Show Notes

• From defending doctoral dissertation to the Crystal Lounge
• Correlation between psychology and poker
• What professional poker players do that amateurs don’t do
• Every decision is a forecast
• Grit versus quit
• “Most of us aren’t willing to quit until it’s no longer a decision.”
• What went wrong at Sears
• Quitting in the NFL: Barry Sanders and Tom Brady
• Advice from Kenny Rogers

Connect With Annie Duke

Website: https://www.annieduke.com/
Facebook: https://www.facebook.com/AnnieDukeAuthor/
Twitter: https://twitter.com/AnnieDuke
YouTube: https://www.facebook.com/AnnieDukeAuthor/
LinkedIn: https://www.linkedin.com/in/annie-duke/

Books

Quit: The Power of Knowing When to Walk Away: https://amzn.to/3D6Frwa
Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts: https://amzn.to/3x8gT1R
How to Decide: Simple Tools for Making Better Choices: https://amzn.to/3cYkZ60

Summary

Annie Duke is an author, speaker, and decision-making consultant. As a former professional poker player, she won more than $4 million in tournament poker, and a World Series of Poker bracelet. Annie discusses decision-making under uncertainty, and her newest book, “Quit: The Power of Knowing When to Walk Away.”

Full Transcript

Brian  

Welcome to another episode of LifeExcellence with Brian Bartes. Join me as I talk with amazing athletes, entrepreneurs, authors, entertainers, and others who have achieved excellence in their chosen field. So you can learn their tools, techniques and strategies for improving performance and achieving greater success. Annie Duke is an author, speaker and decision making consultant. As a former professional poker player she won more than $4 million in tournament poker. During her career, Annie won a World Series of Poker bracelet, is the only woman to have won the World Series of Poker Tournament of Champions, and the NBC National Poker Heads-up championship. Annie is the author of several books, including the national bestseller “Thinking In Bets:  Making Smarter Decisions When You Don’t Have All The Facts”. Her latest recently released book is “Quit: The Power Of Knowing When To Walk Away.” Annie loves to dive deep into decision making under uncertainty and she helps others to do the same by sharing lessons learned which have been cultivated through a combination of her academic studies in cognitive psychology and real life decision making experiences at the poker table. Annie is active on several boards and is the co-founder of the Alliance For Decision Education, a nonprofit organization whose mission is to improve lives by empowering students through decision skills education. Welcome, Annie, and thanks for joining us on LifeExcellence.

Annie  

Well, thank you for having me.

Brian  

Annie, I’m so looking forward to our conversation, first of all, because I’m fascinated by your story, and I’ve known a little bit about you and got to learn more about you in researching for the show, and secondly, I’m fascinated by human behavior. Now, you grew up in New Hampshire and your parents were both educators and you are very well educated as well, probably because they were. You graduated from Columbia University and then earned a master’s degree – and I’m not sure people know all these things about you – earned a master’s degree and completed your doctoral work in cognitive psychology at the University of Pennsylvania. You were on the verge of defending your doctoral dissertation – which is basically getting all the way through the process, as I understand it – but instead found yourself playing poker in the basement of the Crystal Lounge in Billings, Montana. Connect the dots for us.

Annie  

Okay, so at the University of Pennsylvania I was what’s called ABD, which is “all but doctored”. But generally, when people say that, they weren’t as far along as I was, which was just come in and defend the thing. But I do have some news, which I announced on Twitter a little bit ago, which is I’m now I enrolled at the University of Pennsylvania to finish up my PhD. So I will be defending it. I will have that done within the year. (Brian:  Oh, fantastic.) So, look, there’s a couple of places to go. One is how did I end up playing poker in the first place, and whoa, that’s a complete left turn, which is the way that people kind of think about it; from this path to become an academic, studying cognitive psychology, to now you’re a gambler. So the first thing is that the reason why I ended up playing poker was actually because I got sick at the end of graduate school. When I was going out for my job talks – which are just academic speak for “job interview” – I had been struggling with a stomach illness and actually ended up in the hospital for a couple of weeks and just honestly had to postpone going out on the job market. The job market in academia is seasonal and so that meant I had to wait a year. While I was taking time off from school I needed money and I started playing poker, mainly just out of necessity, really, because I needed some dough. I didn’t feel well, I was still recuperating, so a nine to five job didn’t make sense. I didn’t want to start a new career because I was still planning to become an academic and I was going to go back to it. It just turned out that I had a knack for the game and I really loved it. When I started making money right away I never left. It sounds strange, but it’s actually stranger than it sounds when you think about the time that this happened. This was in the mid 90s and now poker is ubiquitous on television. There’s internet poker, there’s all sorts of access. You can you can turn on the TV basically on any given night and see people playing poker. But that was not the case in the mid 90s. There wasn’t poker on television, it wasn’t widely understood to be a job that you could make money at, particularly not something that a woman was supposed to do. So it was odd, but I had an entree into it, which is that since I had been about 16 years old, my brother had actually been playing poker professionally. So that was how I even knew that it was a possibility. So that’s how I ended up doing that, but then to address kind of the whoa, that’s a weird left turn; it’s really not. What I was studying in graduate school had to do with learning and particularly learning in uncertain systems, and how do you actually take from the feedback that you’re getting from the world in order to derive kind of a mental model of the world. And poker really sort of pulls that thread in a different way in this very high stakes, fast paced world, which is just rife with uncertainty; like you can’t see your opponent’s cards, there’s luck involved, particularly in the short run, in terms of how any single hand might turn out. And it’s the kind of environment that is actually really hard to solve a lot of learning problems in, like, how do you close the feedback loop? If you win or lose a hand what does that mean for the decisions that you made. Did you play the hand in an optimal way, and that’s hard to know because mostly you don’t see the other opponents cards. You don’t really know what the other options are that you could have taken. It’s an environment where the types of cognitive biases that Daniel Kahneman writes about in “Thinking Fast And Slow,” really are going to get a chance to take root and grow. Because sometimes the more certain the environment that you’re in, the more tethered to a sort of objective rationality you have to be. As an example, if we took a game that has less uncertainty like chess, where I can see my opponent’s position, and the pieces don’t randomly move by the roll of some dice, it’s very hard if I lose a game to feel like I just got unlucky. I’m sort of tethered to having to admit that maybe I should examine the decisions that I made and you probably outplayed me. But in poker, that’s not the case. In poker, because there is this really strong influence of luck and I often don’t end up getting the information I would need in order to tie me to the mast when I lose a hand, it’s very easy for me to say, oh, I just got unlucky, that didn’t have anything to do with my decision making. The other player played really poorly, that wasn’t my fault; these kinds of things. And that’s just the case in those types of environments, and I found that really fascinating. As I think about my path in life, that I’ve always studied and thought about the exact same problem, I’ve just thought about it in different environments. Initially, it was in an academic environment, and then it was in poker, and then later as a business consultant. So writing on the topic, really diving into the research to think about how you would communicate these topics to people who don’t have PhDs – like me, I don’t have a PhD right now – and I sort of pulled that thread, I think, through my whole life.

