The Sunk Cost Fallacy: Why Letting Go Can Be a Good Thing

Have you ever wondered if it is worth standing in the queue for buying tickets or investing a lot of time or more resources (money or human) in something that suffered losses or did not go according to plan? This is a common phenomenon called the “Sunk Cost Fallacy”. Here, one continues to invest in the project or the decision irrespective of the outcome.

Sunk Cost in economics means a cost that has already been incurred and that cannot be recovered. For example, if you invested $100 for a concert, whether you can make it to the concert or not, the $100 is a cost that you cannot recover. The $100 spent on the concert is a sunk cost. Fallacy means a mistaken belief or a misconception that renders one’s argument null.

This is a cognitive bias where you continue to invest in a project, idea or plan despite it going down just because you have invested a significant amount of resources into it. This phenomenon happens as we value the resource we have invested higher than the resource we have on hand. The resource could be anything time, money or effort. We do this as many of us tend to show an aversion to loss and we do not want to admit loss. We also tend to develop emotional attachments to the resources we have invested in.

Let me give some examples of sunk cost fallacy I have experienced personally. We were A-list members of AMC theatres which allows us to watch 3 movies a week and enjoy further discounts on popcorn and other condiments. The cost of the membership was 20-odd dollars. I felt that we should watch a minimum of 3 movies a month to make up for the cost of the membership. Sometimes we ended up watching worthless movies. What I did not realize was that I could have put that time to better use and ended up spending more on condiments which I could have avoided. The realization of opportunity cost in something else and the sunk cost of membership would have helped me make a better decision. Now as a family, we are trying to make better decisions and trying our best to not fall into this trap of the “Sunk cost Fallacy”. Professionally, we have seen many companies like Nokia, Blockbuster and many others continued to invest in what they believed is the best rather than being realistic and futuristic causing their downfall.

How could one avoid this phenomenon?

Recognize the phenomenon: The first step in avoiding the trap is to recognize and acknowledge this phenomenon. Be aware of the resources you have already invested in and objectively check if further investments in the current failing project would prove fruitful or not.

Do not get too attached: Think practical and act rational. Just because you invested your resources in something it does not mean that you have to hold on to that forever. Businesses are meant to grow and investments are supposed to make you feel happy. If you know that the investment is not yielding the desired results, pause, think and validate if further investment is worth it rather than making an emotional decision.

Focus on What’s next? If you are not sure if future investments of resources on the previously made investments can make your idea/plan/relationship better, it is better to move on. Rather than brooding over the past, move on and look for benefits in other options by cutting the losses.

Seek an external input: Seeking an external input might help bring a different perspective. It might bring more clarity when your assumptions are challenged. Their thoughts and ideas can help you make a more objective and rational decision.

A short video on sunk cost fallacy

In a nutshell, the sunk cost fallacy is a bias that can make us stick to a losing cause and continue to invest in that as we are emotionally connected to the previously invested resources. There are ways to avoid falling prey to this phenomenon by recognizing, seeking external input and focusing on what’s next.

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Tips for Writing an Effective Resume

Over the past few years, I have had the opportunity to work with fresh candidates out of school, friends, relatives and new immigrants on their resumes. Some of the common phrases that I have heard from them are “This is an Indian model Resume“, “Oh! my friend in marketing shared this format“, and “my job agency prepared this resume“. What puzzled me was that most of these resumes despite being typically long did not give a sense of who one was really. In this blog, I am trying to sum up, what I have learnt so far in my professional journey and the inputs that I have received from my peer groups to help others in the search for their dream job.

Be the STAR

Most resumes that I have come across reads

Partnered with engineers, data scientists, designers, customer agents, biz dev teams to define product specs and launch new features

The above statement is one of your responsibility as a product manager. Instead, review the sentence below

Collaborated with a cross-functional team consisting of engineers, designers and biz dev team to launch new features to increase the user registration conversion by 30%.

The statement above is constructed using the STAR expands to Situation, Task, Action, and Result. This is usually suggested for interviews but I have found the method helpful in constructing my resume.

