Annie Duke (@annieduke) is a World Series poker champion, a shrewd decision-maker, and the author of Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts and Quit: The Power of Knowing When to Walk Away.
What We Discuss with Annie Duke:
- Why “Never give up!” is objectively terrible advice (as even Muhammad Ali might grudgingly admit).
- Life’s too short to keep fighting a battle that’s only losing ground when you could better devote the time you’re spending to more worthwhile pursuits.
- Why the worst time to make a decision is when you’re already in the middle of it.
- How the sunk cost fallacy keeps us spinning our wheels in fruitless attempts at progress long after we should have turned back.
- How we can actually tell the difference between a worthy pursuit and a lost cause — and what we can do to resist our own stubborn impulse to persist beyond reasonable defeat.
- And much more…
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Kenny Rogers may have been affectionately known by his fan base as The Gambler, but our guest Annie Duke — a bona fide World Series poker champion — is someone who really knows when to hold ’em and when to fold ’em in a high-stakes game of cards. Visiting us way back on episode 40, she taught us how to put our best guesses forward with lessons from her book Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts.
On this episode, Annie rejoins us to share the wisdom from her latest book, Quit: The Power of Knowing When to Walk Away. But will she teach us how to know when to run? Listen, learn, and enjoy — and in the final words of this podcast, you might even find an ace that you can keep!
Please Scroll Down for Featured Resources and Transcript!
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Miss our last conversation with Annie Duke — World Series poker champion and author of Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts? Catch up by listening to episode 40: Annie Duke | How to Make Decisions Like a Poker Champ here!
Thanks, Annie Duke!
If you enjoyed this session with Annie Duke, let her know by clicking on the link below and sending her a quick shout out at Twitter:
And if you want us to answer your questions on one of our upcoming weekly Feedback Friday episodes, drop us a line at firstname.lastname@example.org.
Resources from This Episode:
- Quit: The Power of Knowing When to Walk Away by Annie Duke | Amazon
- Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts by Annie Duke | Amazon
- Annie Duke | How to Make Decisions Like a Poker Champ | Jordan Harbinger
- Annie Duke | Website
- Annie Duke | Twitter
- Annie Duke | Facebook
- George Foreman vs. Muhammad Ali: The Rumble in the Jungle (Highlights) | YouTube
- Muhammad Ali’s Final Fights Were a Controversial End To Legendary Career | The Sydney Morning Herald
- Superforecasting: The Art and Science of Prediction by Philip E. Tetlock and Dan Gardner | Amazon
- Poltroon | World Wide Words
- This Day in History: Future US President Andrew Jackson Kills Charles Dickinson for Publicly Calling Jackson a “Worthless Scoundrel, a Poltroon and a Coward” | Today I Found Out
- Commitment Bias (Escalation of Commitment) | The Decision Lab
- The Leadership Lessons of Mount Everest | Harvard Business Review
- The Sunk Cost Fallacy | The Decision Lab
- Katamari Damacy | Wikipedia
- Kill Metrics: How to Stop – Before It’s Too Late | Willmore
- Yes, This Photo from Everest Is Real | Outside Online
- Into Thin Air: A Personal Account of the Mt. Everest Disaster by Jon Krakauer | Amazon
- Where Are the ‘Everest’ Survivors Today? | Bustle
- Molly Bloom | The One Who Makes the Rules Wins the Game | Jordan Harbinger
- Mansplaining Your Way Through the Crypto Crash at Thanksgiving | CoinDesk
- Barry Sanders Retired in His Prime, But Why Did He Do It? | FanBuzz
- The Real Reason Why Seinfeld Ended | TheThings
- George Goes Out On A High Note | Seinfeld
- Why Did Dave Chappelle Quit Chappelle’s Show? | Showbiz Cheat Sheet
- Still in the Game: Can You Guess the Oldest Active Athletes in 2021? | Gulf News
- Fleabag Season 3: Is There a Season 3 for the Phoebe Waller-Bridge Series? | Web News Observer
- It’s the Last (Ever?) Day of Filming of Ted Lasso Season 3 | British GQ
- Jumping the Shark | TV Tropes
- Freakonomics Revised and Expanded Edition by Steven Levitt and Stephen J. Dubner | Amazon
- Steven Levitt | TED
- Heads or Tails: The Impact of a Coin Toss on Major Life Decisions and Subsequent Happiness by Steven D. Levitt | NBER
- SV Angel
- Survivorship Bias | The Decision Lab
- “Desert One”: Inside the Failed 1980 Hostage Rescue in Iran | CBS News
- The Operation That Took Out Osama Bin Laden | Military.com
- 35 Years Ago: Remembering Challenger and Her Crew | NASA
- Admiral William H. McRaven | That’s So McRaven | Jordan Harbinger
- Grit: The Power of Passion and Perseverance by Angela Duckworth | Amazon
- Angela Duckworth | How to Grow Your Grit | Jordan Harbinger
- When Prophecy Fails: A Social & Psychological Study of a Modern Group that Predicted the Destruction of the World by Leon Festinger, Henry W. Riecken, and Stanley Schachter | Amazon
- Apocalypse 2011: What Happens to a Doomsday Cult When the World Doesn’t End? | Slate
- When They Are Wrong, Analysts May Dig in Their Heels | Stanford Graduate School of Business
- Neil deGrasse Tyson Thinks We Should All “Get Over” Pluto | Big Think
- Flat Earthers: What They Believe and Why | Scientific American
- False Flags Are Real, but Far Less Widespread Than Social Media Suggest | Poynter
- Who Killed Sears? Fifty Years on the Road to Ruin | Investopedia
- Endowment Effect | Investopedia
- Status Quo Bias | The Decision Lab
757: Annie Duke | The Power of Knowing When to Quit
[00:00:00] Jordan Harbinger: This episode is sponsored in part by Peloton. It's the time of year where we start thinking about what next year we'll bring. We make New Year's resolutions to exercise more, but let's face it, will you actually stick with it? It's been proven that you're more likely to stick to a routine if it's something you enjoy, which is why so many people stick with Peloton. The instructors are so fun. It's like working out with a friend. There's a very strong Peloton community. Also, I'm all about data, and Peloton tracks your metrics so you can keep tabs on your performance over time. And right now, Peloton's got a gift for you. Get up to 200 bucks off accessories like cycling shoes, heart rate monitors, both of which I have and use regularly, and more when you purchase a Peloton Bike, Bike+, or Tread, and up to a hundred dollars off accessories with the purchase of a Peloton guide, which will turn your TV into an AI-powered personal trainer. Make this the first step toward achieving your fitness goals in the New Year. Choose from Peloton cycling to scenic runs, boot camps to power walks, a huge variety of classes that work for you. Taught by world-class instructors who know exactly how to get the best out of you. So don't wait. Get this offer before it ends on December 25th. Visit onepeloton.com. All-access membership separate, offer ends December 25th, cannot be combined with other offers. See additional terms at onepeloton.com.
[00:01:06] Coming up next on The Jordan Harbinger Show.
[00:01:09] Annie Duke: I think that one of the problems that we have with sort of accepting quitting is an okay thing to do, is we think quitting is going to stop our progress. This will slow us down. And the fact is that quitting done well actually speeds us up because we stop doing things that are going to damage our health. We stop being in jobs that are dead-end jobs. We stop being in relationships that aren't fulfilling and making us happy and allowing us to actually gain the things that we most value. And we quit those and that frees us up to go do other things that will actually get us to where we want to go faster.
[00:01:46] Jordan Harbinger: Welcome to the show. I'm Jordan Harbinger. On The Jordan Harbinger Show, we decode the stories, secrets, and skills of the world's most fascinating people. We have in-depth conversations with scientists and entrepreneurs, spies and psychologists, even the occasional professional poker player, mafia, enforcer, former cult member, or former jihadi. And each episode turns our guest's wisdom into practical advice that you can use to build a deeper understanding of how the world works and become a better thinker.
[00:02:12] Now, if you're new to the show or you want to tell your friends about the show, I suggest our episode starter packs. These are collections of our favorite episodes organized by topic. And it'll help new listeners get a taste of everything that we do here on the show — topics like disinformation and cyber warfare, persuasion, influence, crime and cults, and more. Just visit jordanharbinger.com/start or search for us in your Spotify app to get started.
[00:02:34] Now, today on the show, persistence is not always the best route. I had Annie Duke back on the show. That was episode 40. We talked about thinking in bets, talked about decision making. This interview, relax, is not done with the current crazy RSV stuffy head cold that I have now, just the intro in the close, promise. Annie Duke is a professional poker player. Now, we all know that loss cutting separates the real pros from the rest at the poker table, but outside of a hand of a poker, most of us think that quitting is bad or it's the same thing as losing, and we tend to be pretty bad at it, and we tend to frown upon quitting just about anything else.
[00:03:10] Annie is a friend of mine, a super smart thinker when it comes to decision making at or away from the poker table. I've come to her with big decisions and talked them through as well, which is always super helpful. Today, we'll discuss when to quit and when to persevere. We'll learn why the worst time to make a decision is actually when you are in the decision itself and why we usually wait until long pass time to quit, to actually stop doing something, as well as why goals can actually trip us up and inhibit the efficiency and effectiveness of quitting.
[00:03:40] This is a topic that candidly, I found really counterintuitive and very, very useful, and I think you will as well. So enjoy this episode here with Annie Duke.
[00:03:53] Really interesting topic you've chosen for this book, Annie, because quitting, it's a tough topic. In part because it's just frowned upon in our culture, especially I live in Silicon Valley, it's like this tech bro place. Whenever you hear advice from these guys on the radio, it's never give up, which is objectively terrible advice.
[00:04:13] Annie Duke: Yeah. I mean, look, what if you're like playing a football match and you get a concussion?
[00:04:19] Jordan Harbinger: Mm-hmm.
[00:04:19] Annie Duke: Should you never give up? Should you stay on the field? It's so easy for me to rattle off examples where never give up is ridiculous. Right? Like, look at Muhammad Ali. The story with Muhammad Ali is, you know, Cassius Clay won the heavyweight championship against Sonny Liston, but then when he became Muhammad Ali, it was a conscientious vector to the war. He refused to go to war, so he got stripped of his title. After he was finally allowed to fight again, it took him four years to get a title fight.
[00:04:47] So now, we're talking, here's a guy who's now in his early thirties and he has to fight a man named George Foreman, who not only was undefeated, but it was basically like you walk in the ring, George Foreman punches you, you get knocked out. That's the end of the match. So, you know, huge underdog goes to the rumble in the jungle. He used to do this like float like a butterfly, sting like a beat, like he was really fast and then he would like score a punch. But now, Muhammad Ali has to change his strategy because he is playing George Foreman. And he starts doing rope-a-dope, which is laying against the ropes, allowing George Foreman to tire himself out while he punches him.
[00:05:23] Obviously, a lot more physical damage to your body comes from that than Ali's old style when he was younger but, and this is the beauty of grit, is that he wins. And he did see something that other people couldn't see. That the naysayers couldn't see. Through all of the sort of negativity and everybody saying he couldn't do it or he shouldn't do it, he did. That's the power of grit. The problem is though, that grit, you know, just the never give up attitude itself isn't a virtue. Grit is a virtue when the thing you're doing is worthwhile. And we can see this with Ali as such an obvious example of why quitting is also a virtue.
[00:06:01] So he keeps fighting, eventually he starts to get some pretty bad medical reports. There's kidney damage showing, starting to have some bad neurological signs. And Teddy Brenner, who's the fight promoter at Madison Square Garden, who was a very good friend of Ali, says, "You really need to quit." And he said it, "I don't want him to come to me and not know who I am one day. You know, like that's not what I'm in here for." Ali doesn't listen to him, refuses to quit. So Teddy Brenner actually quit him and said, "I'm not going to host a fight of yours here anymore." Then, Ferdie Pacheco pretty quickly after that, who's his fight doctor says, "Look, there's really bad damage to your kidneys occurring, like you should not fight anymore. This is unsustainable. It's going to be permanent damage. You need to stop." Ali ignores him and keeps fighting. Ferdie Pacheco quits.
