Recently, I filled in the shortest form that I ever saw over the course of my career. It was just a single page. And yet it was more difficult to complete than any of the 30+ page forms I’ve filled out before.
It was a resignation form.
Quitting doesn’t come to many of us easily. No one wants to be a ‘quitter’.
The final chapter of Steven Levitt and Stephen Dubner’s excellent book Think Like A Freak, following on from their (Super)Freakanomics fame, is aptly titled ‘The upside of quitting’. They identify three important forces that bias us against quitting:
- A lifetime of being told that quitting is a sign of failure.
- We think too much about the time or money or sweat we’ve poured into a project – the sunk costs.
- A tendency to focus on the concrete costs staring us in the face, like the cost of enrolling in a degree or the price tag on a new car, and ignore opportunity costs.
The first is a definitional problem – a psychological issue we can consider from the point of view of language, so I’ll leave that till last. The other two have to do with money, or other forms of currency like time.
First, some terminology: a sunk cost, according to Investopedia, is one that has already been incurred and cannot be recovered. An opportunity cost is the cost of an alternative that must be foregone in order to pursue a particular course of action.
In business, these terms can help to explain why we see drastic markdowns – 50% off, 75% off, even 90% off!
Imagine our couple Abby and Bobby own a business. Two years ago, they purchased a $10,000 shipment of fluorescent glittery belts with cat-shaped, rhinestone-eyed buckles and a khaki fringe. Unsurprisingly, they have not sold well. Abby and Bobby have only limited warehouse space, and the shipment is taking up valuable room – room they could be using to store this season’s latest craze, boots with three sets of shoelaces.
In this scenario, the sunk cost is the $10,000 Abby and Bobby initially outlaid for the belts, none of which have sold. Thus, we understand their pain at the thought of having to sell them at less than cost. The opportunity cost, however, is that the valuable warehouse space and in-store display space currently being taken up by the belts means they are unable to profit from the boot craze – and Abby calculates that Bobby could make $20,000 profit on a $5,000 investment in triple-laced boots. It makes sense for Bobby to mark the belts down to 50% below cost and for Abby to put in an order for the boots, having freed up their cash and their space.
What are the sunk costs in your life?
Perhaps you are stuck in a course of study, or a career, or any predicament really, largely because you feel you have ‘invested’ too much in it to quit?
Think about whether there are any situations in which you feel trapped, and then ask yourself:
What are the opportunity costs if I don’t make a change?
Finally, let’s take a look at that first bias, our reluctance to ‘quit’. Persistence is something I value highly, and I do not take easily to quitting. However, I believe that there comes a time in probably every worker’s life (sooner or later) that we find the opportunity costs are greater than the sunk costs we have invested in our careers – that there are other things we want to try in our lives, and that if we don’t we will regret it.
Paul Terhorst in Cashing in on the American Dream provides some timeless advice on deciding when to quit, starting with the need to look for meaning in yourself rather than your job, and to enjoy your career and then move on.
According to the Online Etymology Dictionary, ‘quit’ as a verb originates in the 12th Century Old French word ‘quitter’ meaning ‘release, let go, relinquish, abandon’ (think of the word ‘acquit’). In turn, this verb comes from the Old French adjective ‘quitte’ meaning ‘free, clear, entire, at liberty’, from the Medieval Latin ‘quitus’ and Latin ‘quietus’ meaning ‘free’.
If you’re struggling over whether to quit something, try reframing the situation – you aren’t giving up or giving in, you’re freeing yourself.
What do you think of quitting?
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