Brian  

They’re very different thoughts, poker versus cognitive psychology, or the thought of getting a PhD at an academic institution, but in fact, there is intersection between the two. How did your educational background give you an edge as a poker player, if it did? So obviously, you understood people, arguably better than most people around the table, did that help you? I know, we’ll get into decision making versus luck and that sort of thing, but just in terms of your background, did that give you an edge at the poker table?

Annie  

You know, it’s so hard to say, right? Because it’s a little bit like, well, what is the cause and effect? A lot of the traits that I have that made graduate school something that I would want to do – particularly graduate school in the sciences – thinking about the types of problems that I want to think about are similar traits that made me good at poker. So the fact that I had studied human behavior in graduate school, did it help me? I don’t know. I mean, I’d taken, certainly, statistics and understanding statistical modeling definitely helped me, that I had that background. But it’s so hard for me to say. Was it the fact that I studied these things in graduate school that gave me a knack for being able to play poker or was it the exact same genesis to both, that these were things that I was really interested in and trying to think about and trying to solve for that made me want to go and do two different things that looks very different, but that we’re sort of studying the exact same thing. It’s just kind of hard for me to say, I think. I think I would be making up a story if I tried to answer that for you.

Brian  

What is it that professional poker players do that amateur poker players don’t do if you had to pinpoint two or three distinctions? I know there’s a lot to it and this could be a very long discussion but if you had to pinpoint two or three distinctions, what is it that pros do that everybody else doesn’t do and that’s why most other people end up broke?