[00:06:47] So these two people quit on him when they're saying to him and these are people who really, really care about him.
[00:06:52] Jordan Harbinger: Sure.
[00:06:52] Annie Duke: Saying that he shouldn't fight anymore. So then, it's hard for him to get licensed. He gets a fight with Larry Holmes in Las Vegas. I don't know if you're this very famously, Larry Holmes cried after the fight because he gave such a beating to Ali. It was just really sad.
[00:07:07] Jordan Harbinger: Mmm.
[00:07:07] Annie Duke: Ali lost to like Leon Spinks and like Leon Spinks, like seventh fight ever. It was just horrible. And then eventually, he can't even get licensed in the US. He ends up fighting in the Philippines and like some, I don't know, like, you know, two-bit like they used a cowbell.
[00:07:23] Jordan Harbinger: Oh man.
[00:07:23] Annie Duke: For the Browns, like, yeah, they were sharing gloves. It was really bad. So this is a good example of never give up. Like what are you talking about? Like two people who really cared about him. Teddy B Brenner and Ferdie Pacheco were saying, "You need to give up. We care about you. This is really bad for you in the long run." And he refused. And I think we can see there that grit isn't good anymore under those circumstances.
[00:07:46] Jordan Harbinger: Yeah. This aside from making me feel kind of queasy, because I'm envisioning being punched in repeatedly in the head and kidneys, you know, we only hear about him being the greatest. We don't really hear about him not knowing when to quit and people go, "Well, that's how you leave a great legacy." But it's like, man, that guy spent, I want to say decades of his life, kind of not—
[00:08:02] Annie Duke: It was decades.
[00:08:03] Jordan Harbinger: —knowing where he was and not being able to walk.
[00:08:05] Annie Duke: It was like 40 years.
[00:08:06] Jordan Harbinger: That's awful. And he had kids and they probably couldn't do much with him towards, for a long time. I guess my rambling point here is that sometimes the grit that gets you to the top can actually be your downfall. It gets you to stick with things that are worthwhile, like building a skill or a craft, but it also gets you to stick with things that are horrible for you or not worthwhile at the very least.
[00:08:27] Annie Duke: Right. And the other thing is that, and I think this is the case with Ali, like just to put a finer point on it, it gets you to stick to things that are worthwhile, but then you keep sticking to them after they're not—
[00:08:36] Jordan Harbinger: Mm-hmm.
[00:08:37] Annie Duke: —any longer. And that's the thing is that life is really short. We have a limited time on this planet. We need to be spending our time on the things that are getting us to where we want to go and not causing us to lose ground. And the minute that things shift, the minute we discover like I'm on this road and there's a tractor trailer that just, you know, turned over and is blocking the road, you need to exit the road as quickly as possible because otherwise you're just stuck. And I think that one of the problems that we have with sort of accepting quitting is an okay thing to do, is we think quitting is going to stop our progress. This is going to slow us down.
[00:09:13] And the fact is that quitting done well actually speeds us up because we stop doing things that are going to damage our health. We stop being in jobs that are dead-end jobs. We stop being in relationships that aren't fulfilling and making us happy and allowing us to actually gain the things that we most value. And we quit those and we, that frees us up. To go do other things that will actually get us to where we want to go faster. And that's the thing, it's like quitting speeds us up. It doesn't slow us down when we do it well.
[00:09:41] Jordan Harbinger: Some people stick for things way too long because — I mean, look, the old maxim is quitters never win, winners never quit, right? So we think something's wrong with us. If we stop doing something almost regardless of what it is, not that there's something wrong with the bad advice we're following, or that our television shows or whatever have taught us, we're just blindly staying the course. And you note this in the book, it's reflected in our language, right? There's lots more synonyms in English for grittiness than quittiness, which is a word that doesn't even exist.
[00:10:10] Annie Duke: Yeah. And one of the first conversations I had with Phil Tetlock who wrote Superforecasting, which is a wonderful book. People should get it. You know, when I started really getting kind of obsessed with this topic, I just started calling people that I know to say, "well, what do you think?" And Phil Tetlock is quite the sort of like epitome of an academic. And so what he said to me is, "Oh, you need to make a peabody table." And I'm like, "I'm sorry, what is a peabody table?"
[00:10:34] Jordan Harbinger: Yeah, what is that?
[00:10:35] Annie Duke: And you notice that — just so people know there is no peabody table in the book, but I do something peabody like. So a peabody table is basically when you take a word and you put the synonyms that are positive for the word in one cell and the synonyms that are negative for the word in another cell. And then you can do that for pairs, right? So what he was saying, you should make a two by two where you have grit and quit and then you have positive and negative synonyms and you could make a little table like that. I said, well, that's not really the way I write, but I'll do that in more free form. So I did, I followed Phil's advice, and you can do this too by looking the thesaurus. And what you'll find is that grit has all these things like steadfast, mettle, right? M-E-T-T-L-E. What's interesting is like if you look at persevere or grittiness or whatever, heroism is one of the synonyms for it.
[00:11:25] Jordan Harbinger: Heroism?
[00:11:26] Annie Duke: Yes.
[00:11:27] Jordan Harbinger: That's charged.
[00:11:28] Annie Duke: The people who grit are the heroes of this story, and we know that that's true because just as you said when we think about Muhammad Ali, we think about a hero of this story.
[00:11:38] Jordan Harbinger: Mm-hmm.
[00:11:38] Annie Duke: We don't think about the other stuff. There's a few negative words for grit, like, obstinate, you know, inflexible, stubborn, rigid, but mostly it's like, you know, perseverance—
[00:11:50] Jordan Harbinger: Yeah.
[00:11:50] Annie Duke: —like heroism. So then when you go and look at quit or quitter, you see things like, you know, loser, failure, capricious, weak-willed, and here's one, coward.
[00:12:02] Jordan Harbinger: Oh, man.
[00:12:03] Annie Duke: So now that's all you need to know, right? Is that the ones who stick it out are hero. Thesaurus tells us that. And the ones that quit are coward. And there's a funny little anecdote, which is, so a synonym for quitter is poltroon, and this is a very old word. It was used in like the 1800. I'm sure you haven't heard it.
[00:12:23] Jordan Harbinger: Sure. It sounds like one. No, I've never heard it before. Yeah.
[00:12:25] Annie Duke: Like, Jordan, are you a poltroon? It's like, I don't know, what is that?
[00:12:28] Jordan Harbinger: Poltroon? Yeah. It sounds like something you'd read in a comic book from 1930.
[00:12:32] Annie Duke: Yeah, that's basically right. So poltroon is calling someone a quitter. And when it was in use, it was a horrible insult, such a bad insult that it was grounds for duel. Somebody called Andrew Jackson, a poltroon. And Andrew Jackson challenged him to a duel, which occurred like, I think in the middle of Manhattan at the time.
[00:12:54] Jordan Harbinger: Of course.
[00:12:55] Annie Duke: Right. It's like on Fifth Avenue or something.
[00:12:57] Jordan Harbinger: The woods of Manhattan above the canal. Yeah.
[00:12:59] Annie Duke: Exactly. Andrew Jackson killed him—
[00:13:01] Jordan Harbinger: Oh my gosh.
[00:13:02] Annie Duke: —in the duel, and afterwards was elected president, but it was because everybody was like, well, I mean, he called you a quitter, you know?
[00:13:09] Jordan Harbinger: Right.
[00:13:09] Annie Duke: Like he called you a poltroon, he deserved it. That's how poorly we think about people who quit. That's kind of like all you need to know about like what's going on with grit and quit in our culture.
[00:13:19] Jordan Harbinger: I found it interesting in the book, you said that the worst time to make a decision is when you are in it, which is somehow really obvious, but also really, really useful advice that never had occurred to me before.
[00:13:32] Annie Duke: You know, the thing is that the way that I feel about my writing is that I'm telling people things that are obvious.
[00:13:37] Jordan Harbinger: Mm-hmm.
[00:13:38] Annie Duke: It's just that they haven't heard it yet. I don't think that I write about things that are complicated, right? I mean, I think I say things that are pretty obvious. It's just that until somebody says it out loud, it's not necessarily obvious to you. And the reason why I write that way is because people tell me these things and when I hear it, it's obvious, but I realize it wasn't obvious before I heard it.
[00:13:59] These are actually my favorite concepts because I think that things that are obvious, but only after you hear them are the most useful because you're more likely to internalize them and start to use that in your decision making going forward.
[00:14:12] So this idea of being in it, like what does that mean? In it means when you're actually in the middle of like facing down whatever the decision is. So like the example that I love to use that I think people really understand about in it is like you may have some general desire to eat healthy. But when there's an open box of chocolates in front of you, you are in it.
[00:14:32] Jordan Harbinger: Mm-hmm.
[00:14:33] Annie Duke: And that's really hard, particularly for me. If they're like delicious salted caramels.
[00:14:37] Jordan Harbinger: Right.
[00:14:38] Annie Duke: Then that's really tough for me to actually resist. And that's true of anything, right? Like we can save we want to save for retirement, but when we're actually like in the middle of thinking about buying the fancy car or the fancy clothes, it's really hard to keep those longer term goals in mind. Like you're not going to be at your best when you're in it.
[00:14:58] And what's true of those things is also true for quitting. We have the intuition, and I think that this is kind of the broad problem that I'm talking about in this book, is that we have this intuition that after we start something, when we get signals that things aren't going well, that we will quit, right? Like if your fight doctor tells you you're getting permanent kidney damage. Obviously, we'll walk away. We look at Ali and we say, "How could he not walk away? That's silly." Teddy Brenner said so, and Freddie Pacheco said so, and our intuition is that we will pay attention that somehow Muhammad Ali is unusual here.
[00:15:35] But what decades and decades and decades of research shows, and this is research from like Barry Staw who's amazing, done all this work on Escalation of Commitment. Richard Thaler and Danny Kahneman, who are both Nobel Laureates, Colin Camerer, some of the real giants in the field. What those decades of research show us is that that intuition is just plain wrong. And the reason that it's wrong is because when you see the signals we were in it, that's the problem.
[00:16:00] So when I'm climbing the mountain in the shadow of the summit and the snowstorm rolls in, I'm in it and I am going to make a bad decision about it. So this is the thing that we all need to realize is that we don't pay attention to those signals very well. We aren't very rational about them. And what happens is that instead of being rational, we're really good at rationalizing.
[00:16:22] Jordan Harbinger: Uh-huh.
[00:16:22] Annie Duke: Like rationalizing away the information.
[00:16:24] Jordan Harbinger: Sure. So we want to make, I assume, make a plan to quit ahead of time based on specific milestones. And your example in the book is the Mount Everest turnaround points, where it's like when you're there on the mountain, you go, "I spent $150,000 getting here. It's taken me eight years of training and doing the other mountains or whatever it is. I am not turning back because it might snow or we're like an hour behind schedule or stuck behind some other group. I'm not doing that. I'm too, too far along." Meanwhile, everything you wrote in your little plan says if you're not here, by this time, you're going to die if you try to get down from the top after that. And you're like, "Well, but maybe," and that's the mountain is literally covered in the dead bodies of people who do this.
[00:17:08] Annie Duke: Yeah. So there's a few things that we kind of think once we sort of understand this problem, that we aren't good at paying attention to those signals in the moment. Like, I mean, here's an example. How many projects have you been involved in where you know the budget has tripled and it's now, you know, a year late, and looking from the outside, you're like, why are you still pursuing this? Like the world is yelling at you that this isn't going well, but people won't give up on those things.
