0:06

Welcome

0:07

to the MedFavor Show. where the focus is

0:09

on helping you grow and preserve your wealth. Join

0:11

us as we discuss the craft of investing and

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uncover new and profitable ideas, all

0:15

to help you grow wealthier and wiser. Better

0:17

investing starts here.

0:19

Matt Faber is the cofounder and chief investment officer

0:22

at Cambria Investment Management due to industry

0:24

regulations will not discuss any of Camry's funds

0:26

on this podcast. All opinions expressed by podcast

0:28

participants are solely their own opinions and do not reflect

0:30

the opinion of Camry Investment Management or affiliates.

0:33

For more information, visit kymriahinvestments

0:35

dot com. In

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the

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1:53

Audi

1:53

Friends, we got a fantastic show today.

1:56

Our guest is Andy Duke, a consultant in

1:58

the decision making space and previously

1:59

a professional poker player who's won

2:02

millions and millions of bucks. She's

2:04

also a bestselling author of books like

2:06

thinking in Bets and just released her newest

2:09

book, Quit, the power of

2:11

knowing when to walk away. Today's

2:13

episode, Annie shares why quitting

2:15

isn't always as bad as advertised. She

2:18

shares why biases lead us

2:20

to want to either quit a trade too early or

2:22

avoid quitting a bad trade and shares

2:24

actionable advice you can take to counteract

2:26

this problem. As we wind down,

2:28

we touch on the alliance for decision education,

2:31

a nonprofit and he founded

2:33

to empower students with essential skills

2:35

to make better decisions. Be sure

2:37

to check the link in the show notes for

2:39

the organization's virtual poker

2:41

tournament on October twenty seventh

2:43

at six thirty PM eastern. If

2:46

you retweet or repost my episode

2:48

with Annie on either Twitter or LinkedIn,

2:51

you'll be entered to receive a free entry

2:53

into the poker tournament. that's worth

2:55

twenty five hundred dollars. Please

2:58

note this episode with the fantastic Annie

3:00

Duke.

3:02

And they welcome the show. Well,

3:04

thank you for having me. I'm excited to

3:06

be here.

3:07

You know, I've probably spent

3:09

I was trying to think of someone

3:12

who I've spent more time with over

3:14

the last few years who I've never met in

3:16

person who I've actually never talked to

3:18

you're probably somewhere in the top

3:20

five. I've listened to all your podcast

3:23

and I've read your books You

3:25

have a new one out. We're gonna get into today

3:27

called Quit. So

3:29

I'm really excited. Before we get to your newest

3:31

book, which is great, and it

3:33

just come out I think it's probably

3:35

important to talk a little bit about

3:37

to the extent you can them. Your

3:39

first two books because it gives somewhat

3:41

of a framework and lead in to your most

3:44

recent

3:45

book. And I feel like it's hard to skip over

3:47

your writings and

3:49

and hop directly to what we're gonna talk about

3:51

today. So

3:51

Give us

3:53

a quick summary from the author herself

3:56

of your first two.

3:58

Really what the first two are exploring?

3:59

in

4:01

broadly is the problem

4:03

that we have as decision makers

4:05

in terms of

4:07

uncertainty.

4:08

though So Pretty

4:10

much every decision you make

4:13

is

4:13

made under uncertainty, and the uncertainty comes

4:16

in two forms. One

4:19

is just plain luck.

4:21

Right?

4:21

Like, you you could be totally omniscient,

4:24

and

4:24

you could

4:25

understand what the future might hold

4:28

perfectly from a probabilistic

4:30

standpoint. So you could know for sure, like, I'm

4:32

gonna win eighty percent at the time and twenty

4:34

percent at the time. But once you've made

4:36

the decision, you actually don't have control

4:39

over when you're going to observe

4:41

that eighty percent versus the

4:43

twenty percent So that means

4:45

that sort of definitionally speaking,

4:47

twenty percent of the time you're getting to get a bad outcome.

4:49

And you just don't have any control over that

4:51

even if you have perfect knowledge. But

4:54

then the fact is that for

4:56

most of the decisions we make, we don't

4:58

have perfect knowledge. So we try to

5:00

approach that But

5:01

for most of the things that we decide about, we

5:03

know very little in comparison to all there

5:05

is to be known. And we're trying to do some

5:07

forecasting, making educated guesses,

5:10

about what we think that the future might

5:12

hold given any option that

5:14

we're considering. But, I mean, we've all had

5:16

that feeling

5:17

after the fact of,

5:18

I wish I had known then what I

5:20

know now. And that's that feeling

5:23

of that sort of exertion of

5:26

hidden

5:26

information on the outcomes

5:28

that you get. So I was

5:30

really in both of those books, I was exploring

5:32

the topic, thinking about, I was

5:34

exploring that topic generally and how

5:36

it really

5:37

kind of can wreak havoc on

5:40

our ability to close feedback

5:42

loops. you know,

5:43

obviously, the way that we learn is from

5:46

experience partly. So

5:48

you make a decision, you get an outcome,

5:50

you say, what did I learn from that? And

5:52

then hopefully, that makes you make better decisions

5:54

going forward. But the influence

5:56

of luck and hit information make that

5:58

actually quite hard to do. to

6:00

figure out, like, what is the relationship between

6:02

outcomes and decisions? Because in the

6:04

short run, that relationship is

6:06

pretty loose. And what I

6:08

was trying to sort of explore there

6:11

was where do we go wrong

6:12

in figuring out

6:15

sort of what this feedback means? and

6:17

how could we maybe get a little bit better? So

6:19

that was what thinking embeds was about. And

6:21

then how to decide what's really just

6:23

a practical book to go along

6:25

with thinking embeds which it's to

6:27

say the thing you have control over

6:29

is the hidden information part. So I'm gonna

6:31

give you some tools, some real practical tools

6:33

that you can implement in your daily life

6:35

to try to improve quality of the

6:37

decisions that you make by improving

6:39

the quality of the information that's

6:41

going into the decision and by

6:43

learning how to actually structure the

6:45

way that you think about an option. Right? So

6:47

you have an option, you have to think about what are the

6:49

different possible outcomes, what are the payoffs, what

6:51

are the probabilities of those occurring all

6:53

informed obviously by your

6:55

mental models or the mathematical

6:57

models that you have or the information or the

6:59

facts on the ground that you believe that you know that

7:01

are relevant to what

7:03

you're deciding about. So that

7:06

was what that book was about. In how

7:08

to decide however, there

7:10

was a very short little section,

7:13

which was about a page and a half long,

7:15

which was actually about quitting. And

7:18

I was making the point that one of the things

7:20

that I wanted to explore in that is that when you

7:22

sort of look at some of the methods that

7:24

you might employee to

7:26

improve decision making, to improve our ability

7:28

to close these feedback loops. It

7:30

seems like you're gonna be taking a lot

7:32

of time. with your decisions which

7:35

is daunting because we make lots and lots of

7:37

decisions and, like, where are we gonna find the time

7:39

for that? And so chapter seven of

7:41

how to decide actually explores

7:43

how you might speed your decision making up.

7:45

Because for a lot of things that we decide, we should actually

7:47

be going faster. We should use a better process.

7:50

we should go faster because the amount of certainty

7:53

that we actually need in order to make a decision

7:55

is a lot less than we tend to

7:57

accumulate. And said one of the

7:59

things, and it's about a page and a half in there. One of

8:01

the things that allows you to go faster is that you have the

8:03

option to quit. Because when

8:05

you make a decision

8:07

under uncertainty, under

8:09

the influence of luck and hidden information, after

8:12

you've started something or after you've made the decision,

8:14

there's gonna be new information covered.

8:16

And having the ability

8:18

to change your mind makes it so that you

8:20

can be less certain when you make the initial

8:23

choice. So I had that little section in

8:25

how to decide that then blooms into you

8:27

know, I didn't know it at the time when I was writing it,

8:29

but it ended up blooming into the

8:30

current book that I wrote. I

8:32

was thinking about this this morning out

8:34

in the ocean, and I

8:36

think there's probably no other

8:38

phrase if you were

8:40

to say to me or I have a five year old

8:42

now. So if the teacher or

8:44

one of the coaches or something came

8:46

up to me and they said, you know

8:48

what, your

8:49

son's a quitter. I can't think of anything that

8:51

would, like, crush my soul or

8:53

be, like, you know, just, like,

8:55

viscerally,

8:55

emotionally, just hit

8:58

or particularly anyone who's involved in

9:00

sports. Right? Like, I feel like that phrase

9:02

is so ingrained. That's

9:04

like the number one

9:05

you can

9:06

be a terrible athlete, whatever, but like

9:08

a quitter. And

9:09

so this phrase, there's

9:11

so much

9:12

baggage maybe being the wrong word,

9:15

but a lot wrapped up in

9:16

this concept.

9:17

So

9:19

talk to us a little bit about why,

9:21

you know, quitting in general

9:23

may have a bad rap. I

9:25

think I've maybe heard you say at some point,

9:27

but It definitely has

9:28

a bad rap. Well, okay.

9:30

So you've kind of gotten to

9:32

kinda one of the core reasons why I wrote the book is

9:34

that I'm on a mission to rehabilitate the word

9:36

for people to realize that quitting is

9:38

totally fine. So

9:41

here's the issue. Like, I can tell you all sorts

9:43

of situations where your son might

9:45

quit in the middle of a game,

9:47

where if they continued, you would think it

9:49

was a stupid choice. like,

9:51

if your son got a concussion, I

9:54

assume you would very much like him to

9:56

quit. And it's really easy to

9:58

come up with all sorts situations

9:59

we're quitting is the better choice. Here's

10:02

the problem, I think, like, really broadly

10:04

before we get into the details that

10:06

we have when we're thinking about this great

10:08

quit decision. is that we think of them as

10:10

somehow as opposing forces, as

10:12

if it's a binary. And

10:15

when we think about this dichotomy,

10:18

them as opposing forces, grit

10:20

has won the day for sure. Like, grit

10:22

is a virtue. When you

10:23

say that someone's gritty, you're saying something

10:26

very very good about them. It's

10:28

synonymous with character. When

10:30

our child, you know,

10:31

starts

10:32

something like playing the trombone,

10:34

and then they come and complain to you,

10:36

you try to push them to continue to do it in

10:38

order to build their character, to

10:40

teach them to not be a quitter. And

10:43

quitting is a vice.

10:46

Right? It's synonymous with the lack of

10:48

character. In fact, it's synonymous

10:50

with cowardice. So

10:52

we have I mean, if you sort of go through,

10:55

like, thesaurus and you look at what are the

10:57

synonyms for grid and what are the synonyms for

10:59

quitting or or

11:01

you'll see that it's very heavily

11:03

imbalanced where grit is positive

11:05

and grit is negative. So we're seeing this

11:07

reflected back at us in the

11:09

English language. so much so

11:11

that when people

11:14

who clearly like,

11:16

nobody could question their grit, are

11:19

faced with a choice of like retirement,

11:21

so let's take Lindsay Von and Serena

11:23

Williams. What you'll see from

11:25

them is that they'll announce that they're leaving

11:27

the sport and then they'll follow

11:29

it with saying, I'm not quitting.

11:32

And they'll usually say something like, I'm

11:34

starting a new chapter or

11:36

I'm excited for what the future is going

11:38

to bring.

11:38

Serena says she is evolving.

11:41

She's

11:41

evolving. There you go. I'm evolving.