Annie  

There are two main things that set them apart from the real students of the game. There are two main things. One is that professional poker players tend to be more aggressive in general, and tend to be aggressive in the right spots. So that just means like, if you have a choice to continue to play the hand, you could call or you could raise. Sometimes actually, interestingly enough in poker, there’s often a choice between folding and raising. That’s a very common choice that you might make in poker, which sounds a little weird, because if you’re folding you’re saying you’re willing to give up the hand. But sometimes you feel like, well, I could give up the hand but also, if I raise maybe the other person will give up the hand. So it’s a common choice that you make. And poker players are just, I think, better at the aggressive part, they’re more likely to choose raising over calling. I think that they see the opportunities in the way the amateurs don’t when I’m pretty sure I have the worst hand but I actually think that raising is probably the better choice here. So I think that’s one of the things, the key distinctions between amateurs and pros. But the other distinction, which I think is actually the biggest one, apropos my book, is that poker players quit a lot more than amateurs do. And wow, that seems like such a weird thing, like, why would that give you an edge? The reason that it would give you an edge – and this is sort of a lesson to take into life – is that if the hand isn’t worth playing, then continuing to play it is actually going to cause you to lose money. Because if the hand isn’t worth playing, that means it’s not worth your investment anymore, that you’re going to get a negative return on the next dollar that you put into the pot. So continuing is actually what’s going to cause you to go broke. But if you’re actually really good at cutting your losses, which as we’ll talk about today, is actually incredibly difficult to do. Then that’s going to actually allow you to use your money in the best spots possible, like to invest in the hands that have the highest return on investment available to you, that have the highest expected value. So we can see it in really three overarching ways. The first is that if you take a game like Texas Hold’em, where you get dealt two cards to start, you have a choice when you get dealt those two cards, whether you want to fold right away, or whether you want to continue with the hand and play; you could call, you could raise, whatever. Amateurs tend to play about 50% of the hands that they’re dealt, just right off the bat and professionals tend to play about 15 to 25%. Folding is an act of quitting, I don’t want to play this hand anymore. So they’re just better at that decision there. Then it gets even worse, because as you put money into the pot, it becomes much harder for most people to fold. I think there are a few reasons that it becomes really hard for people to fold. The first is that you’ll hear people say sentences like, I needed to protect the money I already had in the hand. They want to protect their chips. Or they’ll say something simple, like, I had too much money in the pot, which is kind of saying the same thing, like, I had money in there and if I fold, that’s the moment that I abandon that money, that I abandon those chips and I can’t get them back, at least not on this particular hand. Of course, so this is very classically called the “sunk cost effect” or “the sunk cost fallacy;” thinking that the money that I put in the pot should matter to whether I should put another dollar in the pot – because it shouldn’t – it should matter if the next dollar I put in the pot I’m going to make money on. Professionals are just better at abandoning those situations. I think another contributing factor to that is it’s very painful for amateurs to fold the hand and then have more cards come and see that they might have won. And of course, even a blind squirrel can find a nut or a broken clock is right twice a day. It’s just a part of the game that sometimes you’re going to fold hands that would have won if you happen to have stayed in until the end. I think professionals are just more sanguine about that. It’s like, well, I folded a hand correctly and then a miracle card hit, that didn’t mean it was right to play. So folding right away, folding in the middle of a hand, and then poker professionals are also better at getting up in a game. So when I’m playing in a game and the game is what we would call really “juicy,” meaning there’s very bad players in the game and then something happens, like maybe I’m not playing well, or I’m tired, or a couple of the players – that were the reason that I was playing – get up and leave and they were replaced by much better players, that’s a good time to get up and quit the game. Particularly when someone’s losing in the game, that’s actually a very difficult decision for people to make. Professionals are just better at doing that. What that ultimately means is that professionals are keeping themselves in situations, much less often, where they’re betting money when they have a negative expected return on that money that they’re betting. And they’re in situations more often where they’re betting money where they have a positive expected return. I think that is probably the biggest difference between experts and amateurs in that game.

Brian  

So they’re less tied to the outcome on a transactional basis too, is that…(Annie: Yeah, right.) Sounds to me like detachment of emotion. So amateurs tend to get really emotional about lots of things, probably starting with the two cards in Texas Hold’em, whereas for a professional, that’s a transaction.

Annie  

I think I wouldn’t necessarily use the word emotional, just because I think that these are deep, deep cognitive biases, that are really kind of coded into our mindware. I can show you all sorts of places outside of the poker table where you have these exact same kind of issues, like this desire to know how things turn out, and that pain of maybe it would have worked out if I had just stayed. Over-optimism, thinking you have a better chance to win than you actually do but also the sunk cost effect, like this pain of giving up something that you’ve invested in some sort of endeavor. In the simplest sense, it’s like, if you buy a stock at 50, and it’s trading at 40, it’s really hard to sell that stock, because that’s the moment that you go from having a $10 loss on paper to realizing a $10 loss. If you think about it, as long as you still hold the stock, you have a chance that the stock will go back up and you won’t actually have to lose the money on that stock. Now, obviously, that’s silly. If you were going to buy the stock at 40, then you should still continue to hold it, because that’s the same as buying. But if you weren’t going to buy the stock at 40, it doesn’t matter what’s happened prior to that decision, less transaction costs, you should just go ahead and sell it because it isn’t something that you would put anew into your portfolio that day. That’s separate and apart from our job as say, investors [which] is to hold, over our lifetime, the best possible portfolios of stocks. And as you point out, if we think about it as a transaction, what happens on a single stock matters very little, it’s sort of across all of the decisions we made. But we can take it out of stocks as well. It’s like, people take jobs and they don’t want to quit them because they don’t want to have wasted all the time that they’ve already put into their current position. Because they’re afraid of the unknown, of what happens if I go and look for another job and I don’t like that one, either. Who will I be if I lose my job, it’s my identity; these kinds of things that make it hard to walk away. Same with relationships. You can see the behavior on the top of Everest; why, under terrible conditions – conditions that an outside observer can see very clearly are conditions where you shouldn’t continue up the mountain – do people continue to the summit and perish up there; for really, honestly, in a very deep way, the same reason that a poker player can’t fold their hand.

Brian  

After reading, “Thinking In Bets” I was thinking about decision making and I think it’s human nature to equate the quality of a decision we make with the quality of the outcome. In other words, when we don’t get the desired outcome that we seek, we tend to fault our decision. We say things like, I made a bad decision or I made the wrong decision. We certainly question the decisions of others when it doesn’t result in the outcome that we’re looking for. But you seem to defend decision making, or at least separate it from the outcome, suggesting – and you mentioned this earlier – luck, this component that we don’t take into account very much, I don’t think, when we’re thinking about decisions that we make and the outcomes that are achieved that either are consistent with that or or go against that. Share more about the the role of luck in that and why maybe we shouldn’t beat ourselves up about an outcome when we made a sound decision or at least thought about it carefully and gathered all the information and took a lot into account before making the decision that we made.

