Sunk Costs

There is an accounting term called “sunk costs”. Sunk costs are unrecoverable past expenditures. These should not be taken into account when determining whether to continue a project or abandon it, because they cannot be recovered either way. It is a common instinct to count them, however. I think the same term could be applied to non-tangible assets such as time and energy. If we let sunk costs influence our decisions, we will not be assessing a proposal exclusively on its own merits.

Sometimes people or businesses will start a business or project, then due to better or more information, find that decision was wrong but continue to stay with the original decision because of the time and money already spent – a sunk cost. Here’s one example. Let’s suppose you buy movie or theater tickets online. After buying the tickets you hear the performance is awful and a total waste of time. You decide to go anyway as you have already bought the non-refundable tickets – a sunk cost. Part way through the performance you are convinced the performance is awful but stay, again because you already paid for the tickets. Again this is faulty decision making. The decision should be based on present circumstances and upside going forward. You would be more comfortable at home and it would be a better use of your time but the fallacy of the sunk costs compels you to stay for the complete performance.

All of this leads up to a lesson in employment and education options for people with disabilities. Let me give you a real life sample. A friend with a disability wanted to start a web business. Vocational rehabilitation services paid for her start up costs of web design. After a year she had sold only two items from her web page. I examined her page, did a few checks and told her the reason she doesn’t get any business is her web page doesn’t come up in the first 20 searches by Google. In fact, it didn’t come up in the first 150 searches. I told her this and suggested she have her web page completely re-done. She said, “It’s too late, its all paid for.” That was a sunk cost. If she made the correct decision she should would have had her web page completely redesigned so that it came up in Google searches in the top twenty. If she didn’t have a disability and couldn’t get VR to pay for her first web design she might have thought differently. The lesson is:
If we let sunk costs influence our decisions, we will NOT be assessing a proposal exclusively on its own merits.

Let’s suppose you use one method of job searching and after a month you have only one lead. If so, it’s time to change job hunting methods. Even if you pay a service to find work for you – if they aren’t producing results, try something new, forget about the money already spent. I should also point out we should be using several methods of job searching to insure our chances of getting employed. The same lesson applies to school. Let’s say after two or three years of college you decide you don’t like your chosen major. Rather than continue because of time and energy already spent, find a different major, one you’ll enjoy. After all, college is preparation for work. Wouldn’t you much rather work at job related to a college major you enjoyed?

About the author

Gene Rodgers Photo Gene Rodgers has been a quadriplegic since age 17. Since then he has earned several college degrees, worked in several states, earned a Switzer Fellowship, and now works as a private contractor.

Do you have a question about employment and disability? Send your question to grodgers@austin.rr.com and put “DLRP JOBS” in the subject line.