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1:59

Welcome to the Jill on Money Show. It is

2:01

Saturday, November twelve. and

2:03

we have a delightful guest

2:05

for this weekend. You're gonna love this.

2:08

It is Annie Duke. She has been

2:10

on the program a couple of times. You

2:12

may know her from her amazing book

2:14

called sinking in bets. Annie

2:17

was a professional gambler.

2:20

She was a professional poker player.

2:22

But she started her career actually as an

2:24

academic, and it's such a fascinating trajectory

2:27

of her life. So she was like a decision

2:29

making scientist something and

2:31

she took some time off and she was playing poker and

2:33

she was really good at it. And so what

2:35

she does is she has got

2:38

behavioral science and lots of analysis

2:40

to explain lots of different

2:42

trends in our lives. And in her

2:45

new book, Quit, she

2:47

is talking about the power of

2:49

knowing when to walk away.

2:52

I think you're really gonna like this. I think

2:54

that many times that you guys are asking

2:56

us these kinds of questions. This

2:58

is kind of the science behind

3:01

why we do and do not

3:03

make the decisions that are often in our

3:05

best interest. Here is part

3:08

one of our interview with

3:10

Annie Duke. So why did you

3:12

decide you wanted to tackle this topic? Oh,

3:14

gosh. You know, I mean, III think that the

3:17

the main reason I wanted to tackle the topic

3:19

is that I I think

3:21

that there's just a misconception

3:24

about grit, which

3:26

is that grit is

3:28

good, full stop period. In

3:30

other words, that if you

3:33

stick to things and you persevere, that

3:36

is a sign of character. You know,

3:38

we think about, you know, quitters

3:40

never win and winners never quit. If at first

3:43

you don't succeed, try try again. That's

3:45

just not so. It's actually the case

3:47

that you want to stick to things that are worthwhile

3:51

and quit everything else. And that's

3:53

actually the true road to success. So

3:55

I just felt like somebody needed to have a conversation

3:57

with grit. which was about the

3:59

other

3:59

side of the coin that grit

4:02

is a virtue, but so is quitting

4:04

a virtue as well. Why is quitting

4:06

get such a bad rap, do you think? Well,

4:08

I think there's a variety of reasons. III think

4:10

it's a little bit of a chicken and the egg problem.

4:12

Mhmm. So let me tell you

4:14

what the chicken is, and then I'll tell what the egg is.

4:17

Right. Thank you. Thank you for that definitional moment.

4:20

Yeah. Because don't I don't I don't I don't know which

4:22

causes which. So the chicken is

4:24

that there's a really wide variety

4:26

of cognitive biases that

4:28

could be sort of wrapped up under this idea

4:31

of buying biasing us against quitting.

4:33

So The most famous of those would be

4:35

the sunk cost effect, which we

4:37

know from, for example, you know, investors.

4:40

If, you know, if you buy a stock at fifty, and

4:42

it's now

4:42

trading at forty, you

4:44

will make a different decision about whether

4:46

to hold that than you would

4:49

if you were just looking at the stock fresh.

4:51

In other words, the ten dollars that you've already

4:53

invested in it or that you've already lost

4:55

in it affects your decision about whether

4:57

to continue to hold it. Now, obviously,

4:59

that's an error because if you weren't

5:01

gonna buy it today, you shouldn't hold it at fifty

5:04

just because you quote unquote wanna

5:06

get your money back. And that some cost

5:08

effect sort of goes across a lot of different things.

5:10

Like, people don't wanna quit jobs because they don't wanna

5:12

waste all the time or energy or training

5:15

or whatever that they've put into it. Of course,

5:17

that causes you to maybe waste some things going

5:19

forward. In other words, to hold stocks or or

5:21

jobs or whatever it is that you wouldn't

5:24

hold if you were coming to the decision first.

5:26

So there's a variety of biases like that,

5:28

the sunk cost policy endowment effect.

5:30

omission, commission bias, status quo bias,

5:33

Opportunity cost neglect, so on and so forth,

5:35

that really biases against quitting.

5:38

So that's the chicken. But then

5:40

the egg part is that

5:42

when we think about the

5:45

sort of narratives that we tell,

5:47

Who are the heroes of the story? The

5:50

heroes of our stories are the people who persevere.

5:53

They're the ones who stick it out through hard

5:56

times and we can see this even with, like,

5:58

the startup founder who got down

5:59

to no money you know,

6:02

everybody was telling

6:03

them to shed down, but they kept going

6:05

and turned the company into a

6:07

success or the people

6:09

who continue up the mountain and snowstorms.