Annie  

So pretty much every decision we make is under the influence of two forms of uncertainty, a little bit that we’ve touched on already. The first is hidden information. So for most things that we’re deciding about, we know very little in comparison to all there has to be known. You can think about something like a hiring decision, how much do you really know about any candidate that you hire into a position? You’ve probably had a couple interviews with them, they’re relatively short, you may have a few references and that’s about it. They’ve never been in the job before. I think that we’ve all had that feeling post decision, oh, if I knew then what I know now, I would have made a different choice. That’s that visceral feeling of what hidden information does to you, that there’s just stuff that you don’t know and that obviously makes decision making quite difficult. When you’re making decisions, what you’re trying to do is gather up – considering the cost of the time to gather the information – the most accurate information that you can have; you’re trying to fill in those gaps as best as you can. But you can never…it’s almost never that you can fill those in completely. So that’s the first piece of the problem. The second piece of the problem is that there’s just the influence of luck. So I can be going through an intersection, I can follow all the laws of the road, my car can be in good repair, I am going through a green light, and somebody hits me, and I can get in an accident. It’s not in my control. It’s just bad luck. So that’s the other issue, is that there’s just the issue of luck. So what that means really, when it comes down to it, is that every decision that we make is a forecast; it’s a forecast of the future in the same way that someone might forecast the weather. Given what I know now, given the information that I have, given the way that I might model this, so on so forth, I think there’s a 30% chance of rain in the coverage area tomorrow. This is where we kind of get into trouble is that…what that means is that if you looked at all the forecasts that somebody made where they forecasted a 30% chance of rain in the coverage area, we could then understand very deeply from the outcomes what the quality of that forecast was, because we could say – given enough of these forecasts – what we would have to see is that it actually rained 30% of the time when they said it was going to rain 30% of the time; but that would be over many, many forecasts. The issue that we have in trying to untangle these problems is that on a given day – on one day – where I forecast a 30% chance of rain, it can’t possibly be 30% rain; it’s either going to rain or it’s not going to, those are the only two things that can happen. So while prospectively, our decisions are probabilistic in nature – in other words, we’re trying to make decisions that have the highest probability of getting us to gain ground toward whatever it is that we wish to achieve – for any given, for any one single outcome that we look at, it’s either going to be good or bad. I mean, it’s either going to rain or it’s not. So when we look, in retrospect, we lose all that sense of the fact that it was probabilistic in the first place. We see this all the time when they say it’s a 70% chance of rain, and then there isn’t any rain that day, people were like, the weather person was wrong. Well, I don’t really know what wrong means in that sense. If I knew that whenever they said 70%, and it actually only rained 10% of the time, I’d say they’re a terrible weather forecaster. But if they were using a reasonable model, and I could take a look at how they came to that decision, and I could see that that decision was actually going to produce rain 70% of the time, if I looked at enough data points, then what I would just say is they made a good forecast and one time doesn’t really tell you very much. So our minds just are not good with that conceptually. This is a problem that I call “resulting,” in cognitive science it’s known as outcome bias, which is that trying to dig down into, was a decision good or bad? In other words, the process that you use to make a decision; did you discover the information that was discoverable? Did you forecast the way that luck might influence the outcome of the decision as best as you could? Which really has to do with what the decision process looks like – that’s very complicated, particularly in retrospect. But knowing was the ball intercepted or was it caught for a touchdown? Did I get in an accident or not? Did it rain or not? When I agonized over what to order on the menu did I like my dish or didn’t I? That is actually quite uncomplicated, that’s very easy to see. What we do is we sort of simplify this problem for ourselves in a way that wreaks havoc, where we say, well, I know what the quality of the outcome is so therefore, I can work backwards to that to the quality of the decision. And that’s just a huge error when all four of these things can be true:  you can make a good decision and have a good outcome, you can make a good decision and have a bad outcome, you can make a bad decision and have a good outcome and you can make a bad decision and have a bad outcome. In a world where all four of those things can be true, you can’t work backwards from the quality of one single outcome.

Brian  

It sounds like you’re trying to make us feel better about having outcomes that aren’t in alignment with the decisions that we made. You wrote that life, like poker, is one long game, and there are going to be lots of losses, even after making the best possible bets. I think for human beings that’s hard to get our arms around. I mean, I hear you, and I want to feel okay about that, but the reality is, if I was planning to go to the beach because the weather man or weather woman said that it was going to be a nice sunny day and it ended up raining, it’s hard for me not to be critical of that. Some of what you’re suggesting sounds like resignation, or at least a reality check that, hey, sometimes you’re going to make decisions that don’t have good outcomes; your four possible scenarios. Are there things we can do to make better decisions and stack the odds in our favor or are we just sort of resigned to the idea that sometimes it goes well, and sometimes it doesn’t go well?

