The Power of Knowing When to Quit | Annie Duke

24:43So you've got 31 people heading up Everest this one day. There are three climbers. Hutchinson, Toski, and Kositsky are these three climbers who are part of an expedition of eight. eight clients, three climbing Sherpas and an expedition leader. So on the day that they leave, there's a bunch of expeditions trying to get up the same day, right? So it's a pretty crowded mountain. So, but these, these are just these three guys who are climbing with this one expedition. So they leave for, for the summit on summit day and you leave at like midnight from camp four and they have something called a turnaround time.

25:17And a turnaround time just basically says, no matter where you are, I don't care if you've made the summit or not. If it gets to be 1 PM, you have to turn around. And it's to stop you from descending the mountain in darkness, which is really dangerous. In fact, eight times as many people die on the way down as on the way up. So they're really trying to sort of protect you from the way down. And one of the ways to do that is to make sure it's light out when you're coming down the mountain. So 1 p.m. is the turnaround time. Again, there's like over 30 people trying to get up in the same day. So it's super crowded and super slow.

25:48And their expedition leader comes up to them and they say, oh, just, it seems like we're moving really slow. Like how long do you think it's going to be until we get to the summit? And the expedition leader says, oh, I think it's going to be about three hours. And then scrambles ahead to try to make up some time. So Hutchinson holds Taskin and Kaczynski back and says, oh, we have a problem. It's already almost 1130. And so by my count, like we won't get to the summit till 230, even if we really sped it up, we're not getting there until two. So that's well past the turnaround time already. So I think we should turn around now.

26:21They have a little, you know, they have a chit chat about it, but they all end up in agreement and they turn around. And just so you know, separate and apart from one other person, they're the only three people who turned around and the other person turned around because they became blinded. So it wasn't even their choice. They just couldn't continue up. So these three people out of all of these people turn around because they realize there's no way they're going to get it in time. Think about how heroic that is, right? Like 20 something people are heading up the mountain and maybe they're going to make it to the summit.

26:51And you're going to be sitting there left with like the, why was I such a coward? I should have kept going. They all made it to the summit. I just paid$75 ,000 and trained for like nine months to do this. And now I'm not going to make it to the summit. So I consider this like an incredibly courageous act, which I think is counterintuitive. Most people think that sticking to it is courageous. I think this is very courageous, right? So the question is like, okay, so why haven't you heard of them? Well, it's probably pretty obvious because it's not a very interesting story unless you're really obsessed with the topic of quitting, right?

27:23Like nobody's going to make a movie out of it, except there was a movie made out of it. And there was a book made out of it. And there was a documentary made out of it. And it was all, you know, it's Into Thin Air by John Krakauer and the movies, the documentary in the movie Everest, where Rob Hall famously ends up on the top of the mountain, getting to the summit at 2 p.m., waits for his client, Doug Hansen, to get there, who doesn't get up to the summit until 4 p.m. Notice now we're three hours past the turnaround time. Doug Hansen collapses immediately and dies. And Rob Hall at that point has no energy whatsoever and can't move down the mountain at all.

27:59And he dies on the summit as well. So here's the rub. These three guys, Hutchinson, Tatsuki, and Kisitsky were part of Rob Hall's expedition. Rob Hall's the one who told them it was going to be three hours until they got to the top of the mountain. The other person who couldn't get up because they became blind was Beck Weathers. It's quite famous. And so the question is, why is Rob Hall the protagonist? Why is he the hero of the story? That's kind of the question that we have to ask ourselves. And I'm not trying to knock on him because he was obviously waiting up there for Doug Hansen. But the problem is he knew the turnaround time and it's single file up the mountain, and he could have turned back around and gotten Doug Hansen on the way down.

28:37but he didn't do that right so he he got what we would call summit fever like by proxy right because he he wanted Doug Hanson to summit so badly um but I think that when we think about that year we think about that that as the act of heroism but I'm wondering why we don't think about these three people who turned around because they were supposed to you know and got back down the mountain safely why aren't they heroes right that's the question that I have in terms of the way that we think about this stuff. Are you tired of feeling stuck and ready to achieve success in your career, relationships, and life in 2023?

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30:04Johnny:Well, with it being the new year, this idea of goals and how these goals create finish lines and myopia towards things that actually lead us astray from quitting, I think it'd be helpful to really discuss that as people are thinking about resolutions and thinking about setting themselves up for success, but not realizing that these goals, whether it's summiting Mount Everest or whether it's completing the marathon can actually lead you into places that might be fatal in the case of Mount Everest. Right. You know, I mean, and I just want to say Rob Hall was like an elite alpinist up until that moment had made amazing decisions.

30:40There were some forces working against him, particularly that Doug Hansen had been in an expedition the year before and the whole expedition had failed to summit. He spent a lot of time trying to convince Doug Hansen to come back. So this sort of piled on a lot of cognitive debris that I think affected his decision-making negatively. So I'm not trying to knock on him. He was great. I just wish that people would see these other three people as heroes also. Yeah. So the thing about goals is they're really funny things, right? That we know that they're good, right? I mean, this is the thing, like everything, nothing is, you know, I said the opposite of a great virtue is also a great virtue.

31:17So, you know, grit is a great virtue, but so is quit. Goals are great, but they're also bad. And understanding what can cause them to be bad can help you to make them better, I think. So goals are really good motivators, right? Because they give you a finish line, a very clearly defined finish line that you're heading toward. And we know that that's going to cause people to achieve those finish lines more often. And actually it can help. I mean, it's a really good motivator. The problem is that goals set a very clear finish line and they can cause you to continue to head toward the finish line.