6:12

you know, and triumph. Or even

6:15

interestingly enough, the people who continue

6:17

up the mountain under really horrible

6:19

conditions and perish are

6:21

often the heroes of our stories.

6:23

And that's reflected in the language. When

6:25

you look at the synonyms for sticking

6:28

it out or grit, they're they're

6:30

really positive. You know, you're showing

6:32

metal. It character.

6:35

I mean, character is synonymous with

6:37

grit. We think when we tell our children, not

6:40

to quit things that we're helping them to build

6:42

character. But when we think about the

6:44

synonyms for quit, well, I mean,

6:46

I'll put it to you this way, Joe. If

6:48

I called you a quitter, would you think I was complimenting

6:50

you? Right. Exactly. I and I think

6:52

that, like, the story of the Everest

6:55

climb is one that I just want to spend

6:57

a little bit time around. And everyone,

7:00

you had to buy this book because it's very compelling.

7:02

And I know we're talking about behavioral economics,

7:04

but there are stories, and it's engaging. And

7:06

the engaging story that

7:09

you tell around Everest has to

7:11

do with this concept of

7:13

turnaround times. Now, these

7:15

are basically I mean, I'm not a climber, but

7:17

it makes sense. Like, if I'm not at certain point

7:19

by a certain time. I've got to turn around because

7:21

it's dangerous. Talk about

7:24

what happened on this per particular

7:26

climb that you cover in the

7:28

beginning of the book? Yeah. So

7:31

I really wanted to open the book with Everest

7:33

because I feel like Everest

7:36

is kind of, like, a symbol

7:38

of grit. Right? Like, how gritty

7:40

you have to be to climb twenty nine thousand

7:42

Right. Completely crazy and gritty, I guess.

7:45

I I would say so. Yes. Exactly. You

7:47

know, so I I think that when we

7:49

think about stories about Everest, you know,

7:52

or Edmund Hillary or whoever

7:54

you know, that we're we're talking about stories of grit.

7:56

And I I felt that someone should really a story tell

7:58

a story about quitting. that happened on

8:00

Everest too because, like, I really wanted to balance

8:02

it out. So this story

8:05

is about doctor Stuart Hutchinson John

8:07

Taseke and doctor Lucasitski. And they were part

8:09

of one of these climbing expeditions. As you all

8:11

recall, Jill, in the nineties, these things became

8:13

very popular. Back then, I think it

8:15

costs about seventy or seventy five thousand dollars

8:17

to join one of these expeditions in about

8:19

nine months worth of training time. And

8:22

so they were part of an expedition of

8:24

eight climbers clients, three

8:27

climbing chirpas and an expedition leader.

8:29

And as you said, for each day's

8:31

climb, they would set a turnaround time. And for

8:33

Summit Day where you're climbing from camp four, so you're

8:35

already very high up

8:36

the mountain. The turnaround time is

8:38

one PM. And the reason for that is

8:40

that if

8:41

you descend the mountain in darkness

8:44

from the summit, it's incredibly dangerous,

8:46

particularly because you have across a part of the mountain

8:48

called the Southeast Ridge, which is very

8:50

very narrow. If you do not

8:53

do that successfully, you will fall to your death

8:55

either all the way into Nepal or all

8:57

the way into Tibet. Neither of

8:59

those things I assume would be something desirable

9:01

to you. And so climber's before

9:03

you have figured out that if you're not

9:06

to the summit by one PM and

9:08

you get there afterwards, you're just too likely to

9:10

descend mountain and darkness and it's just

9:12

too dangerous and the chances that you have,

9:14

you know, a really bad outcome, maybe death

9:16

has gotten too high. So the expedition

9:18

leader has impressed upon his group that

9:21

when they leave

9:22

for summit day from camp four,

9:25

that the turnaround time is one PM.

9:26

no matter where they are in the mountain, they're supposed to turn

9:29

around at one PM, summit or not.

9:31

So our climber set out,

9:33

and this was a time, as I said, in the nineties

9:35

when these expeditions had gotten quite popular.

