The Sunk Cost Fallacy is a concept in economics that boils down to ‘know when to cut your losses’. But it’s not quite that simple; because the Sunk Cost Fallacy actually prefers you look at a situation agnostic of cost; i.e. money you have already spent, and instead focus simply on the choice at hand.
Consider this hypothetical. Two people acquire tickets to see ‘Shakespeare in the Park’. One of them paid $50 for his ticket; the other was on his way to purchase a ticket when he got one free from a friend. The evening of the performance it begins to rain. Which person will likely choose not to go see the performance? You instinctively know the answer – the person that paid for his ticket is more likely to sit in the rain and be miserable. A rational individual would not care whether or not the ticket had been purchased or received as a gift. It is only worth the expected enjoyment of attending the performance minus the expected costs of weathering the storm. The ticket itself is a sunk cost because it can’t be returned, and that sunk cost should not enter into the decision to attend the performance. The reality, however, is that not attending the performance will be more emotionally difficult for the person who paid for his ticket since he has to deal with the disappointment of not seeing the performance as well as the sunk cost of the ticket. The mind has a tendency to classify such an outcome as a “double fail” that should be avoided, so the person who paid for his ticket will be more likely to sit outside in the rain to watch the show. With the proper perspective and discipline, however, the person could instead ask, “Would I still be willing to go sit in the rain if the ticket were free?”
By contrast, The Monty Hall Problem is an exercise in logic and probabilistic outcomes. When given a limited number of choices, when alternate choices are removed from play, it is actually in your interest to pick something different. You can either read the brazenly plagiarized section below, or watch the explanation here on Youtube. Here’s how it works:
Assume that a room is equipped with three doors. Behind two are goats, and behind the third is a shiny new car. You are asked to pick a door, and will win whatever is behind it. Let’s say you pick door 1. Before the door is opened, however, someone who knows what’s behind the doors (Monty Hall) opens one of the other two doors, revealing a goat, and asks you if you wish to change your selection to the third door (i.e., the door which neither you picked nor he opened). The Monty Hall problem is deciding whether you do.
The correct answer is that you do want to switch. If you do not switch, you have the expected 1/3 chance of winning the car, since no matter whether you initially picked the correct door, Monty will show you a door with a goat. But after Monty has eliminated one of the doors for you, you obviously do not improve your chances of winning to better than 1/3 by sticking with your original choice. If you now switch doors, however, there is a 2/3 chance you will win the car (counter-intuitive though it seems).
So now we come to the obvious part and apply this logic to law school. If you are even vaguely intelligent, you should do a bit of research before choosing your desired profession. Some of us made the choice prior to when most of the unfortunate truths started dribbling out about the scam that is law school and the lawyerly career path. At this point in time however, there is just no excuse not to be able to educate yourself about the horrible job market, the crushing debt, and lest we not forget the douchebag fucknozzles that will without a doubt inhabit the legal world you must deal with on a near daily basis. All this is awaiting the unwary who may be considering law as a career.
But lets delve a little deeper and apply the economic and statistical principles above. Statistically speaking, you will have about a 50% chance of getting a legal job that requires you to both hold a JD and pass a state bar somewhere. What’s that you say? Your career service office told you that 90+% are employed 3 months out of law school? Yeah… lets talk about that. I’m going to play fast and loose with the stats. I may put a link in here later with a detailed post about job stats, but there are quite a few sites that explain it better than I do. The rough numbers are that your career office claims 90% employment. Which is a snapshot which includes just one data point from students. Many law schools offer fellowships after graduation to any non-employed student. You think free money; they think higher US News rankings for pennies by paying you to work. So approximately 15-20% are actually fellowships paid by the school. 10% are unemployed already. Add to that, anyone doing any job whatsoever (fry cook, retail, etc) and that’s another 10-15%. Add to the previous ‘any job’ category another 10-15% who work doc review, which can increase depending on how horrible your school is to upwards of 30-40% (truly). Only about 30% of grads ever end up working in a large law firm setting. And the majority of those jobs are gobbled up by the grads of the top 15 schools in the country. This has all been beaten to death on many other blogs, with much more scrutiny. Oh yeah, and all those people who are unemployed and don’t return the call of the career service office about how their employment is going? They aren’t included in the data set.
So the question is whether a law degree to become an attorney is really worth nearly 4 years (you have to consider the added 6 months to take the bar and get results assuming you pass on the first run) and $150,000 in debt to acquire a job that pays all of $50,000 (if you are lucky). Once again, you might think, but career services keeps showing up these graphs of income around 90K… well if you haven’t noticed, it’s a bimodal curve, with a big wide peak around 45-50, and a tiny thin peak at 120. The 3-5 people in your class making 120 won’t be you. But those 5 people are represented quite prominently in that graph you are seeing, and career services is really trying to sell you on that pipe-dream.
Ask yourself why your career services office (if you have one that does anything) is always touting the JD+ career options. That really isn’t the sign of a healthy profession. “Hey, we know you have invested a ridiculous amount of time and money, not to mention effort and anguish into becoming an attorney… but you really should consider doing this other job that only requires a GED. Kudos for you for going to extra mile and 7-8 years to get better degrees, but they aren’t actually worth anything.”
The Sunk Cost concept: You are in a profession that you can not get a job in; or can only get a mediocre low paying job. Do you go do something else? Ignoring sunk cost you would say yes. Obviously. But we are looking at the $150K in loans and all those bar fees and all that education and time it took to get to where you are… and it is really hard to ignore the sunk cost.
Monty Hall concept: So here is a more interesting way to try to look at the same idea. The Monty Hall Problem is at its core an argument of an A/B switch. Or slightly more simply, the known versus the unknown. In a career metaphor, you may actually view this as a slightly adulterated version of the problem above. In relation to your career, all through your education there were doors presented to you with possibilities behind them. Doctor, Lawyer, StockBroker… the doors were presented and you passed over some and agonized over others. Here though is where the metaphor gets interesting. For in this case, we know with a certain likelihood that behind the lawyer door is a statistically significant chance that you will end up with a failed career. Which means, in terms of the Monty Hall problem, we already know that the ‘lawyer’ door is absolutely a 2/3 possibility of getting a goat. Yet we are presented with the option of ‘not lawyer’ and again most of us choose not to walk through that door. Even though we know the statistics.
I mean come on. Conceptual math never has any direct impact on our daily lives, right? Just look at all those people who won the lottery… I bet my turn is right around the corner. I’ve got a system… unlike all those other people…