31:52So what's good about goals is also what's bad about goals, because if the finish line is still the right place for you to be running toward, having that goal is amazing because it will get you to keep running toward it, right? But if that finish line is no longer the right place for you to continue to be running toward, it's going to get you to keep running toward it. And I think that one of the most amazing examples of this comes from this woman, Siobhan O 'Keefe, who was running the 2019 London Marathon. And on mile four, she started having this really bad pain in her foot. And then on mile eight, her fibula bone snapped.

32:31She broke her leg. So obviously, like the medical tent was like, stop running, please. Please stop. You shouldn't run anymore. but she didn't pay attention. She ignored them and she finished the race. 26.2 miles. She broke her leg on mile eight. So I think there's a couple of things here, right? One is like, let's just step back and be logical about this. She's a marathon runner. She loves it. She's obviously jeopardizing the chances that she might ever run a marathon again in order to just complete that one, right? Like, and who knows when she's going to get back and she could end up with like a compound fracture or maybe need surgery or whatever, like really not be able to run again because she's continuing.

33:11So I think hopefully, hopefully we can all agree on that. But the second thing that's really interesting is like, tell me if you share this intuition, because like I've written about this and I wrote a book about quit and I'm still like, what a badass, right? I'm still like, oh, I wish I were that gritty, man. That's amazing that she kept running, except it's not, but I can't help but think it is because that's the way that we view that kind of thing, right? Like we view it as this amazing, you know, feat of mental and physical toughness, but it's kind of, it's dumb to keep running and you should actually walk off the course or have the medical people carry you off at mile eight to the hospital to go get your leg attended to.

33:56And yet we think she's such a badass. Well, there's people who've built their career on grit. I'm not sure if you're familiar with David Goggins, who was another guy with a story of just grit and determination and his whole thing is never quit. And he has run ultra marathons and have put himself in the medical tent and has busted multiple bones in his feet. And I remember when I first heard his story, how enamored and just awestruck I was of that guy and thinking if I could just get a spoonful of that, how much better I would be. And then, and then of of course, chasing that and looking to acquire that and wanting to acquire more than that teaspoon.

34:41But yeah, at some point, you have to look out for future you and what you want to be accomplishing. And certainly if you love something like that, such as running so much, you're going to want to take precautions. So you're able to do that for the rest of your life. Yeah, I think that's right. And I think that the thing that we forget is that we lose sight of the other things that we could be doing. Whatever it is that we choose to do, which we've chosen under conditions of uncertainty, it may be the best thing at that time, but it could turn out, you know, over time, the world could change or your preferences could change and it's not the right thing for you to be pursuing anymore.

35:18It could be that it turns out it wasn't the right thing to pursue in the first place. It's just that like, it was a good decision at the time because you didn't have all the information, but now you've collected a lot of information and, you know, you've realized it's not the right thing to do and you ought to go switch to something else. And I think that there's a lot of, I know there's just a lot of examples of people who quit well. I mean, so here's kind of the opposite of David Goggins and it's Alex Honnold. So Alex Honnold is a free climber. If anybody's seen the movie Free Solo, they're familiar with him.

35:49He summited El Capitan with nothing, no ropes, nothing. It was just like climbing with his fingers in his toes. You know, obviously an incredibly gritty human being, but he gave up. People just kind of don't remember it. He was climbing for the film. And when we were talking before about these issues of external validity, how are other people going to see us, right? So think about you've got cameras now pointed at you.

36:14Johnny:Yeah, they had to set up the cameras. They had to climb ahead of them. They had all of these people on board to light everything to get this production underway. So his quitting didn't just impact himself and his internal goal, but everyone who took time off to do this, yeah. By the way, I think that's totally badass that he did that. So what happened was, if you watch the movie, and this sort of gets lost because we think about the fact that he did successfully end up summiting. But the year before he actually summited, he had been practicing his climbs, and he slipped. And he messed up his, I think it was, he messed up his foot.

36:48So he's trying to get himself back. And it's now sort of the last moment where he can attempt to climb. He decides that he's going to try it. And he gets up to pitch six. And he just he purposely fouls his climb because he just realizes like his body doesn't feel right. And obviously, this is a really dangerous thing to do. He doesn't have any ropes to catch him at all. So in the face of a bunch of people hanging off a mountain who are friends of his, who had invested a lot of money in this project, which may never be completed. I mean, obviously there's no movie if he doesn't actually make it to the top, right?

37:23He just purposely fouls his climb because he realizes the expected value has gone against him. I mean, for me, free climbing, the expected value would always be against me, but not for him. Like he's like David Goggins, right? Like he's amazing, right? He's doing something that almost no humans, well, this thing he's trying to do, no human has ever done. But he has the wherewithal to say, no, I need to turn around. This is bad. If I keep going, I'm going to fall off this mountain and then I'm never going to get another try. So he goes back and he heals and he comes back the next year and he successfully makes it to the top.

37:56So I think that people would see that as a story of grit, but I see it as a story of successful quitting. And I think that that's the thing is that it's to distinguish grit about the long, the long haul, right? Like what's the long cause, but like lots of quitting along the way to make it. So that thing that you're trying to actually achieve will, will be successful. And I think it's such a good, I mean, in a lot of ways, I think Alex Honnold ends up being like an allegory for the way that we should be thinking about these types of decisions.

38:23Johnny:I think a blind spot for us around quitting is there feels like there's a finality to it and there's almost nothing to be gained. So the founder of Slack and that story of creating the video game and pushing and pushing and finding some success and even investors cheering him on and saying, stick with it. and him looking at the expected value saying, well, the amount of effort we put into this marketing effort and the rate of decay of people staying on and paying was going to be a Herculean effort for them to keep this game going, to keep those employees paid and to keep investors happy. And he pulls the plug when everyone around him, I mean, the staff wants to stay, they're excited about the project.