11:44

it seems so weird. Right? Lindsey

11:46

Vaughan is clearly

11:48

really gritty, but when she retired, she

11:50

announced that she wasn't quitting. She

11:52

said, I'm stopping skiing. This is in her

11:54

announcement. I am

11:55

stopping skiing. My body is broken.

11:58

Broken and it's

11:58

screaming at me to

11:59

stop. And then she followed it with, but

12:02

I'm not quitting. She

12:03

said, but

12:04

but you are quitting and why are you so afraid to

12:06

say this? And then same thing with Serena

12:08

Williams. Like, she's not quitting. She's evolving.

12:10

No. She's quitting. She's not gonna play professional

12:12

tennis anymore. She's quitting. That's

12:13

fine. she's,

12:15

you know, the

12:16

goat.

12:17

So I think she's allowed to do that, same

12:19

thing with Lindsay Von. But we have

12:21

such a negative bias toward the word

12:23

that when we do actually

12:25

quit and we want to talk about it to other

12:28

people, we use all these euphemisms,

12:30

like we evolve, like starting

12:32

a new chapter. The big

12:34

one in business is pivot.

12:38

But

12:38

pivoting is quitting.

12:40

So

12:40

why do we feel the need to

12:42

sort of, like, give the word, the

12:45

Voldemort treatment? Like, that's that

12:47

would not be said. And instead,

12:49

like, you know, serve it soft with

12:51

these euphemisms so that we can avoid

12:53

actually saying the word. So that's that's

12:55

really what I'm trying to do is just say, like, we

12:57

have to start this. And we have to

12:59

recognize that

13:02

there's

13:02

so many different cognitive biases

13:04

that I'm sure people are familiar with from

13:06

reading, you know, thinking fast and slow and why not

13:08

from Daniel Commons work and Richard Taylor's work,

13:10

that all you can pull the

13:12

same thread through them, which is

13:14

we have trouble as human beings stopping.

13:16

It's

13:17

very hard for us to be willing to do

13:20

that. And we have this big bias, which I

13:22

think

13:22

is probably surprising to people.

13:24

We have a bias toward grit.

13:26

in

13:26

general. So, you know,

13:28

people love Angela Duckworth's book

13:30

as do I, by the way. And I

13:32

think that if you read my book, I hope you have already

13:35

read hers. And if you haven't

13:37

read her book grit, you should go read it

13:39

because she

13:39

the science that she's talking

13:41

about is really important. But

13:43

given the popularity of those kinds of

13:44

books, I think that if you ask most people, like,

13:47

what's the what's the, you know,

13:49

sort of worse

13:50

part of the human condition. You

13:52

know, do you think do you think it is that

13:54

we just like quit things too much or that we

13:56

stick to things too long? And I think

13:58

most people will just intuitively

13:59

say, oh, we quit too much.

14:01

That's

14:01

the popularity of those books. But when you

14:04

actually look at the science, It's

14:06

actually usually the case that we stick to things

14:08

too long. And I think that's what we need to

14:10

recognize. And if that's the case, then

14:12

quitting is a good thing. So why are why are we

14:14

so mad at the word? you

14:16

talk a lot about opportunity cost

14:19

as

14:19

a way to think about quitting. And I think

14:21

that's for those who who

14:23

are listening to this topic, maybe walk

14:25

us through about how should we think about in

14:27

our lives, you know, some examples

14:30

of how we can implement this in a

14:32

thoughtful way that that is beneficial

14:34

rather than kinda getting stuck in

14:36

all sorts of situations. because my

14:38

goodness. I mean, there's so many examples, whether

14:40

it's personal relationships, whether it's

14:42

jobs, whether it's, you

14:45

know, moving on and on. How

14:47

can we start to think about this where it's

14:49

additive? So

14:49

let's try to take this a little bit of the time.

14:52

We can see how how the conversation goes. So

14:54

let me just start with opportunity cost.

14:56

So the issue with opportunity cost

14:58

is anytime you're you're pursuing a

15:00

particular path. That means

15:02

that that's time and attention that you can't

15:05

spend pursuing something else. So,

15:07

like, in a this simple sense, let's imagine

15:09

you're an investor and you're fully committed. And

15:11

then

15:11

you see something else another

15:14

trade that you'd like to put on. If

15:15

you're fully committed, that's stopping you from

15:18

being able to make that trade. So you would have

15:20

to quit some part

15:22

of your portfolio in order to free the capital

15:24

up to be

15:25

able to do the other thing. And

15:28

what you're saying is

15:30

the path that I'm on has a certain expected

15:32

value. I'm either winning to it or

15:34

I'm losing to it by a certain amount.

15:37

And there's also an expected value

15:39

associated with the paths that I am not taking,

15:42

and that is the opportunity cost.

15:43

Right? So if you're

15:45

on a path and there's some other path

15:47

that you could be on, where you would be

15:50

generating more profit. And

15:52

I'm not just talking about money, it could be more happiness,

15:54

for example. So let's think about

15:56

it as broadly as you more

15:59

ground towards your

15:59

goals.

16:01

Then the fact that you're doing

16:03

the thing you're doing has

16:05

costs associated with it. Those are

16:07

opportunity cons meaning that you can't go and do the thing that

16:09

would be better. And this

16:11

becomes a really important kind of starting

16:13

point for how think about quitting is that I

16:15

think that part of the problem for us

16:17

with quitting is we think if we quit, we stop

16:19

our progress.

16:21

at

16:21

least it slows us down.

16:23

But

16:23

actually quitting done well because

16:25

quitting is a skill. We ought to get good at it.

16:27

Qu quitting done well speeds us

16:29

up. it gets us to our goals more quickly

16:32

because if we're on a path

16:34

where say we're losing ground,

16:37

or where we're not gaining very much ground

16:39

in comparison to other things that we could be

16:41

doing. If we quit, then

16:43

we can do those other things that are gonna

16:45

cause us to gain more ground. So

16:48

when you quit at the right time, you're

16:50

actually gonna get to where you wanna go

16:52

faster. So I think

16:54

that's kind of a piece and that's getting

16:56

that concept of opportunity costs wrapped

16:58

into the way that we think about

17:00

quitting. So that would be kind of the FERC's place I

17:02

would go. There's a lot of other

17:03

places to go, which we can certainly talk about.

17:05

Well,

17:06

we'll wander down some paths. And so

17:08

I think here's the hard

17:10

part for a lot of people, you

17:12

know, quitting for many

17:15

it is, like, a finality. Right? Like,

17:17

it the the hard part for many is, like, it closes

17:19

the door on whatever it is. And it

17:21

could be a dream. It could be something trivial.

17:24

But it means it's And so in many

17:26

cases, I think people struggle with the

17:28

quitting concept because

17:32

Everyone's, in my mind, like, always

17:34

hopeful and cheering for something to work out,

17:36

whatever it may be, regardless

17:38

of the opportunity cost. Like, it it

17:40

implies a sense of fidelity and and and

17:42

maybe failure or maybe not so much

17:44

failure. But in the hard part and you talk about this

17:46

in the book, is there so

17:48

many examples of hindsight

17:51

bias where you look at it. Look, I live in

17:54

LA. So

17:55

many actors, producers,

17:58

involved

17:58

in this world that are just

17:59

hustling and struggling.

18:02

And, I mean, it's like

18:04

investment banking, but

18:06

with less pay. It's so competitive.

18:10

And you look out and you say,

18:12

okay. Well, at what

18:14

point is this like you know,

18:16

that I move on. You know, I've had a little bit

18:18

of success, but at what point? And then

18:20

you look at the people like Anthony Hopkins,

18:22

John Hamm, others who had

18:24

success they win win win and, like,

18:26

they're, like, fifty or something.

18:27

Okay. So John Ham and Anthony

18:30

Hopkins. Great examples. Right? So we wanna be

18:32

really survivorship bias, which

18:34

student retrospect is not true necessarily

18:36

prospectively. So we'll point

18:38

to people who, oh, they work to

18:40

work to work to work to work words and was until they were in their days

18:42

until they finally found success

18:44

and never give up never

18:46

give up. I actually saw someone post on Twitter, you

18:48

know, we know that the venture world is

18:50

little

18:51

slow at the moment. And there were

18:53

somebody who said, who's very successful,

18:55

who said, it took me fourteen

18:58

months to raise my So I say never

19:00

gave up. And the problem with that

19:01

is that what's true and retrospect is not

19:03

necessarily truth prospectively. Right?

19:06

So there's always

19:08

gonna be outliers. But for

19:10

every John

19:12

Hamm, there's

19:14

a hundred thousand people who,

19:16

you know, had big dreams and goals for

19:18

their selves and ended up being a waiter

19:20

with acting on the side.

19:23

for their whole lives.

19:25

So we have to remember

19:27

that, right, is that we have to think

19:29

about what the causal relationship is and not

19:31

fall prey to survivorship bias. So

19:33

the question is, like, how do you actually

19:36

untangle those problems, which are really

19:38

hard? Particularly when

19:40

Generally, when we're pursuing something,

19:43

there is some progress at least that we

19:45

feel we're making along the way. So if you take

19:47

something like acting, no doubt

19:49

John Ham got some roles. Were

19:53

they

19:53

the big breakout madman

19:55

role? No. But he was getting some roles. You

19:57

know, I'm sure he started off maybe extras, and

19:59

then he was gonna supporting roles or a

20:01

few lines here and there. And

20:03

it's really easy when you're in it, when you're in

20:05

the middle of that stuff to say my break is

20:08

coming tomorrow. I

20:09

just gotta keep going because I just got hired for

20:11

something and now I've seen this other producer and

20:13

I've created this other relationship. I know I

20:15

know that I'm gonna be able to break

20:18

through. but that can keep going on at infinitum.

20:20

And the problem

20:21

that we have is

20:24

a couplefold, one that you touched

20:27

on. which is that we set a goal,

20:29

which

20:29

is like a finish line and a race.

20:31

And so imagine if

20:32

you're running a marathon and and the finish

20:35

line is twenty six point two

20:37

miles. And you've made some progress.

20:39

You'd want eight miles or something, but then you break

20:41

your leg. Do you

20:42

continue running? And the problem

20:45

that we have is that we have intuition that we

20:47

won't. But a lot of people actually do

20:49

this. There's a woman I talk about in my book

20:51

called Siobhanokey. If you did this

20:53

and then three other people in that same

20:55

marathon. It was a two thousand nineteen

20:57

London marathon, and then just search marathons, and

20:59

you'll see that people are always doing this.

21:01

Because of what you said about failure,

21:03

is that we don't measure ourselves by, like,

21:05

I had a few acting rolls and that's okay.

21:08

We measure ourselves against it. We actually get

21:10

to twenty six point two miles. So It's

21:12

not that we gained eight miles. It's it's that

21:14

we're short the finish line. We're in

21:16

the losses, in this particular case,

21:18

by about eighteen miles. And

21:20

if we keep going, maybe we can actually achieve

21:22

the goal. But if

21:24

we quit, that's the moment

21:26

that we have to take a loss on

21:29

paper. and turn it into a realized

21:31

loss. Right? That's the moment that we

21:33

can never actually make it. If

21:35

we quit acting, we're never gonna

21:37

be John Hamm. And that's a

21:40

horrible moment for a human being.

21:42

Because as long as you have the gamble

21:44

on, in other words, you're continuing,

21:46

maybe you

21:46

can actually make it work.

