WEBVTT - How Quitting Can Make You a Winner 0:00:00.040 --> 0:00:03.600 You're listening to Bloomberg Business Week with Carol Masser and 0:00:03.680 --> 0:00:08.280 Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio Carol Master 0:00:08.320 --> 0:00:11.039 along with Ed Ludlow here in our Interactive Brokers studio. 0:00:11.080 --> 0:00:13.119 And I don't know about you, Ed, but I know 0:00:13.200 --> 0:00:15.480 growing up my parents dress not giving up easily, not 0:00:15.560 --> 0:00:17.320 at all. You don't walk away from things. You do 0:00:17.400 --> 0:00:20.680 not quit, do not quit. That was definitely my upbringing. 0:00:20.760 --> 0:00:23.159 And it's me now, you know me. I know you 0:00:23.239 --> 0:00:27.720 keep going headstrong, yes, persevering well, writing about this and 0:00:27.760 --> 0:00:30.680 how learning to quit and walk away may just be 0:00:30.760 --> 0:00:33.440 a really crucial, important life lesson. So let's get to it. 0:00:33.600 --> 0:00:35.839 Form A professional poker player, Annie Duke is with us. 0:00:35.840 --> 0:00:38.040 She's a best selling author of Thinking and Bets. Her 0:00:38.120 --> 0:00:40.920 latest book Quit, The Power of Knowing When to walk Away. 0:00:41.040 --> 0:00:43.400 She joins us via zoom in New York City. She's 0:00:43.400 --> 0:00:46.000 also the co founder of the Alliance for Decision Education 0:00:46.000 --> 0:00:49.000 that's a nonprofit. She's also partnered at first Round Capital, 0:00:49.240 --> 0:00:52.120 a seed stage venture firm targeting tech entrepreneurs. She is 0:00:52.159 --> 0:00:55.600 a very very busy individual. And he's so so good 0:00:55.640 --> 0:00:58.600 to have you with us. How are you? I'm good. 0:00:58.680 --> 0:01:03.040 How are you doing, little cloudy out? You know, we 0:01:03.080 --> 0:01:06.160 need the rain, but it's going to stop at some point. Listen. 0:01:06.440 --> 0:01:07.959 You know, it's been a couple of years since I 0:01:07.959 --> 0:01:11.399 think we talked about your previous book, but you always 0:01:11.800 --> 0:01:14.759 take your experiences as a poker player, you know, what 0:01:14.840 --> 0:01:16.880 you've learned, and then how we can apply it kind 0:01:16.880 --> 0:01:19.120 of to our broader lives. Tell us about the progress 0:01:19.120 --> 0:01:23.319 and how it's culminated in your latest book. Yeah, So, 0:01:23.720 --> 0:01:26.160 I mean, I think there's just a really interesting conversation 0:01:26.280 --> 0:01:28.839 to be had between poker, which is this very high 0:01:28.840 --> 0:01:34.280 stakes decision making under uncertainty exercise, uh, and cognitive science, 0:01:34.280 --> 0:01:38.080 which is thinking about, you know, how do we make decisions? Um, 0:01:38.120 --> 0:01:40.400 And I think that the two disciplines can really inform 0:01:40.400 --> 0:01:42.640 each other. So, you know, the way I started thinking 0:01:42.640 --> 0:01:46.720 about quitting was that realizing that quitting the option to quit, 0:01:46.800 --> 0:01:51.040 that option is so incredibly valuable in poker, because if 0:01:51.080 --> 0:01:54.600 you couldn't fold your hand, it wouldn't really be that 0:01:54.680 --> 0:01:57.160 skillful game, right, and poker players have to really think 0:01:57.200 --> 0:01:59.800 about how to get good at cutting their losses. And actually, 0:01:59.800 --> 0:02:02.280 when you look at the difference between elite players and 0:02:02.360 --> 0:02:06.480 merely Okay. One one of the biggest differences