39:06Johnny:The investors have money staked in it. They're excited about the project. and it would have been very easy for him to just walk away, quit. But he was able to find a tool that they had built internally had value. And bringing that tool into the world created slack out of quitting. But yet for many of us, when we think of quitting, we're like, well, there's nothing to be gained. We see bumper stickers around this idea of like, it's final, it's over. I'm never going to summon again. I'm not going to get this opportunity to make the documentary. I'm not going to get another investor. but that's really not the case.

39:41Johnny:And that's a blind spot that we have. Yeah, so that blind spot is called opportunity cost neglect. We have a name for it. I'm giving you the cognitive science, like behavioral economics term for it. It's called opportunity cost neglect. So this is what we can think about. Basically an infinite set of opportunities that are available, but you can't do them all at once because we're human. We've tried. Multitasking is not really a thing. So like, look, if you're in a monogamous relationship, you're in a monogamous relationship, right? Like all the other people that you could be in relationships with aren't available to you in that case.

40:14If you're in a job that's, you know, say a nine to five job during that nine to five period that you cannot be in another job, right? Because we just physically can't do that. So what we have to think about is when we choose to engage with something, then we're also choosing to not engage with all the other opportunities that might be available to us. Some of those opportunities have costs associated with them. In other words, if we did them, our life would be worse. But lots and lots of opportunities have gains associated with them. And when we reject those, there is a cost to that. We're rejecting the gains that are associated with the other things that we might choose to do, right?

40:54And this is what we lose sight of, right? Is we think when we quit hard stop final, we're stopping our progress. But that's not true because you don't really quit things in general to not start something new. And if you're starting something that's better, then you're actually going to speed your progress up. So like contrary to popular belief, quitting actually speeds you up. It gets you to where you want to go faster. And I think Stuart Butterfield is such a great example of this. because so he has this company, HoneySpec. The game that he's developing is called Glitch, which is this big world building, multiplayer, cooperative online situation.

41:30It's a critics darling and he has some diehard users. He sort of has this, you know, he really has the suspicion that not enough diehard users to make the game actually worth the time of the people who are working for a lot of equity. And he has 6 million in the bank. I mean, so Johnny, when we were talking before about like, you have to be so certain to walk away. He's got 6 million, right? Like he can go for a very long time at this point. So they do this big marketing push. They are really growing their users. And they actually have in November of 2012, they have their largest weekend ever, like their biggest weekend ever for user acquisition.

42:07And Butterfield goes to bed on the Sunday after that last weekend push. And he really can't sleep. And it's because he's doing the expected value calculation, which is, oh my gosh, it's going to be 31 weeks to break even if we can maintain this growth, which as you said, AJ, no, right? You're just going to get obviously attrition. So he just realized like that's completely absurd. And at that moment, he realized it wasn't a venture scale business and he returned the capital to the investors. Now, here's what I think is really interesting. He didn't quit to go develop Slack. He quit because he realized that this was not worthwhile.

42:46And he actually said something really interesting when I talked to him about it. He said he felt he had a moral obligation, a moral obligation to his employees, which is the opposite of the way that most people would think. Most people think I have an obligation to continue to employ those people. They have worked really hard. I need to let them keep their job. And he said, no, I have a moral obligation to let them go because they're brilliant and they're taking much less cash than they could get on if they went out onto the market into another job in exchange for equity that I have now determined is not worth their time.

43:20And the minute that I know that equity isn't worth it, I need to let them go. I have a moral obligation to do that, which is one thing that I think makes him such a special person that he was able to see that framing. So anyway, he shuts it down. Then he says, hmm, you know, I'm an entrepreneur at heart. So this is now going to be his third try, which we talked about. It's going to be his third try. He says, I'm an entrepreneur at heart, and I want to develop something. And he starts thinking about this internal communication tool that didn't even have a name. And here's the thing. It had been there for two years.

43:50So when we think about opportunity costs, think about the fact that Slap was under his nose for two years, and he never considered it as a product. It took quitting the other thing for him to turn his attention and say, you know, people really like this thing. Maybe that should be the product. And that's the problem with opportunity cost neglect, right? Like when we start something, we get so myopic. And then all of a sudden, when you quit, sometimes that's when you see all those opportunities that would have been available to you. And that's when he saw it. He switched, obviously developed Slack.

44:23We know he sold it to Salesforce for over 20 billion. And by the way, just, I think it was this month, he just quit again. I'll be interested to see what he's going to do next.

44:32Johnny:I want to jump on this part around the sunk cost fallacy and then bring it into endowment because I think many in our audience are aware of sunk cost fallacy. But you point out in the book, even being aware of it doesn't help us break that cycle. Not even in the least little bit. You know, the high speed train project, you know, hit a nerve for me because I've been here for 15 years and going on and on. And then reading in the book just how far off we are from this, but yet more and more billions are being put into a project that's a train to nowhere. You know, when I published the book, the budget was up over$80 billion.

45:09It's now up over$105 billion, like just even since I know, right? So that was just the latest revision. So they're trying to connect San Francisco and LA basically, right? And it's a disaster. So the budget was supposed to be$33 billion with a completion date of 2020 or 2021. It was like right around now. Needless to say, no part of the line is operational at the moment. And the budget has now been revised to over$105 billion. And here's what the amazing thing is. So they approved the bond in 2010. They start building their first section of track, which is a section between Madera and Fresno in 2015.