21:48

And

21:48

when you quit, that's when

21:50

you're taking the sure loss. So

21:53

let's just start there. So one

21:55

of the things in in terms of untangling

21:57

these problems is to recognize that when you're in it,

21:59

when you're sort of facing those decisions

22:01

down, particularly as you start to

22:04

accumulate this

22:05

time and effort. And, you know, it becomes part

22:07

of your identity, what you're doing, and,

22:09

you know, you're you're sort of moving a little bit

22:11

toward your goals. It's gonna be really hard to

22:14

stop. So what we have to do with that is

22:16

not leave the decision to when we're in

22:18

it. We have to do it in

22:20

advance. So let's think about if

22:22

you started. Okay? because we can we can do it later,

22:24

but let's talk about let's say I set out

22:26

for LA, and I'm like, I'm

22:28

gonna be the next John Ham.

22:31

Basically, what you can do is say, what is my

22:33

tolerance beforehand? How

22:35

many years am I trying to give this a

22:37

go? am I willing to try to

22:39

give this a go? And figure that

22:41

out in advance, and

22:42

then decide what success looks

22:44

like for you. So, you

22:46

know,

22:46

let's say that you decide that you're young enough that

22:49

you're willing to give it five years, and

22:51

then say, what what do I need

22:53

to observe? like, how

22:55

many roles would I have to have gotten?

22:57

Would I have to be net positive in terms

22:59

of income and not waiting

23:01

tables anymore? Like, whatever it is for

23:03

you, you figure it out. and then

23:05

write those things down. We'll call them kill

23:07

criteria. And if you

23:09

haven't hit those, then you kill the project,

23:11

you go and do something else.

23:13

So Now, what if you're already five years

23:15

in though?

23:16

And you didn't do this in advance?

23:18

And

23:18

you're like, but I got these rolls and I, you

23:21

know, I got a line in this

23:23

film and I got to stand on the

23:25

set next to Brad Pitt or something and so

23:27

I feel like I've really made it and I know

23:29

it's just around the corner. know, the

23:31

producer said they were gonna help me out or

23:33

something like that. Well, sit down at that

23:35

moment and said, how long am I willing to

23:37

continue to do this? And what would I need to

23:39

see? So when people say things like I know

23:41

I can turn it around, it's

23:43

really good to say, what does that

23:45

look like? What does turning it around

23:47

mean here? In what

23:49

period of time? Write that stuff

23:51

down and commit that if you don't meet

23:53

those criteria, that

23:54

you're going to walk away. And

23:56

this is kind of the

23:58

one of the best

23:59

ways to deal with it, and you should be putting that

24:02

on kind of a regular

24:03

cadence. So here's a really simple

24:06

example of a kill criteria. A stop

24:08

loss is a kill criteria. It's

24:10

saying I know that if I own a stock

24:12

and I losing on it, and now I'm in the lost sis. It's

24:14

gonna be really hard for me to sell it because I'm gonna

24:16

say, ridiculous things like, well, now it's really

24:18

cheap. Even

24:19

though,

24:21

I know that

24:21

if I were approach that stock today, that

24:24

I would not think it was a buy. So it's a

24:26

very classic sunk cost fallacy,

24:28

you know, I wanna get my money

24:30

back. so you're using all these rationalizations.

24:32

And, of course, it doesn't make sense. Why would you

24:34

need to get your money back in that particular stock? Like,

24:36

just go put it in something else and get your ten

24:38

dollars back that way. But this

24:40

is what happens to us and we know this.

24:42

Right? So what do we do? In advance, when we

24:44

put in this the buy order,

24:47

we also put in a stop loss order because

24:49

what we recognize is that after we've lost a certain

24:51

amount of money, so we've accumulated

24:53

those sunk costs. So it'd be really hard for us

24:55

to walk away at that moment. So let's make the decision

24:58

in advance. Well, you can do that

25:00

for your acting career also.

25:02

There's

25:02

a lot that you mentioned that I

25:04

think is is really on point. You have a

25:06

few phrases in the book that I'm definitely

25:09

storing away. We'll definitely cite you

25:11

with him, but but kill criteria is a great

25:13

one, and and this illusion of progress is

25:16

another. As you mentioned, stop

25:18

losses I have some friends that have a very large

25:21

research organization, and

25:23

they've been publishing investment

25:25

research for twenty years hundreds of millions

25:27

of dollars in revenue just to vary

25:29

a large successful business.

25:32

And a number of years ago, they

25:35

ran a experiment and

25:37

looked at all of the recommendations

25:39

they made over the years. And then

25:41

they said, okay, what if because there's some

25:43

trend following philosophy within the

25:45

organization in some areas. But they said, what

25:47

if we had added stop

25:49

losses to these recommendations? would they have

25:51

worked out better? And the answer is universally yes.

25:54

Right? And listeners, this is not saying this is for

25:56

everyone or the approach and and and

25:58

Anna McQuanton.

26:00

Everyone listening kind of knows that. But

26:02

the phrase that you had, it's one of

26:04

my favorite phrases in the book, and there's a lot,

26:06

is the phrase of being in

26:09

it. trying to make a decision when you're in it. We did a poll,

26:12

which we'd love to do on Twitter. And I and

26:14

there's two versions, but they're kind of the same

26:16

thing. One was you have a written

26:18

investing plan and the vast majority

26:20

of people, you know, eighty, ninety percent, the

26:22

answer is no. And

26:24

then the second, which is a derivative of the first,

26:27

but same situation is said,

26:29

when you make an investment, do

26:32

you as when you buy something

26:34

mutual fund, ETF, stock,

26:37

whatever, Bitcoin, do you

26:39

establish the sell criteria ahead of time

26:41

when you place the trade. And it's like ninety percent said no.

26:43

No. They don't. Yeah. I've

26:45

done some coaching

26:46

with PM. And

26:48

you know,

26:49

I I here here's where

26:51

I think this problem is, is these are

26:53

PMs. They're expert investors. Obviously, they

26:55

you know, if they have a team, they have

26:58

clients and analysts who work with them and

27:00

they have

27:01

some sort of investment thesis.

27:03

And the thesis for what they're gonna

27:06

trade is making some sort of prediction

27:08

about what the fundamentals are gonna look

27:10

like and then what the implications of that

27:12

are. Right? So they are writing

27:15

down the thesis. But here's the problem that we have,

27:17

whether it's investing or anything else, is that

27:19

we have the intuition. That

27:21

once we've made

27:21

that decision to start something,

27:24

that when the world goes against us.

27:26

Right? So we do this information discovery. We

27:28

find out, oops, I broke my leg in the

27:30

middle of the marathon. that when the

27:32

world goes against us, we will react to that

27:34

and we will actually exercise the option to quit.

27:36

So in the case of these PMs,

27:39

They've got their thesis. The thesis implies

27:41

certain things about what the fundamentals are gonna

27:43

look like, for example, in the future.

27:45

And then when the fundamentals don't

27:47

look like that, they assume

27:50

they they make the assumption, the intuition that they're

27:52

gonna react to that in some kind of rational

27:54

way. But what we know is that

27:55

they don't. It's

27:56

just not true. And

27:58

so you want to take that

27:59

extra step. I know it feels like a distinction

28:02

without a difference, but it really

28:04

isn't. it

28:04

really is different. To say, here's my thesis.

28:06

This is this is why. This is my

28:08

rationale for why I'm putting this trade

28:11

on. And I'm gonna

28:13

write down specifically what my

28:15

stop out criteria are. And also by

28:17

the way, what my buyout criteria

28:19

are because we do have an attendant problem,

28:21

which is we actually tend to quit

28:23

too soon when we're in the games.

28:26

we're making money on something, we'll stop out

28:28

often too early. And when we're

28:30

losing money on something, we'll stop

28:31

out too late.

28:33

So it actually helps with

28:36

both sides of the equation. Remember, I'm not

28:38

disagreeing that sometimes we're not gritty

28:40

enough. Right? I just don't think that that in

28:42

general is our biggest problem. But

28:44

in this case, it's it's true. And

28:46

Alexey must have some really interest work with some

28:48

collaborators where he was looking at expert investors.

28:50

These were institutional investors in

28:52

conditions where they were fully committed.

28:55

and they needed to free up capital to trade

28:57

some new thesis. So he

28:59

looked at the buy side decisions

29:01

and what he found was that they were

29:04

really generating a lot of alpha. I think it was like a hundred and twenty bps

29:06

on average, on their decisions to

29:08

enter into a

29:10

position.

29:10

But what was interesting was

29:11

when he looked at their exit decisions,

29:14

remember they're freeing up capital to go do something else.

29:16

When he looked at their exit decisions, they were

29:18

actually losing about seventy bps.

29:21

to those decisions. Now what was the

29:23

benchmark, of course, because we wanna know what that is? It's

29:25

what if I threw dot darts at the portfolio

29:27

to figure out what to sell? Alright? So that

29:30

that's the appropriate benchmark in this

29:32

particular case, and they're losing seventy bps to

29:34

that. Now, these are really smart people who making

29:36

a lot of money when they're deciding

29:38

to buy. So why is that happening?

29:40

Well, the first thing that he found was that

29:42

they were using a heuristic where they were

29:44

only looking at the tails of their portfolio. In other

29:46

words, the extreme winners or the

29:48

extreme losers. in order to decide what to buy or

29:50

sell. But, you know, that's a proxy.

29:52

Right? Like, ideally, you would look at your whole

29:54

portfolio to try to figure out what had the highest

29:56

expected value. keep

29:58

that, and then what had the lowest expected

29:59

value sell that so that you could go put your money

30:02

into this new great thing that you wanted to

30:04

trade. But they don't do that. They look at

30:06

the tails, and then the problem is have a

30:08

huge feedback problem. Right?

30:09

Because nobody's tracking

30:12

it. On

30:13

the buy side, you're tracking what you

30:15

own. So

30:16

you're getting this really nice feedback

30:18

loop that's telling you is the world unfolding

30:20

the way that I predicted, the in the

30:22

way that made me want to buy this in

30:24

the first place. But when your portfolio, so

30:27

nobody's checking it against any kind of

30:29

benchmark. And this is why

30:31

we need to have this x criteria.

30:33

Right? Like, you need to what is that

30:35

criteria that you're gonna sell or you're gonna

30:37

draw down or you're gonna buy up

30:40

or whatever? as you enter into

30:42

the decision because then

30:44

this problem wouldn't be a problem anymore

30:46

because either it would satisfy those things

30:48

or not. you wouldn't just be looking

30:50

at a certain subset of your portfolio

30:52

to decide how to free that capital up.

30:54

Yeah.

30:54

I mean, looking at a lot of my friends and

30:57

discretionary investing world. And I'm talking about firms

30:59

that manage billions, tens of billions,

31:01

hundred billions. So often, you

31:04

look at the fundamental subjective process.