9:38

So it wasn't just these eight climbers, the three

9:40

climbing sherpas, and the expedition leader

9:42

who were climbing. There were over thirty people on that

9:44

mountain. And there it's kind

9:46

of like a one, you know, single

9:48

lane road. as you're going up to

9:50

the summit. So you're you're really subject

9:52

to how fast the people in front of you are going,

9:55

and it was slow. There was basically a traffic

9:57

jam on the mountain that day. So

9:59

Hutchinson recognized that it was going pretty

10:02

slow. And the expedition leader

10:04

came up behind him and

10:06

he just asked the expedition leader, hey, how long

10:08

do you think it's gonna be until we get to the summit?

10:11

The expedition leader told him about three hours.

10:13

and then scurried on a head to try to make

10:15

up time. Hutchinson holds tasking

10:18

and Kasitsky back and says,

10:20

oh, I think we really have a problem here

10:22

because

10:22

if

10:23

it's three hours to the summit, I'm looking at my watch.

10:25

It's almost eleven thirty AM right now.

10:28

So it seems to me that we're only we're gonna

10:30

get to the summit around two thirty even if

10:32

we were to really speed up, we'll

10:34

get there at two PM. Mhmm. And

10:36

that's well past the turnaround time.

10:38

So if we're supposed to turn around no

10:41

matter where we're at one PM, it seems to me

10:43

we should turn around now because there's no way we're gonna

10:45

make it to the summit. So

10:47

it it took a little convincing, but

10:49

Taseke and Kasitski did agree.

10:51

Right? And the three of them turned around and they

10:53

went back to camp four, and

10:55

they lived. See, but that's the thing

10:58

that's so weird because there's, like, always seems this,

11:00

like, binary choice and which

11:02

is, you know, you made it or you didn't make

11:04

it. And maybe the binary trait should be

11:06

like, well, you live. That could be our first

11:08

thing. Like, living would be good. Getting

11:11

back down the mountain should actually be the goal.

11:13

Right. And I found that kind of interesting

11:15

that, you know, you we tell ourselves stories,

11:18

and as you say, you know, that obviously Angela

11:20

Duckworth kind of popularized this idea

11:22

of grit. But even before her, there's

11:25

this sense that, like, oh, I've not

11:27

just put in all this time, but

11:30

I've, you know, also created

11:32

like a whole space. There's so much energy

11:34

that I've put into this endeavor, which is

11:36

getting up this mountain. And all

11:38

of a sudden you reframe this as

11:41

you failed, but you didn't fail. You lived.

11:44

So living again, that would seem to

11:46

me like the first part. And

11:48

the second part would be like, okay,

11:50

presuming I can live then

11:52

I hope get up this mountain. And

11:54

as you say, it plays out in lots of different

11:57

areas. It just seems so dramatic

11:59

because

11:59

in this case, it was life or death. Howard

12:01

Bauchner: Yeah. So as you said,

12:04

like, look,

12:04

when we think about the sunk cost effect,

12:07

Right? You put seventy five thousand

12:09

dollars into the cause. You spent

12:11

nine months training. You've gotten

12:14

so far. if you turn around

12:16

now, doesn't that mean that you'll have

12:18

wasted all of that? So that's that's one

12:20

problem. Right? Of course, that's thinking about

12:22

waste as a backward looking problem because

12:24

If it's a bad decision to continue going

12:26

forward, that would be the real waste. In this case,

12:28

probably a waste of human life. Right?

12:31

So So we need to, you know, sort of switch

12:33

the way that we think about that. Those costs are already

12:35

sunk. That's why it's called the sunk cost fallacy,

12:38

but it's creating friction that

12:40

makes us wanna continue. The other thing that you

12:42

pointed out is that we have this really

12:44

perverse way at looking

12:46

at goals that we have. So the summit

12:48

is obviously the goal. At this point, these

12:50

climbers are about three hundred feet from the summit.

12:53

And we think about them as having failed.

12:56

Never mind that they climb twenty nine thousand

12:58

feet into the air, something that almost

13:01

nobody has ever done. That doesn't

13:03

really count for anything. So we measure

13:05

ourselves against how short we are

13:07

of the goal, not how far we

13:09

are from the starting

13:11

line. Right? Which in their case, is

13:13

very, very far. And think you can intuit this.

13:15

Like, obviously, if you run twenty miles of a

13:17

marathon, you'll think of yourself as a

13:19

failure. and it will feel worse

13:21

to you than never having started a marathon

13:24

at all. Never mind that you won twenty,

13:26

you know, you ran twenty more miles than the person

13:28

who never started. So this is also,

13:30

like, one of these forces. And then you also

13:32

have this problem, not just a feeling

13:35

like, well, if I stop now, I

13:37

will have failed. Right? that makes it

13:39

really hard for us, but also these, what ifs?