45:52Johnny:Very highly trafficked route. Yes, right. Exactly. On flat land. So here's the thing that I think is so nuts. Somewhere, I think it was like 2016, some genius says, I think we might have a problem. And the problem was that there's two huge mountain ranges in California. One is to the south of San Francisco, right? It's called the Diablo Range. And the other is to the north of LA, which is called the Te Chappie Mountains. Okay. So they're both like these big mountain ranges. So there's a reason why the Central Valley is not really connected to San Francisco and LA in the first place, right? Because like if anybody's ever driven from San Francisco into the Central Valley, it's like a very precarious pass.

46:40It's really slow. It's hard to get through because they're mountains, right? And we build trains on flat land a lot in this country, but we don't really build trains means we haven't really figured out the mountain thing. And it's in a seismically active area. So the problem is they're like, I don't know if we can actually blast through these mountains without starting an earthquake. It's actually quite bad. So they say, we have this engineering problem. So first of all, you should say to yourself, well, did they start in the wrong place? If the problem is really the mountains, why are they building track between Madera and Fresno?

47:14But here's what happened. So that's the moment where they say, it's not going to cost$33 billion, It's going to cost like 80 billion. And we're not even sure if it will be that low because we really don't know what's going on with the mountains. So this now gets shot over to Newsom in 2018. And they're like, look, I think we might have a problem because we really don't know what's going on with the mountains. Seems like a perfect time to go. It seems to me that we could use that at this point, they had spent about$7 billion, right? It seems to me that we could use that$73 billion for something that would be greater good to the taxpayers of California.

47:46And instead, Newsom approves two new pieces of track, sections of track, one between Bakersfield and Merced, which, again, doesn't traverse any mountains. It's on flat land. And then the other one, this one's really good, is between San Francisco and Silicon Valley, which is like, I think that's already pretty well connected, right? So none of them are like addressing the mountains. So why aren't they stopping? Well, it's pretty easy to see why they're stopping because they don't want to waste the taxpayers' money, right? We've put$7 billion into it. Now I think it's up to$9 billion. And if we abandon course now, then we'll have wasted all of that money that we put in.

48:25And that's where we can really see the problem with the sunk cost fallacy. Because cognitively, we're thinking about it backwards. We're thinking about, I spent$9 billion, and I don't want to have wasted that. And so I'm going to take that into account about whether I continue. Instead of thinking about it as a forward-looking problem, should I, at this point, now spend$100 billion more? in order to complete this thing? Because if you shouldn't, if, and this is how you would get to the answer, right? Let's imagine that we had spent$0 in taxpayer money. And I said to you, it's going to cost over a hundred billion dollars.

48:58And we have no idea if we can blast through these mountains. The question is, would you start it today? And if the answer is no, then you shouldn't keep going because every dollar that you put in after the point that the answer would have been know is a dollar that you're actually wasting in service of trying not to have wasted the$9 billion that you already spent. And we see this over and over again, not just with public works projects, but with investors who don't sell investments. There's a lot of people in crypto right now who are refusing to sell. And I've seen them say, I bought it at$50 and it's trading at$23.

49:36I can't sell because I won't get my money back. What? But that money's gone, right? Would you buy it today at 23? That's the question that you should ask yourself, right? Got a Sam's Cafe pizza order up. You know the best part about this spicy Italian sausage? I voted for this topping. Yeah, just another perk of being a member. Come join us. Sam's Club.

49:59Johnny:Well, I think that's a great point to make for those who are now a little chagrined over all of these biases that we're hearing about and recognizing in ourselves, because even the professionals, the best investors, as you talk about in the book, who have access to all of these numbers. On the gain side, looking at what to buy, they do really well. They analyze the numbers, they crunch everything, and they outperform. But on booking the losses, that's where the bias comes up, out of sight, out of mind. And they're not actually tracking the losses in a meaningful way that would allow them to gain even more reward.

50:34Johnny:So even when we have all the facts and data, you know, my wife was laughing while reading the book. She's like, well, have these politicians never driven between LA and San Francisco? Like, of course you cross two mountain ranges. It's like, well, they're probably flying in private jets, so they've never really thought about it. But anyone has seen those mountain ranges. You've taken that route. The investors have this data. The crypto investors have the data, but they're not acting on it. So Barry Staw, who was like, he really was like a giant in the field, starting in the 70s, started doing some very foundational work on this issue of what this broad problem is called escalation of commitment.

51:11So you can see that umbrella term very easily applied to the bullet train, right? It's like, you said you were going to commit this amount of money. Now it's going crappy. And now you're increasing your commitment by$100 billion. Like, yay you, right? Right. So he really was thinking about that actually in terms of the Vietnam War, which was he had come of age along with people like Hal Arx and Jeffrey Rubin, Joel Brockner, come of age during the Vietnam War where they saw the United States get really stuck in that war, despite the fact that it was very clear that we were losing. And just seeing, you know, throwing not just like money at the problem, but more bodies at the problem, right?

51:53You can see this with Putin and Russia right now, right? I mean, same thing, like 300 ,000 conscripts. Let's just throw them onto the front line, right? So he was thinking about this escalation commitment. And this is where that intuition is, right? That we have an intuition that we're going to stop. That when we have the information that we need to know, like, should we keep going or shouldn't we, that obviously we're all going to stop. But I think it takes two seconds to see that that's not true. All you have to do is say, look, raise your hand if you've ever had a friend who's been in a relationship where you can very clearly see that they're unhappy and they ought to break up.