[00:17:33] And that's the same thing as, you know, climbing Mount Everest, right? I think we have an intuition, first of all, that we will pay attention to those signals that intuition is wrong. The second thing that I think we have an intuition about is that if we know about the problem, that we won't do it. And that intuition is also wrong. Knowing about it does not help you one bit. Not at all.
[00:17:51] And the third intuition that I think we have is, and I think this is something that I hear a lot of people say, particularly in business, in finance, is they say, well, what I say to myself is, if I had the option to start this fresh today, would I do it? So you can kind of think about like, you know how you'll often say to yourself if I knew then what I know now, I would make a different choice.
[00:18:12] Jordan Harbinger: Yeah, sure.
[00:18:13] Annie Duke: So the idea is, okay, but what if you said, well, I do know those things? If I had the choice to start it today. In other words, if I had no history with this at all, would I start it today?
[00:18:22] So like a simple example would be if you buy a stock, say at 50 and it's trading at 40, to say to yourself, if I'm going to hold it, what I'm really saying is I would be willing to buy it today at this price. Is that true? That's something that people do all the time. It's true. If I knew today what I knew now, like would I start this project today? They think that they can kind of get around the problem by thinking about it that way. The science also shows that that does not work at all. It doesn't make it better. And the reason is that there's no way to undo the history that you have with the decision.
[00:18:51] Jordan Harbinger: Right. So we can't just make believe that we're making this decision in a vacuum.
[00:18:55] Annie Duke: Yeah, because nobody parachuted you to Camp IV—
[00:18:59] Jordan Harbinger: Right.
[00:18:59] Annie Duke: —on Mount Everest, right? You spent the $150,000, you spent the years of training, you got from base camp to camp I to camp II to Camp III to Camp IV. We're not parachuting you into that spot. If you've been working on a project, no matter how over budget or how much you've blown the timeline, you can't pretend like you're making a decision to start at fresh today because you've already been doing it.
[00:19:23] We need to sort of dump that as an idea that we can solve for it. And that gets us to exactly what you said is that like, well, how do you solve for it? And one of the best ways to do that is to do it before you're in the decision. In other words, to say, what are the signals going to be that I'm going to see in the future that would tell me that I ought to quit? And then commit to do that when you see those signals. And I know it sounds a little bit like a distinction without a difference, it's like, but wait a minute, you just told me that when I'm in it and those signals happen, I don't see them. But what the science shows again, very clearly is that no, but if you do say, let me try to anticipate whatever those are in advance and make a pre-commitment when I'm not in the decision, that that actually will get you to behave much more as if you're fresh to the decision.
[00:20:09] And that's really all we're trying to do, right? If you have history with it, we want you to behave the same as if you were fresh to it. That's what we're trying to accomplish. And thinking about these things in advance are going to get you very close to that.
[00:20:22] Jordan Harbinger: Is this sunk cost fallacy or is it more, because it seems like what you're saying is there's this illusion where, like I said before, we can't ignore all of our previous pre-commitment and investment. And even though you know that you shouldn't calculate it, it's just very, very hard/impossible for us to remove it from any calculation we make in our brain whether to quit or continue. And I see this in myself when I'm reading. I know this is like the dumbest example in the world, but I'll be reading—
[00:20:51] Annie Duke: No, it's not. This is a really good example by the way.
[00:20:53] Jordan Harbinger: You know, where I'm going with this? Okay.
[00:20:54] Annie Duke: I do.
[00:20:55] Jordan Harbinger: I'm reading a book and I go, "God, this is boring, man. I am not interested in this. I should cancel this interview, or I should stop reading this book, or whatever." I'll go, "But I'm halfway done with the book. I spent the whole afternoon reading it outside. I've got a little sunburn as a result. I'm just going to read a couple more chapters and then I'm going to decide." And then I read a couple more chapters and I go, but now I'm 65 percent through this book and I can't just put — I was just going to finish it and then I finish it and I go, that was a freaking waste of time. Why did I spend my day doing this?
[00:21:26] Annie Duke: So you're describing kind of what I call the Katamari problem. So there's this really strange video game for that came out in the OTS called Katamari Damacy. And my daughter used to play it. I never thought that I would use it as an analogy because my daughter just used to play it a lot, but I'm happy that it was useful for something besides her entertainment. So the premise of it is that a king has gotten drunk and wiped out all the planets and stars in the universe. And so the prince, his son, has to make new ones. And so he's given a Katamari, which is just Japanese for a clump. And it's a tiny, tiny little clump. And you have to roll it around on the ground. If it hits something that's larger than it, it will become smaller. But if it goes over something that's smaller than it, it becomes larger.
[00:22:14] So at first you're picking up like little pieces of dust and hair and thumbtacks, and then eventually it's like rolling over bottles and pieces of paper and then the cat and the dog, and then the couch and then cows, and then it's rolling over the whole house. And then, as one reviewer put it, it's ripping bloody rainbows out of the ground. And then when it gets big enough, it becomes a star. That's the premise of the game. It's actually quite addictive.
[00:22:42] Jordan Harbinger: It's a lot of hair and thumbtacks to make a star, but we'll let that part slide, right,?
[00:22:46] Annie Duke: Right, exactly. So what does that have to do with what you just said? Well, you just described a Katamari problem. You start off with a little clump, right? And you're picking up this debris and what's happening to the Katamari. It's growing bigger, and then that keeps rolling, which allows you to pick up bigger and bigger, bigger things, accumulating more debris as you go along until you have this humongous clump.
[00:23:06] And that's what you're describing. You start off and you read a little bit, and that little bit makes you more likely to want to read more. Why? For a variety of reasons. So some cost, as you said, is a small piece of it. It turns out that there's a very large number of cognitive biases and then also some motivational problems as well, which comes from the motivational side of psychology that make you not want to quit. But what you described is a little bit of the sunk cost problem. So the sunk cost problem is once we put time and effort, attention, money into something, we don't want to quit because either we want to get our money back or we don't want to have wasted our time.
[00:23:43] So that's what you're describing, right? Like, I've already read this much. If I quit, I'll have wasted my time. So that little bit that you read is like the Katamari, it's small, it's a little clump, but that clump sort of now has momentum. Which makes you read more. And now when you say, "Oh, this is still boring," you're like, "but now I'm halfway through."
[00:24:03] Jordan Harbinger: Right. The snowball is bigger.
[00:24:05] Annie Duke: Right. And then you keep going and it's like, "But now, I'm three-quarters of the way through." And then, and then it gets really bad because then you've got like a chapter and a half left. You hate the book. You have all the information you need to know that there's no reason to keep winning it. But there's a finish line and that's the end of the book. So how can you possibly stop? And then all of a sudden you've read a book, which I imagine you would like to get that time. And this brings up the real Katamari problem, is that because we think of waste as a backward-looking problem, I don't want to have wasted the time that I put into reading this, it causes us to waste more time.
[00:24:41] Jordan Harbinger: It's funny because I do describe it in my own head and when I've talked about this before as a snowball effect because the more I push through to continue, of course, I'm just investing more, the heavier the sunk cost feels. And it's funny because I know it's happening. In real time, I'm going, I'm just investing in this thing that I don't want to invest in and making this worse, and I still can't stop myself probably at least 50 percent of the time.
[00:25:02] Annie Duke: Yeah. So this is where kill criteria can become really helpful. So kill criteria, basically what you mentioned, which is decide in advance. So let's take a really simple example of kill criteria from Everest. On Everest, when you leave for the summit on the day that you leave for the summit from Camp IV, they have a turnaround time in place. They actually have a turnaround time for all the climbs. But for summit day, it's helpful to know this and that turnaround time is 1:00 p.m. And what that means is that no matter where you are in the mountain, it doesn't matter whether you've made the summit or not, at 1:00 p.m. you have to turn around. Why do they set those turnaround times? Well, because they know that in the shadow of the summit, people are going to be pretty poor decision makers about this, and 1:00 p.m. is the turnaround time because if you descend after 1:00 p.m. you're too likely to send some pretty dangerous parts of the mountain and darkness, low on oxygen, with frostbite, tired and exhausted. The probability of death just goes up a lot higher if you haven't turned around by 1 p.m.
[00:26:01] So there's this wonderful story of three climbers, Dr. Stuart Hutchison, John Taske, and Lou Kasischke. They're part of a climbing expedition in the '90s. There's eight climbers. These three became friends, three climbing sherpas and an expedition leader. So they leave on Camp IV and they have the turnaround time, which is 1:00 p.m, and it's really slow. Everest got super popular and so it would be crowded.
[00:26:24] Jordan Harbinger: I've heard about this. There's just lines to get past things now where you're waiting.
[00:26:28] Annie Duke: Right. And obviously, this is slowing people's progress to the summit. So their expedition leader came up from behind them and Hutchison just said to the expedition leader, "Hey, how long is it going to be to the summit from here?" Because he knew that things were kind of going slow and the expedition leader said three hours. So the expedition leader now runs ahead after telling them it's going to be three hours, tries to speed up the mountain and Hutchison told Taske and Kasischke and just said, "Hey, I think we have an issue because our expedition leader just told it's going to be three hours and I'm looking at my clock and it's already 11:30 in the morning. And I can do math, and that means that we're going to make the summit at 2:30. Like even if we sped up, we'd make it 2:00 p.m., that's already an hour past the turnaround time anyway. We can't make up that much time." So he said, "I think we should turn around now." He got a little bit of resistance from one of them who was doing the seven summits and it was going to be their seventh summit but they agreed and they turned around and they went back to camp. Now, Jordan—
[00:27:22] Jordan Harbinger: Right. Yeah. Like I'm sure they wrote a book about that, oh wait, nobody cared because they just quit.
[00:27:26] Annie Duke: Right, exactly.
[00:27:27] Jordan Harbinger: And that's the problem.
[00:27:28] Annie Duke: That's the problem. And it's an even bigger problem because they did write a book about it and it was called Into Thin Air by Jon Krakauer.
[00:27:35] Jordan Harbinger: Oh yeah, I read that a long time ago—
[00:27:36] Annie Duke: Right.
[00:27:37] Jordan Harbinger: —when I was in high school.
[00:27:37] Annie Duke: So I bet you don't remember these three people.
[00:27:40] Jordan Harbinger: No, I was going to say, I don't remember the book going like that, but whatever, you're fresher than I am.
[00:27:45] Annie Duke: No, well, they're in the book, but I also had read the book and seen the movie and I didn't remember them either. You know who? I remember Rob Hall.
[00:27:53] Jordan Harbinger: The people who died, yeah, unfortunately.
[00:27:55] Annie Duke: Right.
[00:27:55] Jordan Harbinger: You know, all jokes aside.
[00:27:56] Annie Duke: Because they persevered. They're the heroes of the story. So that's what I was saying about grit. They're the heroes of the story. So Rob Hall was their expedition leader. This is the shocking thing. He's the one who told them that 1:00 p.m. was the turnaround time. And he kept going.
[00:28:11] Jordan Harbinger: Oh gosh.
[00:28:12] Annie Duke: And perished to top the mountain. He got there at 2:00 p.m. That's an hour past the turn. He perishes on the mountain while waiting for another person in the expedition, Doug Hansen, who gets there at 4:00 p.m. And they both perished on the mountain. They're the protagonists. These three guys, Jon Krakauer did write about. In fact, he said they were the best decision makers on the mountain that day. He says that in the book, but we don't remember that because they aren't the heroes.
[00:28:39] Jordan Harbinger: Mmm.