Annie  

I mean, that’s the whole bag, right? So let me just, first of all, say, like, look, I can explain resulting to you. Of course, when you order the chicken at a restaurant and it comes back poorly, you’re still going to think you’ve made a mistake. So I’m very aware of that. The question is, though, how much do you accept that in yourself? Is there something in you that says, well, maybe it wasn’t a mistake, let me actually think about the quality of the decision I made regardless of how you feel, regardless of whether you feel it’s a mistake, because in the end we sort of have to learn from our experiences and we have to be able to close these feedback loops in a way that makes sense. If we’re going to improve our decision making going forward – which is how you actually end up improving your life because it’s the thing that you have control over, you don’t have control over anything except for your own decisions, that’s what you have control over – then it’s really bad if you get a good outcome out of a bad decision. You just assume, oh, that must have been a great decision because I got a good outcome. It would be like going and playing Baccarat, where you’re losing two and a half cents on every dollar that you play, winning and thinking that you should quit your job and become a professional Baccarat player; that would be silliness but that’s sort of the equivalent to what we’re doing a lot of the time. Likewise, you can have a bad outcome and you shouldn’t think that you shouldn’t repeat the decision, that would be as silly as saying, I went through a green light and got in an accident so I better start going through red ones, which we don’t want to do. But on some scale, we do that every single day. So it’s about stopping yourself from doing it as much as possible, which maybe only a little bit more than you would have otherwise. But that little bit more actually really makes a huge difference. And the way that you do that is really getting laser focused on that hidden information problem. Because that’s the thing that you can actually do something about. And in particular, not just trying to figure out how do I really improve the quality of the information, not just the quantity of information that’s going into a decision, but more importantly, how do I actually get different perspectives on the decision that I’m making? Because as I said, we’re all, each of us, are very riddled with bias, the way that we think about the world is shaped through our own perspective and our own experiences. Often, it’s shaped by what we want to be true of the world. If we went back to, for example, the sunk cost effect, the decision that I make about whether I should sell a stock is going to be affected by whether I’ve lost money in the stock to date. But you, somebody outside of me, who has a different perspective, you aren’t subject to that same bias, because you don’t own this stock. So you may be able to see that, you may have a different perspective on what I should do or what my decision should be that kind of helps to cancel my bias out. So if you think about intuitively, why do businesses have teams, the idea is that you’re supposed to bring different perspectives to the table. Now, most of the decision making that occurs on teams actually doesn’t do that. But if you do it right, then you can actually access those different perspectives. And that’s the single most important thing that you can do to improve decision making. The second most important thing you can do is to write it down. So as you’re going through a decision process, and you’re trying to make, like these forecasts of the future, and what are the different options we have? And how do I think those different options might turn out given the resources that we have to put into it? How are different people thinking about the problem? What are the rationales for why they believe what they do? Create a written record of it, because then when you do get a good or bad outcome, you don’t have to guess at what you were thinking at the time, which is often distorted; by resulting by hindsight, bias, there are a few things that can really cause us to mis-remember in a very significant way, what we thought at the time. But if we have a record of what we thought at the time, it becomes much easier to go in and sort of examine the decision we made to try to figure out if there was information that we missed, that might have been accessible at the time, so that we can start to actually disentangle the outcome from the decision process, and then start to improve those processes going forward. But it requires both of those things in order to be able to do it.

Brian  

What’s the tool for being able to document that? So is that journaling or does it take the form of some sort of matrix? What do you recommend on that?

Annie  

So, on an individual basis, you can do journaling, you can actually draw decision trees. You can do weight and rate tables, there are a variety of things that you can do in order to document that process. I would say your mileage may vary on that. In terms of team decision making, now really people don’t have meetings anymore that don’t have agendas. And there’s a reason for that because it creates discipline to the meeting. But for any agenda item, that means that there’s feedback that you’re looking for from the team. And you shouldn’t just, in my opinion, send an agenda out for the people who are going to be involved in the meeting but you should think in advance what are the judgments that I’m trying to get from the team? What are the rationales? What’s the feedback that I’m trying to get? Actually ask the team independently and asynchronously to get you that. In other words, in a sense, where you’re not “reply all,” where each person can offer their opinion. Those are opinions that you would be discovering in the room. Discover them beforehand, so that people are not under the influence of other people in the room and things that have to do with leadership and seniority and charisma, and this kind of thing, and they can offer up their opinion. Then that naturally creates a record. Because now what you have is the judgments of each independent member of the team, generally with some sort of rationale for that judgment, recorded. And that then gets fed back to the group prior to a meeting occurring. Those judgments could be in the form of many things, they could be brainstorms, for example. brainstorming is better done independently and then discussed as a group. It could be questions that you have, like, if you’re on a hiring committee, there could be a question about, on a scale of one to seven, how strong do you think this candidate will be as an executive partner? Where seven is the strongest and one is the least strong and people have to give a judgement there. Then what’s your rationale for this judgment? You gave them a five, why? And then they can write some free form information, that’s another way that you can get judgment. Sometimes it’s a forecast, we’re going to be talking about how long or how many resources this project is going to take. Can you tell me how many weeks with a lower bound and an upper bound? Or, how many months you think this is going to take to complete? How much money do you think it’s going to cost? What do you think the return on investment is going to be? Whatever you might be discussing that you would normally be discussing in the context of a meeting, you can get those judgments in advance, and then that naturally creates a record at least as far as team decision making goes.