between amateurs 0:02:06.520 --> 0:02:09.680 and experts and poker is how often they fold. When 0:02:09.680 --> 0:02:11.720 you just look at they get their first two card 0:02:11.800 --> 0:02:15.800 combination in a game of Texas hold them Um. Amateurs 0:02:15.840 --> 0:02:19.280 will play, they'll play over fifty of their hands, so 0:02:19.440 --> 0:02:23.119 they're folding less than half the time, whereas experts are 0:02:23.360 --> 0:02:28.200 playing about fifteen. And you were one of the top 0:02:28.200 --> 0:02:31.960 poker players for twenty years, right, and you've written this book, 0:02:32.000 --> 0:02:35.840 and it's hard to get one's head around the strength 0:02:35.919 --> 0:02:39.000 of being able to walk away, to stop, to quit. 0:02:39.840 --> 0:02:43.840 Talk me through the psychology of that. Yeah, So here's 0:02:43.880 --> 0:02:46.680 the thing. Whenever we make a decision, we don't have 0:02:46.720 --> 0:02:49.640 all the facts, and luck is going to influence the outcome. 0:02:49.680 --> 0:02:51.880 So I'm sure you've had that feeling, d of Oh, 0:02:51.919 --> 0:02:53.600 I wish I knew then what I know now. I 0:02:53.680 --> 0:02:56.600 might have made a daily basis of course, right. I mean, 0:02:56.600 --> 0:02:58.320 look at what's happening with the market, right like you're 0:02:58.360 --> 0:03:01.440 you're finding out information very rapidly every single day. So 0:03:01.520 --> 0:03:03.680 this is where the option to equip becomes so valuable 0:03:03.960 --> 0:03:07.360 because it allows us to start things even though we 0:03:07.400 --> 0:03:09.560 don't have all the facts that we know very little, 0:03:09.600 --> 0:03:13.520 because we know theoretically that when we find out new information, 0:03:13.760 --> 0:03:15.959 we can actually change our minds and we can change course. 0:03:16.480 --> 0:03:19.440 The problem for us as decision makers, though, is that 0:03:19.440 --> 0:03:22.680 that decision is itself made under uncertainty. Right, So, like 0:03:22.960 --> 0:03:24.640 I got to cool you out on that though, because 0:03:24.680 --> 0:03:26.880 you are also a venture capitalists and this is what 0:03:27.000 --> 0:03:30.000 fascinates me. You're a seed stage venture capitalist, right. You 0:03:30.080 --> 0:03:32.720 invest in many companies, not all of them are going 0:03:32.760 --> 0:03:36.000 to be successful. So when did you have a founder 0:03:36.080 --> 0:03:38.400 sitting in front of you one of a hundred meetings 0:03:38.440 --> 0:03:41.720 you've taken that quarter of that year, how do you say, right, 0:03:41.720 --> 0:03:43.760 I have to say no, I have to walk away 0:03:43.760 --> 0:03:47.760 from this potential opportunity. So you have to be thinking 0:03:47.800 --> 0:03:51.240 really struct in a structured way about the decision. So 0:03:51.400 --> 0:03:55.640 essentially you're taking all of your experience and you are 0:03:55.960 --> 0:03:59.080 thinking about what are the signals that I see that 0:03:59.240 --> 0:04:03.400 tell me that an investment is worthwhile? You know, given 0:04:03.440 --> 0:04:05.400 the constraints of like how much capital do you have? 0:04:05.600 --> 0:04:08.160 What what do you want your portfolio construction to look like? 0:04:08.640 --> 0:04:12.119 And then you have to systematize that. So as an example, 0:04:12.880 --> 0:04:15.680 let's just say broadly, this isn't This is not nearly 0:04:15.720 --> 0:04:18.120 as complex as as you would actually approach the decision. 