31:06

Can so many of these little phrases

31:08

kind of survivor bias of outcomes

31:10

work their way in where you talk to

31:13

someone and the challenge particularly is,

31:15

you know, in the investing world, the

31:17

market environment could last

31:19

a decade for from

31:22

financial crisis to not too long

31:24

ago, it was one very particular

31:26

environment, growth stocks, growthy type

31:28

investments, S and P, and

31:30

every little dip resulted in new

31:32

highs. And so listening to

31:34

investors, like, this is a a random example,

31:36

but, like, you have a portfolio management

31:38

team, all the analysts or PMs get together, they

31:40

pitch their stocks, and they pick, like and

31:43

then, you know, you have the

31:45

example where the one PM He's

31:47

like, yeah. But, like, do you guys remember when so

31:49

on so stock went down by fifty percent

31:51

and we doubled down, and then it's like our

31:53

best performer. So, like, you have a sample size

31:56

of, like, too or and so

31:58

what what's so interesting about what you're talking

32:00

about in every institution you guys need to

32:02

hire, Annie, is I don't know if you do

32:04

this, but come consult for some of these

32:06

book, big shops and Yes. I have a job that

32:08

where I do that. She's a million dollars a day

32:10

listeners. If you mentioned the message show, you

32:12

get a ten percent discount. So

32:14

But what really hit home to me earlier that you

32:17

were talking about is, you know, no

32:19

one has a plan or written rules, first of all. So

32:21

start to think about that.

32:23

And Most of the the reason

32:25

that people think, you know, they need the rules

32:27

is is for the losers, and I think

32:29

that's useful. But you need it

32:31

for the winners also.

32:32

Right. And so I was getting ready to say as, like, you know,

32:35

some of our I'm a trend followers, and

32:37

and I have to do angel investing. And so so

32:39

much of investing is about these power

32:41

laws, these very large outcomes where you

32:43

make ten fifty, a hundred

32:44

x or whatever. And so but

32:46

so many

32:47

investors, we see

32:49

There's great phrase. I wanna attribute this to

32:51

Jerry Parker. So Jerry, sorry if this

32:53

wasn't you. What did he say? He said

32:56

investors are hopeful of losses and fearful

32:58

of gains. And so the

33:00

one bagger or the two bagger, it's amazing.

33:02

You doubled. You tripled your money

33:04

thinking about the vacation in France,

33:06

buying a new condo, whatever,

33:10

but that's often just on the

33:12

path to the five ten, fifty, a

33:14

hundred pagger. And so thinking about how to

33:16

deal with one stock that

33:18

becomes ninety percent of your

33:20

portfolio. Are you people

33:22

love the binary in out, but how to

33:24

think about what to do with that? Ahead of time,

33:26

before you're in it, before you're stuck in

33:28

the middle. I think

33:29

it's this is really important for people to

33:32

understand, is that, you

33:33

know, Richard Dyer talks a lot Nobel Laureate

33:35

talks a lot about mental accounting.

33:38

And mental accounting

33:39

is a cognitive phenomenon. Right?

33:41

It's not like your actual balance sheet

33:43

necessarily, although it can align with that. Right? So

33:45

if I buy a stock at fifty and it's

33:47

at forty, in my mental

33:50

accounting, I'm in the loss is ten dollars and

33:52

also in my actual Right?

33:54

And if I buy a stock at fifty and it's now trading at sixty

33:56

in my mental accounting, I'm in the gains,

33:58

and also on my ledger. But this is

34:00

also true, like, for example, if we go back to

34:03

the marathon, and thinking about it as a cognitive phenomenon.

34:05

If I've run sixteen miles of a marathon,

34:07

you could say, well, aren't you

34:09

in the game six fifteen miles.

34:11

But no, because it's a marathon, there's a finish

34:13

line, which is twenty-six point two miles. So I'm

34:15

actually in the losses there, ten point two

34:18

miles. So this is just the

34:20

cognitive phenomenon. And this idea of being in the games or being

34:22

in the losses distorts

34:24

our behavior. It as much

34:26

as how much do we want to

34:28

leave luck in

34:30

the equation. Right? In other words, do we want to

34:33

take on risk or do we

34:34

want to reduce risk risk on risk off?

34:37

Right?

34:38

So this is work

34:40

from back from Condiment

34:41

University. So people with Daniel Condiment,

34:44

people are very familiar with the idea of

34:46

loss aversion. which stops us

34:48

from starting things. Right? It's like, oh, I

34:50

don't wanna buy that stock because maybe I'll

34:52

lose and then I'll feel bad. Even if the

34:53

stock is positive

34:56

value. and it's

34:56

within your risk tolerance. You won't do it because it just has

34:58

a higher possible loss associated with

35:00

it, but then some other thing.

35:03

that actually has a lower expected value,

35:05

but, like, you're less likely to just have a

35:07

loss. And so you'll you'll choose the thing

35:09

that has a smaller loss associated with it

35:11

even if it's got a lower expected value

35:13

because of loss aversion. So that's a

35:15

starting problem. But what he points out is

35:17

that there's a companion problem

35:20

which is called sure

35:22

loss aversion. SURE, short loss aversion.

35:24

And that's once we've already started

35:26

something. We now cognitively

35:28

will end up either in the games or in

35:32

the lawsuits. And what happens is when we're in the

35:34

losses, we don't want to turn

35:35

that into a

35:38

shore loss.

35:40

k?

35:40

So as long as I own the position, as long as I have the

35:42

stock, right?

35:43

I could

35:44

get my money back. So

35:46

if

35:47

I keep risk on,

35:49

it's a way for me to maybe not

35:51

have to turn a loss on paper into

35:53

a short loss, into a realized

35:56

loss, and we're averse

35:58

to that to turning things into shore losses and that will stop us

35:59

from stopping. Now on the

36:02

flip

36:02

side is that when

36:04

we're in the gates, we

36:07

want to go risk off because we do want to

36:09

turn gain on paper into a shore gain

36:11

or a

36:12

realized gain.

36:14

Now, this is so much so that you just pointed out, we're

36:17

willing to pay to

36:20

have the opportunity on both sides of

36:22

the coin.

36:24

So the original work that he did, which I'm gonna put in

36:26

a slightly different example with Amos

36:29

Kiberski, goes like this. I

36:32

owe you a hundred dollars. So I'm gonna

36:34

give you a hundred dollars or you can

36:36

flip a coin. And if you win, I'll

36:39

give you two twenty and you

36:41

lose, I'll give you zero. Now, obviously, you know

36:43

that two twenty doing that has a higher expected value.

36:45

Right? In one case, you're gonna get a

36:47

hundred, but it's sure. it's

36:50

guaranteed. In the other case, you have an expected value

36:52

a long run win of

36:54

a hundred and ten dollars. So

36:58

you really ought to take that gamble

37:00

because you're winning to the decision,

37:02

but people won't. Why won't

37:05

they? Because If you take the gamble as opposed to

37:07

taking the sure when, that's the only way

37:09

that you can go to zero. So

37:11

they don't do it. So they're

37:13

paying ten dollars. for the

37:15

opportunity to not risk zero. But

37:18

now let's take the flip side of the

37:20

equation.

37:21

Now you owe me a hundred dollars. Okay?

37:24

Sad for you. So you owe me a hundred

37:26

dollars. And so now you're in the

37:28

losses a

37:30

hundred. And I say to you, okay, you owe me a hundred dollars, but you want

37:32

to flip a coin.

37:34

And if

37:35

you win zero,

37:37

you don't owe me anything. And if you lose, you're gonna

37:39

owe me two hundred and twenty

37:41

dollars. Okay. So again, that

37:44

expected value is worse. In one case, you're negative

37:46

a hundred. the other case, if you

37:48

take the gamble and you leave the risk

37:50

on, it's really a hundred and ten loss in the long

37:52

run. It's costing you ten dollars to take the

37:54

gamble, but indeed

37:56

people do. Why? Because it's the only way to

37:58

avoid the shore loss.

37:59

That's the way that you

38:00

can get to zero. It's the only

38:03

path open to you.

38:05

So

38:05

it's on both sides of the equation

38:07

that we make these irrational decisions, which

38:09

is why we need to be thinking

38:11

about these benchmarks or kill

38:13

criteria in advance. so that

38:15

we can absolutely be more rational

38:17

both in terms of when we quit, but also

38:19

in terms of when we persevere. Howard

38:21

Bauchner: Is there

38:22

any practical tips on this to start

38:24

to think about, hey, there's some things you can do

38:26

to get just better at removing,

38:28

you know, the shame or the

38:31

mental block of thinking

38:33

about quitting.

38:34

So, yeah, I mean, look,

38:37

ideally, you

38:38

need to start doing is thinking about things on a longer time horizon.

38:40

So there's a phrase that I

38:42

think everybody should be saying to them. I'm stealing it

38:44

from Ron Conway, who's the founder of SVA Joel.

38:47

and the phrase

38:48

is life too short.

38:49

So what you have to realize is you have a limited

38:51

time on the planet and you have

38:53

limited attention for

38:56

things. And it's a complete

38:58

tragedy to spend your

39:00

time on something that you are not getting

39:02

enjoyment out of that is not making

39:04

your life better as far as you can tell just because

39:06

there's a finish line and you're afraid of

39:08

finishing short of the finish line. Because

39:11

those precious moments how

39:14

much you know, by chapter two, you realize that the book isn't for

39:16

you and you read ten more chapters, that time

39:18

that it takes you to read those ten

39:20

chapters as time you could spend

39:23

reading a book that is actually gonna be

39:25

worth your while or I don't know watching a

39:27

TV show or hang out with your family or going

39:29

dirt biking, I don't really care, but it's gonna be

39:31

better than whatever you're doing. And so we have

39:33

to keep reminding ourselves that life's too short to ever spend your time on

39:35

something that isn't worthwhile. And just to be

39:37

clear, this is something that is

39:39

very much ingrained in

39:42

the book grit by Angela Duckworth. It's just people misinterpret her work

39:44

because what she says is you have to explore a

39:46

lot of stuff to find the thing that you're

39:50

passionate about. define the thing that you're is worthwhile, and then

39:52

stick to that even that if it's

39:54

hard. She's not saying perseverance on

39:56

its own is a virtue and that

39:58

you should stick to things no

39:59

matter what. There's a big

40:01

immersed interpretation going on, and that's kind of

40:03

what we're saying.

40:05

So in poker, you know, there was a saying among the top players which

40:07

is life is Poker is one long

40:10

game. And what was that? It's okay to fold

40:12

one hand. because you're gonna play

40:14

thousands and thousands of them.

40:15

It's okay to quit

40:16

a game because you're gonna play

40:18

play in thousands of thousands of

40:20

those. Right? So

40:21

it's one long game. And the thing is

40:23

to make decisions that are maximizing

40:26

your expected value over your

40:28

lifetime, and that's

40:29

gonna require a

40:30

tremendous amount of quitting. Now, here's

40:32

the thing that I want people to

40:33

know though, is that certainly

40:36

experience helps you

40:38

with this. you know, it's

40:40

like the stock market goes down,

40:42

but you've experienced this before. So you're

40:44

not panicking. And

40:46

you're like, I'm

40:47

just gonna you know, I wanna invest in all

40:49

parts of the cycle, and I've been

40:51

here

40:51

before, and I know it'll

40:54

be fine. Right?

40:54

So that's gonna help you. It's good. That type of experience is

40:56

gonna help you with these types of decisions.

40:58

But in the end, I think that

41:00

what we have to recognize is that

41:03

you know, that can help, but we're gonna be

41:05

really crappy at the

41:08

decisions. So there's kind of three strategies

41:10

that we can use to help us be

41:12

better in ordered to disentangle the emotions from the

41:14

decision. One we already talked about, which is think about

41:16

these things

41:18

in advance.