52:30And yet it goes on for months or years after the point where it's obvious to everybody else. So do you think for a second they're special and that's not happening to you? Of course, it's happening to you. It's happening to all of us. And to your point, AJ, professional investors fall into this trap as well. Not just some of these other fallacies, but there's also this kind of out of sight, out of mind, which we really started this conversation with, right? Which is we don't even hear about the people who quit. And in the investing world, once you sell something, you don't track it. So we create all these shadow books of like theses that we might want to trade.

53:04And if something's in our portfolio, we're obviously tracking it because it's in our portfolio. We can see what our P &L looks like on a daily basis if we want to, right? We can watch that thing tick up and down. So we're getting all sorts of feedback about it. But once you sell it, it's gone. So the amazing thing is that they're not even checking. So So they're looking at how their buy decisions are doing against what a random strategy or beta or indexing the market would look like. And they're really good at that. They're like 120 basis points better than that. This is work that's been done by Alex Imas and a bunch of his collaborators.

53:41But when you look at the sell decisions, they're doing 70 basis points worse than a random benchmark, which is just free the capital up from anywhere in your portfolio randomly. right and but they don't know it because that's the problem with all the quitting right is that you don't see the quitters for every person who doesn't give up and spend 16 months to raise their seed round you don't see the hundreds of people who kept going and never succeeded we just don't see them and so it's impossible for us to actually sort of try to make a reasonable decision if we're not even tracking it.

54:19Johnny:Last point I want to make, one of our biggest frustrations as coaches is watching people stick to the status quo. And this is so powerful that many of us feel stuck even though we have these large goals and we know what's better for us. So I'd love to just discuss the omission commission bias because it impacts so many of us. And it's so easy, as you say, to see it in others, right? We can see the status quo impacting our friends and family members and get frustrated. But when we're faced with it ourselves, it's a really powerful bias. In order to talk about status quo bias and omission co-mission bias, I think we need to step back and talk about loss aversion for a second, because this is where the interaction becomes really bad.

54:57So loss aversion is foundational work originally from 1979 from Daniel Kahneman and Amos Tversky. Daniel Kahneman, also Nobel laureate in the economic sciences. Amos Tversky wasn't alive at the time that was awarded, so he didn't receive that. But this is part of prospect theory. And loss aversion basically says that we really don't like to start things that are associated with some chance of loss. And in fact, we over-index on the losses in comparison to the wins. So this actually becomes a really big problem in enterprises, right? Is that if you swing for the fences, there's a really high chance that you lose in the short run, right?

55:40But if I do something that's an incremental change, even though the expected value is lower, there's just a lower chance of any kind of big loss that's associated with it. And so what you'll see in enterprises is that you get a lot of incrementalism and consensus-driven decision-making over these sort of big swings that people are willing to make, which is how a startup can beat an enterprise. The startups are taking more big swings, right? Okay, so that's loss aversion. And then there's another concept, which is called sure loss aversion, which is also from Kahneman, which is when we have a loss on the books, we don't like to convert it into a realized loss, right?

56:16So we don't want to take a paper loss and turn it into a realized loss or a sure loss. So you could see this, it's related to sunk costs. So if I buy a stock at 50 and it's trading at 40, if I sell it, then I have to realize that$10 loss. But if I hold it, I could maybe get the money back. Right. So this also, so that makes us not want to convert. Okay. So now we've got this stage set with loss aversion and short loss aversion. So now let's think about how that interacts with a status quo bias, which is a preference for the status quo. And then also omission, commission bias. So omission, commission bias, this is something from John Barron, where we see failing to act in a different light as acting.

56:59All right. So I'm sure you're familiar with the trolley problem. This is kind of an omission commission problem, right? So you've got five people are in the way of a trolley that's going to come run them over. There's a lever, you can pull it. But if you pull it, it's going to be diverted onto a track where one person is going to get hit by the trolley. And people are very reticent to pull that lever because one is sort of like the state of affairs. Like, it's just, what can I do? It's just nature. And the other is an omission, a commission, rather. It feels like an act. And we don't want to do that because I'm an act.

57:37So another place where this omission, commission bias, and this is where some of the original work was done, is on vaccine hesitancy. If it's the plan of nature for you to get measles or COVID or something like that, we'll prefer that to a possible bad outcome that could come from the vaccine itself. even if the chances of harm from the vaccine are much, much lower than the chances of harm from the disease. It doesn't matter. We'd prefer to allow nature to run its course basically, as opposed to do something where we change the state of affairs. So now we've got that all figured out. So let's bring them all together now.

58:20It turns out that loss aversion is asymmetric in the sense that where we're recruiting that fear of things going wrong, that fear of realizing those downside outcomes is when we start something. In other words, when we change the state of affairs. So if we switch from the status quo, and sticking with the status quo is an omission, right? If we switch from the status quo to something new, in other words, like I quit my job to start a new one, or I quit my relationship to start a new one, or I shut a project down to start a new one. And as we're trying to navigate that decision, we get hyper-focused on the losses that might be associated with the new thing that we're doing in a way that we aren't hyper-focused on those for the thing that we are already doing.

59:12So let me give you an example to make this clear, because that was a little bit egg-headed. So I'm going to make it less egg-headed right now.

59:18Johnny:Thank you. So there's this woman that I was talking to named Dr. Sarah Olston-Martina. She happened to write me when I was about six months into writing this book. and she had a decision about quitting. So I got on a Zoom with her right away. I was like, listen, I'm writing a book. I want to talk to you. So she had been an ER doc for a really long time and then had gotten promoted to be a hospital administrator. And for a wide variety of reasons, she just was not happy in her work like at all. It was particularly was interfering with her relationship with her kids. She had a two-year-old and a four-year-old.

