Are “Sunk-Costs” preventing you from making a wise decision that will further your legal career or law practice?
A well known economic term, sunk-costs refer to sticking by a decision, even when you shouldn't, because of the investment you have already made.
As an attorney you have made many decisions that contribute to where you are now in your legal career. The decision to go to law school, the decision as to what practice area to pursue, the decision about what type of law firm to join, whether to go solo, whether to practice law or use your legal training in another area. There are costs associated with these decisions. The issue is: Are the decisions you have made to date causing you to avoid making a change that you know will help you progress?
As examples of the cost of sunk-cost decision making bias consider these:
- For an investment, Rachel bought 100 shares of xyz company for $100 per share. The stock value is plummeting and the per share value is now down to $50. Rachel's investment adviser tells her that the stock value most likely will continue to go down and recommends that she sell immediately. Rachel doesn't want to sell because by doing so she would lose half of her investment. She keeps the shares and eventually loses her entire investment.
- Joe decided that he wanted to become a lawyer. He worked hard in undergraduate school to make the grades that would gain him admission to law school. He borrowed quite a bit of money for law school tuition. After graduation he joined a Big Law firm and has been working long hours for several years. Hi is not happy with his practice area, the law firm management and the practice of law itself. Joe wishes he had chosen another career path but feels he can't make a change now because of the investment of time and money he has already made in becoming a lawyer. Joe stays at the firm. He is miserable and his work suffers. Eventually he is fired.
Is the sunk-costs bias affecting your ability to make the best decisions for your legal career or law practice?
- Do you want to quit practicing law or change careers but don't because of the monetary and time investment you have made?
- Are you practicing law at a firm you do not like because you have already put in a lot of time there?
- Are you staying in a practice area that you thought you would like but don't because of the effort it took to develop that practice area?
Think about it. Are you avoiding making a change that will improve your situation because of the investment you have already made? It makes no sense. Make the decision based upon the facts as they are now, without considering a prior investment-one that is irrelevant to your present situation.
Do not allow your choices in the past to prevent you from making the right choice to move forward in the present!
Have a Great Practice!