Brian  

That makes sense. That’s good. Thank you. Annie, your latest book was just released, and it’s a book about quitting. I have to tell you, and I actually mentioned this offline to you, I’ve wrestled with this concept a lot especially before reading the book. We’ve been taught our entire lives to persist through adversity and motivational quote books – and I’m a big motivation guy – are filled with advice to persevere. I think it was Churchill who said never, never, never give up. Quitting has such a negative connotation in our society but you maintain that same fortitude can get us into trouble because it sometimes causes us to stick to hard things long after we they’re no longer worthwhile and we should have stopped. Tell us more about that.

Annie  

Yeah, I mean, here’s the thing, yes, grit and quit standing in sort of opposition to each other. It’s very clear that we think about grit as a virtue and quit as a vice, like winners never quit, quitters never win. We think about grit as character building. But I’m with you, I think that grit is an incredibly important character trait to have; I think everybody should read Angela Duckworth’s book, “Grit,” I think it’s great. But the thing that we need to realize is that you can’t make a blanket statement like quitting is weak willed and terrible and grit is awesome, without understanding the context. Because really, if you think about it, they’re the exact same decision. If you choose to persevere, you’re choosing not to quit. If you choose to quit, you’re choosing not to persevere. So it’s a matter of calibration. And it will take me one second to tell you all sorts of places where it’s obvious that somebody should quit. So if you’re at the top of Everest, then a blizzard comes in, do you think you should continue to the summit? Should you persevere there? Of course, not. Just turn around. If you’re in a football game, and you get a concussion? Should you keep going? Or should you take yourself out of the game? Obviously, you should quit. If you’re Blockbuster, and you’re selling physical cassette tapes, DVDs, in a physical location and streaming comes on the horizon, should you persist in that business strategy and that business model? Well, no, not at the point that the information is clear that you are to pivot. When you have a chance to buy Netflix, should you probably do that? I mean, most businesses that have gone out of business, including Sears, you can very clearly see a failure to quit. People hurt themselves all the time by not quitting. If you’re in a toxic relationship, is perseverance a virtue? Or is that folly? If you’re in a dead end job that you hate with a business that has a culture that  is making you miserable? Is it character building to stay in that situation or are you better off leaving? As obvious as that is, you can just look at the motivational quotes to understand that it’s not really the way that our minds work. Like we don’t like to quit, we think it’s bad. Yet here I am, I think we’re in agreement about all these situations where quitting is the right thing to do. In the end, I think the problem is this, that we think that quitting is going to stop our progress. It’s going to stop your progress and make it so that you don’t get to your goals as fast as you might otherwise. But it’s not true. That’s only true if the road that you’re on, the thing that you’ve started, is getting you to where you want to go. But there are all sorts of situations in which the thing that you’re doing is actually not a good thing for you to be doing. It’s causing you to lose ground, or not gain very much ground in comparison to other things that you might be doing. And in that case, when you quit at those times, it speeds you up, it actually allows you to get to where you want to go faster, because you get off a road where there’s a tractor trailer that’s turned over and traffic is stopped. And you get to switch and get your car on a new road where the traffic is moving fine.

Brian  

In some of those instances, it’s easy to evaluate in hindsight, but not always easy in the thick of it. So maybe Blockbuster was an easy one and somebody should have seen that. Or Polaroid is a really great example of new technology coming into the mainstream and just completely ignoring that technology, which is basically what Blockbuster did. But there are other situations, like Sears is sort of…I don’t know that there was a point at which…I mean, even looking back in hindsight, a point at which you would have said or I would have said, geez, they should have moved out of this segment.