[00:28:39] Annie Duke: We don't care. And that's the problem, right? That's the problem. Why is it that we remember Rob Hall who ignored his own turnaround time, but we don't remember these three guys? So that's like such an important point. But there is a lesson in the story, which is, had that turnaround time not existed, those three people would've been in danger.
[00:28:58] Jordan Harbinger: Sure.
[00:28:59] Annie Duke: So three people more than otherwise would have turned around and got back safely. And that's why things like turnaround times are so important for our decision making.
[00:29:11] Jordan Harbinger: You're listening to The Jordan Harbinger Show with our guest Annie Duke. We'll be right back.
[00:29:16] This episode is sponsored in part by Innovation Refunds. If you own a business, pay attention because you could be eligible to receive a payroll tax rebate of up to $26,000 per employee. Your business must have five or more employees. It's not a loan. There's no payback. This is a refund of your taxes. This is your money that you can get back potentially. And to see if you qualify, go to getrefunds.com/jordan. I realize I sound like one of those weird daytime TV commercials, but this is my friend's company. I was kind of surprised that this wasn't too good to be true. And look, they got 4.9 out of five on Trustpilot. What my friend Sean did is he assembled a team of tax attorneys that are trained in this little-known payroll tax refund program. Surprisingly, little known, because the government doesn't really need to prioritize you getting your money back. Surprise, surprise. They've already returned to billion dollars to businesses with a B. They do all the work. There's no charge upfront. I made sure that I didn't want to, you know, "Hey, sorry we didn't get you any money, but that'll be $5,000." No. They simply share a percentage of the cash that they get for you. And businesses of all types can qualify, including those who took a PPP loan, nonprofits, and those that had an increase in sales. So you don't have to have gotten totally steamrolled by the pandemic to qualify for this.
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[00:30:45] Jordan Harbinger: This episode is also sponsored by Grammarly. I try my best to finish my work around 5:00 p.m. so I can pick up Jayden from preschool and spend quality time or not-so-quality time with the kids, farting around on the floor. I utilize several apps to be more productive and save time. Even a small time saver can feel like a big help, especially these days. Grammarly is on top of my list of tools than I use every single day, even though my grammar is supposedly above average, which is surprising because I didn't pay a lick of attention in middle school. But Grammarly is far more advance than just a spell checker. It's like having somebody over my shoulder gently, not annoyingly, reminding me that I can make my writing more clear, more concise, more professional. Grammarly will suggest better synonyms to use so that I sound smarter and more intelligent, which I could have used it right there, those are two basic words I could probably have replaced. And Grammarly's tone detector checks how your message comes across, you know, friendly, gruff, and unfriendly professional, whatever. It's easy to implement because it runs in the background of everything that I write, as long as I want it to. Grammarly is free to download. It offers comprehensive spelling, grammar, punctuation, suggestions. Instantly proofreading and providing suggestions, so you're writing always comes across as professional and mistake-free. And you know damn, well, you judged other people when they make mistakes. I use Grammarly Premium, which is the paid version, which has clarity, focused sentence rewrites to keep your writing clear and to the point so you get work, emails done faster, back onto the important stuff.
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[00:32:26] Jordan Harbinger: If you're wondering how I manage to book all these folks for the show, it's always been about my network and I know networking is a gross, dirty word. It's schmoozy. It feels gross. None of that is present in the course. I want to teach you how to do this stuff for free, but also in a non-gross way. That's jordanharbinger.com/course. This course is about improving your relationship-building skills, inspiring other people to develop a relationship with you, and the course does all that, again, in a super easy, non-cringy, down-to-earth kind of way. No awkward strategies, no cheesy tactics, just practical exercises that'll make you a better connector, a better colleague, a better friend, a better peer. Just six minutes a day, not even that, that's all it takes. And by the way, many of the guests on our show already subscribe and contribute to the course. So come join us, you'll be in smart company. Again, you can find the course at jordanharbinger.com/course.
[00:33:13] Now back to Annie Duke.
[00:33:17] Molly Bloom a long time ago, episode 120, we're on like 700 something now, talked about horrible poker losses from some big, rich Hollywood types. There's, you probably know these stories too, but there was a guy who lost something like 20 million and he missed his wife's 70th birthday party, or maybe it was their 50th anniversary party. It was just some monumental event that you just don't miss for anything, and he's playing some three-day-long Red Bull and cocaine poker game or something like that. It's just really sad, even though it's self-inflicted and it just shows you how powerful trying to make a decision is in the moment. I mean, yes, this might be gambling addiction or something else, but when you're on a mountain like Everest, the poll is largely, it's kind of the same. It's similar.
[00:33:58] Annie Duke: Yeah. I think this brings up something really important. So, you know, as I was thinking about quitting, one of the reasons why I'm so obsessed with it is because I think that the main skill that separates amateur from elite players at the poker table, Is loss cutting, you know, just like quitting.
[00:34:15] So when you look at the first two-card starting combinations that you get, you know, you get dealt two cards and hold them at a nine-handed table, you'll see that professionals are folding somewhere between 75 and 80 percent of the two-card combinations that they get just like right off the bat. And amateurs are folding less than 50 percent of the time. So pros are just folding way more because they recognize that the hand isn't worth it to continue. And then once you're in the pot, like once you've actually invested money in the pot and you've seen more cards, pros are much better at folding in those situations. And you'll hear amateurs say things that sound very sunk cost like. They'll say, "I have too much money invested in the pot already, I can't fold."
[00:34:55] Jordan Harbinger: Mmm.
[00:34:56] Annie Duke: It's like, but here's again, the thing is, it doesn't matter how much money you have in the pot. What matters is the next dollar you bet going to earn you any money. And they just don't think that way. So I think that's another big piece of the puzzle for them is, and they'll say like, you know, "I want to protect the money I had. I can't fold now. I've got too much invested," which is really what all of our problems are, right? "I can't break up now because I've got a year in this relationship," but what if the next year is going to be miserable too? Why are you stay? "I can't quit my job now. I did so much onboarding. I've learned the culture and it's taken me a long time to figure out the politics." Okay, but what if the next year of your life in that job is going to be miserable? And we look backwards instead of forwards. And that's what the poker players are doing.
[00:35:41] And then there's another piece which I think plays into this on top of sunk cost, which is this desire for certainty. They want to know how the hand is going to turn out. And for them in particular, the idea, these what-ifs are so hard for us. The idea that you would fold a hand and it might turn out that you would have won it is so painful that they want to play it up until there's no chance that they could win, which is generally until the end.
[00:36:06] You know, there's a saying among bad players, which is any two cards can win. And the answer is, sure. If I climb up Everest in a snowstorm after 1:00 p.m. trying to make it the summit, I might survive. But that doesn't make it a good decision because I'm probably not going to survive enough of the time to make that a good choice. Same thing in poker, I can play a seven and a two, which is the worst hand in poker. And there's some chance that, you know, sometimes that's going to win the day, but it's not going to win the day enough of the time, but we want that certainty so much and can't we feel that. Like, you know, what if I could have turned it around? Like you see people with projects or products or relationships or whatever, it's so hard for them to leave it because like, what if I could have turned it around? What if I had stayed, maybe I would've made a work. Maybe if I continued up the mountain, I would've made the summit. Maybe if I held onto the stock, I would've made my money back.
[00:36:57] And these things are really hard. It's really a siren song and it reflects the asymmetry, which is like, if you want to know how the thing you're going to do is going to turn out, you have to stick to it. That's the only way for you to know for sure to the point where we really aren't willing to quit until it really isn't a choice anymore. because like it's a dead certainty.
[00:37:16] Jordan Harbinger: It's a dead certainty, or we're like super screwed. Quitting requires you to be, you have to make peace with what might have been at your job or in the hand of poker or whatever decision you're making. And that's always the problem, right? Like if I just held the stock a little longer. Well, wait a minute, I just won't sell it. And then, I'll know what's going, "Oh, I should have sold it," right? I mean that's with every, everybody in cryptocurrency in the past few years as well is like, "No, why didn't I?" Because in the moment you were like, "But it's going up."
[00:37:44] Annie Duke: I actually saw the weirdest exchange on Twitter. Somebody had bought Bitcoin somewhere around 50,000 and they had announced that they had sold it at like 26. They said that they had sold it at 26. And I saw a reply saying like, "What are you doing? Like now you can't ever get your money back." And they were saying like, "What if it goes back to 50?" This is the issue we have, right? If you wouldn't buy it at 26, then you shouldn't hold it at 26. It doesn't matter that you bought it at 50, but this was such a good expression of this problem, you know? But those what-ifs are so strong. Look, here's the thing, like just culturally we feel this way. How do people feel about Barry Sanders?
[00:38:25] Jordan Harbinger: Oh gosh. I mean, I don't know, but—
[00:38:28] Annie Duke: They're like, "Why? How could he do that? Why did he quit? He could have kept going."
[00:38:33] Jordan Harbinger: Yeah, yeah. People are mystified by this.
[00:38:35] Annie Duke: They're mystified by it. And he just said, "I want to quit at the top," so did Seinfeld. He said, "I don't want to become the butt of a joke. I want to be the one making the jokes." And people get really pissed when that happens. People actually prefer a situation like you just talked about, like Aaron Rodgers or Tom Brady, or Peyton Manning, John Elway, because once they quit, you know that they have to. So it's really hard, like if they quit at what might be the top, people are like, "How could you possibly quit? Maybe there was more." They want to see the decline.
[00:39:07] Jordan Harbinger: That's well put. Right, we only know when we should have quit with hindsight. And you know that because people are like, "God, can you look at this irrelevant idiot still doing this podcast?" Right? And I'm hoping people don't say that about me in 10 or 15 years, but maybe in 10 or 15 years, it'll be like, "Jordan, hang it up, man. This is just sad now. You know? And I'm going, "But it's fine. I still get fan mail and I still get DMs from people." "Nobody uses that anymore. Jordan, what's wrong with you?" And it's ironic because it's like, we should only quit when it's so obvious that something has become terrible. And again, it sounds like a blueprint for my career as a podcast host. I'm on the upswing for now.
[00:39:48] But look at a guy like, I think your example in the book was maybe Dave Chappelle, where he left and everyone's like, "What an idiot, he left? Oh man, what was he thinking? He must be on drugs."
[00:39:58] Annie Duke: Yeah. They said it like they thought he had checked himself into a mental institution.
[00:40:02] Jordan Harbinger: Sure.
[00:40:02] Annie Duke: Or that he was on drugs. Look, everything is about what your own values are, right? So if you love podcasting so much that even if nobody listens to you, that's fine. And you know, Peyton Manning or Tom Brady may love the game of football so much that it doesn't matter to them that they're not performing well on the field, assuming no permanent damage or, you know—
[00:40:24] Jordan Harbinger: Sure.
[00:40:24] Annie Duke: —Steve Young probably took one too many concussions, right? But assuming that stuff aside, this is a matter of your values. So you may feel like, "I don't care if anyone's listening. I like having conversations with the people I have. And hopefully, people will listen to these conversations, but if they don't, I'm cool." Then, I'm going to say, "Hey, I'm all for that." Right?
[00:40:43] But just as we accept that, we have to accept the other side of the equation, which is Dave Chappelle was doing standup, which is what his first love was, and people started screaming characters from his show at him. And for him, that was just awful. He really hated that, that his show had sort of become who he was. They wanted him to do the material and the characters from the show as opposed to the material that he really wanted to do. And for him, that was just not a situation that fit with what he valued. And so he quit. And people were so confused because he obviously walked away from a huge contract when the show was the number one comedy show around and nobody would accept it.
[00:41:21] But we have to accept these things, right? Like it's a trick to quit on top. And as I said, like Barry Sanders did it, Jerry Seinfeld did it. Dave Chappelle did it with his show. Phoebe Waller-Bridge with Fleabag left everybody hanging on the show that everybody loved. It would be like if Jason Sudeikis didn't make another season of Ted Lasso, right? We'd all be like, "What? Why? It's so good. It hasn't jumped the shark yet." Even when we're looking at other people, we want that certainty.