13:41

What if I had continued up the mountain?

13:43

That

13:43

I think that's really hard for us. What if I had

13:46

stayed in that job? What if I had in that relationship?

13:48

What if I hadn't shut my startup down? What

13:50

if I had kept running?

13:52

And I think that those what ifs are really hard for

13:54

us, and they're particularly hard for us. in the

13:56

situation for these three climbers when people

13:58

did continue up the mountain. Because

14:01

what if in that moment

14:03

where you're trying to decide, what if they all make it

14:05

successfully there. And I just

14:07

feel like an idiot for

14:08

having turned around. So think about how courageous

14:11

it was. I mean, it's interesting

14:13

that you compare it also to your

14:15

your career as a professional poker player.

14:17

There are plenty of hands where your

14:20

rules or the way that you think

14:22

about probability would say, okay,

14:25

you're done. Get out. You're quitting this. Right?

14:27

And then if you tell the funny story where

14:29

you're, like, you know, sitting at a table where a

14:31

professional player turns you and says, you know, like,

14:33

after watching the hand come out, like, oh, crap.

14:35

I could have I could have actually won that, but that wouldn't

14:37

have been the prudent choice. I

14:39

thought it was kind of intriguing to

14:42

me this idea around

14:45

quitting in a job where you

14:47

were talking to a doctor. And

14:49

I've heard so many of these stories. Okay?

14:52

where people will call the program up and

14:54

say, you know, I've been a healthcare worker. I've

14:56

been a teacher. And I just like, I

14:58

I need permission to quit out asking

15:00

me permission. They want to know,

15:02

like, financially, am I okay? And,

15:05

yeah, listen, there are times where I say you can totally

15:07

do it. And if you were to stay two more years. That

15:09

pension does get a little fatter, but you could do

15:12

it. And I always will say, like, are you miserable? And

15:14

there are some people who say, yeah, I am.

15:17

Can you just tell the story about your

15:19

the way that you approached this

15:21

doctor where you said, like,

15:24

imagine a year from now. So play

15:26

that out so people can ask themselves

15:28

and get into this, like understand the

15:30

probability and

15:32

the application of statistics

15:35

to a big decision like I'm

15:37

gonna quit or make a career change?

15:38

Yeah, absolutely. So a woman

15:41

named Sarah Olson Martinez contacted me.

15:43

and she was facing a

15:46

decision about whether to quit her job. So

15:48

she was an emergency medicine

15:51

doctor had worked

15:53

you know, in the that's where her training

15:55

was but she had also been

15:57

promoted to an administrative position.

16:00

by the time she contacts me,

16:02

she's actually only doing six shifts a month

16:04

in the and the rest of her time is administrative

16:07

work. Now I was in middle of writing a book

16:09

I'll quit. So I was like, hey, do you wanna get on

16:11

this? This is good.

16:13

Oh, you're a great character. Yeah. Well,

16:15

I you know, I just I was like, I really wanted to hear

16:17

story because I was obviously thinking deeply about

16:19

it and thinking, oh, that this might be interesting for

16:21

the book. So yeah. So she's

16:23

telling me about her job. And

16:26

you know, that when she was,

16:29

you know, working in the it was really

16:31

shift work. So while the work was really

16:33

hard, it was also fulfilling. And at

16:35

the

16:35

end of your shift, you were done. like

16:37

you went home, your work didn't come home with you.

16:39

But the administrative work was not like that.

16:41

It was kind of twenty four seven, you know,

16:44

calls, emails, text, putting

16:45

out fires, like having to answer

16:47

questions.

16:48

And that she had two young children

16:50

and it was really negatively

16:53

impacting her relationship with her kids.

16:56

And at that point, she described herself

16:58

as miserable. Not only miserable, but

17:00

having been miserable for quite some time,

17:02

like, few years. You know, unlike

17:05

many people who are facing this, she actually had

17:07

another job that she had already been offered.

17:09

So she's in she's in a superior position

17:11

to many people who are thinking about quitting because she knows

17:13

there's another opportunity available to her

17:16

and it's to evaluate cases

17:18

for an insurance company. So when she's

17:20

telling me all this, as you might imagine, Joe,

17:22

I'm I'm slightly confused as to why she's

17:24

asking me about whether she should quit. because

17:26

she's miserable for years, and she has another

17:29

job offer available to her. So

17:31

I asked her, and I said, well, so

17:33

what's stopping you from quitting. Like, what

17:35

what is it that's holding you back from this new job?

