#65: The "Sunk costs" of your career

And why it's never too late to start anew

Hey friends,

Welcome to the 65th edition of the “Level Up Ladder” newsletter.

It was a scorching week in Bucharest (around 40 °C, 104 °F) so I spent most of the week inside or in the car, going from home to work and the gym. I made progress on two of the five projects I need to hand in by the end of the summer for my MBA, and I also had some time to reflect on my career and other interests. I realized I was a bit stuck with my content and what I wanted to write about, but now I have a bit more clarity, and I will touch on that soon.

I decided to go in two main directions or, let’s say, two stages for my readers. My target audience would be split in two:

1. High-competent/high-achievers in tech who want to step into leadership roles.

2. Managers who want to become better at leading teams and projects and eventually break into the C-level suite.

This means I want to reduce as much as possible the “fluff” and the BS that other people write about on LinkedIn or in their newsletters. “10 leadership characteristics you need to succeed in 2024” is an interesting article, but I wonder how much it really helps.

And I don’t want to be that type of creator anymore, or not “only” that type of creator. I have written this type of post before, and I will write it again as it brings a lot of eyes to my profile. But I got flabbergasted this week (did you like this word?) when I saw that one of the top leadership accounts I follow on LinkedIn created a cohort course to become a top account on LinkedIn. Priced at $5000.

Another top leadership creator I know has contacted me several times in the past to offer his coaching.

On leadership?

No, on growing on LinkedIn, of course.

So, mark my words here. No matter how much I grow, my offer will not be about growing on social media. It’s not my passion. It’s not my purpose. It’s not my experience.

The best way I can help people is by sharing my knowledge and my experience leading tech projects and teams. And becoming a better person in the process.

PS: One cool thing I started doing again, since I no longer have school on Sundays, is running with the gang from my MBA’s alumni. It’s very fun and I’ve met some extraordinary people already.

I’m the one in black, on the right :D

It’s never too late to start anew

There is a concept in economics called “sunk costs”. From a rational perspective, decision-making should be based on future costs and benefits, not on past expenditures that cannot be recovered.

Psychologists Daniel Kahneman and Amos Tsversky spent their lives studying how human decision-making often deviates from rational economic models. The “sunk cost fallacy” emerged as a prime example of this deviation.

Here’s an example of it:

Imagine you're halfway through a movie at the theater, and you're not enjoying it at all. The plot is confusing, the acting is poor, and you're bored. However, you paid $15 for the ticket and already invested an hour of your time, so you decide to stay until the end, thinking, "I've already spent money and time on this, I might as well see it through." This is the sunk cost fallacy in action. The rational decision would be to leave and spend your remaining time doing something you enjoy, as the money and time already spent cannot be recovered whether you stay or go. By staying, you're only losing more of your valuable time.

Why do humans have this fallacy?

1. Loss Aversion: Humans have a stronger preference for avoiding losses than acquiring equivalent gains. This makes the prospect of "wasting" past investments particularly aversive.

2. Commitment and Consistency: As described by psychologist Robert Cialdini, people have a strong desire to appear consistent in their behavior. Abandoning a path we've committed to can feel like a threat to our self-image.

3. Status Quo Bias: There's a general tendency to prefer the current state of affairs, even when change might be beneficial. This inertia can make career changes particularly daunting.

4. Escalation of Commitment: As described by organizational behavior researcher Barry Staw, individuals often increase their investment in a failing course of action to justify prior decisions.

What does it mean for your career?

Easy; this fallacy will prevent us from changing careers or even our jobs. Because we have already spent “X” time or effort on getting to where we are.

1. Educational Investments: Years spent pursuing a specific degree or certification can feel "wasted" if one considers changing fields.

2. Industry-Specific Experience: Accumulated expertise in a particular sector can create a sense of being "locked in" to that career path.

3. Professional Networks: The time and effort invested in building industry connections can seem too valuable to leave behind.

4. Financial Commitments: Student loans, mortgages, or other types of debt can feel like chains, not allowing us to take any risks.

5. Identity and Self-Perception: Our careers often become intertwined with our sense of self, making change feel like a loss of identity.

In Romania, there is another one, closely tied with the one above, and that is “Other people’s perception”.

Let me elaborate on that. There are several jobs, considered unworthy, like being an electrician or plumber, that pay more than jobs that require university studies. But a lot of people stick in their low-paying jobs only because they are ashamed of telling other people that what they do is not something that would require a PhD. (This is one of the main reasons people make up fake titles in their LinkedIn profiles. “Chief of staff” usually means assistant.)

Many examples from various fields illustrate the potential for success when individuals overcome the sunk cost fallacy:

1. Julia Child discovered her passion for French cuisine at 50, after working in advertising and other state jobs all her life.

2. Ray Kroc was 52 when he pivoted from selling milkshake mixers to franchising McDonald's.

3. Colonel Sanders founded Kentucky Fried Chicken at 65, after careers as a streetcar conductor, insurance salesman, and service station operator.

And my favourite example: Bill Campbell.

Bill Campbell was one of the most important leaders in Silicon Valley and the personal coach and mentor to some of the biggest leaders in tech. From Steve Jobs to Larry Page, Jeff Bezos, and Mark Zuckerberg, just to name a few.

Bill was a football coach for Columbia University when he first entered the business field at 39. In 4 years, he was the VP of Marketing at Apple.

I strongly recommend the book written about him, “The Trillion-Dollar Coach”.

The sunk cost fallacy, while deeply ingrained in human psychology, doesn’t need to dictate how we spend the rest of our lives. The most successful professionals are those who can adapt, pivot, and embrace new opportunities, unburdened by the weight of past investments.

Remember that we should make choices that align with our current aspirations, skills, and the evolving demands of the market.

Not with our past.

Thank you for reading and I hope you’ll join me in the comments section for further discussions!

I hope you have a great weekend!

Leo Alexandru

P.S. If you enjoyed this piece, please consider sharing it. That's how new people find my work and I am able to continue writing.

Thank you so much for being here!

P.P.S. If you want to read my content daily, don’t forget to follow me on Linkedin.