59:50So she gets offered a new job, evaluating cases for an insurance agency. so she gets on the the zoom with me and she's really just telling me like how incredibly miserable she is in her work she just really hates it and she's been miserable for a very long time so that goes back to like we really quit kind of too late anyway because she'd been miserable for like three years she'd been considering quitting for three years so I said so a little confused I said to her okay so you have this other job offer already like why aren't you taking it. And she said the sentence, because what if I hate that job too?

1:00:28Like that's the sentence, right? I sort of paused and I said, oh, right. Because loss aversion is asymmetric. Here she is in a job which she freaking hates. And she's not thinking about, but what if I continue in this horrible job that I know I'm going to hate? And instead she's not focusing on the good that could come out of the switch. Instead, she's focusing on the fact that maybe it wouldn't work out too. So now I need to get her to stop doing that. So I just asked her basically the expected value question, which was, I said, it's a year from now you've stayed in the job that you're already in.

1:01:00What is the probability you're happy? And she immediately said zero, like it's a 0 % chance that I'll be happy. I've been miserable for three years. Like at this point, nothing's going to change. So I said, okay, so imagine this new job and you take this new job and I understand it might not work out, but what do you think the probability is that you'll be happy in that new job. And she said, 50, 50. And I just said, is 50 % greater than zero? And she was like, yeah. So I got her to focus on the upside. Again, when we think about that opportunity cost neglect, I got her to think about the gains that would be associated with that new path, with that switching, committing an act to veer from the status quo to something new.

1:01:42And I got her to think about the gains that she was giving up as opposed to that fear, that loss aversion being recruited, that fear of it not working out. And this is something that I've done with like C-level executives that I coach where they're really reticent to fire somebody. What I've actually started doing is just saying to them, imagine nobody's in the role. Is it worse? Because they're always saying to me, what if we hire someone new and they don't work out? And then I just stop them. I say, okay, maybe not, but what if nobody's in the role? Are you better off? And the amazing thing is that when they're at the point where we're having that conversation, I've never had them not answer yes, every time.

1:02:18Johnny:It's a powerful way to look at things, but it's hard for us to get there on our own. And it's really the value of coaching and consulting to come in with that perspective, because we get in our own way in a lot of these matters, especially when we feel like we built it, we own it, our action is what's going to steer us the wrong way. When in actuality, we're sitting in the status quo, we're veering way off course, but we're likely to enact to change any of it. This is exactly right. So the issue that we have, and we can just go back to this idea that we need to collect so much certainty before we're willing to walk away, right?

1:02:56That who does the sunk cost belong to? It belongs to me, right? I'm the one who put the time and money and effort into it, right? If we think about endowment, which you just mentioned, which is our ownership over things, like if I built it, I built it. So these are things that I'm carrying around is my own debris. So that then can get us to this place where we can start to say, how can we get better at these decisions? Right. And there's basically two strategies. One is to not make the decision in the moment when you're facing it down. Right. So in other words, think in advance about what, what could occur in the world that would make it so that you would want to quit.

1:03:31So that's something I do with, like, if I'm working with somebody who's having trouble letting an employee go, who's having trouble exiting somebody, I'll say, okay, okay, so I know that you don't want to exit them today. How long are you okay with the situation as it stands? And they'll usually say something like six weeks. And I'll say, great. So imagine it's six weeks from now, what would you see from this employee that would tell you you should keep them on? What would you see that would tell you that you ought to exit them? So that would be called kill criteria. That will allow them when six weeks passes to actually be more likely to exit them.

1:04:05Because it stops you from saying, well, it's sort of that idea of tomorrow is always tomorrow, you know, where it's like, I know they can turn it around. And then they say, I know I can turn it around. And then it's six weeks later. And they say, I know I can turn it around to you again. And you don't want to exit them because that feels like your failure. If you actually write down what the criteria would be, it's going to help you exit them. So that's like one strategy. But the other one you just mentioned, AJ, which is get yourself a coach, someone from the outside looking in, because that's that thing that I said about, we all see it in other people.

1:04:36We can see so clearly when they're just like pursuing something that they ought not be pursuing. And imagine then that everybody must be seeing that in you also, but nobody's opened their mouth because you didn't set up a relationship that allowed them to open their mouth. And if you just gave them permission or sought out that advice in a real way, whether it's a mentor or therapist or an executive coach or whatever, they're now going to be able to help you through these decisions, right? They're going to help you see going back to that original question of what's worthwhile to stick to and what's not.

1:05:13And they're going to be helping you parse that apart a lot better.

1:05:16Johnny:And friends and family aren't comfortable pulling that trolley lever either, right? So like they don't want to be responsible for you breaking up that relationship or quitting that job or making a decision. And they don't want to say it because what if you stay with them? Right. The other part that goes with that as a coach, when you're able to pull these out, you have an opportunity to get buy-in from the other person. That buy-in is now an accountability between two people, that person and their coach. And it has been brought out. When you're looking at the problem yourself, and you wrote about it in the book, and we've talked about it on the show, you will rationalize every decision.

1:05:59And so it's all just swirling around. So the pull of these patterns, I'll go, okay, you've noticed as a pattern, you've come to me because this is the pattern that you wanted to break. Here we are. What happens if we allow this pattern to play out again and we get to the end of this and we're sitting here having this conversation, how are you going to feel? Well, if that's the case that I'm going to feel really dumb, or I'm going to, I'm going to be very harsh with myself. I'm going to be depressed. Right. Okay. So we're going to get a buy-in that that is going to happen if we do the same thing, the status quo that's always been.