Situation: Describe the situation that you were trying to solve.

Task: What was the problem you are trying to solve or the goal you are trying to achieve?

Action: What was the action that you performed or were you asked to perform? I would prefer it to be about that task you and your team perform with more focus on your part.

Result: What did your action result in? Show something qualitative or quantitative to show that you learnt something or helped achieve a significant goal for the team or the company.

Recruiter Speaks: “Be Result Oriented as opposed to Task Oriented.”

  • Recruiters or Hiring Managers to shortlist for a Marketing Manager role, already have an idea about the roles and responsibilities of candidates for the Marketing Manager role. What they want to see is what difference the candidate made in their previous role! The best way to do that is through results(KPIs, Numbers, ROI etc.).
  • Include a summary of the What, How, Outcome and Underlying theme in each statement
– Chetan Choudhary

Consistent Formatting

Whether you use a functional format, chronological format or a combination of both, make sure that you are consistent in the style, language and timelines across your resumes. Some parts of the resume cannot be in ascending order of timelines while others in descending order. I would prefer the latest relevant work experience first over the others and go backwards. Regarding the length of the resume, I would prefer to stick it to 1 or a maximum of 2 pages. Use professional font and font size between 10 and 12 and make it aesthetically pleasing.

Use Good Action Verbs

Strong action verbs help you describe your skills and accomplishments. It helps you to express what you have done or accomplished and as stated it enables you to create impactful sentences that make it easier for recruiters to understand what makes you stand out. Some examples of action verbs are listed below.

For example, compare the 2 sentences below

Understood strategic and competitive position in the market to develop a product strategy and roadmap.

Spearheaded product strategy and developed long-term product roadmap through detailed analysis of the competitive landscape in the market to improve customer acquisition by X%.

The first one simply states what you did, but the second one highlights how you achieved something using your skills rather than the achievement. What makes it stand out is the action word which adds punch to your resume.

Recruiter Speaks: Include 3-5 key action items per experience

  • Wordy resumes are not always the best resumes
  • As far as possible, avoid action verbs like managed, worked with, coordinated, and assisted. Instead use action verbs like achieved, spearheaded, led, accomplished, enhanced etc.
Chetan Choudhary

Include Skillset

Dedicate a section on your resume to include a bullet list of your unique skill set. The list should be a combination of both hard skills (ex: Design, Accounting, Risk Management) and soft skills(ex: Adaptability, problem-solving, communication). This helps you showcase to the hiring manager that you are well-rounded. If you are switching careers, highlight those transferable skills you possess to execute your role.

Win over the ATS

ATS or Applicant tracking system is designed to help recruiters screen applicants suited to the role from a pool of many aspirants. But not applications are scanned by the ATS, there is a real human who is reading your resume in the first cut. Recruiters/hiring managers scan your resumes to understand your skill set and select 5-10 resumes for screening for a job.

Recruiter Speaks: Win over ATS with key words and customized resume for each application

  • Highlight your key skills matching the role you have applied for. This helps catch the recruiter’s attention in the initial 10 seconds.
  • Highlight KPIs: Include numbers, percentages, process improvements in days/percentages, dollar value, and market share wherever applicable. This is a key differentiator.
  • Optimizing tools suggested: Jobscan.co, resumeworded.com, ChatGPT(Use this one carefully and optimize your resume manually)
Chetan Choudhary

Other Considerations:

  • Customize the resume for each unique role that you apply for. Do not apply with a general resume for all jobs.
  • Write a cover letter which adds a personal touch on why you suit the role.
  • Certifications from credible institution that is relevant to the position and the experience adds a lot of value.
  • Add links to your linkedin profile, blogs, portfolios, publications. Make sure that these are clickable.
  • Do not add Date of Birth, Complete Address, Head shot(unless required), additional email address and phone numbers.
  • Write an introduction and a share why you fit this role to the recruiter for them to get some context.
  • Maintain a database of all the resume along with your master resume to help you prepare for the interview.

To review your resume feel free to reach out on instagram @vyasonkeys or via comments here.