Quit: The Power of Knowing When to Walk Away

by Annie Duke

“The results of this paper suggest that people

may be excessively cautious when facing life-changing choices.”

If you feel like you’ve got a close call between quitting and persevering, it’s likely that quitting is the better choice.

We have an expectation that people ought to have seen in foresight what we can so easily see in hindsight. And when they don’t, we can’t believe how obtuse they are.

Prospect theory is a model of how people make decisions, accounting for systematic preferences and biases involving risk, uncertainty, gains, and losses. One of the key findings of prospect theory is loss aversion, recognizing that the emotional impact of a loss is greater than

the corresponding impact of an equivalent gain. In fact, losing feels about two times as bad to us as winning feels good to us.

when we have already accrued losses on paper, we become risk seekers. Daniel Kahneman subsequently characterized this as sure-loss aversion.

Quitting on time usually feels like quitting too early, and the usually part is specifically when you’re in the losses.

Quit While You’re Ahead?

“Almost nobody hits their take-profit order. They exit manually before that.” In other words, traders will quit earlier than the take-profit order would tell them to, in order to lock up a sure win, regardless of whether continuing to hold that position would be a winning decision. When they have a win on paper, they don’t have any interest in recruiting luck into the equation any further, risking losing gains that they could put in their pocket.

The best quitting strategy would be to examine all your holdings, not just the ones at the tails of your portfolio, and decide which were going to generate the least value going forward and sell those. That would maximize the value of the portfolio as a whole. This is, after all, their buying strategy, and they execute it with skill and success, by using amazing data-driven strategies to generate excess returns.

First, for most things we quit, there is no obvious data available for how it would have gone if we had stuck to it. It’s merely a hypothetical or a counterfactual.

Traders sometimes create shadow books of the things they were thinking about buying but didn’t, to track how those decisions might have gone. A solution I’ve recommended to clients working in financial markets is to use the same strategy to solve the feedback problem on sell-side decisions. Create a book that tracks those sell-side decisions and see how they’re doing

compared to a benchmark of how they would have done if they randomly sold something different in the portfolio at the same time.

But much less obvious was the mental feat of quitting and turning back on Pitch 6. Once he made the decision to go for it and start climbing that morning in 2016, every force—except, obviously, gravity—was pushing him to persist. He had invested months in training. His friends, in addition to investing their time and money in the effort,

were literally risking their lives to film the attempt. An entire film project was at stake.

He saw the U.S. involvement in the Vietnam War as a living, breathing, high-stakes, slow-motion train wreck of an example of our inability to quit.

instead responding with what Staw later called an escalation of commitment to the losing course of action, responding to the growing awareness that there was no real path to victory for the United States by increasing the nation’s commitment to the war.

Psychologists Jeffrey Rubin and Joel Brockner conducted an amusing experiment to answer two questions: How long will people wait for something that never arrives, and what price will they pay to continue waiting? It turns out people will wait a surprisingly long amount of time, and they will pay an amount that clearly exceeds the value of what they were waiting for.

A good signal that the end of construction will be late: when the beginning of construction is delayed by half a decade.

A perfectly rational decision-maker would consider only the future costs and benefits in deciding whether to continue with a course of action. In other words, if continuing on has a positive expected value, a rational actor would persevere. If it has a negative expected value, they would quit.

But this cognitive illusion is very strong. Just because you know it’s an error in theory doesn’t mean that you won’t fall for it when you are facing down these kinds of decisions.

When we embark on an endeavor, we also accumulate debris—the time, money, and effort we have spent. As we accumulate costs, the mass grows, escalating our commitment and making it more and more difficult to quit. That decision to persevere then makes us accumulate more costs, which then makes us even more

likely to continue the next time we consider quitting. And that keeps adding weight to the scale in favor of persevering. The whole thing snowballs.

A relationship that’s not working out turns into a game of Katamari.

“Due to a need to justify prior behavior, a decision maker may increase his commitment in the face of negative consequences, and this higher level of commitment may, in turn, lead to further negative consequences.”