1:06:35All right. So now we are going to change this and the procedure that we're going to do, you're going to have buy-in and accountability on what we're going to do. And then we can adjust and make an assessment now that we've done this differently and we can make tweaks to that and we can see where we are. If that doesn't happen, that pattern will continue. That pattern can continue for years. I mean, years. So this is the thing. It's like we've all had those friends who come and complain about the relationship that they're in. And then it's like, you know, and they're saying things like, but I've put so much time into it, right?

1:07:16Like we can just go back, right back to sunk cost, right? I've put so much time and effort into it. And I don't want that all to be for naught. And then a year later, they're still in the relationship and you're just, it's rinse and repeat. And you can go on, you know, now they waste five more years of their life, not happy because they're trying to protect the time they already put in. So if you can get someone to stop and say, okay, I understand that you're unhappy. And I also understand you're not going to break up with the person today, but how long are you okay with this? Like you have to set a deadline.

1:07:46I mean, I think this is really important to have some sort of deadline. How long are you okay with it? Okay, well, I can do this for six more months. Okay, so in six months, what is it that you're going to see that's going to tell you that this has turned around? What is it that you're going to see that is going to tell you that it hasn't? And what would be the inputs to get you to a good version of the future? That might be like counseling, for example, right? And then once you've done that, now notice I'm not saying here are the inputs. They're saying that. I'm not saying you should only be okay with this for six months.

1:08:20They're saying it. I'm not saying I'm going to give you a list of the things that would tell you this doesn't work out anymore. They're generating that for themselves. So all it's doing is basically taking that intuition from Barry Stah, right, that he sort of blew up. We think that when we see the signals that we're going to react to them. It's saying, okay, we now know we're not going to react to them well if we're trying to deal with it in the moment when we're in it, when we're in the midst of the decision. But if we can identify those signals in advance, then maybe we can do that, particularly if we have someone who we're accountable to, someone who's helping us to think through the problem, somebody who's coaching us through to help us get to the ability to set a good deadline, to be able to think through what those kill criteria are, and they're going to hold us accountable to it, right?

1:09:08So let's take the simplest sense of a kill criteria, turnaround time on Mount Everest. So here's what we know about these kill criteria. They're not going to be perfect because only three people turned around that day. But you know what? That's a lot more than zero. If that's way more than zero, I'm going to take those three. And if you think about like your life is sort of a compounding of, you know, a little bit better decisions that are compounding on themselves. If you have an employee who's underperforming, if it takes you three months instead of six months to exit them. Think about the effect, the positive effect that's going to have on your business over time.

1:09:45Are you going to exit them at the exact right moment? No, they're going to, you know, if I know you should exit them today, is the person that I'm working with going to exit them three months longer than I as an outside observer would have them do it? Sure. But it's going to be six months before they are, you know, otherwise would if I weren't doing that. And I have buy-in from them. It's their decision then. So they're not going to come back to me and say, well, you told me to fire them because I'm going to say, no, I didn't. You said you were unhappy and we set a deadline together. And then you talked about objectively speaking, what the signals were going to be that would tell you that you ought to leave.

1:10:18So I just helped you through that decision. And so it's just like, it creates no conflict. It makes it much more likely that the person's going to follow through on it. And I think we look, Daniel Kahneman was the one who said to me, I think everybody needs a quitting coach. And that guy literally wrote the book on cognitive errors. So I'm going to go with if that guy needs a quitting coach, I need one too.

1:10:40Johnny:Well, I think there's a certainty that we ascribe to the past, right? So you were talking earlier about seeking out certainty in a lot of these situations, you know, the dating example. Well, if I break up with this person, I know before I found them, that search was tough. There weren't a lot of options. There wasn't things going on. I didn't have a lot of dates. And we ascribe certainty to the past and we look at the future of being single with all of this uncertainty so we default to the status quo. But if I were to tell you, yeah, the reason you're not meeting people is because you're with this dud of a person.

1:11:13Johnny:You've robbed yourself of all the other outlets in your social life, your passions, your hobbies, that you could be meeting that great partner for you. You might see things a little differently, but it's really hard to get there on your own without a coach. And it's really hard for you to see through the fog of war in the moment of these decisions that we're faced with. And I think that with relationships, it's the exact same question that I ask of the executives that I work with. When someone's really unhappy in a relationship, the thing I always ask them is, would you be happier if you were alone?

1:11:45And the thing is that, again, because of this issue of loss aversion and omission commission bias, they're focused on what if I never find somebody else? Okay, well, that may happen, right? What if I find someone new and they're not great? Okay, so now you're sounding like you know, all of us do. Sarah Olson Martinez fell into this trap, right? So I try to get that away from there. And I just say, would you be happier alone? And I just make them confront that. And the thing is that, again, when you're in the state where you're actually having that real conversation, the answer is always yes. I'm miserable.

1:12:18I don't want to come home from work because I don't want to be with my partner. I dread having to socialize with them, you know, so on and so forth. And when you say, would you be happier alone? They all say yes. And I say, okay, well then, you know, why are you so afraid? Like, what if I end up alone for the rest of my life? Well, what if you end up alone for the next month, would you be happier? Right. And, and that, that helps them step in and apart from exactly what you said, which is, and this is something in the employment relationship too, is the fact that that person's in the seat means you can't hire someone new into it.

1:12:49So there's a lot of opportunity costs associated with that. So in order to have this like C player or D player in the seat, because of all the things that you're worried about. Like what if I, you know, the next person I hire isn't any good. You're blocking yourself from the opportunity to go hire somebody new. You know, you have answered this question the last time you were with us, but let's see if things have changed. So Annie, we love asking all of our guests, what is your X factor? What is that quality that makes you unique and special? You know, this is such a hard one for me because I mean, I think I'm a weirdo, but at the same time, I don't think I'm special.