0:04:18.160 --> 0:04:21.080 So let's simplify it. Let's say that you know at 0:04:21.120 --> 0:04:23.240 seed what you care really care about. What's the quality 0:04:23.279 --> 0:04:26.120 of the market, Uh, what's the quality of the product? 0:04:26.360 --> 0:04:27.680 You know, do you think it's a good product, do 0:04:27.680 --> 0:04:29.680 you think it's going to achieve product market fit? So 0:04:29.720 --> 0:04:32.160 and so forth. What's the quality of the founder, what's 0:04:32.160 --> 0:04:34.919 the quality of the team. You have to be systematic 0:04:34.960 --> 0:04:37.960 and in making very clear and precise ratings of those 0:04:37.960 --> 0:04:41.240 things every time a founder comes into pitch. And then 0:04:41.240 --> 0:04:43.640 you also have to be thinking ahead, right like you 0:04:43.680 --> 0:04:46.680 have to make forecasts that are also very precise about 0:04:46.760 --> 0:04:49.839 what's the probability will fund at successfully funded Series A 0:04:49.960 --> 0:04:53.200 or Series B. And by doing that, what it allows 0:04:53.200 --> 0:04:55.760 you to do, first of all, is to overcome some bias, 0:04:55.880 --> 0:04:58.560 because it's harder to tell yourself a story or to 0:04:58.640 --> 0:05:01.719 ignore certain information that's a negative signal or ignore certain 0:05:01.720 --> 0:05:05.280 information that's a positive signal, because you're you're thinking about 0:05:05.279 --> 0:05:08.640 the exact same things each time, and you're creating a 0:05:08.720 --> 0:05:10.920 record that then allows you, as you see how those 0:05:10.960 --> 0:05:13.960 companies do, to go back and check on them and 0:05:14.000 --> 0:05:16.880 say what was I thinking at the time, and like, 0:05:17.000 --> 0:05:30.960 how were my forecasts? You got less? Indeed, Kenny Rogers 0:05:30.960 --> 0:05:32.520 for you. But yes, you need to know when to 0:05:32.600 --> 0:05:35.360 fold them. And that's what we're talking about with Annie Duke, 0:05:35.520 --> 0:05:39.760 former professional poker player, longtime professional poker player who did 0:05:39.800 --> 0:05:42.520 so well. Best selling author of many books, her latest 0:05:42.520 --> 0:05:45.040 one Quit, The Power of Knowing When to Walk Away, 0:05:45.360 --> 0:05:47.800 still with us via zoom in New York City. We 0:05:47.880 --> 0:05:50.279 mentioned too. She's the co founder of the Alliance for 0:05:50.320 --> 0:05:53.719 Decision Education, and nonprofit with the mission of empowering students 0:05:54.000 --> 0:05:56.680 through decision skills education. She's also a partner at first 0:05:56.720 --> 0:06:02.760 Round Capital, a seed stage venture firm targeting tech entrepreneurs. UM. 0:06:02.800 --> 0:06:05.680 You know, I was looking at your book and you do. 0:06:05.240 --> 0:06:08.239 You're right, you know, we need to redefine what failed 0:06:08.240 --> 0:06:10.760 and wasted means. You know, when we worry so much 0:06:10.760 --> 0:06:13.920 about quitting UM, and that quitting means that we failed, 0:06:13.960 --> 0:06:16.320 what exactly are we failing at? If you quit something 0:06:16.320 --> 0:06:18.880 that's no longer worth pursuing, that's not a failure of 0:06:18.920 --> 0:06:23.839 that's a success. Talk about Anie turning it upside down. Yeah, okay, 0:06:23.880 --> 0:06:25.880 So the problem, Carol is that we tend to think 0:06:25.920 --> 0:06:29.440 about waste as a backward looking problem. Right, So we're worried, 0:06:29.560 --> 0:06:32.880 like if we are in a job