41:19

So when I

41:20

say things like, invested all cycles

41:23

of the market, that's actually that's

41:25

actually part of my sort of

41:27

kill criteria. Right? It's like my advanced planning. If the market goes down, I

41:29

don't much care. There's amount

41:31

of rebalancing

41:32

that I do. I

41:34

wanna make sure that my portfolio is balanced in particular way. I have

41:37

on a regular cadence that doesn't have anything to

41:39

do with whether the market is up or

41:41

down to evaluate what

41:44

sector I do and do not wanna be in, you know, how heavily I wanna

41:46

be in one thing versus another and that kind of

41:48

thing. But it's separate apart from market

41:50

movements, and that's because I

41:53

know I'm gonna be a bad decision maker in those moments. And

41:55

so I have made pre commitments to how I'm gonna behave

41:57

in those moments. Okay? So

42:00

even there, that's part of how

42:02

I'm taking the emotion out of it. And

42:04

then the second thing is you gotta get

42:06

yourself a quitting

42:08

coach because The other thing so you can be not in it thinking

42:10

about it in advance. That's one way

42:12

you can do it. But the thing is that

42:14

other people aren't in it with you.

42:18

So

42:18

we've all had that experience of watching somebody in a relationship where

42:20

you're just thinking like, man, this is so

42:22

obvious that you should be ending this

42:25

thing. You know, and they're not ending it because they keep

42:27

saying, no, we're gonna I think we can turn it around

42:29

and we're doing our seventeenth rounds

42:31

of couples counseling

42:32

and whatever and you're like, oh my gosh, it's never gonna

42:34

work. We can see it from the outside. Right?

42:36

When someone's miserable in the job, we can see it

42:38

from the outside. When they have a startup that

42:41

just isn't working, And you can tell it's

42:44

just grinding away. It's something for fear

42:46

of having failed. You can see

42:48

it from

42:50

the outside. But you can't see that from the inside. So get somebody

42:52

from the outside to really help

42:54

you. And this is where things like financial

42:56

advisers, for example, are so

42:58

incredibly helpful. because

43:00

it's not only that you can have, like, stop out criteria

43:04

to understand, like, when should I

43:06

be selling? what would be the

43:08

conditions under which I might buy up, so on so

43:10

forth. But you can make that commitment

43:12

with the help of somebody who's gonna coach

43:14

you and guide you in those moments where

43:16

you're panicking. And this is such an incredibly powerful

43:18

concept. And by the way, backed up

43:20

very well by science. I just wanna say

43:22

that, that Daniel

43:24

Donovan himself

43:26

has a quitting coach. This is where I got the idea from.

43:28

Dan O'Connor's coaching coach is Richard Thaler. I

43:30

mean, I think we all do pretty well to

43:32

like a couple Nobel laureates looking

43:34

for a quitting coach. But if Daniel Donovan needs

43:36

a quitting coach, don't you think you do?

43:39

I mean, come on. So

43:40

the science actually some of the science that really backs us up

43:42

is so fun. So it's a a very star who's

43:44

like a real giant in the field of what

43:46

we call escalation of commitment. This

43:50

when you get bad news or bad signals from the world sort

43:52

of doubling down on the path

43:54

that you're on as opposed to walking away.

43:57

he did this really simple thing, which is he

43:59

looked

43:59

at

44:01

bank loans

44:02

that were in

44:03

a state where they needed to be

44:06

written off.

44:07

And essentially, he

44:09

just compared what happens when

44:11

new management

44:14

comes in? you know, so you have some loan officer who's

44:16

responsible for the loan. Let's say they get replaced but

44:18

from somebody else or new management

44:20

comes in or

44:22

that kind of thing. And what he found was that when

44:24

the person who made the original decision

44:26

or approved the original

44:28

decision to give the loan was

44:30

still in place. They write sat books. But

44:33

when someone new came in, all of

44:35

a sudden you got this rationality about

44:38

what the state of those loans were, and now all of a sudden, they got

44:40

written off. Like, all the bad ones sort

44:42

of got written off all at once. And

44:45

you can see where that is. Right? Like, it's like, I gave

44:48

the loan. I'm endowed to it. It was my

44:50

decision. I don't wanna feel like I made a mistake or,

44:52

you know, you're sort of feeling the loss of

44:54

the money. And as long as you keep

44:56

it on the books, maybe they'll pay it back.

44:58

But obviously, if that's not the

45:00

case, you should write it off and you shouldn't keep it on your

45:02

balance sheet anymore. But it takes

45:04

new people people who are fresh to the decision to be able to

45:06

actually do that. Howard Bauchner: I mean, the quid and

45:08

coach

45:08

concept, I mean, it's

45:11

Everyone can relate to this. Right? Like, just

45:13

think about your friend, your so and

45:15

so that there's the decision that's

45:17

just so obvious and you can see that but but, like, I can

45:19

see it apply in my life too where maybe it's

45:22

not, you know, the most life

45:24

changing outcomes. But a

45:26

good example, we always

45:27

give to investors about their

45:29

portfolios.

45:30

We say, you know, the average

45:32

financial advisor that's been in business twenty years

45:35

owns across his book of business, something like two hundred

45:37

mutual funds. Because they've just bought them, they've

45:40

collected them, they, you know, they could

45:42

then get the attachment to them, the

45:44

old, like, with Baylor

45:46

mug, you know, again, they just sit there.

45:48

But that feels a little abstract. And

45:50

so I always tell people I

45:51

say, listen. pause the podcast, go out, walk out to your

45:54

garage. Take a look around

45:56

what's in your garage, and I guarantee you

45:58

there's zero zero

45:59

of you

46:01

that if tomorrow

46:02

your garage was empty, you would go buy

46:05

all the same stuff in the garage. Right?

46:07

Like that old aquarium sitting there and

46:09

everybody. Like, oh, maybe I'll

46:10

use again

46:11

someday. roller skates, like, on

46:14

and on. And I I just went through this

46:16

personally because we renovated our house,

46:18

which is kind of a bummer because

46:20

when you move, you have to take

46:22

everything and move it to a new place, so it's it's

46:24

easy to cleanse. But when you're renovating

46:26

You

46:26

stick it all in your garage.

46:29

Right. And so through

46:30

this very

46:32

painful and retrospective process

46:34

where it's like every item, do you

46:36

keep or give away? And I wish, and I still

46:38

may do this, by the way. So but wish

46:40

I either had a friend come over or I wish

46:42

we just said, let's getting rid of all of it. Like,

46:44

we we this is it. Sorry.

46:46

Clean slate. This is

46:48

all gone. to save ourselves the middle clutter of having decide about all these

46:50

things. But it's almost like you wish you a I had

46:52

hired a friend of mine and be like, alright. We need an

46:54

objective third

46:56

party. to

46:57

be like, yo, you're never

46:59

gonna use these golf

47:00

clubs from you know, and so

47:02

where I'm going with this is I'm

47:04

ready for the Annie Duke app or,

47:06

like, it's, like, that when AI, get the Anaduke AI in a

47:08

couple years, put all my Google glasses, and

47:11

be, like, alright, Andy, can you walk me

47:13

through this, you know, this this

47:16

let give me some framework for how to think about this because

47:18

I feel like everyone on

47:19

the planet could use some form

47:22

of non

47:24

impartial third

47:25

party decision maker. I talked to

47:27

a woman, doctor Sarah Allspokes

47:29

to Martinez, for the book, and it

47:31

was a completely accidental thing. So people

47:33

will write into me. And I

47:35

I really try to respond to everybody.

47:37

I don't succeed, but I try.

47:40

And she happened to write into me

47:42

as I was starting to think about

47:44

this book. And I

47:44

think I might have been, like, a couple chapters in or something. She actually

47:46

ended up in chapter two, but and she wrote

47:48

me and she said, I'm thinking about quitting my job,

47:50

but I really need help. can

47:52

you give me any taps? And I'm like, oh, I happen to be writing a book about quitting. Do you wanna

47:55

get on a Zoom? So we got on a

47:57

Zoom. No. It's a really interesting story, and I think

47:59

it

47:59

shows you

47:59

the power just talking to

48:02

someone who has an outside view, right, who can sort

48:04

of maybe see things more clearly than you

48:06

can because they're not carrying

48:07

all the degree of

48:10

sunken as you point out endowment. Like, it's my

48:12

mug, don't take it away, or even

48:14

your identity being wrapped up in what you're

48:16

doing. So she was in

48:18

emergency room

48:19

the head physician. And she had

48:20

done that for many years and then she

48:23

got promoted and became an administrator

48:25

as well. So by the time I talked

48:27

to her, she was only doing about six shifts

48:29

a month in the and the rest of it was administrative work.

48:31

And when she had started, she

48:33

really loved emergent

48:36

medicine you know, she

48:37

loved the challenge of it, you know, the

48:39

problem solving so and so forth. And the other thing

48:41

that she liked about it was it was basically

48:44

shift work. So you did your shift. And yeah, the shift was really hard, but when you

48:46

went home, you were done. And that

48:48

wasn't the case with administrative work

48:50

anymore. And what she had started

48:52

to

48:52

find over

48:54

the last few years was that it was impinging on her family

48:56

life. So she had two children that

48:59

were who were quite young.

49:02

And she just found that, like, her job was not particularly compatible

49:04

with making sure that when she

49:05

came home, she was paying attention to her

49:07

children because she was having to attend to

49:10

administrative stuff

49:12

sort of twenty four seven. So she was miserable.

49:14

And as she described what had kind of

49:16

happened over the last few years, if you

49:18

had listened to it, ma'am, you would have been like,

49:21

wait, why

49:21

is she writing to me? Like, I mean,

49:23

it's very

49:24

clear that she should quit. She's really unhappy.

49:26

So it turned out she

49:28

had another job in often, which is why she

49:30

had written me. And so after she

49:32

told me how

49:33

unhappy she was, I said to

49:36

her so I just wanna understand, like, what's stopping you from quitting

49:38

here? And she said,

49:40

well,

49:40

what if I hate the new job? So, I

49:42

mean, this is like

49:43

a very deep answer. because

49:46

one of the insights from Conant University combined with

49:48

the work of Richard Zekhauser on

49:50

status quo bias is that

49:53

when we're already doing something. We don't

49:56

think about it in any

49:57

way as a new decision or one

49:59

that

49:59

we were starting each

50:02

day anew. Right? It's like, it's just the status quo. It's the

50:04

thing about the passive least resistance. What's

50:05

always been done? But remember, loss

50:08

aversion is a

50:10

starting problem.

50:10

problem When we think

50:11

about the losses that might be

50:14

associated with the decision, it prevents us

50:16

from starting. So now we can see this here,

50:18

right? Is some

50:20

associated with her new job? What if I hate it? So it's

50:22

preventing her from starting and

50:24

switching to that, but notice that

50:27

the fact that she was already miserable in her own job, she was

50:30

willing to tolerate because it doesn't feel like

50:32

she's starting something fresh. So there's a

50:34

lots of version in that case

50:36

is asymmetric. Right? Like, we feel it on the switch, but

50:38

we don't feel it on the thing that we're

50:40

doing. So I just

50:42

paused at sort of acting as

50:44

our quitting coach. Right? And I said, alright. Well, let

50:46

me ask you something. I hear you

50:48

like it's scary. So if it's

50:50

a year from now, so let's say that you stay in the job

50:52

that you're in now, it's now a year

50:54

from now. What do you think the

50:56

probability is that you're happy in the job? And

50:58

she immediately said zero percent. She'd

51:00

been miserable for a few years. It's

51:02

not like

51:02

was an unknown quantity. So she said zero percent. So

51:04

I said,

51:05

well, what's the probability you'll be happy in the

51:06

new job? And she said, well, I don't know.

