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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.
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