and it doesn't 0:06:32.880 --> 0:06:34.320 work out and we have to quit and walk away, 0:06:34.320 --> 0:06:37.120 that we'll have wasted our time in it. If we 0:06:37.480 --> 0:06:39.400 buy a stock at fifty and is trading at forty, 0:06:39.560 --> 0:06:41.720 were loath to sell it for fear that we can't 0:06:41.720 --> 0:06:44.800 get our money back. So these have to do with 0:06:44.839 --> 0:06:47.240 like resources that we've already sunk into this, and this 0:06:47.320 --> 0:06:50.760 is part of the sunk cost fallacy. Um. Resources that 0:06:50.800 --> 0:06:53.640 we've already sunk into something prevents us from walking away 0:06:53.640 --> 0:06:55.760 because that's the moment that you go from failing to 0:06:55.920 --> 0:06:58.279 having failed. That's the moment you go from having a 0:06:58.320 --> 0:07:01.760 ten dollar lost on the books to having a realized 0:07:01.839 --> 0:07:04.560 ten dollar loss or a sure loss of ten dollars. 0:07:04.600 --> 0:07:08.520 And the problem with that backward looking um perspective is 0:07:08.560 --> 0:07:11.000 that it causes you to put more time, effort, and 0:07:11.080 --> 0:07:14.440 money into something that isn't worthwhile. So the idea is like, look, 0:07:14.520 --> 0:07:17.000 if there's a stock that's trading at forty and you 0:07:17.040 --> 0:07:20.120 wouldn't buy it today, then the fact that you bought 0:07:20.160 --> 0:07:22.800 it at fifty shouldn't matter. You shouldn't hold it because 0:07:22.800 --> 0:07:25.480 holding is the same as buying. You should sell it, 0:07:25.520 --> 0:07:27.440 but we don't do that because we want to get 0:07:27.440 --> 0:07:30.560 our money back and that's huge opportunity costs because we 0:07:30.600 --> 0:07:32.800 should be taking those that forty dollars and putting it 0:07:32.800 --> 0:07:35.800 into something that is worthwhile. So how do you think 0:07:35.800 --> 0:07:38.080 about it when you know we spend so much time 0:07:38.120 --> 0:07:40.120 and talking and I know Ed talked attle bit about 0:07:40.120 --> 0:07:43.520 this in terms of the tech universe. You know, entrepreneurs, 0:07:43.520 --> 0:07:45.960 you create these companies that become vehemous in the tech 0:07:46.040 --> 0:07:50.080 space and then maybe have to pivot. And you do wonder, 0:07:50.200 --> 0:07:54.520 like I think, as you're talking about Facebook meta metaverse, 0:07:54.600 --> 0:07:58.000 like this is something that may take years to play out. 0:07:58.120 --> 0:08:00.160 It's who knows whether it will be a really art 0:08:00.200 --> 0:08:02.440 decision or not. But you do wonder about somebody like 0:08:02.440 --> 0:08:05.840 a Mark Zuckerberg so identified with this company so entrenched, 0:08:06.320 --> 0:08:09.200 is it possible that he won't know maybe when to 0:08:09.240 --> 0:08:13.040 walk away from something that could ultimately pan out to 0:08:13.040 --> 0:08:15.520 be nothing. Yeah. So I mean, look, the thing is 0:08:15.560 --> 0:08:18.160 obviously that the more uncertainty there is, the harder it 0:08:18.280 --> 0:08:20.080 is to figure out that you're supposed to quit, and 0:08:20.240 --> 0:08:22.640 more importantly, the easier it is to rationalize that you 0:08:22.640 --> 0:08:26.000 should keep going. So when there's lots of uncertainty, like 0:08:26.520 --> 0:08:28.920 you know in the startup world, it's easy to say 0:08:29.120 --> 0:08:31.600 it's just around the corner, like next quarters, when I'm 0:08:31.600 --> 0:08:34.480 going to start acquiring