thought processes in that thinking one is just that it's a waste in the first place.
So I know, I mean, the term is a sunk cost and it's a cost that you're not going to recover. But I think a lot of times people think that it's just because it's a cost, you can't recover that it was a waste. And I don't believe that I also don't subscribe to the, like, everything happens as it's supposed to. And it was the perfect thing for you. I don't think we even need to go there, but I also don't like to argue with reality. So it happened, right. And Byron, Katie has a quote when she says when you argue with reality, you lose, but only a hundred percent of the time. Right? So it's like wishing that it had turned out a different way. Wishing you could go back and do something different. Wishing that like, you know, saying that it was a complete waste.
It doesn't do it. It doesn't serve you. Even if the thought is true, it doesn't serve you. I don't think it's true though, because mother, whether it was meant to be for you or whatever or not, you know, whether it was the perfect thing, the universe gives you, whatever, all these like woo sayings are. I don't actually care. I just think like it did happen. And it has created who you are. It has helped mold the person you are for better or worse. That was your path. Right? For me, I am the person I am. And I think the way that I do, because I went to law school, I may not be practicing law, but that decade was a very important time in my life. It shaped who I am leaving. It didn't mean that I wasted it.
Right. It goes so much more than just the degree. Like obviously the friends that I've made, the experiences that I had, the lessons that I learned, the way that I learned to think and approach problems, it showed me what I like and what I don't like. Right. It was necessary for me to see that what society had told me is true. Wasn't true for me that the prestige and you know, the name, the identity, the money that won't make me happy. But what if that was true for me? How would I have known without going through it? Right. There are tons of people who work as lawyers who are happy. They went to law school. They love their experience as a lawyer. That's wonderful. Mine was different and that's okay. It doesn't make it right, or it doesn't make it wrong. It just is.
But there was no way for me to have known without having gone through it. I mean, I probably could have done a little bit more research than I did, but my point here is that this was my path. I had to become a lawyer or I did to become a lawyer. I learned tons of things through that 10 years. And if I focus on that, instead of focusing on the fact that I'm not making money directly with that degree, then I can see all of the gifts that it gave me. And by the way, I mean, I do use my degree all the time. I don't know if it's worth a hundred thousand dollars for me to like write my own contracts. But I think in my business, the things that I know in contracts, just negotiations, things like that. I use it all the time.
I also use it all the time in my personal life. I think that it helps me to maybe not be taken advantage of in certain situations. When I'm working with let's say contractors or whatever, I just think it has shaped the way that I think. And if I'm only focused on what I've wasted, then I will find it. I will see that it's a shame for me to leave. Right. But if I can appreciate that, like this is something that has made me who I am and not to mention. I mean, it has now created this whole business for me, right? Like I look at this, like this was the path that I needed to deal with losing that identity and understanding how hard that is so that I can relate to other people. There's a lot to consider when you're thinking, like whatever you're switching into.
How do you learn from that experience that you've had? So I just want you to stop thinking that leaving means you wasted it. Like, just because you are not working in that field does not mean that I did not have the effect or did not teach you anything or didn't, isn't going to help you in the future because I guarantee you, it will, you will see how it shows up in the different things that you do. It has molded you into the person that you are for better or worse. It has taught you what you like and you don't like, and it has allowed you to see that like that chapter might be over and you want to try something else. And that leads me to the second Paul T reasoning that we have. And it's more kind of a standard of society that we've obviously been taught, but also the way our brain works, that you have to stick with it and make it work, whatever it is, like, whatever you choose, whether it's a relationship or a job or whatever persistence is the only way you have to push through no matter what.
And I want to offer you an alternative to normalize, changing your mind. I actually might do a whole episode on this because our brain doesn't like to be wrong, right. It is how we're wired. And if you look right now at the political landscape, I mean always in politics, there's tons of studies. And they've shown that like when we are presented a fact to the contrary of what we believe, especially if it does something to like rattle our self-confidence, we dig our heels in deeper. We've all seen this now where there are themes to be facts that people just want to ignore. And it makes them kind of double down on whatever they are believing. Again, like, it's good to know how the brain is wired, because then you can catch yourself. Your brain is naturally going to want to do that. But you also have this prefrontal cortex that is good at reasoning.
And when you see yourself acting in these ways, you can kind of catch yourself and maybe observe or get curious. Like, do I truly believe this? Or am I digging my heels in? Because I've said this for so long, I don't want to be, I want to implore you to start cultivating a practice, changing your mind. Okay. Not just with your work, but with anything. And I think this is maybe one of the biggest gifts that I've been given through this process. And I was forced to do it because like most of us, isn't it interesting that we always think we're right, right. Like we always, whatever we're approaching, whether it's religion, politics, how our friends should act, what people should do in our relationships, how our spouse should treat us what our kids should do, what the school system should do during COVID, whatever your thoughts are about anything you think that your thoughts are right.
And trust me, I think that my thoughts, all right. I think I'm brilliant. And I have the solutions for so many people, if they would just listen to me. And one of the best practices that I have cultivated is asking myself, what if I'm wrong? What if I don't know what is best right now? Like what would that make me? Is it okay for me not to know, is it okay for me to be wrong? Is it okay for me to change my stance on things it's not easy? And there's things I'm much more passionate about. And I have a much harder time coming to that realization that I'm wrong. But I will say overall as a practice, this has been a life-changing thing because it allows me to relate to people easier. It allows me to not get as upset in arguments. It allows me to listen to other people.