51:09

I haven't done it yet. I

51:11

said, well, just give a guess. Like, what's your best guess? because I guess

51:13

fifty fifty, like, maybe half the time. I'm really happy in it.

51:15

And I just said to

51:18

Orsera, is

51:19

fifty percent greater than

51:21

zero. Her

51:22

face was just like, you know, in

51:24

that moment, she was like, oh my god, this is like

51:26

so obvious. Of course, I'm supposed to quit. But

51:29

she couldn't see it before because she was in it. Right? And all of

51:31

those things, like loss aversion and status

51:33

quo bias. And then

51:36

you know, the other thing is that she was

51:38

really worried that the other doctors would think she was a wolf

51:40

that her bosses

51:42

in terms of the

51:44

administration administrative

51:45

position would be really disappointed

51:47

in her. And then there

51:48

was all the time and effort in her training

51:51

that she had put into the job and

51:53

what if she abandoned that When

51:55

it simply put, it's just you're gonna be happy zero percent of the time

51:57

here and fifty percent of the time here. So go

51:59

do the

51:59

other thing. but

52:02

she needed someone from the outside to relieve her of all of that debris

52:04

and allow her to actually make

52:06

the switch, which she did end up doing.

52:09

wonder

52:09

what percent of the time that

52:12

someone comes to listeners and Anna, you can I

52:14

wanna hear your guess where

52:16

they have a situation like this.

52:19

and they're thinking about quitting

52:22

something.

52:22

It seems

52:24

like most

52:24

of the time they already know the answer

52:26

Right? Like, they know the answer is probably to

52:28

quit. They're just kind

52:30

of, you know, for one of

52:34

the many emotional attachments to it, you know, either

52:36

need someone to agree with him,

52:38

push him, or whatnot. But

52:40

I love to say

52:42

to people And this goes back to

52:44

the optionality of quitting

52:46

something, you know, when someone

52:48

comes up and goes like, mav, you know,

52:50

I got fired from my job. Mav, something bad

52:52

happen, and and Joker Wilnich has a good example of this. But

52:55

I'd say first of all, I'm sorry, you know, you went

52:57

through this. But And second

52:59

of all, congratulations Congratulations. Isaac, congratulations. And you they

53:01

they're usually taking it back. Like, hey. I just got

53:04

divorced. But sorry about this. I had this lunch today,

53:06

and I

53:08

said, Sorry to hear that. But congratulations. Like, this is, you know, a

53:10

a new seat is a good thing. Joko's the

53:13

thing mental attitude he takes is he

53:15

just says good to these sorta

53:18

situations, whether they're gonna be positive nose. They just because good. Now

53:20

you can put it behind you and move forward

53:22

with the rest of your life with what

53:24

whatever. Maybe that may be a lot better. You

53:27

know, I mean,

53:27

so this reminds me of a couple of things,

53:30

so if I can just throw two things

53:32

out. Here's the first thing. Again,

53:34

this this has to do with opportunity cost. And the fact

53:36

is that once we it's something we tend not

53:38

to explore the other things that might be available to

53:40

us. So when something is forced

53:42

upon us, it allows us to go maybe

53:44

find something better. We

53:46

don't always but it gives us the chance to do that. And I think you

53:48

know, a lot of startup founders when

53:50

things start to falter and they're

53:51

not going, well, one

53:54

of the rationalizations that they have for

53:56

continuing is that what about

53:57

my employees? I

53:58

owe it to my employees

54:00

to keep

54:02

going. And this goes to that congratulations kind of thing. Well, no,

54:04

you actually owe it to your employees to shut

54:06

this down. Why? Because your

54:08

employees, this is a startup. are

54:11

working for very little cash comp and a lot of

54:14

equity, and they're very smart

54:16

obviously, and they're very dedicated and

54:18

they're gritty

54:20

And now by continuing, you're trapping

54:22

them in a job where you've determined

54:24

that the equity isn't worth their

54:28

time. So you

54:28

owe it to your employees to

54:29

actually let them go so that they have

54:31

the opportunity to go find something that is

54:33

worth their time. and

54:35

their attention the equity is worthwhile. And I think that

54:38

that's such an insightful way to think about

54:40

it. Stuart Butterfield was the one who kind

54:42

of first framed it that way for me as he

54:44

was making the decision to shut his

54:46

company glitched down, which

54:48

was

54:48

developing game never ending.

54:50

and he that's the way that he sort of talked himself through

54:52

that is that I owe it to my employees because I'm now determined that the

54:54

equity is not venture scale, and that's

54:56

what they signed up for. And now that

55:00

I realize not worth their time. I need to free them. And think

55:02

that what this goes to is

55:04

actually in relation to some of this

55:06

explore, exploit,

55:08

like, people wanna read algorithms to live by Brian Christian

55:10

and Tom Griffiths. This is explored much

55:12

more deeply. But I think about the

55:15

way that ants operate So

55:18

forager ants, you know, they're in

55:19

a colony, they go to to they go to

55:21

some new territory, they look around for food, so they're all

55:23

kind of scattered looking around for

55:25

food. And then an ant finds a food source,

55:27

when as it brings the food

55:30

back to the colony, it lays down a

55:32

Fairmont Trail. Now, obviously, when it's

55:34

one ant, that's pretty faint,

55:36

but other ants will kind of pick it up, and

55:38

they're pretty wired to

55:40

follow that pheromone trail. So

55:42

now another four

55:44

hundred ant gonna follow that Fairmont Trail when they find the same food

55:46

on the way back. They're also

55:48

going to lay down a Fairmont Trail, and that's

55:50

gonna get reinforced

55:52

until you end up with the ants marching in a line, you know, like, the ants marching

55:54

one by one, hurrah. Okay. So

55:56

when you actually look at that behavior

55:59

their marching in the line is that pheromont trail gets stronger

56:01

and stronger on the way to that quality

56:04

food sort. When you actually look at

56:06

the colony, what you'll see is about ten to

56:08

fifteen percent or so. of the

56:10

Foringer ants aren't following

56:12

along. They're just they're

56:13

sort of scattered wandering around. So

56:15

you're like, what's

56:16

the deal with this? So, like, these

56:18

malinguish. Are they like anti

56:20

pannerists? Like, what's the deal? Why aren't they

56:22

getting with the program? And it turns out

56:24

that what scientists have figured out is because

56:26

they're continuing to look for

56:28

food. So why are they continuing to load

56:30

for food? Well, because the world is uncertain. Right? Like, you find the food. Maybe

56:32

it's, like, watermelon on someone's back deck.

56:34

But then maybe they come and clean

56:38

it up. and then the food's

56:40

not there anymore. So you have these other ants that are continuing to explore,

56:42

which is really helpful for the colony

56:44

because now they discover backup

56:48

food sources. And those backup food sources are

56:50

really important when your plan a doesn't work

56:52

out anymore because someone clean the watermelon up.

56:55

And then sometimes that backup plan that you're sort

56:58

of out there searching for turns out to be

57:00

even better than the thing that you were exploiting

57:02

in the first place, and so you can

57:04

switch to that. Now,

57:05

obviously, human beings are in a colony. So what

57:08

happens is we go toward the

57:10

watermelon and we don't

57:11

see any of the other stuff

57:13

that's available to us. So in some ways,

57:15

when that watermelon gets cleaned up, that

57:17

starts us in

57:18

exploration mode and we start looking

57:20

around for other food sources. Right?

57:24

And so actually have a chapter in the book on forced

57:26

quitting. Lessons from forced quitting

57:28

because, look, I'm not saying, you know, it

57:30

doesn't always work out

57:32

for everybody. But what it does

57:34

do is free you up to start

57:36

exploring other opportunities. And I think

57:38

that we saw a really big example of this with

57:40

a great resignation. So people, I think when they're

57:42

thinking about the great resignation, they think that

57:44

everybody sort of across every

57:46

sector quit. but

57:48

it's not true. The people who quit

57:50

were actually the ones who were

57:52

laid off in the

57:55

first place. In other words,

57:57

people in the service sector. So you have people in

57:59

the service sector who

57:59

are forced to quit. That's what

58:02

being fired is or being laid

58:04

off is. that

58:06

presumably allows them to start thinking about

58:08

the world differently examining their

58:10

values. What do we really want out of a job?

58:12

What are opportunities that are available to me that they exploring

58:14

before. And when the world starts

58:16

opening up, they don't necessarily go

58:18

back to their old old job.

58:22

Right? Because you have the great reopening. Now there's lots of opportunities available. So

58:24

they're sort of looking around and you see them quit,

58:26

but they weren't quitting just to quit. They were quitting

58:29

to switch to something new.

58:32

which they were exploring because the pandemic had put a pause

58:34

on their career. You don't see that

58:36

same behavior from people who held their

58:39

jobs through the whole thing. because

58:41

those ants were on the pheromone

58:43

trail going to the watermelon, whereas the

58:45

other ones were forced to

58:47

wander around. Right? And I think that this is it's like such

58:49

an important lesson when you talk about like good or

58:52

congratulations when that

58:52

happens to kind of reform

58:55

that as an opportunity to

58:57

start anew. Howard Bauchner: And

58:58

the life is short comment. I think

59:01

it's it's so thoughtful because it's

59:03

not judgmental. Right? Like it and someone who's

59:05

in it, the the funny thing I know

59:07

you work with Everyone knows going into start

59:09

ups. It's like whatever eighty,

59:11

ninety percent fail, whatever the number is.

59:13

It's a lot. And

59:15

every founder knows that, and every founder talks

59:18

about it, but then you ask the founder, you

59:20

know, they're gonna be the ten percent that

59:22

succeeds. Right? Like and

59:24

so Yeah.

59:24

I think I have those stats in the book, which I don't have at the top of my head,

59:26

but it's something like seventy percent of founders

59:28

think they're gonna be the one

59:30

or it might be higher than

59:32

that. It's like

59:34

lake will be gone, like, times ten,

59:36

and they're all talented and brilliant. And

59:39

Well, they

59:39

are all generally talented and

59:42

brilliant. It's just most

59:42

startups fail. Yeah. And so, like, that's just the math of it. But

59:44

I thought and you lay this out in the book,

59:46

and listeners, there's a lot of really great stories

59:49

in there. We're not gonna touch

59:51

on today, so you gotta go read it. But

59:53

kind of walking through the framework of I

59:55

think he said it was Conway, but, you know,

59:57

he he says, look, I basically,

59:59

raid

59:59

I'm paraphrasing. You can you can correct me because

1:00:02

basically, start up, I think you need to

1:00:04

shut down. And they're like, no.

1:00:05

We're not gonna do that. Here's the reason why. And

1:00:07

and like you said, he's he's not super

1:00:09

judgmental. He's like, okay. Like, maybe you might succeed. But let's lay

1:00:11

out the criteria

1:00:12

because you're in this.

1:00:15

from which we can

1:00:15

make an objective decision in three or six

1:00:18

months. Like, what would it we need to

1:00:19

see for this to continue? because then it

1:00:22

gives it and then I think this work trade with

1:00:24

employees too,

1:00:25

where, like, look, this

1:00:27

isn't really working out. But if you think

1:00:29

you really this hasn't happened, like, what needs

1:00:31

to happen for this to work out and have

1:00:33

the criteria? because otherwise, it just

1:00:35

feels very emotional. So I thought that that was like one

1:00:37

of my favorite favorite parts of the book, that

1:00:39

sort of line

1:00:42

of thinking. Yes.