17:38

And she

17:38

said something really interesting. She

17:40

said, what if I take the new job and I hate it?

17:42

This was so interesting to me.

17:45

So I said to her, okay,

17:47

well, let me ask you this. Imagine

17:49

it's a year from now and you stay in your current position.

17:52

what's the probability that you'll be happy?

17:55

And she said zero percent.

17:58

Because she knew she she'd been unhappy

17:59

forever. Right?

18:01

So she knew she was gonna be unhappy. So

18:03

I said, well, what's the probability if you take this

18:05

new job? Now imagine that it's a

18:07

year from now. Like, what's the probability you're

18:09

happy? And she said,

18:12

yeah, I'm not sure. Probably fifty

18:14

fifty. And so, well, it's

18:16

fifty percent greater than zero. And

18:18

she said, well, that Yes. And

18:20

she quit the next day. And the last time I

18:23

checked, she's actually quite happy. That's

18:25

amazing. Yeah. And and I think

18:27

that it brings up this really important kind

18:29

of asymmetry in the way that we think. You

18:31

know, investors can experience something called

18:34

loss aversion. We we can experience

18:36

this everywhere, which is just that when we're

18:38

deciding whether we want, you know, we want to enter

18:40

into an investment. We focus on the downside.

18:43

Like, what if it doesn't work out? What if I lose

18:45

my money? And it can cause us to

18:47

choose investments that have

18:49

lower expected value. In other words,

18:51

you can't lose very much, but also what goes

18:54

along with that is you can't win very much. In other words,

18:56

they're very low volatility. we'll prefer

18:58

that over something where you could actually win

19:00

quite a bit, but there's maybe a greater

19:03

loss that might be associated with it. So

19:05

loss aversion is very common problem.

19:08

But what's interesting is that loss aversion is

19:10

asymmetric. We recruit it

19:12

much more strongly for things that

19:14

we're starting.

19:15

We don't recruit it in the same way for things

19:17

that we're continuing that we've already started.

19:20

So you can see this with also Martinez.

19:22

Right? Like, there was a really good chance

19:24

of a bad outcome from staying with

19:26

what she was doing.

19:28

But when I asked her what was bothering her,

19:30

it was the chance of loss at the thing the

19:32

new that she might start. So

19:35

now we see the problem with quitting. Right?

19:37

Is that there's all sorts of forces

19:39

like sunk costs. because she said, like, I've trained

19:41

so much in this and so so

19:43

that that sort of make us stick to the thing that we're

19:45

doing, but then also we don't wanna start new

19:47

things for fear that we might lose even

19:50

when the chances of a worse outcome are

19:52

much, much smaller than

19:54

the chances of a worse outcome from the thing that

19:56

we're already doing. And you could see that coming

19:58

out in Austin Martinez'

19:59

story. So all I did was refocus

20:02

our and

20:02

just get her to see that, look, you have

20:04

a much better chance of being happy if you

20:06

switch to the new thing. And once once

20:08

I kind of got her to see the upper to any

20:10

cost what she was giving up. By

20:13

not taking the new job, she switched.

20:16

Okay. We'll do part two of our entered view

20:18

with any duke tomorrow if you've got a financial

20:20

question. If you want to know whether you should

20:22

quit, give us a holler. Go to

20:24

our website jill on money dot com

20:27

Click the contact us button. Of course,

20:29

let us know if you'd be willing to come on the air.

20:31

While you're on the website, check out the blog,

20:33

check out all the resources, and preorder

20:36

my new book It's called the Great

20:38

Money Reset. And thank you so

20:40

much for listening. Try to do something

20:42

nice for someone else today. Rich growth,

20:45

Grace. We'll talk to you tomorrow.

20:52

Throughout

20:52

the sixties and seventies, cops

20:54

hunted down key figures of the Dixie

20:56

mafia, including its enigmatic ringleader,

20:59

Kirksey Knicks. making money.

21:01

I'm not interested in her heartbeat. Fifteen

21:04

years into Kirksey's life sentence, the Dixie

21:06

mafia was practically folklore but that

21:08

would soon change. I'm Jed Lopinski.

21:11

This is Gone South, a documentary

21:13

podcast from c thirteen originals, a

21:16

cadence thirteen studio. Season

21:18

two, The Dixie mafia, available

21:20

now on the odyssey app or wherever you

21:22

get your podcasts.