customers, I'm going to start accruing 0:08:34.559 --> 0:08:36.320 net new a r R that's going to show me 0:08:36.360 --> 0:08:39.520 that I'm successful. So where I go with that is 0:08:39.960 --> 0:08:42.720 Ron Conway, with the founder of s v angel Um. 0:08:42.760 --> 0:08:44.920 I think really has the right tactic here, and he's 0:08:44.920 --> 0:08:46.600 probably one of them. I think he might be the 0:08:46.600 --> 0:08:49.320 most successful. I think he is the most successful angel 0:08:49.360 --> 0:08:52.160 investor ever. So he's dealing with this problem of you know, 0:08:52.360 --> 0:08:54.959 when do you grit it out even though things look 0:08:55.000 --> 0:08:57.520 like they're going bad, and when you actually quit. And 0:08:58.000 --> 0:09:00.000 he demonstrates this thing like you've got to get people 0:09:00.000 --> 0:09:02.800 to help you with the decision, because he, as someone 0:09:02.840 --> 0:09:06.160 who has invested in company after company after company, has 0:09:06.200 --> 0:09:08.680 a better perspective than the founders who are actually in 0:09:08.720 --> 0:09:11.280 the decision. So he'll go to them and he'll say, look, 0:09:11.320 --> 0:09:14.200 I don't think things are going that well. They'll say, oh, 0:09:14.240 --> 0:09:17.080 I can turn it around, which is what they you know, naturally, 0:09:17.120 --> 0:09:19.959 they believe these are gritty people who are brilliant, who 0:09:19.960 --> 0:09:22.600 believe in what they're doing, and he'll agree with them, 0:09:22.679 --> 0:09:24.400 and he'll say, yeah, okay, I agree that you can 0:09:24.440 --> 0:09:27.880 turn it around. So how long, like, how long can 0:09:27.920 --> 0:09:29.960 you keep going like this? Let's say they agree a 0:09:30.040 --> 0:09:33.320 quarter and then they set benchmarks for the end of 0:09:33.360 --> 0:09:37.320 that quarter. So it's about being clear because otherwise you 0:09:37.360 --> 0:09:40.760 can rationalize it away. Right, So if you say clearly 0:09:40.800 --> 0:09:43.400 that we have to generate two thousand and net new 0:09:43.440 --> 0:09:46.720 a R in the next quarter, then um, if you 0:09:46.760 --> 0:09:48.840 fall short of that, you have to have a conversation 0:09:48.880 --> 0:09:51.720 about walking away, because you've agreed about what it is 0:09:51.760 --> 0:09:54.240 that shows you that you're on your path, because otherwise 0:09:54.240 --> 0:09:55.880 you can just stay on that treadmill. I know I 0:09:55.880 --> 0:09:57.800 can turn it around, and then you have the conversation 0:09:57.800 --> 0:09:59.200 in three months and you know you can turn it 0:09:59.200 --> 0:10:00.760 around again, and then all of a sudden you're out 0:10:00.800 --> 0:10:03.320 of money. And the problem is that if you knew 0:10:03.320 --> 0:10:06.120 it a year before, that's a year that you, as 0:10:06.160 --> 0:10:09.880 a brilliant human being, cannot be spending on another idea 0:10:09.920 --> 0:10:11.839 that might actually change the world. So this is the 0:10:11.920 --> 0:10:15.160 kill criteria. Is that correct? Yes? That is kill criteria 0:10:15.360 --> 0:10:17.800 is thinking in advance about what are the signals that 0:10:17.840 --> 0:10:20.600 I might see that things are going poorly? And obviously 0:10:20.600 --> 0:10:22.280 the flip side is what are the signals that I 0:10:22.360 --> 0:10:24.800 might see that things are going well? And it turns 0:10:24.800 --> 0:10:27.960 out that we're just way more rational when we're