The Sunk Cost Fallacy - Deepstash

The Sunk Cost Fallacy

We encourage people not to quit even though it's like a series of textbook examples of what economic theory tells us not to do: basically, the sunk cost fallacy, which drives people to continue a course of action in order to justify the volume of their previous efforts, despite the fact that a clear-eyed cost-benefit analysis would tell them that continuing is unlikely to be worth the effort.

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Most people have one of two reactions:

  1. Explanation 1: Nobody wants to work. Businesses now face incredible challenges hiring and retaining good employees, and it's because people have developed unreasonable expectations about what their jobs should be.
  2. Explanation 2: It's a temporary trend. Workers are taking advantage of their newfound leverage -- both direct and indirect -- due to the pandemic. Down the road, things will normalize. Wages might rise, employers might adopt new flexible workplace policies, etc. We'll adjust, but it won't be existentially different.

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“I left my job because I simply considered my value as a worker and realized that the people I was working for couldn't or wouldn't ever likely be able to perceive it.”

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“I left my job because I thought hard about what I was doing for a living, and realized it didn't fit with my long-term goals.”

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Quitting a job that's a bad fit, or even just not as great a fit as it might once have seemed, is for many people a sign of high emotional intelligence.

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We can't know whether it's a "good" thing or not without knowing the object of the verb. Examples:

  • "He quit trying to raise more investment and focused instead on bootstrapping the company."
  • "She quit trying to sell into that market because these other ones were more profitable.
  • "He quit the relationship because he realized he and his partner didn't want the same things."
  • "She quit the academic program because it wasn't as fulfilling as she'd hoped, and she didn't think she'd make enough extra money later to justify it."

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The U.S. Department of Labor revealed Friday that 4.4 million people, reflecting 3 % of the entire U.S. workforce, left their jobs during September.

That number broke the record that had been set in August, which in turn had broken the previous record, set in July.

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Both explanations miss the point.

  1. Explanation 1 is too tied up in its undercurrent of misplaced moralism: the idea that employees owe their places to their employers, and that workers in a larger sense have an obligation to work -- and especially to work for employers' offered terms.
  2. Explanation 2 does capture the give-and-take of the marketplace, but it unsatisfactorily looks at people's actions as if they were just data points in a macroeconomics class. It strips individuals of their agency.

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“I left my job because I realized that I’d stuck around too long out of a misplaced sense of moral duty.”

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“I left my job because I realized that by taking up the spot and performing at least competently (even if it wasn't the perfect position), I was blocking someone else for whom it might be a dream job.”

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“I left my job because I realized that I’d followed someone else's plan for my life, and even if it had worked out on paper, I wasn't thrilled with the result; meanwhile, the fear of simply being branded "a quitter" had stopped me from finding an off-ramp earlier.”

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Emotional intelligence is the practiced awareness of how emotions affect your communications and efforts, coupled with strategies that you develop to leverage your emotions and other people's emotions in order to help you achieve goals.

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“People who quit things are losers.”

“Quitting one thing makes it easier to quit other things later in life .”

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We encourage people to continue on certain courses of action because they're the courses of action they've already put time and effort into:

  • Continue trying to make that flawed startup work;
  • Keep working at that job because it's the one you trained for;
  • Stick with the relationship because you don't know how much worse it could be out there.

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It’s certainly swimming upstream, trying to get people to embrace the idea of "quitting" as a morally neutral word at least, and perhaps even something to be admired in the aggregate.

But emotionally intelligent people know: Stripping the abstract emotional connotations of the concept of quitting itself, from any decision whether to continue or stop doing something, is more likely to result in an outcome that brings you closer to your long-term goals.

That's really the whole point of emotional intelligence.

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People who wear glasses know that a change in prescription is sometimes required, to allow them to see more clearly.

Sometimes, we need to do the same thing mentally: Your thoughts and emotions may cloud your vision and judgment. When that's the case, you need to change your glasses: that is, change your perspective.

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