Annie  

I would actually say…so let me just say first of all, that this is part of the problem, that, as Richard Thaler, who won a Nobel Laureate – I like to listen to Nobel laureates so I’m going to quote with Richard Thaler for you – said, most of us aren’t willing to quit until it’s no longer a decision. In other words, we need to have so much certainty that it’s the only thing that we could possibly do before we’re willing to walk away from something. And obviously, that’s long after you should have walked away from something. So this is a little bit of a forecasting problem in the same sense that the decision to start something is also a forecasting problem, where we’re choosing to start something, a business or whatever it is, a relationship. We don’t really know how it’s going to turn out, we’re making our best guess of how it’s going to turn out and then you learn all sorts of new information. There’s information discovery after the fact. We should be able to react to that so when we get negative signals from the world – that tell us that the thing we’re doing is not going as planned, or that at some point it has stopped going as planned – we ought to be willing to switch. Except we won’t do that, because we’re so afraid that we will have wasted our time, or maybe we could have turned it around. That’s the moment that we go from failing to having failed, which is not a moment that we enjoy as human beings. So we stay the course, despite all the signals blaring at us that we ought to be switching. We need those alarm bells to be so loud as to be deafening before we’re willing to do that, and actually say, okay, it’s over, we failed. If we go to something like Sears, it’s actually very obvious the moment that – at least, this may have even been too late – but we know the moment where they really went wrong. Sears was, we all know, a retail company and it was huge. I think in the 50s it represented one percent of GNP, which is pretty, whoa, so it’s a really big store. But then what happened was Walmart comes along and Kmart comes along and eventually Target comes along on the low end. And then on the high end, you end up with the Saks and Neiman Marcus and whatnot, and Sears kind of loses its place in the retail space. By the 90s it’s no longer the number one retailer in the country and as we know, it ended up going bankrupt. Now, what was the point at which they should have sold? Well, it was Sears that we actually have enough information, there was enough information at the time, actually, to kind of know what they should have done. The unknown story of Sears that people don’t realize is that Sears was also a financial services company. In the simplest sense, back in the 1800s, when they had a catalog, they had to offer their customers credit, so they had a banking division. And then along came the late 20s and 30s, when people started having cars and it started to eat into their catalog business so they started to create physical locations that people could drive to, to buy things. When they did that, they realized, oh, people have these new cars, maybe we should start selling insurance for the cars because they’re driving the cars to our stores. We could have a desk in the store that sells them insurance for their cars. So they founded a company called Allstate Insurance. I don’t know if you knew that Sears owned Allstate, but they did. Allstate obviously was booming and then they ended up becoming the largest insurer of any kind, of personal liability and also life. Then, that was going so well, that in the 70s, they acquired a company called Dean Witter, which for those who are older will remember, it was a big financial services company, stock broker. They also founded the Discover card, so that was a Sears entity. Then they also bought Coldwell Banker, which was a real estate company. Then what happened was – this was right around the time that they have this booming financial services empire – that the retail business really starts to flail. So it’s faltering and it’s starting to lose money, and the shareholders are demanding action. And the board makes the decision that the solution to all of this is to get back to their retailing roots. So they decide to sell all the financial services off. So they sell off Allstate. They sold Dean Witter to Morgan Stanley – it was Dean Witter Discover at the time – to Morgan Stanley, and at the time that represented 40% of Morgan Stanley’s worth. So think about what Morgan Stanley is worth today if you want to understand how big that transaction was. I think Coldwell Banker ended up merging with some other companies and became Realogy. I think their market cap is something like $2 billion, and I believe that Allstate, its market cap is something like $40 billion. They sold that all in the 80s and early 90s and then they went broke. So when were they supposed to pivot? Well, I would say that that’s the moment you have one part of the business that’s losing money, and you have another part of the business that’s making money hand over fist. Now, why on earth would they sell the part of the business that was making money hand over fist? Because they were a retailer. It’s who they were and that’s the hardest thing to quit. You’re giving up your identity and saying this thing that we’ve been since the 1800s We’re now we’re not going to be anymore in order to do this other thing. But I hope that you have the same feeling as I do of just shuddering to find out that they owned Allstate and still managed to go broke. So I think yes, in retrospect, it’s always easier to see the moment that you should have quit because you have much more certainty about it, but you can do it prospectively as well. I mean that that’s the thing is that those signals are there. And for Blockbuster, let’s remember they had the opportunity to acquire Netflix, the signs were there. Then sometimes you have this happen purposely. So Sony, which had the Walkman, they internally knew that digital music was coming. There was a proposal to develop something that would have been like the iPod, that would be some sort of digital music carrier. They deliberately chose not to do it for fear of disrupting their business, which was the Walkman. They didn’t want to disrupt themselves. They recognize that that there was a problem, they recognized that the signals were there that things were going to change and they chose not to disrupt their own business. Of course, that caused them to go broke. And this isn’t just about businesses, this is just kind of how we live our lives, is that we ignore these signals, we rationalize them away. We’re selling off Allstate all the time in order to maintain whatever it is, who we are.

Brian  

Sure. Let me give you a different example; Allstate is actually a nice segue to into it because Allstate is a big NFL sponsor, obviously. We’re a couple of weeks into the football season as we record this show, and I’d like to get your take on two of the greatest players to ever play the game, both of whom have ties to the state of Michigan, which is where I live. Annie,  Barry Sanders – I don’t know if you’re a football fan or not – but Barry Sanders was one of the greatest running backs ever. He rushed for more than one thousand yards – which is a lot – in each of his ten seasons as a Detroit Lion. Then at the age of 31, at the top of his game and on the cusp of becoming the leading rusher in NFL history, Sanders walked away. That’s one guy. Tom Brady, arguably not only the greatest quarterback to ever play the game, but perhaps the greatest athlete of all time some people say, retired from the NFL recently, and just 40 days later announced he was coming out of retirement and of course, is back this season with the Tampa Bay Buccaneers. Share your thoughts on each of those decisions and how they fit into the decision making process you describe in “Quit.”