[00:41:49] Now, think about how that translates to ourselves. You know, partly because if I call you a quitter, I'm calling you a loser. So if I quit something, I think you're going to call me a loser.
[00:41:58] Jordan Harbinger: Yeah. Yeah. We don't want to have to do a duel.
[00:42:01] Annie Duke: No, exactly.
[00:42:02] Jordan Harbinger: No duels in Manhattan.
[00:42:03] Annie Duke: That's right. So I want to walk away at a point when Jordan will not question the decision. And if you think about, like for example, in a startup, what does that mean? It means you have no more capital and you can't raise anymore.
[00:42:14] Jordan Harbinger: You're broke.
[00:42:14] Annie Duke: You're broke.
[00:42:14] Jordan Harbinger: Yeah. You've laid everyone off. You're broke and yeah, you're selling your monitors.
[00:42:18] Annie Duke: Then everybody goes, what could you do? You tried your best. There was nothing you could do. We get it. That's why you had to quit and you don't feel the same criticism or the same self-recrimination that comes along with quitting well before that.
[00:42:32] Jordan Harbinger: It stands the reason that quitting on time then just feels like quitting too early because you haven't reached the socially acceptable, completely obvious, no going back point of where you should have already quit.
[00:42:43] Annie Duke: Yeah. So what you bring up, it's really important. It's not just that we quit late because we're worried about what other people will think.
[00:42:49] Jordan Harbinger: Mm-hmm.
[00:42:50] Annie Duke: At which point we could be quitting late not because it feels like it's the right time but because we know it's too long but we want to make sure everybody else knows along with us. But there's good science that shows that that's not true. That it's actually if we quit, when we quit, we're already at the decision too late. Like when we think maybe we should quit, it's actually not very close at all. We're actually getting to the quitting decision too late. So when we quit on time, it really does feel to us also like we're quitting too early. And this actually comes from Steven Levitt, you know, Freakonomics and whatnot.
[00:43:22] Jordan Harbinger: Oh, yeah.
[00:43:22] Annie Duke: Go see his TED Talks, read Freakonomics. He's wonderful. He put up a website where people could go and — like Jordan, let's say that you had a really tough decision about should I stay with what I'm doing, or should I quit and go do something else? So let's say it was like a relationship, should I stay in my relationship? Should I quit? Should I stay in my job? Should I quit? And so you have one of these big decisions, and he invited you to come to this website. You would put in your decision. He would ask you to rate on a scale of one to 10, how happy you were at that moment in time. And then he would invite you to flip a virtual coin — head, you stay; tails, you quit. So first of all, like you'd be like, well, who'd ever do that?
[00:43:58] Jordan Harbinger: Yeah.
[00:43:58] Annie Duke: Like this is a really big life decision. 20,000 people.
[00:44:01] Jordan Harbinger: Out of how many though? Were like, I'm not doing this. This is the stupidest thing I've ever seen.
[00:44:05] Annie Duke: I don't know. But 20,000 people is a lot.
[00:44:07] Jordan Harbinger: It is a lot. It's a lot. But I imagine like a million people got the invitation and went, "No, thank you."
[00:44:12] Annie Duke: Yes. But 20,000 people did go and do it. Here's the interesting thing about this, so I just want to make sure that you see this logic, if you're willing to flip a coin to make the decision, it must mean that you're 50/50 on the choice.
[00:44:24] Jordan Harbinger: Okay. Fair.
[00:44:25] Annie Duke: So that means you think it's a very close call. And if we think about like what's the goal of quitting or not quitting, and let's assume it's to increase your happiness, right? So basically what you're saying if you're going to flip a coin is, "I don't know, I'm really torn. Maybe staying is going to make me happier. Maybe quitting is going to make me happier. I don't know." Fair?
[00:44:42] Jordan Harbinger: Yeah.
[00:44:42] Annie Duke: So you know, these people flip the coin. They either quit or they didn't. And remember he had measured their happiness before the coin flip and now he checks back in with them too in six months later. Because he wants to understand like, is it true that it was a 50/50 choice? Meaning quitters are just as likely to be happy as the non-quitters. And what he found was no. Like quitting was the winner.
[00:45:03] Jordan Harbinger: Really?
[00:45:03] Annie Duke: Yeah. So when you check back in with them, the quitters were happier. So what does that tell you? It tells you that when we're experiencing this as a close call, It's not close at all. Quitting has already won.
[00:45:14] Jordan Harbinger: I suppose this makes sense, right? Because we're weighing all the sunk cost and all the investment and everything, and that makes it look like it's equal. But once you get rid of that baggage, it's like clunk, the scale just drops down on the side of quitting. Like if you were airlifted or teleported into that situation without the baggage, you'd go, "Man, this person really should quit. You should definitely quit."
[00:45:33] Annie Duke: Well, yeah, and actually I think that we do sometimes get airlifted into those situations when friends come to us.
[00:45:39] Jordan Harbinger: Mm-hmm.
[00:45:40] Annie Duke: So like how many times as you had a friend who's like in a crappy relationship?
[00:45:43] Jordan Harbinger: Yeah.
[00:45:44] Annie Duke: You have a beer with them. They're telling you how miserable they are, da, da, da, da. Maybe they should break up. "I don't know what I should do."
[00:45:50] Jordan Harbinger: But I don't want to be alone. And it's going to be so hard to get back in the apps. And you're like, "Forget about that craft. She's terrible."
[00:45:57] Annie Duke: Right. "Like, you're so unhappy." And then you see them three months later and you're rinsing, repeating the exact same conversation, and then three months later the same because it's like you reading a book. "But I put so much time, I've put so much effort, I've put so much this into that," and then that makes them stay. And then it's like, now they've spent another six months, and now they've spent another six months. It becomes really hard to disentangle yourself from that. Just like, it's hard to put the book down, but if you airlift into it, meaning you're just the friend who's observing. So you're not carrying, you don't have the Katamari, right? You don't have any debris that you're dragging along with you. You're just looking going, "Man, you got to get out of this. This isn't good for anybody," but it's hard for us to see it when we're in it.
[00:46:39] Jordan Harbinger: How do we do that mental time travel to figure out whether we should do this or not? Is that even the right, am I aiming in the right direction here?
[00:46:47] Annie Duke: No, you are, you are. So I think this is a pretty good example of how we can handle this. So there's a guy named Ron Conway. Some of your listeners might be familiar with him. He is a founder of SB Angel, one of the absolute most successful, if not the most successful angel investors ever, really smart guy. Obviously, he is helping people to grit things out because he's getting companies at their earliest stages when they may just be an idea and he's helping people go through the hard times in order to achieve an Uber-type of exit. But when you talk to him, what's interesting is that the thing he really prides himself on is helping people to get to the quitting decision. And he does it by really helping them to get to sort of kill criteria and to be able to do some mental time travel to be able to see what the future might look like.
[00:47:34] So the way he describes it, he'll sit down and go, "Jordan, let's be honest, this startup is not going well."
[00:47:39] Jordan Harbinger: Mm-hmm.
[00:47:40] Annie Duke: You know, whatever, like, you're not achieving product market fit, you're not generating enough net new revenue, you know, whatever. You know, just things aren't going well. I think we ought to think about shutting things down. Now, he's having this conversation with them long before they have to because they have capital in the bank still. What his goal is that if he sees it, he wants them to shut it down before they're at zero. That's what his goal is.
[00:48:03] So what inevitably happens is you'll say, "No, I know I can turn it around," which is fine. That's what people say in that situation. Like, "No, I know I can turn it around." And here's the trick that he does. He doesn't disagree. He says, "That's great. I know you can turn it around. I believe in you. You know, let's just look at kind of what your runway is and let's agree that you really only have like six weeks, two months to figure out if you can turn this around." It's easy for me to get you to agree to that because that's not in it. So when I say, "Well, let's talk about two months from now," you'll be like, "Okay, yeah, let's do that." He'll say, "So what does turn it around look like? And he'll set benchmarks which just might be like revenue generation, right? Like, maybe this is what the top of your funnel is going to look like in two months. If it's going to be populated in this way, you're going to have closed this much new business. You're going to have done the work to see if customers want your product, whatever it is. He does that with you.
[00:48:54] So like Jordan, what do you think good looks like? What do you think the signals would be in a couple of months that this still isn't going your way and that you ought to shut it down?
[00:49:03] Jordan Harbinger: He's getting us to set up kill criteria for ourselves in the moment without saying—
[00:49:08] Annie Duke: Right.
[00:49:08] Jordan Harbinger: —without being too obvious about it, I guess.
[00:49:10] Annie Duke: Well, because he's not saying we should kill it now because of these criteria. He's saying, let's talk about it in six weeks.
[00:49:16] Jordan Harbinger: And he's doing this because even though he already knows you're supposed to quit, he just knows you're not going to do it.
[00:49:20] Annie Duke: You're not going to do it. So he's trying to help you to get there yourself. So now, we've worked together and we set these kill criteria, and now, Ron says to the founder, "Okay, let's meet up in six weeks, or let's meet up in two months," whatever that deadline is, you always want to have a deadline for it. "Let's meet up and let's talk about it and see if things have improved." And then he does, and they're just much more likely to shut it down then and return the capital to the investors at that point. And I think that one of the things that's so important about what he really says to the founders is, "Look, you're clearly a very smart, very gritty, very driven individual who could be doing amazing things. Your life is too short to spend your time on this thing that isn't working because you could free up that time to go work on something that is," and I think that's such an important thing. And then, sometimes with these rationalizations, what he'll he from hear from the founder is, "But I owe it to my employees."
[00:50:16] Jordan Harbinger: Yeah.
[00:50:17] Annie Duke: "I owe it to my employees." And he says, "No, their lives are short too. And they're working for you for little cash comp in exchange for equity that we have now together determined is not worth it."
[00:50:27] Jordan Harbinger: Right.
[00:50:27] Annie Duke: "And their life is too short to keep them here. You need to let them go and do something that's going to change the world also."
[00:50:33] Jordan Harbinger: The hitch here is that while quitting feels like, "Oh my gosh, I'm starting over." This is, "Look, we're going back. We're just greatly slowed down in our lives or our business." Actually, it could speed you up because it frees you up from the thing you're quitting, which is not working out to go full-on into the new thing that might.
[00:50:51] Annie Duke: That's exactly right. And I think that one of the reasons why we don't think that is because of survivorship bias and the aphorisms that go along with that, right? Like, if at first, you don't succeed, try, try again. Like why do we have that? Well, because we can name a lot of success stories. Who stuck to it? You know, come what may. And what we think is, oh, then, if we stick to it, we'll succeed. But what's true in retrospect is not true prospectively. And so we hear these stories of the people who got to the brink of death and managed to survive. And we think, well then that's the way to do it. Get to the brink of death, and then will manage to survive. And it's not true. And you know, if you look at the average age of a founder of a unicorn, it's 42 years old.
[00:51:34] Jordan Harbinger: Oh my gosh. I didn't know that. I mean, that's my age.
[00:51:36] Annie Duke: You know, it's not the Zuckerbergs. These people have failed a lot. They've tried stuff. It didn't work. They've tried other stuff. It didn't work. And then they come across an idea and it does work. And why is that? Well, because they're sticking to the stuff that's working later. They're quitting the other stuff as quickly as they can once they figure out it's not working, so they can move on to a better idea.
[00:51:57] Jordan Harbinger: Let's go back and talk a little bit about kill criteria. How do we set this up? Are there some examples you can give? I know there's some in the book that are pretty interesting. Because I think people are going, "Oh my gosh, I need kill criteria for my career decision that's coming up," or, "my college admissions or my retirement pros and cons." You know, how do we set this up for ourselves?