thinking 0:10:28.000 --> 0:10:31.680 ahead than when we're actually in the moment. So if 0:10:31.679 --> 0:10:34.080 we can think ahead, which is what wrong Conway is 0:10:34.120 --> 0:10:37.080 getting his founders to do, that can get us to 0:10:37.160 --> 0:10:39.920 that decision in a more rational way. And, as he says, 0:10:40.000 --> 0:10:42.480 life's too short not to do that, because if you're so, 0:10:43.520 --> 0:10:47.680 founders are brilliant, right, they're gritty. We want them working 0:10:47.760 --> 0:10:50.080 on the best problems that they can be working on. 0:10:50.120 --> 0:10:51.720 So if they find out that the thing that they're 0:10:51.720 --> 0:10:54.240 working on isn't worthwhile, we want them switching as quickly 0:10:54.280 --> 0:10:56.440 as possible to something that is going to change the world. 0:10:56.600 --> 0:10:58.120 It's really kind of funny in a week that we've 0:10:58.160 --> 0:11:00.240 been spending so much time talking about elon us on 0:11:00.320 --> 0:11:03.760 Twitter and announcing the deal. Kind of a second, it's 0:11:03.880 --> 0:11:06.840 it's just kind of staggering. Hey, we have about a 0:11:06.920 --> 0:11:10.280 minute left. Was there a real life lesson that you 0:11:10.400 --> 0:11:15.080 learned and where you didn't quit when you should have? Oh, 0:11:15.120 --> 0:11:20.400 my gosh. Absolutely so. I think I, like most people, 0:11:20.640 --> 0:11:23.880 have stuck to things too long. And that's true, whether 0:11:24.000 --> 0:11:27.800 it's uh, you know, playing sports with an injury. I 0:11:27.840 --> 0:11:30.440 think that I probably I should have quit poker earlier. 0:11:31.440 --> 0:11:33.480 I wasn't happy. And the other thing was that the 0:11:33.480 --> 0:11:36.480 game was changing in a way where players were getting better, 0:11:36.559 --> 0:11:39.200 way better than me, and I honestly at that point 0:11:39.200 --> 0:11:41.000 in my career didn't want to put in the time 0:11:41.040 --> 0:11:45.400 to keep up and um, and so I think I 0:11:45.400 --> 0:11:47.600 took too long to get to that decision. And I 0:11:47.640 --> 0:11:49.360 think part of the reason why, and this is a 0:11:49.520 --> 0:11:52.439 really important lesson is that when you're when your identity 0:11:52.559 --> 0:11:54.920 is wrapped up in it. I was a poker player, 0:11:55.160 --> 0:11:57.360 I think it becomes very very hard to walk away. 0:11:57.440 --> 0:11:59.320 And we need to be thinking about that in these 0:11:59.320 --> 0:12:01.679 types of decision agents. Is is it because you know, 0:12:01.800 --> 0:12:03.520 am I happy? Or is it because I feel like 0:12:03.520 --> 0:12:05.320 it's kind of who I am? Yeah? I know that's 0:12:05.320 --> 0:12:07.560 a really good point. I'm thinking about Tom Brady, just 0:12:07.640 --> 0:12:13.079 Al Bunch in this week you know. Yeah, sorry, okay, okay, listen, Annie, 0:12:13.120 --> 0:12:15.280 this has been so much fun. Good luck with the book. 0:12:15.640 --> 0:12:19.760 Come back soon, Annie Duke uh, former professional poker player, 0:12:19.800 --> 0:12:23.160 as we said, author, she's an investor. Her new book 0:12:23.200 --> 0:12:26.280 Quit The Power of Knowing When to walk Away. It 0:12:26.559 --> 0:12:29.040 is out, so check it out. Alright, folks, that's a 0:12:29.040 --> 0:12:31.480 wrap for our hul Bloomberg Business Week team or thanks 0:12:31.480 --> 0:12:34.200 to Ed Ludlow for joining us. I'm Carol Masser. Have 0:12:34.240 --> 0:12:34.960 a great evening.