1:00:43

So, Ron Conway, it shows us

1:00:45

the combination, the powerful combination of kill

1:00:47

criteria and equating coach. So,

1:00:50

Conway can see that the enterprise is

1:00:52

no longer worth

1:00:52

pursuing. He goes to the founder, the

1:00:53

founder says, no, I can turn it around. He

1:00:56

says, fine. What does that look

1:00:58

like? Let's set out and say,

1:01:00

this is what, you know, revenue is gonna look like

1:01:02

in two months or this is how far along the

1:01:04

product's gonna be in two months, whatever. You

1:01:06

figure out, you know, and you work on

1:01:08

that together. So notice he's not disagreeing with him as you pointed out.

1:01:10

He's he's like, sure. Yeah. So let's figure out what that

1:01:12

looks like, and then they revisit it in two months

1:01:14

and, you

1:01:16

know, If they've hit it great, if they haven't, no. And this is something

1:01:18

that I have people use with employees all the time as

1:01:20

well. I think that it makes it a lot easier.

1:01:23

And, you know, he really takes pride in that

1:01:26

because he says life's too short. Like, I don't

1:01:28

want this founder to waste their time on something that

1:01:30

isn't worth

1:01:32

their time. I would prefer for them to be going on to something else so that,

1:01:34

you know, free their attention up so they can go

1:01:36

do something great. And what

1:01:37

I think is really important

1:01:38

to point out about this is

1:01:41

because somebody will send this to me

1:01:42

like,

1:01:43

but if he knows that it should be

1:01:45

shut down today, why isn't he making

1:01:47

them shut down today? And

1:01:48

the answer is because they're not ready But

1:01:50

yeah, they might not shut it down

1:01:52

for two months. But if he didn't

1:01:55

go through this process. They might not shut it down until literally every

1:01:57

bit of capital was burned. Right? They might go on for

1:01:59

another year and a

1:02:02

half. And

1:02:02

So it's not really a

1:02:04

waste of two months to use this kind of

1:02:06

process. It's actually saving

1:02:08

you, like, another year, another two

1:02:10

years where they might work on something that

1:02:13

really isn't worth their while. And I think that that's something incredibly

1:02:15

important to think about, astroteller

1:02:17

at x, which is

1:02:19

Google's innovation hub, he

1:02:21

says the same thing, you know. And this is this thing about, like, waste

1:02:23

is not a backward looking problem. It's a forward

1:02:26

looking problem. Right? Like,

1:02:28

if you spent money on something that's gone. What matters is should I

1:02:30

spend another dollar on it going

1:02:32

forward? He actually approaches projects

1:02:34

trying to get to the answer about whether you should

1:02:36

quit or

1:02:38

not. really fast. And as he says, if I can get to the

1:02:40

answer two

1:02:40

million dollars instead of nine million dollars,

1:02:43

it's not that I've wasted two million

1:02:45

dollars. I've saved seven.

1:02:48

And

1:02:48

that's definitely Conway's approach as well. Yeah. I

1:02:50

mean, one

1:02:51

of the biggest takeaways that

1:02:54

professional particularly

1:02:56

startup investors say, and

1:02:58

and I think they could be a little more clear

1:03:00

about it with all the the

1:03:02

founders from the get go is

1:03:04

that, cases in

1:03:06

many cares the wrong word. I wouldn't say they don't care if a startup

1:03:08

fails. Obviously, they prefer it as amazing.

1:03:10

But if a founder has an

1:03:12

idea, they

1:03:14

try it, it doesn't work out, but they fail

1:03:16

with, like, grace, dignity,

1:03:18

transparency, and do it in a

1:03:20

way that

1:03:22

almost always the

1:03:24

second go round, that founder will get a

1:03:26

shot. Like, if if he has another idea, she

1:03:28

has a great company number two,

1:03:32

But so often you see the ones that are, you know, have the

1:03:34

shame, embarrassment, or afraid, and they just

1:03:36

kinda go ostrich fold. Like, head and

1:03:40

the sand, stop

1:03:40

updating, disappear, or just, you know, kind of what you

1:03:42

said, just

1:03:42

like nuke all the money in a in a

1:03:45

Hill Mary Pass, that's

1:03:47

probably less likely to

1:03:49

get, you know, a new

1:03:52

second shot. I mean, everyone in VC

1:03:54

loves second shots. Look at

1:03:56

look at Laurie, what's his name? They just got funded at dollars.

1:03:58

WeWork Newman. Yeah.

1:03:59

Right. Yes. That's true. Although,

1:04:02

I But,

1:04:04

yeah, I

1:04:04

mean, I think this is one of the things that we have to remember that we have such

1:04:07

a bias against quitting that there's all sorts

1:04:09

of ways

1:04:09

that we rationalize

1:04:12

that

1:04:13

we shouldn't quit. So, you know, it might be I owe it to

1:04:14

my employees. Right? That could be one. But one

1:04:16

of

1:04:16

the things that Conway hears all

1:04:18

the time is I owe it to my investors.

1:04:21

My investors believed in me. They've invested money in me. And

1:04:24

so I owe it to them to give it every

1:04:26

last try in order to try to

1:04:28

turn it

1:04:28

around. And he says, no. You

1:04:30

and he said no shit if

1:04:32

you owe it to your investors to return capital

1:04:34

and also just so that you know,

1:04:37

they're more like to give you

1:04:39

more capital in the future. If you do that, it's

1:04:42

not a bad thing. They're not gonna think that you

1:04:44

were a quitter in the

1:04:46

sense that we open the

1:04:48

podcast with. Right? They're gonna actually say, wow, this is a really

1:04:50

thoughtful individual who got

1:04:52

to the answer, figured out it was

1:04:54

a no, and return the

1:04:56

capital and he points out to them

1:04:58

again as an outside observer with lots of

1:05:00

experience that they're likely

1:05:02

to be funded again. Astra teller says the

1:05:04

same thing, you know, really because they funding

1:05:06

such big innovations. These are generally

1:05:08

people who are coming in with innovations they

1:05:10

wanna pursue that are kind of like

1:05:13

their lives work. So, you know, they're

1:05:15

very attached to it. It's there's a lot of mugs involved, like, thalers mugs that they have

1:05:18

there. And when it

1:05:20

comes to that decision about whether to shut the

1:05:22

project down,

1:05:24

you know,

1:05:25

they're all afraid that, well, I'm gonna lose my job and

1:05:26

you're gonna fire me from here and, you know,

1:05:28

so on so forth. And and ask for

1:05:31

a teller to look at all these people

1:05:33

here. They were all on projects that we set down and

1:05:35

look there over here now. So he's trying to

1:05:38

point out to them that

1:05:40

there's life after that as

1:05:42

well because I think, again, when we're in

1:05:44

it, we don't see the long time

1:05:46

horizon. We don't see that idea that, like,

1:05:48

it's one long poker game. or, you know,

1:05:50

life is one long game. And we're just

1:05:52

so afraid of that moment

1:05:54

again of taking the shore loss,

1:05:56

of going from its

1:05:58

failing to

1:05:58

Now it has

1:05:59

failed. We've taken all the risk off

1:06:02

because we've quit. And now we know

1:06:04

for sure, we can't turn

1:06:06

it around. It's such an awful moment to us that we can't

1:06:08

see beyond that and we start to

1:06:10

rationalize the decision to stick

1:06:12

to

1:06:12

decision to stick to it it.

1:06:14

part of the rationalization is people are gonna criticize me

1:06:16

or they're gonna think poorly of me if I walk

1:06:18

away. That's not really true. It's more you're

1:06:20

gonna think poorly of yourself.

1:06:23

but most people are gonna be relieved for you. Tell

1:06:25

me

1:06:25

your opinion on this. Is this useful or not? With

1:06:27

a lot of the decision making and

1:06:30

quitting would be

1:06:32

an example there's a lot of sayings and platitudes

1:06:34

and all the sort of

1:06:36

comments that everyone loves to

1:06:38

use, particularly

1:06:40

with survivor bias examples. And there's a million

1:06:42

of them, you know, quit while you're ahead.

1:06:44

Don't be a quitter. There's probably

1:06:48

fifty. are those best avoided in the decision making process? If

1:06:50

you're trying to make an objective decision and,

1:06:52

like, almost every time you're talking to a friend or

1:06:54

something about this

1:06:56

and they they trot out one of these comments as if it's like the here

1:06:58

I've blessed you with this, you know,

1:07:00

insight. They feel dangerous to me

1:07:02

because often they feel like

1:07:05

a survivor bias hindsight

1:07:08

outcome. There's so many things

1:07:08

wrong with them. First of all, let me just say

1:07:11

most most of those things have carry

1:07:13

with them what's called the illusion of explanatory depth, which is

1:07:15

one of my favorite phrases, which is something that

1:07:17

isn't really deep but

1:07:19

feels deep. So The best

1:07:21

example of that is when people say it is what it

1:07:24

is. Right? It sounds like, oh, that's

1:07:26

really deep. But if you think about it, it's not deep

1:07:28

at all. It's just the illusion of

1:07:30

explanatory depth. But when it

1:07:32

comes to aphorisms about

1:07:32

quitting, they're all giving you really bad

1:07:34

advice.

1:07:34

Right? Like winners never

1:07:36

quit,

1:07:37

quiters never win. How

1:07:39

could that possibly be if I'm holding a bad

1:07:42

position? Like, I've got a stock that's

1:07:44

losing. I shouldn't run it to zero. I

1:07:46

should quit and go put my money in

1:07:48

something else. And in fact, when you think about

1:07:49

things like some cost and endowment and status quo

1:07:52

bias and sort of

1:07:54

the path fail nature of

1:07:56

goals. Right? Like, that stopping

1:07:58

short of the finish line is just a failure. No

1:07:59

matter that you already ran sixteen miles, it

1:08:02

doesn't matter. Like, all of these

1:08:04

forces, o mission, o mission bias.

1:08:06

So in some words, that make it

1:08:08

so hard for us to quit, that

1:08:10

the act of quitting is actually one

1:08:12

of courage. because

1:08:14

you're really bucking all of these

1:08:16

cognitive debris that makes it really,

1:08:18

really hard to walk away from something

1:08:20

including the

1:08:22

head trash that we have, which has to

1:08:24

do with what we call external validity, how how

1:08:26

are other people going to think about me, where

1:08:28

you think they're going to think you're a loser.

1:08:30

And you have to have the power of your conviction to be able

1:08:32

to walk away from something because you know that

1:08:34

even if they can't see it, that you

1:08:36

know this is not the right path

1:08:39

for you to be on. because the

1:08:41

right time to quit, the perfect time to quit is

1:08:43

usually gonna be when it's not obvious to people around you. Because

1:08:46

it's a forecasting problem.

1:08:49

what you don't wanna do is get

1:08:51

into a situation where you're already fallen into

1:08:53

the crevasse. And yeah, then nobody's gonna criticize you

1:08:55

for not continuing them

1:08:58

out because it's not a choice anymore. You before And other gonna

1:09:00

see it, so

1:09:03

it's really scary to

1:09:06

walk away in those situations where some

1:09:08

people may call you a quitter. And it takes a

1:09:10

lot of

1:09:10

courage. So when we think about these aphorisms,

1:09:14

like winners never quit and quiters never win. Of course, winners. Winners quit

1:09:16

a lot. It's part of how they win. They

1:09:18

have to because they have to always be

1:09:21

switching. That thing's

1:09:22

not working. Let me move over for

1:09:24

this thing. If at first you don't

1:09:26

succeed, try try again. We need to add something to that which is if

1:09:30

wow it's worthwhile. Right? Never

1:09:32

give up. Well, never give up unless you're

1:09:34

one of those people who goes on, you know,

1:09:36

American Idol back in the day

1:09:38

when they show the Bad Auditions.