[00:52:15] Annie Duke: There's an example from a company that I work with called mParticle. They do a customer data platform. Where we were working with their sales force to try to get them to be more efficient. So Jordan, have you met some salespeople in your life?
[00:52:28] Jordan Harbinger: Yeah, of course. Yeah, plenty.
[00:52:30] Annie Duke: Are they gritty?
[00:52:31] Jordan Harbinger: Sometimes to a fault where you're like, stop calling me.
[00:52:34] Annie Duke: Yeah.
[00:52:34] Jordan Harbinger: This is not happening. You're wasting your time. And having been in sales, now I do people a favor and I go, "Here's what would get me there. Here's what won't. I'm really not—" and they're like, you can just hear the experienced ones go, "Wow, thanks," because you just saved them hours of time.
[00:52:47] Annie Duke: That's exactly right.
[00:52:49] Jordan Harbinger: Yeah.
[00:52:49] Annie Duke: But what's interesting is, like, what I was finding with sellers was that even in situations where there were really adverse signals like this was a SaaS company, they already had a competitor installed. They'd be like, "But I know I can win them over." Like, that's the thing is that they really want to keep going until the deal is truly dead. Like you've already fallen into a vast kind of death. Like you're on top of the mountain. It's 4:00 p.m. Okay, I'll give it up. And obviously, this is really bad because you have a limited number of reps that can be selling for you and you want them to be spending their time on the most valuable leads and ditching all of the rest. This is our goal for anything.
[00:53:28] Jordan Harbinger: Sure.
[00:53:28] Annie Duke: Right? Like true at the poker table, I want to spend the most of my time playing when I'm playing well and quit all the other times. I want to play the hands that have the highest expected value and quit all the rest, so on, so forth, right? So we just did this, this is, I think, a good example of how to get to kill criteria. You've got a lead through an RFP or RFI, it's now six months from now and the lead is lost. Looking back, you realized there were early signals that you were not going to win the deal. What were they? So notice they're not in a deal. We're not talking about a deal that they just lost. We're asking them in the abstract, you got to lead. Six months later, you didn't win it. Looking back, you realized, oh yeah, I could tell from the first meeting that this was not going to close. What were those signals?
[00:54:14] So we had everybody do it independently, which is important, not as a brainstorm in the room. It's a better way to get this kind of information. It was like 40 sellers and they sent us a whole bunch of stuff. Some examples, the first thing and only thing that the potential customer wanted to ask me about was price. So that's bad.
[00:54:31] Jordan Harbinger: Mm-hmm.
[00:54:31] Annie Duke: Because you're probably a stocking horse. The RFP or RFI was very clearly written with a competitor. So that means they're probably already down the process and like you're a box-checking exercise. Another one was we couldn't get a decision maker in the room.
[00:54:47] Jordan Harbinger: We cared so little about this that we didn't even call the person who could pull the trigger.
[00:54:50] Annie Duke: Yeah, exactly. I mean this was some among a very long list, right? But I'm just using these three as examples. And so for those three, we then turn those into kill criteria. So if in the first meeting they only want to talk about price, you would kill. If it was written with a competitor in mind, you would ask them directly, how far down the road are you with this competitor? Sometimes the answer is, we have them installed, right? At which point you would kill. With the "I can't get in an executive in the room," you offer executive alignment at the next meeting. I'll bring a decision maker from my side. You bring a decision maker from your side. At the next meeting, we find that deals go more smoothly this way. And if they say no to that, you kill.
[00:55:27] So what does this allow you to do? Well, first of all, it allows you to abandon course much more quickly in the same way that having a turnaround time helps you to abandon course much more quickly. But also I think this is so important for people who are gritty and ambitious and driven, is that it gives you another way to succeed. Because once you've made these criteria clear, then when you're doing deal review and you say, "Well, they went straight to price and they didn't want to talk about anything else, so I killed it." You get kudos. As opposed to when you leave it on the fly and you say, "I killed the deal," you get quizzed.
[00:56:05] Jordan Harbinger: Mm-hmm.
[00:56:05] Annie Duke: You don't get kudos. You get interrogated. It turns it from something which is a moment of interrogation, which the best way to defend yourself against is, "I did all this research and I had 17 meetings with them and you know, what could I do?" Which is the defense against that, which is to stick longer. And here you just go, "Well we agreed if they only talked about price, I was supposed to ditch it." And then everybody's like, "Yehey, you," and there's no interrogation.
[00:56:28] Jordan Harbinger: Bravo boundaries. Yeah.
[00:56:30] Annie Duke: Yes. Good for you. Go generate some new leads.
[00:56:35] Jordan Harbinger: This is The Jordan Harbinger Show with our guest, Annie Duke. We'll be right back.
[00:56:39] This episode is sponsored in part by Zapier. Most of us rely on technology for our jobs. I mean, I'm literally, that's my entire job. You probably use a bajillion different apps just like me, Slack, Google Drive, Trello, you name it. There are a lot of routine tasks that can eat up time, like lead management, employee onboarding, customer support. I'm always trying to figure out ways to be more productive, save time, optimize. That's what's awesome about Zapier. Zapier makes it easy to connect all your apps, automate routine tasks, streamline your processes. Zapier works with over 4,000 popular apps to automate just about any workflow imaginable. You don't even have to know how to code. That's the whole point. An example of how I use this after I record an interview with a guest, I used to have to sit there, wait for the video to process, upload, and then download it, and then upload it to Google Drive, and then tell my producer that it was there. Now, after I record with a guest, Zapier will detect that the new file has been created long after I'm gone, automatically upload it into a specific Google Drive folder, then notify my team on Slack that the file has been uploaded. So I basically just hit stop and go to lunch. It used to take me like 25 minutes to wait for all that crap, and that's if everything was running smoothly. All of that manual stuff is now gone now that I use Zapier to automate everything. That's just one example. It's saving me a ton of time.
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[00:58:10] Jordan Harbinger: This episode is also sponsored by HVMN. You may have heard buzz about ketone supplements, and how they can boost your workouts by helping your body use fatty acids for fuel. I take a shot of HVMN's Ketone-IQ supplement before my morning workout. It's better than coffee. It's focused energy. It's kind of like being in the zone without the jitters/anxiety. If you're prone to that from caffeine, which I guess I am. Ketone-IQ comes in portable, convenient shots, which are great for on-the-go cycling, a long run, running from meeting to meeting. I know a lot of elite athletes are using it. I've asked them personally. I'm not just looking at the website. The taste is bitter. I've said it before, it tastes like it works. They don't try and literally sugarcoat it. They don't add sweeteners. They want to keep it all pure. Again, athletes use it. They don't care about taste apparently. So don't be scared to try it out. It really does work. I feel much more focused, less hungry during and after a workout, better endurance. I don't get the slow down at the end. There's not like a weird crash. So if you're working out hard, you're training for something, definitely give Ketone-IQ a try. I am curious. Write in, tell me what you think. A lot of you have said you really like this stuff too.
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[00:59:24] Jordan Harbinger: This episode is also sponsored in part by Something You Should Know podcast. Finding a new great podcast can be an exercise in frustration. So let me save you a bunch of time and tell you about a podcast I've mentioned before that I know you're going to enjoy. It's called Something You Should Know with Mike Carruthers. He's a friend of mine, experienced radio guy. Every episode of Something You Should Know delivers fascinating information you can use in your life that'll help you understand your world better. Sound familiar? Topics that'll really affect you, like what it means to be rich, quitting, when to know when to walk away, how to train people to respect your boundaries. Very similar in the vein of The Jordan Harbinger Show in many ways, different format. There's a wide range of topics in guests that are always fascinating. They'll leave you a little smarter than you were before. Mike, of course, asks questions that you would want to ask as well. Something You Should Know is fun and entertaining. You'll learn something new and useful in each episode. It was listed in Apple's shows we love. It has thousands of five-star reviews. So give it a listen. Search for Something You Should Know where you get your podcasts, and when you see the bright yellow bulb start listening and you can thank me later, Something You Should Know.
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[01:01:01] Now for the rest of my conversation with Annie Duke.
[01:01:05] In the book, you give examples from the Iran hostage rescue, the bin Laden raid. I think that stuff really makes sense and illustrates it in very simple ways. I think there was something, "If we lose three out of the five helicopters in the desert due to the sand in the Iran rescue, we're turning back," and that happened and they were like—
[01:01:22] Annie Duke: Yes.
[01:01:22] Jordan Harbinger: "Okay, we're done." It wasn't like, "Ah, but I think we can maybe still make it," and then get a bunch of soldiers captured by Iran. The bin Laden had a similar thing. It's like, "We can afford to lose one of the helicopters." And they did, so they proceed.
[01:01:33] Annie Duke: Yeah.
[01:01:33] Jordan Harbinger: That stuff being decided in advance seemed, of course, literally life saving, but also how could you possibly make that decision in the moment? Oh my gosh.
[01:01:42] Annie Duke: Yeah. I mean, and that's something that Admiral McRaven told me was he wants to make as few decisions on the fly.
[01:01:47] Jordan Harbinger: Mm-hmm.
[01:01:47] Annie Duke: As he has to know some things are going to come up on the fly, right? But the idea of like, how many functioning helicopters do we have? Has Pakistan figured out that we're in their airspace? There's stuff like that where you know you've seen this enough, you've done it enough that you know if this goes badly, what are the things that are going to have happened? Let's write those things down. And even with something like the Pakistani airspace, it depended on how close they already were at the point that they got detected. Right? So even that was built into the plan.
[01:02:17] He said they probably had like a hundred different command decisions already planned out before you started, and there's maybe going to be three or four that come up on the fly and that's going to cause you to be just a much better decision maker because what are you supposed to do in the middle of it when you've lost one helicopter? "But we've come so far and we've done all this training and we've spent all this money and I've sold this to the president."
[01:02:37] Jordan Harbinger: Mm-hmm.
[01:02:38] Annie Duke: "That this was something that we were going to do." And what if Bin Laden isn't there the next time? And you can imagine all of the different ways that you're going to rationalize yourself into continuing on in a situation where that can really create disaster.
[01:02:53] I mean, honestly, like the Challenger is a very good example of—
[01:02:57] Jordan Harbinger: The Space Shuttle?
[01:02:58] Annie Duke: Yeah — of not paying attention to the signals because they knew that those gaskets failed in cold weather. But it was like, "We've put so much time and it's on TV and the media is watching us and how can we stop now?" Because they left that decision to the day of, instead of just saying in advance, if it's below a certain temperature, we're going to abort the mission and they're much better now about checklisting those kinds of things. But you can see where that allowing those decisions to occur in the moment can end up in real disaster.
[01:03:25] Jordan Harbinger: We were watching that in my school as kids. Can you imagine? I mean, I remember it was clear as day, that was really traumatizing.
[01:03:33] Annie Duke: The teacher was from my hometown.
[01:03:35] Jordan Harbinger: Oh man.
[01:03:36] Annie Duke: Christa McAuliffe, she was from my hometown.
[01:03:38] Jordan Harbinger: Just a horrible—
[01:03:39] Annie Duke: Oh, it's awful.
[01:03:40] Jordan Harbinger: —thing to have happened and, of course, to see on live TV. The bin Laden raid, Admiral McRaven was on the show, episode 315. We don't talk about kill criteria per se, but we kind of do.
[01:03:49] What about the age-old wisdom? Hey, quit while you're ahead. Is there anything to that? I'm sure you had to—
[01:03:54] Annie Duke: No.
[01:03:55] Jordan Harbinger: —go through that in the book when writing.
[01:03:56] Annie Duke: So it's so funny, you know, almost to all the aphorisms about quitting are like "never give up."
