by It is extremely difficult to walk away from a project that you have put your heart and soul into. You might tell yourself that your hard work will pay off, or that the money you’ve spent doing it will be worth it in the long run. So, instead of reducing your losses, you keep sinking more of your time, effort and finances into it – a psychological phenomenon known as the cost fallacy.
The sunk cost fallacy, or sunk cost effect, occurs when you choose to do something simply because you have invested our resources in it in the past. Instead of focusing on the current or future costs and benefits – which would be the best rational choice – you focus on what you’ve already spent and commit to decisions that aren’t working for you. no more.
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“Spent cost neglect is a cognitive bias. Basically, it’s the idea of ’spending good money after bad money’ – where we’re stuck thinking that changing course will mean wasted costs,” says Dr Claire Vowell, founder of The Psychologist Corporate.
Although this heuristic can go anywhere – for example, it might explain why you feel compelled to finish a book you don’t like because you started it – but it can get in the way on your career too.
“It’s common in the workplace for people to feel like they’ve invested a lot in a career, and that changing would mean wasting a lot of time, money and energy,” says Vowell. “I see this often when the highest achievers followed a traditional career, which involved a lot of time, effort and dedication. For example, in law or finance.”
Sadly, the longer we stay stuck in the mindset of hidden mental cost, the harder it will be to break free. “This is because we continue to invest and the costs continue to rise,” says Vowell.
The impact of the cost fallacy went into the workplace
One of the biggest negative consequences for employees is stress and burnout. You may feel emotionally attached to a job that you no longer enjoy, simply because you have done it for years. But if you’re in a job you don’t like, the added pressure of trying, or seeming trapped, can create enormous pressure and contribute to poor mental health.
“For employers, continuing to invest in projects that fail can demotivate employees, leading to reduced motivation and higher turnover rates,” says Vowell.
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It can also lead to financial trouble, especially if an employer pours more and more money into a project that is not financially viable because abandoning it is a worse idea than starting over with a new approach .
Dr Carolyne Keenan, a registered psychologist, said: “This phenomenon often affects advertising strategies or business ideas. When we’ve invested time in something it can be hard to let it go even if it’s not producing the results we want.”
“It usually manifests as a backlash, or a bias towards the plan that was originally committed to,” she says. “The view is that it would be a waste of resources to invest further by changing the approach. There may also be a personal or emotional connection to a project or decision.”
How to know when you walk
“First of all, take time to think about the cost negligence that has occurred and whether it applies to you. It is a common tendency and people often fall into this thinking trap. We don’t want to introduce any self-criticism,” says Vowell.
Signs of the cost fallacy may include repeatedly experiencing poor results despite your best efforts. The situation may also be straining your well-being or confidence – especially if you are feeling more insecure about a project or your career. Finally, if you can’t think of a reason to continue in a career or project other than the time or money you’ve invested so far, it might be time to reevaluate.
That said, it can be difficult to know whether something will be seen through or turned away from. For example, you tend to go through a rough patch in a career, or feel stuck in a rut. However, this doesn’t mean you should definitely quit work – it can be an obstacle to navigate.
Vowell suggests thinking about what you want from your job and evaluating your own values and definition of success. “I work with my clients to understand the influences and expectations that led to a particular career choice,” she says.
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“Sometimes a particular career path starts when you’re a teenager and parents, or teachers, and their expectations may have a big influence,” she says.
“This is not necessarily the right choice for us when we’re in our 20s or 30s, or beyond. If your current role is not aligned with your values, what could bring you closer to them?”
See: Thinking of making a career change?
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