And more importantly, it has allowed me to give myself room to grow and evolve. Right. If I don't have to be right all the time, if I give myself room to say, Hey, if there is new information that comes in, I am willing to look at it. Then I don't attach my identity to any one thought or anyone's stance that I take. And I give myself the space and the grace to change and be humble and understand that like I'm not right all the time. This is, you know, great in any aspect. But I think specifically when it comes to what you're doing with your life, whether it's your career or the relationships you have or anything, you know, hopefully you are not the same person that you were when you were 18 or when you were 28 or 38 or 48. You know, I mean, you get the drift we change.
And that is the best news. You do not want to be the same person. You were at 18, right? Hopefully life and its lessons will give you wisdom to change you. And when you change, you have to be allowed to change your mind. That doesn't mean that you made a bad decision. Maybe it does, you know, in a certain situation. But even then it just means you're human, right? The information you had at the time, you made a decision, that decision turned out to be one that you don't want to stick with. That has to start being okay with you. The more that you normalize that the richer your life becomes because you don't attach yourself to an identity. You won't have the drama about being wrong about something. So many of us are so terrified of being wrong, like as if that means something other than the fact that you're a human, like who is right all the time.
And yet we all think we're right all the time. And we all think that if we are wrong about something, then that somehow, I don't know. It means something about the person that we are or how responsible we are or whatever we attach so much meaning to it. And it is no wonder that we are terrified to take a risk, because if you cannot be wrong, then how can you ever do something with uncertainty, right? Unless you can guarantee that you're going to be right, then you can't take any risk. And so the more you normalize that you're a human being that is allowed to be wrong. That is allowed to take a step and then pivot and decide that that wasn't the right step and not beat yourself up and still love yourself. Right? They, you open up your life to having a full rich, you know, amazing ride that you are allowed to trust yourself and make the best decision in that moment for yourself and not put this pressure that like everything has to be perfect.
And I want you to think about why you're so afraid of taking that risk, because you already know what's going to happen. If you're wrong, you recognize the pain you're in right now. You know that if you pick something else and it turns out not to be that dream thing, you can't go through this again. Right. You know what your brain is going to do to you. It's going to meet you up every day. It's going to dream of a different life, but then keep you stuck in that one. It'll never let you live it down. Like so many of you, I think I hear so many people, so graspy and panicked about the next thing. And so that's why they can never take a step because if the next thing is not the quote unquote thing, then they literally make it seem like they will die. Like this is, this is it. I got one more shot. And I'm always like why or who said, what have you knew? You could keep on changing.
Like you have to learn to take that pressure off that you are meant to be one thing. Like where did this rule come from? Who in this world is ever just one thing. Like we are all multifaceted. We are all ever changing. We are all always growing. I actually just heard Martha Beck speak about how I can't remember the term, but there's a term for the fact that humans are different than all other animals. Because our brains, most animals after puberty, when they become, you know, an adult, their brains stopped growing. So it's like, there's a lot of growth until they become an adult. And then it just stops. And that's what they're kind of left with. And humans are not like that. And our brains continue to grow. And yet we want to deny that we want to think like, okay, when you're a child, you can be curious and you can dream and you can evolve and you can try different things.
And we expect our children to do that. But somehow somebody just decided at the age of 18, that stops like, then you make a decision and that's it. And you have to stick with that for the rest of your life. And we've kind of bought into this. And I understand that there is a need to pick a career because of like money and in this society. And there is no one way to think about that is like, how do you grow your skillset so that you can end up having a consistent income to support yourself? That's one thing, but making it mean that you can't ever change your mind or that there is something wrong with you. If you are not happy in the thing that you chose at 18 is insane. And I want you to be aware of that. That that's what you're doing.
That that is what you're making it mean that if you didn't get it right, that there's something wrong with you. I hear this all the time. Like I should have my life figured out by now. And I'm always like, why, who, who does? Why, who told you, you were supposed to, who do you know that has it figured out? Like people put on the persona that they haven't figured out, but every one of us every year is evolving and constantly wondering, is this what I should be doing? Am I happy here? Do I want to try something else? Why do I feel unfulfilled? What is that thing I want to explore? And I think the more you allow yourself to do it, the quieter that voice becomes of that unfulfillment and that restlessness, I think why it's so loud in so many of us is because we never let ourselves experience it.
And so I want you to look at this as one chapter in your life and it might be over and that's great. Doesn't have to be terrible, right? You don't have to look at it as like some big waste or something horrible that you have to get away from, but it's like you tried something and now maybe it's time to try something else. I always talk on the podcast about how the most liberating thing that I've gotten out of this experience is not this podcast or this business. It's that I have no idea what I'll be doing in five years. And before that thought would have terrified me because I was definitely the type a planner who wanted to always know exactly what I should be doing. And now I realize how liberating it is because I not attached to any identity. I don't expect to know what I'm going to be like in my forties or in my fifties or in my sixties.
And I don't at all pretend to know what the world is going to be like and what opportunities are out there and what new industries are going to come up. And so I'm allowing myself to just be, be in this moment, decide what I want to do now, and then figure out what I'm going to do later. And that has been the most freeing thing, because I don't have to have the pressure of like, I need to build this for the business so that it lasts for the next 20 years. It's how, how could I even know? Like I can try to come up with that. And even that's laughable, right? Anybody that's tried to come up with a plan and it never goes the way you want it. You realize like, and yet we keep trying. And I think it's fine to have, you know, an idea of what, where you want to go.
Share it on your stories. Tag me. I would love to see it. And I will be back next week with another one. Talk to you soon. Thank you so much for listening. I can't tell you how much it means to me. If you liked the podcast, please rate and review us on iTunes. It'll help other people find the show. If you want to connect or reach out, follow along on Instagram and Facebook at lessons from a quitter and on Twitter at Twitter podcasts, I would love to hear from you guys and I'll see you on the next episode.