[01:04:01] Jordan Harbinger: Yeah. Terrible.
[01:04:02] Annie Duke: You know, "winners never quit," but there's one, as you just pointed out, there's one aphorism, "quit while you're ahead," and that is also terrible advice. And the reason why all of these aphorisms are terrible advice is because the actual advice is quit when the thing you're doing is no longer worthwhile and stick to everything else. So that's kind of harder. It's not as easy a rule of thumb, but the issue with both of these, you know, "try, try again," like, "never give up," is that that's playing into this bias that has to do with sunk cost endowment, how our identities get wrapped up into things we're doing, our preference for the status quo, so on so forth that make us want to stick to things too long. So "never give up" is amplifying a bias about sticking to things too long, except, "quit while you're ahead" is also amplifying a bias that we have, which is the one time that we often quit too early is when we're ahead.
[01:04:50] So when you look at like the behavior of retail traders who are like trading in the stock market, it's very common when you put in when you buy a stock or you make a trade, that you put in both a take gain order and a stop loss order. So what does that mean? It means like, let's say I buy a stock at 50, I may put in, if it gets to 40, I'm going to automatically sell it, like the computer will do it for you and just sell the stock at 40. So that would be a stop loss. But on the flip side, I might say, if the stock gets to 60, I'm going to automatically sell it. So that would be a take gain. And what you find is that, you know, just as the "never give up" amplifies the bias about quitting too late. When the stock gets to 40, people cancel their stop loss order and they keep holding.
[01:05:36] Jordan Harbinger: Oof.
[01:05:36] Annie Duke: Why? Because the moment when you're in the losses, when you have a loss on paper, the moment you quit is the moment you can't get that money back.
[01:05:44] Jordan Harbinger: Right? It's that Bitcoin tweet all over again.
[01:05:46] Annie Duke: It's the Bitcoin tweet. Well, how could you sell it at 26?
[01:05:49] Jordan Harbinger: You're never going to get your money back.
[01:05:50] Annie Duke: You're never going to get your money back. Now, on the flip side, people put in these take gain orders. So they buy it at 50, they have a take gain at 60, and they get to like 56, and they cancel their take in order. So they quit while they're ahead. But before it, they rationally said they should. So we're going to assume, you're the most rational before you've bought the stock and you've decided if it goes to 40, I'm going to sell. If it goes to 60, I'm going to sell. And now you can see a rationale on both sides. When it goes to 40, you hold but when it goes to 60, well, you wouldn't know because you've sold before it ever happens. So you're canceling the take gain order, but now to sell too early. And the reason is the mirror image, which is if I have made six dollars on that $50 buy, the only way that I can lose that money back is if I keep holding it.
[01:06:37] So just as much as we don't want to take a loss on paper and turn it into a sure loss, a realized loss. We also don't want to take a gain on paper and end up losing that back. We want to turn that into a sure gain or a realized gain. And the only way we can do that is to sell.
[01:06:53] Jordan Harbinger: I know a lot of people are sitting there thinking, "Okay, fine. I don't have anything. I want to quit, but I really want to convince my kid or my spouse or my friend to quit something." How do we convince someone else to quit something you mentioned before, this investor who does a good job of asking questions and helping kill criteria for the future, but how do we avoid that escalation of commitment, the doubling down, all these logical fallacies and mistakes that people make? How do we help someone else avoid those?
[01:07:20] Annie Duke: So I think there's two really good strategies. I mean, first of all, the fact that you're helping them is helpful.
[01:07:24] Jordan Harbinger: Mm-hmm.
[01:07:25] Annie Duke: Right? Because we can see things from the outside that people from the inside can't see. And so just the fact that you're trying to help and coach them is going to be very helpful for getting them to quit. And there's lots of evidence that shows that if you get somebody else to help you with the decision, you'll do better. But I think that this actually works. I mean, if we're talking about kids, kids also have the problem of quitting too early, mainly because they just don't have the time horizon to be able to know the difference between a bad day on the soccer field and you know, "It's going to get better," versus, "I had a bad day and I didn't score any goals and now I want to quit." And that's the point of Angela Duckworth's book. It's why people should get her book because we do want to be able to tell the difference between those two things. And a parent can really help, or you as a friend can help somebody do that on both sides of the equation.
[01:08:07] So when somebody is saying that they want to quit, it may be that it's worthwhile. It may be that it's not. It may be that they're willing to pull the trigger, maybe not. Whatever you see, you can do exactly what Ron Conway does and says, "That's fine. How long can you take this situation for as it sits?" So maybe for your kid, it's like, "Look, you've got 10 more games left. Let's stick it out and let's look at what's happening after the end of those 10 games. And then you figure out what does success look like and what does failure look like? What does it look like, that it's something that you would want to continue, and what does it look like if it's something that you don't want to continue? And write those things down," and whatever that deadline is, then you can help them with both sides of the equation. Both not quitting too early because you're allowing them some time to try to see how it plays out and also with not quitting too late because you're helping them to see that they should walk away.
[01:08:59] One of the examples I give is I coach, you know, CEOs, executives. I will tell you, one of the biggest problems people have is in firing people. They don't want to do it when it's obvious that having nobody in the role would be better than having that person in the role. They still won't do it. They're hoping they can coach them through it. They're hoping they can get them to turn it around. This is just the way we are. And so what I say is, I want you to sit down with them and do the Ron Conway thing. Sit down, you know, over the next six weeks, this is what I expect to see. You know, just give them some KPIs. And agreed to what those are with them and then say, "We'll talk again in six weeks. And if we don't see this turnaround, then I think it's time for us to talk about what the next step is, which would be moving on."
[01:09:43] Because otherwise what I see with them is they go and they have a discussion, they tell the employee what they think is going wrong. The employee says, "I hear you." They make all sorts of promises. They say they're going to turn it around and then it's six weeks later and they're back in the same spot and they have the same conversation and this goes on forever. And this actually not only makes it so that they can get that to that decision faster. But it gets the employee to realize that it's the right decision also.
[01:10:10] Jordan Harbinger: Right. It's like, kill criteria for both of you. "Okay, I'm going to fire you in six weeks." And the other person goes, "Okay, I'm going to have to move on in six weeks unless these things change.
[01:10:18] Annie Duke: Right. And then you can talk about what are the inputs that will create the change, and you now have some focus to what you're doing in the role. And I would say that along with that, and it was a little bit of the framing I just gave you is another way that you can help people see it, is to say, "What would you be doing with the time?" Or, "Imagine you're alone, would it be better or worse than the situation that you're in?"
[01:10:39] So when I work with CEOs, what I say is, "Imagine that there's no one in the role, are you better or worse off than you are today, including the fact that when you have someone in the role, they're generally acting as a blocker?" Because people will pick up that slack, but they can't, as long as the person who's not performing is in the role, it also usually is causing cultural breakage, right? So if you take that person out of the role, "I understand that you have to do a search, and that's kind of scary and all that stuff, but don't you think people will pick up the slack and you'll reduce the cultural damage that's occurring?" So I sort of get them refocused over on that.
[01:11:12] Same thing with relationships, you know? "But I'm afraid of going out into the dating pool. What if I end up alone? What if I end up in a relationship that isn't as good?" And I try to refocus that in two ways. One is if they're worried about being alone, I say, "Well, what would be worse? Okay. Let's imagine being alone is it worse than the situation you're in now?" Generally, when someone's at the point where they really are thinking about walking away, they usually realize they would be happier alone. So you can sort of get them to think about that in a way that makes it more concrete.
[01:11:40] And then in terms of the, "What if I date somebody new and it doesn't work out?" I just ask them this simple question, "Okay, what's the probability in six months you're going to be happy in the relationship you're in?" and they'll usually say, "Low, like, I've put a lot of effort into it. I've tried, we've done couples counseling, so on and so forth. So I'm pretty sure I'm going to be unhappy in six months." "Okay. So let's say you start dating someone new. What's the chance you're happy with them?" "Well, I don't know." "Is it greater than zero?" "Yes." So that sort of thinking about what are the opportunities you're giving up. You know, if you're spending money on something that isn't working out well, what if that money was all of a sudden freed up? What would you go spend on? What if your time was all of a sudden freed up, what would you go spend it on? That can also be very helpful to sort of reframe it for people in terms of getting them to see the opportunity costs, the stuff that they're missing out on because of what they're doing.
[01:12:27] Jordan Harbinger: I want to wrap with some of the cult stuff because who doesn't love a good cult discussion? Especially on the show? Cults and prophecies are often wrong and you write about this in the book. You've got these cults that are either the doomsday stuff from years gone by. Cults are very similar to what we do with our jobs and careers as well, our political candidates. When we get new information about something, we will just go, eh, sunk cost, status quo bias. It's really hard to recognize our mistakes and our faults because of cognitive dissonance. So let's talk a little bit about what happens in these cults. Because I think for a lot of folks, when a cult leader says 2012 is the end of the Mayan calendar, we're all going to die. And then it's January 1st, 2013. People don't just go, "Oh man, we were so wrong about that." They go, "Oh, oh wait, the Mayan calendar and the Gregorian calendar, they don't overlap completely. And so actually now it's May 2016. So we got an extension."
[01:13:23] Annie Duke: So here's the fact. The hardest thing to quit is who you are. And when the things you believe become part of your identity, when what you do becomes part of who you are, it is very hard to walk away from it. That's true, whether it's a cult. So a lot of people are familiar with, "when prophecy fails."
[01:13:42] Jordan Harbinger: Mm-hmm.
[01:13:42] Annie Duke: Leon Festinger followed the seekers from the 1950s. Aliens from the Planet Clarion were supposed to come and wipe out humanity with a flood, but the true believers of the seekers would be rescued at midnight on December 20th, 1954. Midnight came and went. No aliens. Weirdly, the cult didn't disband. They actually doubled down. They escalated their commitment to the cause, which is what happens. They didn't walk away. So, okay, that's weird because you had a day of doom and it came and went. Your cult was disproved, and yet you still believe, and it's the rationalizations, like, "Oh, they're coming later." Or, "Oh, we believe so hard that that's why they didn't come."
[01:14:22] Now, less of you think this just has to do with cult members, I'm sure people are thinking about some stuff happening in politics right now where they can see those same kinds of things occurring, this occurs for people who you would consider to be quite rational, and it has to do with when you have beliefs that make you stand out from the crowd, which a cult will, when you've taken actions based on those extreme beliefs like cut off your family, maybe you've given up a whole bunch of money to the cause that kind of thing, when you're confronted with the world telling you, "Hey, abandoned course," that means abandoning your identity. That's really hard. And in the battle between identity and the facts, identity is going to win.
[01:15:00] So John Beshears and Katy Milkman did a really interesting study where they just looked at stock analysts and their earnings projections, and a lot of those earnings projections would be in the consensus, like mainstream, and some of them would be out of consensus, quite extreme. And they said, "Okay, well, let's look at what happens when the actual earnings come in and they conflict with the forecast." And what they found was that when the forecast was in the mainstream, the analysts were like, "Oh, whatever. I was wrong." And they'd update it. But when it was not, when it was out of consensus, when it made them stand out from the crowd, they would double down on their projection. Forecasting again, something that was out of consensus, and it's kind of in this way. Like, Jordan, if you believe Pluto is a planet that wasn't unusual, everybody believed Pluto was a planet who cares? It doesn't define you, right? So if they tell you then that Pluto isn't a planet, you're like, "Eh, whatever." But what if you're a flat earther?
[01:15:51] Jordan Harbinger: Mmm.
[01:15:52] Annie Duke: That's part of who you are because it makes you stand out from the crowd. So now, when someone shows you a laser experiment that demonstrates the curvature of the earth, you're like, "Ah, that's wrong. Your equipment is broken." And we have all these ways of rationalizing this stuff away. Like false flag, that's a way to just reject evidence that doesn't really fit with what your belief system is, right? To say something, it was the deep state.