There’s a saying among top poker players that poker is one long game. It’s a reminder that the particular hand they’re playing is not the last hand they’ll ever play or that any particular day that they’re playing is not the last day they’ll ever play. A poker player will play thousands upon thousands of hands over their lifetime, so in the grand scheme of things whether or not they lose one single hand of poker matters very little. What matters is that they’re maximizing

their expected value over all those days and all those hands. That’s what they mean by one long game. This mantra is meant to help expert players overcome the sunk cost fallacy,

What really matters is maximizing your expected value across all the things you start, across all of your mental accounts. If you’re investing in a number of stocks, some are going to win and some are going to lose. What matters is whether you’re winning across your whole portfolio not whether any one investment is up or down.

When things start going poorly, we don’t want to quit because we don’t like to close accounts in the losses. This is why poker players remind themselves that poker is one long game. We would all do well to remember that life is one long game as well.

Knowing is not the same as doing.

they ask themselves, “If I were approaching this decision fresh, would I want to enter into this course of action?”

X has a very specific charter: to take their best ideas from concept to commercial viability in a five-to-ten-year time horizon. It’s not enough that the idea is a world-changing solution, or even that the proposed solution is possible. They also have to know that the economics will work, so that it will become self-supporting and profitable. The reasoning behind the five-to-ten year time horizon is that if the solution could be developed in fewer years, somebody else is probably already working on it. If it is going to take longer than a decade, the technology might be outdated by the time it gets to market.

Every dollar they save by getting to no quickly is a dollar they can spend on something that could change the world.

The point of this mental model is to remind you that there is no point building the pedestal if you can’t train the monkey. In other words, you ought to tackle the hardest part of the problem first.

clearly understands that quitting gets you where you want to go faster.

The sooner you figure out that you should walk away, the sooner you can switch to something better. And the sooner that happens, the more resources you’re saving, which you can then devote to more fruitful endeavors. One of the beautiful things about the monkeys-and-pedestals mental model is that sometimes it helps you quit before you start.

One of Teller’s valuable insights is that pedestal-building creates the illusion of progress rather than actual progress itself.

Astro Teller also understands a subtler but no less important point, that we have a tendency, when we butt up against a monkey that is proving difficult to solve, to turn our attention to building pedestals rather than giving up. We prefer that illusion of progress to having to quit and admit defeat.

Figure out the hard thing first. Try to solve that as quickly as possible. Beware of false progress.

Essentially, when you enter into an endeavor, you want to imagine what you could find out that would tell you it’s no longer worth pursuing. Ask yourself, “What are the signs that, if I see them in the future, will cause me to exit the road I’m on? What could I learn about the state of the world or the state of myself that would change my commitment to this decision?”

That list offers you a set of kill criteria, literally criteria for killing a project or changing your mind or cutting your losses.

in line with lots of subsequent work that’s been done on all sorts of precommitment contracts. Whether it comes to following through with diet plans or work plans or study plans, these types of precommitment contracts get people to act more rationally. Essentially, kill criteria create a precommitment contract to quit.

Creating a set of kill criteria would help the team to cut their losses faster when the signs were clear. To develop such criteria, we started by working with the sales team to generate a list of signals that would tell them that an opportunity wasn’t worth pursuing.

In general, this idea of casting yourself into the future, imagining a failure, and then looking back to try to figure out why is called a premortem. Using a premortem is a great tool to help develop high-quality kill criteria.

We tend to associate the idea of funnel management with sellers or investors. But every one of us has a funnel we are managing: the interests we can pursue, the classes we can take, the projects we can do at work, the jobs we can apply for, the people we can date.

We all have to make these choices about which opportunities to pursue and which to skip or quit. As we’re making those choices, we want to spend as little time as possible on the things that aren’t worthwhile and as much time as possible on the things that are. You can set kill criteria before you accept a position at a company, or before you decide on your major or what college you’re going to, or the house that you want to buy, or the place that you want to live. When you’re shelling out money for a concert ticket, you can think about what the weather conditions would have to be for you to eat the cost and stay home.

The best quitting criteria combine two things: a state and a date. A state is just what it sounds like, an objective, measurable condition you or your project is in, a benchmark that you have hit or missed. A date is the when.

It’s easy to move from one pedestal to another, from a postdoc to an adjunct and so forth, thinking that your big break is right around the corner. Of course, with every pedestal, you’re accumulating sunk costs, putting more time and effort into the endeavor, making it harder and harder to walk away.

“This is exactly why X produces such outsized returns. Not because we’re perfect at what we aspire to, but because we’re so relentlessly aspiring to it that we’re modestly successful and that turns out to be enormous.”