Tuesday, June 11, 2013

"Grad School Is a Sunk Cost"

Some pratty little business-school first-year once told me that my experience in grad school was a sunk cost and therefore I should quit since I hated it.  He then compared it to an opera ticket to a bad performance of Aida.

Although I'm the first to admit that economic theory goes whoosh over my head, the way I understand a sunk cost is like this: You paid/invested quantity X for Thing Y.  You have received or will receive benefit amount Z.  If you can receive more benefit from doing Thing A, then you should ignore the X you paid and not do Thing Y any more.  

This dude- who is, I fervently hope, not doing anything with people any more - tried to say that I had put X amount of suffering into grad school and thus far received nothing, therefore I should quit.  However, scientists can generally estimate whether or not they will ever graduate, and in how many years (+/- 2, but still).  So further investment in grad school does in fact get you something - a PhD - which is worth more in future earnings, respect, and career possibilities than not having it.  (At least, we hope.) 

So I think grad school isn't like a sunk cost fallacy.  It's like a 5-year T-bill. Cash it in early and get nothing, wait it out painfully and maybe get your investment back with some interest.  Hope the government doesn't go bankrupt in the meantime.

(This happened to someone I knew in grad school: the lab's funding ran out before she graduated.  You can imagine the disaster that ensued.)


  1. Anonymous2:56 PM

    yeah, this just reinforces my belief that business school is pointless.
    as someone who went to grad school, and now works in business, you are correct.
    it would be a sunk cost if you were not going to graduate, or if after graduating your phd was worth nothing, which i can say given my experience is not true, with evidence to the contrary being that fancy schmancy consulting firms that the first year that talked to you probably dreamed of getting a job at take people with phds at the same level as those with mbas

  2. Anonymous7:47 PM

    A friend of mine who was getting his MBA while I was in graduate school told me this exact same thing, and I was definitely frustrated and infuriated!

  3. ivfcycler3:45 AM

    i think you can sell your 5-yr t-bill to someone else for a good fraction of your initial investment (unless everyone thinks the govt will certainly go bankrupt before the 5 yr term, or interest rates have suddenly gone thru the roof). so that's like the option to leave with an ms, at least you got some degree out of it.

    1. There we go! It's perfect.

    2. P.S. I would have said six-year T-bill but I'm not sure those exist.

  4. Not all business school students are this dense. I say this in defense of my husband that started his MBA my 5th year (out of 7) of grad school and was supportive until the end (even when I was like, I should just quit now). He was one of the few that did all the readings, participated on class, etc. But some good does come out of business school!

    1. I'm sure they aren't! This one was a particular treat. There's some in every bunch, right?

      A pal of ours from grad school just got an MBA and is now working for a big tech company that starts with a B. He loved it (he went to Snootier U). I'm not down on all of them... just this one. Sigh.


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