1:09:41

Who's Simon Cow says, I'm sorry, you're screeching like a cat,

1:09:43

and you're like, I'm not giving up my dream, and it's

1:09:46

like, are you kidding

1:09:48

me? You're

1:09:49

terrible at this.

1:09:50

Makes for good TV though. It does make for good TV. And then

1:09:53

what's

1:09:56

interesting is The only aphorism that's

1:09:58

positive about quitting, quit while you're ahead, which is encourages this horribly behavior

1:10:01

of stopping out

1:10:04

as you when you're at two x or three

1:10:06

x, when if you had held onto it, it would go to twenty x, and the expected value says

1:10:08

that you

1:10:11

shouldn't actually sell it. So we need to stop thinking in aphorisms and

1:10:13

we have to start thinking in nuance and

1:10:15

really get down to what the

1:10:17

core of the matter

1:10:19

is, which is you know, on balance, if

1:10:21

you look at the cost and benefits of what you've already started and

1:10:23

you assess it

1:10:27

today, or do the benefits still outweigh the cost in comparison to other

1:10:29

things you might be doing, including

1:10:31

switching costs. Right? And

1:10:33

that that's really

1:10:36

that's really what it comes down to. And,

1:10:38

you know, we just we we really, for a variety of

1:10:40

reasons that have to do

1:10:42

it ourselves and other people, we

1:10:45

generally just don't get to that decision until it's

1:10:47

way too certain that things are going badly. And every single second,

1:10:49

you know, this is the

1:10:52

astroteller thing. yeah,

1:10:54

after nine million dollars, you know for sure it's

1:10:56

not gonna work. But if you already had the information that you needed after

1:10:58

dumping two million dollars into it, you just wasted seven million dollars

1:11:03

you could have spending amazing because you were so afraid of walking

1:11:06

away because

1:11:06

winners never quit and quiters never win.

1:11:10

Well, you

1:11:11

have some great examples in the book and I don't wanna get to them

1:11:13

here, but just give the the listeners

1:11:15

a a tease about,

1:11:17

you know, some

1:11:19

people who are reluctant to quit because so much

1:11:21

of what they're doing is is that it becomes their

1:11:24

identity. And one of

1:11:26

my favorite quotes, the last couple

1:11:28

years was an Adam Grant quote, and I always get it

1:11:30

backwards because I use it both ways now. But he talks about he's

1:11:34

like, I don't want my ideas

1:11:36

to become my identity. And I and I use it both ways. I

1:11:38

don't want my identity to become my ideas where you get attached to something,

1:11:40

and then you can't

1:11:42

quit it because it becomes who

1:11:44

you are. And so many of these when we

1:11:46

talk about athletes, you know, how many have quit right at the top. I mean, Serena

1:11:49

and maybe John Elway,

1:11:51

but so many MJ and

1:11:53

everyone else just keep mom and People were really mad at Barry Sanders. I mean, I think that's the other thing

1:11:55

that we

1:11:57

need

1:11:59

to remember. is that as we look on

1:12:02

other people, it's it's that feeling of, you know, it's why I wanna fall into the crevasse.

1:12:04

Because when Barry Sanders quits

1:12:06

at the top of the game,

1:12:09

people

1:12:10

are, like, their heads explode.

1:12:12

You

1:12:12

know, when Seinfeld quit,

1:12:14

you know, wait, why? Because

1:12:17

it's not obvious to them

1:12:19

that that's the time you quit. But as Seinfeld said, like, I don't wanna be around

1:12:21

for when I jumped the shark. You

1:12:23

know? Like,

1:12:25

things are good

1:12:27

now. before we let

1:12:27

you go a little bit. Tell me what the alliance

1:12:30

for decision education is.

1:12:32

Give us some insight because you guys

1:12:34

are hosting a poker tournament coming up.

1:12:37

give us a little preview of

1:12:39

what y'all have been doing. We're hosting an online

1:12:39

poker an online

1:12:42

tournament to raise

1:12:44

funds for the alliance for decision education. So you can go

1:12:46

over to the website there, which I'm sure will be in the show notes. And

1:12:48

you can sign up for the

1:12:51

Poker tournaments, which which you We

1:12:54

hope you will. This is an organization

1:12:56

that I cofounded with Eric Brooks. And we are trying to

1:12:58

bring decision education into every t through twelve classroom.

1:13:04

So, you know, I mean, when we think

1:13:06

about the education system, like, think about teaching

1:13:08

something

1:13:09

the amateur

1:13:11

the like trigonometry, why? you know,

1:13:12

I mean, the idea that, you know, I

1:13:14

think that, you know, when those types of things were common, people thought, well, if we give people really

1:13:19

hard math problems to

1:13:19

deal with. It's gonna teach them how to think and reason. And that's

1:13:21

been a disappointment over and over again back

1:13:23

from the early nineteen hundreds,

1:13:26

actually

1:13:26

a guy named Thornite disprove that.

1:13:28

What we really need to be doing is saying, look, in

1:13:31

a world where you don't need to memorize

1:13:33

you don't need to memorize facts anymore

1:13:35

facts anymore. where you can look up any

1:13:35

mathematical formula. But what we need to do is

1:13:38

teach people how to think. We have to

1:13:40

teach people

1:13:42

how to decide And we need to start teaching those skills

1:13:44

very early. Right? Things like how do

1:13:47

you figure out what's true? how

1:13:51

do you construct a good decision to figure out what option

1:13:53

to choose? How do you think

1:13:55

about habits and habit

1:13:58

formation and changing your habits?

1:14:00

Here's one for a little bit older

1:14:02

kids. How do you start thinking probabilistically? Right? How do you start

1:14:04

to realize that

1:14:07

for any option you're considering, like,

1:14:09

there's different ways that things could turn out and you need to

1:14:11

sort of examine those and start doing some forecasting around that. So really

1:14:13

thinking about the model of

1:14:15

social emotional learning. where

1:14:18

kids these days, you

1:14:20

know, in K through twelve, every single year

1:14:22

are getting some social emotional learning in

1:14:24

order to help them with like bullying,

1:14:26

for example, and emotional control, and empathy.

1:14:28

And we think we need to do

1:14:31

the same with decision and

1:14:33

education. And it's a little bit of a

1:14:35

tragedy that in the adult

1:14:38

world, work

1:14:39

on decision making and

1:14:41

decision science has

1:14:42

become so incredibly popular. but not thinking about,

1:14:44

well, if it's really good for a thirty five year old,

1:14:46

it would probably be really good for an eight year

1:14:48

old. So

1:14:51

to

1:14:51

take the kind of knowledge

1:14:53

that has

1:14:54

so permeated the adult

1:14:56

world in terms of books like

1:14:58

thinking fast and slow by condiment where people

1:15:00

are really starting to understand this decision making space.

1:15:02

You know, the work of Michael Mobesan, for

1:15:05

example, or Phil Telbach. out of Grant,

1:15:07

Don

1:15:07

Moore, so on and so forth,

1:15:10

Katie Milkmann. And say, let's take

1:15:12

what we know from that and start

1:15:14

thinking about how we could implement that into

1:15:16

K through twelve to create better

1:15:18

decision makers. And our motto motto is, better decisions lead

1:15:20

to better lives, which

1:15:22

lead to a better society.

1:15:24

And I

1:15:25

think we're all feeling that need right now. How do you guys just

1:15:27

go better? Or do you is the kind of mission

1:15:27

to train teachers? Are you doing online courses?

1:15:30

Or are your goal to get actual,

1:15:32

like,

1:15:34

coursework into the schools? Like, how how do

1:15:36

you go about this mission? Yeah. So

1:15:38

so the goal

1:15:39

is definitely to

1:15:41

get actual class working to every single

1:15:43

school. But the way we're doing that is not by being direct program providers, although we

1:15:46

do some of that. when

1:15:49

we looked at other educational movements that were really successful, like

1:15:51

the movement and

1:15:56

actually STEM, What we

1:15:58

saw is that behind the scenes, there was an organization which we would call a field field

1:16:00

catalyst. Basically saying

1:16:03

we're gonna take

1:16:06

this

1:16:06

world, we're gonna define the field in our case

1:16:09

decision education. We're gonna create

1:16:11

common language around it.

1:16:13

and then we're gonna start to accelerate that field. We're gonna

1:16:15

catalyze the field. So we do that in a variety of ways.

1:16:17

Some of that is to

1:16:20

curriculum development. We

1:16:23

have a teacher fellowship where teachers come in and they

1:16:25

learn the material and then they create curricula that

1:16:27

they then bring into their own

1:16:30

schools. We also

1:16:32

fund research. So we

1:16:32

take people who are doing research,

1:16:35

maybe an adult decision making, and get them to start doing that research and thinking about

1:16:39

the applications to children so that

1:16:41

we can get a body

1:16:43

of

1:16:44

scientific proof that this

1:16:45

is worthwhile and to understand really

1:16:47

from that standpoint what works And

1:16:50

then obviously, we're trying to create push

1:16:52

and pull in terms of policy levers,

1:16:54

parents demanding this for their children.

1:16:57

And that's really how something like

1:16:59

stem happens. Right? Or social emotional There was a a organization

1:17:01

called Castle that's been around for,

1:17:03

like, three decades. But it

1:17:05

wasn't until ten or fifteen

1:17:08

years ago, you

1:17:10

started to see social emotional learning appear in every single school. But what they were doing was taking people who sort

1:17:15

of circling their center of gravity and

1:17:18

bringing them into the fold. So, like, another thing we do is we fund other nonprofits. We help to

1:17:20

accelerate other nonprofits who are in

1:17:22

our space doing things like pivots.

1:17:26

for example, or financial literacy, which would

1:17:29

be definitely in the space of what we

1:17:31

do. And, you know, we just have

1:17:33

a long view of it. we sort of think

1:17:35

about it as a moonshot, something that would

1:17:37

really improve individual lives and really

1:17:39

improve society. And it's

1:17:41

gonna take a decade. and we're here for

1:17:44

it. You know, and we hope other people

1:17:45

are willing to come along for the ride because we think

1:17:47

that this is one of

1:17:49

the most important things we can be doing

1:17:51

right now. we'll post the link in the show notes listeners.

1:17:52

And we did a podcast with a a

1:17:54

group that's doing similar but focused on

1:17:56

personal finance, getting

1:17:59

into schools. Tim, Renzneta, NextGen Personal Finance, and

1:18:01

they've started to have a lot of success. Where do it

1:18:05

was, like, ten

1:18:08

percent of high school is taught, any sort of

1:18:10

Oh, that's amazing. Yeah. For some of my but now it's up to almost

1:18:11

half, which is kind of amazing. But we'll post

1:18:13

link in the channel listeners,

1:18:16

both for

1:18:17

any's website alliance for decision education dot org, as well as the poker

1:18:19

tournament, as well as

1:18:23

the new book. quit,

1:18:26

check it out, listeners. It's really awesome. Annie, this was a whirlwind. love

1:18:28

to have you back in the future.

1:18:30

Thanks so much for joining us today.

1:18:35

Well, thank you for having me. Podcast listeners will

1:18:37

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1:18:39

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1:18:42

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