1:13:26So this is like a really hard question for me in particular to answer. You know, honestly, I think it's just that like I'm a thread puller. You know, it's like I think that a lot of people think that if you get distracted by shiny objects, it's a bad thing. And I just think it's a really good thing. And I get distracted by shiny objects all the time. Like there's just things that sort of catch my fancy and I'll just sort of go and start pulling on the thread and seeing if it interests me. so I think that in that sense I'm like I'm a good explorer because I love I love to just go like look at nooks and crannies and that kind of thing so you know I mean that's how I ended up writing all of these books was I just wanted to go like explore some stuff you know and I guess like if you look at my life it's a lot of that kind of thing it's like you know I was in graduate school and then I got really interested in poker so I went and did that and then I got back into cognitive science, but I was thinking about poker and cognitive science together.

1:14:22And that was really fun. And then I was like, really wanted to start doing some, you know, speaking. So I did that. And then I really wanted to, you know, speaking was like great, but it was like an hour and sort of very light touch. And I wanted to do something really deep with clients. And so I started developing a consulting business with like, you know, where I wanted to have long-term relationships with people. And I did that. And then I wanted to write about all of that. And so I did that. And now I'm getting my PhD. I'm finishing. So I did five years worth of graduate work at UPenn, stopped literally ABD, like all but doctored.

1:14:56I just didn't defend the dissertation. And now I'm back doing that now because I just got interested in something that I was doing with Phil Tetlock and Barb Mellers on forecasting that I did during the pandemic where we were training people to be better forecasters. And it wasn't that fun. So I think that's it. I think it's like, maybe it's very distractible. Maybe that's the way we should put it. I'm like a super distractible human. Well, it certainly has shown up in your career. I mean, for anyone who even goes to Wiki, they see everything that you have done. Has anybody ever said, like, I'm really distractible?

1:15:34That's what my superpower is, is I'm very distractible. A distractible weirdo. We got it. Yes, a distractible weirdo. That's it. We love it. And where can our listeners find more of your work and book? So you can always go to anniduke.com, which is my website. All the stuff is there. I'm on Twitter for the moment. I don't know if I'll stay there. I'm also on Post Social, so you can find me over there as well. Yeah, so those are the main places. But the other place I would love people to, a few things that I would love people to explore, if possible, the Alliance for Decision Education, which I co-founded, where we're really trying to think about like the topics that we talked about today and how important it is what we know for adults who are really trying to become better decision makers to start to bring that knowledge into K through 12 education.

1:16:25So we want decision education to be like a field like social emotional learning or STEM that's really taught from the time that you enter school until the time that you leave high school. And so that's what we're trying to do there. So really hoping people will go check it out. super passionate about it. Also after school all-stars, which I'm on the board of. And then the last thing is Renew Democracy Initiative, which is just a really cool organization. It's a lot of people from the left and right coming together, all with the same value that democracy, liberal democracy is really good. And so you've got people ranging all the way from Michael Steele, who used to be the chair of the RNC, and Bill Kristol, obviously coming from the right with like Heidi Heitkamp, who was the Democratic senator from North Dakota.

1:17:14So it's really crossing the political spectrum. It was founded by Gary Kasparov. I'm just super passionate about democracy. So hoping that people will go check that one out too.

1:17:25Johnny:Awesome. Well, thank you so much for joining us and writing this book. It inspired Johnny and I to take a new lens at quitting in our career and in business and start to look at some of these cognitive biases that I wasn't even aware of going through the book. So it was a great read. I'm glad Johnny and I didn't quit reading it. Thank you. Well, I'm glad I didn't quit writing it. But I did quit a book in front of it, though. I wrote a proposal for another book before I quit and then decided I wanted to quit instead. So I quit the other thing in order to write quit. It's like, who's on first? I love it.

1:17:58Johnny:Thank you, Annie. Thank you so much for having me back. I really appreciate the chance to come and talk about my work. And I'm very, very grateful to everybody who gives me a platform to do that. Well, it was great having you. We enjoy it.

1:18:21This week's shout out goes to Fred, who's leveraged the lessons that he's learned in our X Factor Accelerator to create some new opportunities and a new active entrepreneur group he's joined. After attending a few meetings, he has usually learned to showcase his value and is now helping to move a couple community projects across the finish line. Since then, his social calendar is filling up and is now excited about the new network that he's built. All this excitement he's created around him has led to starting a new business, working with the town on some community projects. Remember, life is short.

1:18:54Stop waiting around for things to happen. If you listen this far, my guess is that you are tired of feeling stuck in autopilot and you are finally ready to succeed at work, love and life.

1:19:06Johnny:If that's the case, then join us, the Art of Charm team and listeners just like you who are taking action on the lessons from this podcast and experiencing breakthrough conversations while growing an incredible network inside our world famous X Factor Accelerator program. The X Factor Accelerator is where high achieving like-minded people meet, strategize and unlock your hidden X Factor to make sure you get the most out of life's opportunities and reach greatness. We kick off the program with a deep dive one-on-one strategy session. So you have a personalized plan of attack. Inside the program, you'll find a skills dojo for you to practice and implement all the strategies that have made our clients so successful.

1:19:46Johnny:After 16 years and 10 ,000 plus happy clients, including fortune executives, professional athletes, and military special operators, we know how to rapidly create high value relationships that empower your career, attract the right people and make you the linchpin in your network. Imagine what you can accomplish with coaching and mentorship with the Art and Charm team and our community. What are you waiting for? Join us today at unlockyourxfactor.com.

1:20:26And you sold the world, you sold the tragedy Cause you had your taste of black only yesterday Yeah, but I remember you, oh yeah I remember you, oh yeah