Annie  

Look, first of all, I think that when you decide to quit on a personal level it has to do with your own values. Some people – like Seinfeld, for example, Phoebe Waller-Bridge of the show, Fleabag – they have a desire to not get that certainty that things have gone downhill. That’s not what they want. They don’t want to be in a situation where it’s clear to the whole world that they need to walk away because Seinfeld has jumped the shark. So for some people, that’s what they value; I don’t want to end up being the laughing stock or I don’t want people people to talk about the day that I jumped the shark, I can see right now that I’m at the top of my game, but I don’t know what next year is going to bring, for me that next year might might start to be the decline and I don’t want to be around for that. So I will tell you that that’s an incredible act of courage for Barry Sanders to do, to walk away like he did or for Jerry Seinfeld to walk away like he did. It takes an act of courage because people question it, they are like, why are you doing that, you’re at the top of your game, what are you, an idiot? But what’s interesting is that on the flip side, when someone plays maybe a season too long – which I think that most people think that Peyton Manning did – everybody’s like, what an idiot, why didn’t he quit the season before? Well, why the season before? You know what he did, he got pretty darn far and had he quit the season before everybody’s head would have exploded. So I think that that’s the first thing to remember is that that ability to walk away when you’re on top, actually, takes an incredible act of courage to say, I think there’s too high of a probability that things are going to start going downhill and I don’t want to end up saying, oh, how could I not know that I shouldn’t have played that extra season. Now for some people, maybe like Brady, it may just be his life, that he loves playing football, and he’s going to get every last bit out of it, regardless of what anybody says about him. Now, he has a little bit of the comfort of doing that, because he’s done so well. But Peyton Manning certainly did really well and people still sort of say like, well, why did he stick around? He just stuck around a little too long. But for Brady, that might be okay, because the thing he might be getting out of that – which is the enjoyment of the game – might be enough that he wants to do that and I think that that’s a value decision for him. I think that either side of those equations are fine if you’re making that kind of value decision. Where I think that it goes too far in not having the courage to walk away is when you’re 300 feet from the summit of Everest and there’s a blizzard. You’re so afraid of failing that you won’t walk away from that situation and you continue on trying to make it up there anyway, because you’re just so darn close and then you put your life at risk, you put your family’s happiness and well-being at risk. Luckily, Tom Brady isn’t doing that to anybody. He’s living out his life’s values, which I think is really important. But I think there’s all sorts of situations where that particular tendency becomes really damaging.

Brian  

So to bring things full circle, you agree with Kenny Rogers.

Annie  

Yes. And what I really agree with Kenny Rogers about is, if you remember, it’s “know when to hold them, know when to fold them, know when to walk away, know when to run.” And what I want to point out about that is three of those things are about quitting, only one of them is about staying. I think that’s the thing that we have to remember is that as much as we think that we need to encourage grit, human beings are naturally gritty. That is our natural state of affairs. Now, I’m not talking about teenagers, I’m not talking about little kids. I’m talking about like people over 25 years old. Our natural state is to stick things out. I think that we see that all the time, because I imagine you’ve probably left relationships or left jobs or whatever, where after you finally do quit, you look back and you say, oh, I should have done that sooner. I don’t know anybody really, who quits things and says, I did that too soon. I feel like almost always people are saying, I should have done that sooner and that’s because all of these forces keep us at what we’re doing already. There are all these things that stop us from walking away from things, not the least of which is that grit is a virtue and quit is a vice and we don’t want to be seen as being weak willed or lacking character. So the thing that I want people to understand that the Kenny Rogers song is really getting at is that you have to repeat three times for everyone that it’s okay to walk away; that this is the thing that we need to do and often it’s an act of courage. Think about how much courage it takes 300 feet from the summit of Everest to walk away, knowing that people are going to say, you got that high and you didn’t finish? I mean, that takes a lot of courage to know that that’s the right thing to do so that you can be alive, so that you can live and have all sorts of opportunities available to you. I think that that’s actually quite hard for most of us to do.

Brian  

Well, it’s interesting. Even in the case of Everest, and even facing, maybe, imminent demise, I think people are still running through the tens of thousands of dollars that they’ve invested to get there, the year or longer investment of time and energy into doing that and it will have been wasted. They didn’t get the prize. They didn’t complete their their goal.

Annie  

Brian, think about what a shame that is, they climbed like 29,000 feet in the air, higher than almost any human being ever gets. What an accomplishment. But goals are pass/fail. Progress along the way matters very little. It’s like if you run 25 miles of a marathon, you ran 25 miles, you failed, because you didn’t run the last 1.2. So think about what that does to us in terms of how much we’re willing to run headlong into something that is no longer good for us simply because we have to get to the finish line. That’s why I think it’s such a courageous act to actually walk away, to say it’s okay, the progress I made along the way was amazing. I was 31, I was an incredible running back, I accomplished what I wanted to in football, and it’s time for me to move on to something else. That’s a really hard decision.

Brian  

Absolutely, but Barry Sanders certainly feels that it was the right one. Annie, you’ve given us so much to think about today. Thanks for your new book, “Quit:  The Power Of Knowing When To Walk Away.” And I think that as a result of the show today, our listeners and viewers will become better decision makers. Certainly as they read your books, they’ll make more informed decisions, and hopefully know when to quit and when to move forward. Thanks so much for being on our show today, it’s been great to have you. 

Annie  

Thank you so much for your time.

Brian  

Thanks for tuning in to LifeExcellence. Please support the show by subscribing, sharing it with others, posting about today’s show with Annie Duke on social media, and leaving a rating and review. You can also learn more about me at BrianBartes.com. Until next time, dream big dreams and make each day your masterpiece.