[01:16:15] Jordan Harbinger: Sure.
[01:16:16] Annie Duke: You know, that kind of thing. You know, that has to do with like these beliefs that are like identity, but then also what you can do can be part of your identity. So I think Sears, you know, the retail company is such a good example of this. Obviously, their identity as a retailer, they were the number one retailer for decades and decades and decades. In the 1950s, they represented one percent of US GNP, holy cow.
[01:16:36] Jordan Harbinger: Wow.
[01:16:37] Annie Duke: I know. But then like Kmart and Walmart. And then eventually Target came along from the discount retailers and then also the Neiman Marcuses and the Saks. They got squeezed out of the market by the '90s. They were not the number one retailer. In the 2000s, they go bankrupt. So we know that story of Sears. But what's really interesting is that Sears wasn't just a retail company, it was also a financial services company. Back in the '30s, they founded a company called Allstate Insurance.
[01:17:03] Jordan Harbinger: Oh, wow.
[01:17:03] Annie Duke: Right, hmm, interesting.
[01:17:04] Jordan Harbinger: Mm-hmm.
[01:17:05] Annie Duke: Allstate Insurance. Why? Because people were driving cars to their stores, and so you could literally buy a drill, some socks, and car insurance.
[01:17:14] Jordan Harbinger: Wow.
[01:17:14] Annie Duke: So anyway, Allstate Insurance ends up becoming the largest personal liability insurer. They also owned a company called Dean Witter, which was a very big financial services company that got acquired by Morgan Stanley, represented 40 percent of Morgan Stanley's worth at that time. It was a very big stock brokerage. They founded Discover Card, holy cow. And they had Coldwell Banker. So then the question is, how did they go broken? It has to do with identity. When the retail stores started faltering and those were no longer making money, they had a choice, right? What are we going to do here?
[01:17:46] The obvious choice is quit the retail business. Keep all the financial services businesses that are thriving, except that their identity was a retailer. What they did was who they were. And so they decided to get back, quote-unquote, "get back to their retailing roots." They sold off all of the financial services companies.
[01:18:04] Jordan Harbinger: Oh no.
[01:18:04] Annie Duke: In order to try to save the retail business. And we know what happened. They went broke. So even when you have incentives to get it right, it's very hard to do it, particularly when your identity gets involved, because in the end, whether it's Sears or the stock brokers or anybody else, we're all in some sort of cult, right? Like we just don't know it.
[01:18:22] Jordan Harbinger: And the more extreme your position, the more cognitive gymnastics you need to put in place to rationalize it. And that's—
[01:18:29] Annie Duke: That's exactly right.
[01:18:29] Jordan Harbinger: —whether it's a cult, a politician or cult of a politician or anything of the sort.
[01:18:33] Annie, thank you so much again for a fascinating conversation. I think I'm in podcasting for the long haul, of course, but you've definitely given all of us something to think about and I appreciate that.
[01:18:43] Annie Duke: Well, I hope so. And I just want to appreciate — you were one of the first people who did a podcast with me with my first book.
[01:18:49] Jordan Harbinger: Oh, wow.
[01:18:49] Annie Duke: When nobody even thought, "Oh, who's this poker player lady—?
[01:18:54] Jordan Harbinger: Mm-hmm.
[01:18:54] Annie Duke: —writing about cognitive science, and we talked about Thinking in Bets way back then. And I'm so appreciative of you giving that book a platform, which then allowed people to kind of get to know me and my writing. And you know, here I am now talking about my third general audience book and I just want to express some gratitude to you, for allowing me to come and chat with you about these things.
[01:19:14] Jordan Harbinger: Well, I appreciate that and I can't take any credit because your writing is wonderful and I'm so glad that we're friends. And thank you for the off-air help that you gave me earlier. I'll leave, I'll let everybody wonder about what that could possibly be.
[01:19:26] Annie Duke: Yes. They'll wonder about what that is, but I think it was a good conversation.
[01:19:30] Jordan Harbinger: Me too. Thank you so much.
[01:19:31] Annie Duke: Awesome. Thank you. Bye.
[01:19:34] Jordan Harbinger: If you're looking for another episode of The Jordan Harbinger Show to sink your teeth into, here's a trailer for another episode that I think you might enjoy.
[01:19:41] Annie Duke: The quality of your life is determined by the sum of two things, the quality of your decision and luck. When something bad happens to us, we act as a skill wasn't involved at all. We just sort of pawn it off to the luck elements. But when good things happen, we sort of ignore the luck element. And we say that it was because of our great skill.
[01:20:01] A self-driving Uber just hit and killed a pedestrian. But what I thought was really interesting was that the reaction was to suspend the testing and just to take the cars off the road, not just the Uber cars, but other self-driving vehicles. And what I didn't see were any comparisons to how self-driving vehicles did per thousand miles traveled versus the technology that we already have on the road, which is cars that are driven by humans. We know that six thousand pedestrians died per year by regular driven cars.
[01:20:37] Let's say that you're on the side of the road and you've got a flat tire. And of course what everybody's thinking in that moment is, "I have the worst life ever. Like, why do these things always happen to me? I'm so unlucky, I'm so miserable." What's really interesting to me about it is like you could have gotten a promotion, like the biggest promotion of your life three days before and you're not standing on the side of the road going, "My life's great because I just got the biggest promotion I could ever imagine." So imagine that you had this flat tire a year ago, and now I'm asking you today, a year later, how much do you think that that flat tire would have affected your overall happiness over the year?
[01:21:17] Jordan Harbinger: For more with Annie Duke, including some common mistakes we make when evaluating decisions, check out episode 40 here on The Jordan Harbinger Show.
[01:21:27] Annie was on the show before for those of you that think you're going crazy, and I've heard a little bit about this, that was episode 40. Quitting and expected value from an endeavor doesn't always have to be about money. This is an important note. Quitting can be about sanity, it can be about mental health, it can be about getting more free time. There's a lot of things that I have stopped doing that would've made me more money because I want to spend more time with my family, or I hate the task so much that I just don't want to do it anymore. Like training and live events, a lot of these, not live shows, but training events and workshops. I just don't want to do that stuff anymore. Lucrative as it might be.
[01:22:01] Another interesting cognitive bias that we didn't get into in our conversation was the endowment effect. Why we value things that we own more than identical items that we do not own? Really, really interesting. This extends to more than objects. It can extend to businesses. It really does even extend to IKEA furniture. "I built it even though it's broken in lower quality than the thing I already have, but it's worth more because I invested in it." Relationships, we see this happening all the time in relationships. Ideas that people have that they become attached to because it's their own. It's something you should watch out for. It's something that I'm certainly on the lookout for and trips me up quite a bit, frankly, if I'm being perfectly honest here.
[01:22:39] The status quo has some inertia it seems, and in fact, there is also the status quo bias. People will stick with the status quo, even if it has a lower expected value. I am also just so guilty of this. Making really big changes, it'll often give me a little bit of anxiety and I'm liable to stick with something even though it's not optimal. It's kind of a devil you know kind of thing and it's really, very apropos in focus happening in my life right now, in fact. So I am very, very aware of status quo bias and endowment effect. It really is the old maxim, better the devil you know. Known quantities are always easier to stomach because they're more familiar. This shows up all over the place, including in the NBA. Why didn't they shoot a bunch of three-pointers in the '80s and '90s? Well, they needed time for somebody to sort of breakthrough that. People did things the way they've always done them. It happens even when people are thinking about problems when there's a lot of people attacking a problem. It really does take a lot to break the status quo.
[01:23:34] Now, in decision making, when it comes to decision making in organizations, one of the practicals that Annie had mentioned off airs have the people who decide whether to start something be different than the people who decide whether to stop something. This helps mitigate the endowment effect, the sunk cost fallacy, and other baises. For example, if somebody decides to make a bank loan and then those people default on loans are in danger of defaulting, you can't have the same person who made the decision to give the loan be the same person who decides whether or not to revoke that or stop whatever credit line it is. It has to be somebody else because you really can't just do a Jedi mind trick and pretend that you are different people. That doesn't work. Science has shown. It's probably going to be easier in an organization than something we can do personally because I can assign something to somebody else if I'm a CEO of a company, I can't pretend to be somebody else if I'm making a decision, personally. You can also have mentors and other people close to you, maybe a spouse, get the final say in these kinds of things but this is tougher for personal decisions. Take it from me.
[01:24:33] Also, being forced to quit something forces us to explore other opportunities that we might not have seen. I know this sounds like just look on the bright side, but really there is a lot to this. You should start exploring other opportunities before you're forced to do so. Ideally, this will make for a softer landing, but if we are forced to quit something, often it forces our vision to open up a little bit and we tend to see other possibilities. I know, again, this has been true for me when I've had to start something over or leave something or quit something, I often find that the new thing that I was never looking for to begin with turns out to be a better option. Not just a rationalization that it's a better option, but actually something that is better for me over the long term.
[01:25:12] I know we talked a little bit about goals during the show. And goals get us to focus on the finish line and keep us motivated to keep going, but they are also bad for these exact same reasons. Sometimes we would simply be better off quitting and goals can often inhibit that. Now, it's great to have goals. I'm not going to quit. I have a goal in mind, but this one's going to be very tough for those of us raised to never quit no matter what. Because goals both serve the purpose of keeping us motivated and focused in the face of a challenge, but unfortunately, they also keep us motivated and focused in the face of a challenge that might have told us otherwise that we should quit. So it's hard to know what to do with goals. Sometimes, they're appropriate and sometimes they need to be reevaluated.
[01:25:51] And hey, look, we all know that we don't want to change our beliefs midstream, especially because doing so admits that we were wrong and that we failed. Quitting, psychologically, somehow makes us go from failing to having failed. And this to many of us means we never should have started in the first place, which I understand and I feel the same way. This is an intolerable belief to hold. I can certainly relate to this because, of course, we're worried deep down that others are going to judge us as harshly as we judge ourselves, we want others to see us as consistent because the opposite, inconsistency, fickle, whatever, it's not flattering. We will be seen as irrational, prone to mistakes. At least, that's what we think is going to happen when really often the opposite is true. Somebody who can admit a mistake, realize they shouldn't be taking a certain course of action, stop taking that course of action, and change their course. That person can, should, and often is seen as more capable, but in the moment, it certainly does not feel that way.
[01:26:54] Great big thank you to Annie Duke. Links to all things Annie will be on our website in the show notes at jordanharbinger.com. Transcripts in the show notes, videos on YouTube. Advertisers, deals, and discount codes, all at jordanharbinger.com/deals. I've said it once. I'll say it again. Please consider supporting those who support this show. I'm at @JordanHarbinger on Twitter and Instagram. You can also connect with me on LinkedIn.
[01:27:16] And I'm teaching you how to connect with great people using the same systems, software, and tiny habits that I use every single day, jordanharbinger.com/course. I'm teaching you how to dig the well before you get thirsty, folks. Build those relationships before you need them, and you'll be joining many of the guests on the show who subscribe and contribute to that course. In other words, you'll be in smart company.
[01:27:37] This show is created in association with PodcastOne. My team is Jen Harbinger, Jase Sanderson, Robert Fogarty, Millie Ocampo, Ian Baird, Josh Ballard, and Gabriel Mizrahi. Remember, we rise by lifting others. The fee for this show is you share it with friends when you find something useful or interesting. If you know somebody who needs to stop doing something, needs to quit, needs to change course, definitely share this episode with him. The greatest compliment you can give us is to share the show with those you care about. In the meantime, do your best to apply what you hear on the show so you can live what you listen, and we'll see you next time.
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