Sunk cost fallacy and career change

A key issue for anyone considering a career change is the idea of “wasting” the experience, skills and time they’ve invested in their current career. We often persist with our existing career way beyond the point where it serves us, telling ourselves things will somehow improve.

It’s an example of what’s known as the Sunk Cost Fallacy, a concept originally coined by behavioural economist Richard Thaler to explain why people continued to invest in something purely because they had already invested heavily in it, even when it’s clear that it would be better to abandon it.

As you might expect, there are psychological reasons behind why we behave this way. Studies show that we find the pain of losing something twice as powerful as the pleasure of gaining something equivalent. This is known as loss aversion and explains why we prioritise avoiding the loss of something over making a gain.

Avoiding loss, but at what cost?

Particularly by the time we’re in our thirties or forties, as well as avoiding what we see as the loss of experience and skills that a change brings, we’re also, very understandably, keen to avoid a threat to our financial security. Remaining in our current field and becoming more senior seems, on the face of things, to be the best way to keep this security.

We also tend to want to avoid the change in our identity that a new direction brings. After years in a career, it can be difficult to emotionally detach from something which will have been a large part of what defines you. I explore this “letting go” with most of my clients. 

If you’re a sales director, as much as you might not enjoy it, you might like the status that comes with it. So, you’ll want to avoid the potential loss of that status, which might come with a new career.

So, if we continue to invest in a role we no longer (or perhaps never did) enjoy, we can avoid what we see as some high costs of change. But if we stay, that comes at a cost too.

In my experience of working with clients on career change for 20 years now, these costs typically include:  

• Stress caused by the repeated cycle of telling yourself on the one hand that you can’t possibly spend another 20 to 30 years in the same career, but on the other that you can’t possibly change either.
• Low motivation, leading to feeling guilty that you aren’t showing up for yourself or your colleagues in the way that you want to.
• Low mood, which, over time, can impact other areas of your life. When we’re preoccupied with something as significant as how we spend eight hours or more of our day, we can make ourselves emotionally absent from the people who mean the most to us.
• Perhaps the highest cost of all is the frustration of knowing you aren’t allowing yourself to grow in a new direction. There’s an “opportunity cost” when you deny yourself the chance to spend the rest of your working life doing something that feels fulfilling and enjoyable. 

How to move forward 

If you’re feeling stuck in the middle between the costs of staying and the costs of making a change, what can you do?

Reframe the idea that you’re wasting your skills and experience if you change: An emotionally intelligent marketing manager who builds strong relationships can use those skills as a therapist. And a lawyer who enjoys helping their clients to understand legal jargon takes the skill of communicating complex information into being a great teacher. 

Both are examples of clients I’ve worked with who, although they needed some additional training for their new careers, found that their existing skills were a strong foundation for what came next.

A career change is more about applying many of your existing skills in a new environment, rather than jettisoning them completely. Leadership, problem-solving, planning, analysis, presenting, facilitating and many more skills besides, transfer to new roles.

Remind yourself that a career change is now the norm

The logic that you should forever continue to invest in your existing career is flawed. Professor Herminia Ibarra, Professor of Organisational Behaviour at London Business School and a highly regarded expert on career development, estimates that people will have between 3 and 7 career changes over their lifetime – that’s actual changes, not just company changes. The rapid development of AI is likely to speed this up. 

Forgive the younger you

People often give themselves a tough time for not choosing the “right” career when they were younger. But if your current career no longer feels motivating or fulfilling, it doesn’t mean you were wrong to go into it in the first place. You simply made an earlier choice based on the information available and the circumstances that you were in at the time.  

Reflect on what you no longer enjoy

Be honest with yourself about what specifically is making you unhappy in your current career. It might be the fundamental nature of what you do. If your role involves seemingly unending data analysis and reporting, but you yearn to do something involving creativity, you probably do need to change careers.

It could also be, though, that you’re going through a challenging phase with a difficult client, or that you’re no longer learning and feeling stimulated, that you aren’t motivated by your organisation’s purpose, or that the culture isn’t a fit for you. This points to a potential change of organisation or sector, rather than an entirely new career direction. 

If you understand why you’re unhappy, you’ll be able to decide if you can make requests that could change a situation, wait for something to pass, or if you need a more fundamental change. 

Be curious and experiment

Allow yourself to explore potential new career paths without putting yourself under pressure to make a quick decision about a new career. Speak to people who do what you’re interested in – find out as much as you can about the day-to-day reality of their work. Take a short course in something – either in person or virtually.

If there’s a chance to do a project at your current work around something else you’re interested in, talk to the person or people whose buy-in you need. All or any of these things are low-commitment ways to gain valuable experience that lets you assess if something is a good match for you. All of the people I’ve coached with who’ve successfully made a significant change have taken this experimental approach. 

Sunk cost fallacy, based on our desire to avoid the pain of loss, means that we can continue to invest in a career that we no longer find fulfilling until we eventually retire. 

If you know that the only thing keeping you in your current career is the fact that you’ve invested in it until now, it’s at least worth making another investment of your time to begin exploring potential alternatives.