How Quitting Can Make You a Winner

And it's me now, you know me. I know you keep going headstrong, yes, persevering well, writing about this and how learning to quit and walk away may just be a really crucial, important life lesson. So let's get to it. Form A professional poker player, Annie Duke is with us. She's a best selling author of Thinking and Bets. Her latest book Quit, The Power of Knowing When to walk Away. She joins us via zoom in New York City. She's also the co founder of the Alliance for Decision Education

that's a nonprofit. She's also partnered at first Round Capital, a seed stage venture firm targeting tech entrepreneurs. She is a very very busy individual. And he's so so good to have you with us. How are you? I'm good. How are you doing, little cloudy out? You know, we need the rain, but it's going to stop at some point. Listen.

You know, it's been a couple of years since I think we talked about your previous book, but you always take your experiences as a poker player, you know, what you've learned, and then how we can apply it kind of to our broader lives. Tell us about the progress

and how it's culminated in your latest book. Yeah, So, I mean, I think there's just a really interesting conversation to be had between poker, which is this very high stakes decision making under uncertainty exercise, uh, and cognitive science, which is thinking about, you know, how do we make decisions? Um, And I think that the two disciplines can really inform

each other. So, you know, the way I started thinking about quitting was that realizing that quitting the option to quit, that option is so incredibly valuable in poker, because if you couldn't fold your hand, it wouldn't really be that skillful game, right, and poker players have to really think about how to get good at cutting their losses. And actually, when you look at the difference between elite players and merely Okay. One one of the biggest differences between amateurs

and experts and poker is how often they fold. When you just look at they get their first two card combination in a game of Texas hold them Um. Amateurs will play, they'll play over fifty of their hands, so they're folding less than half the time, whereas experts are playing about fifteen. And you were one of the top poker players for twenty years, right, and you've written this book, and it's hard to get one's head around the strength of being able to walk away, to stop, to quit.

Talk me through the psychology of that. Yeah, So here's the thing. Whenever we make a decision, we don't have all the facts, and luck is going to influence the outcome. So I'm sure you've had that feeling, d of Oh, I wish I knew then what I know now. I might have made a daily basis of course, right. I mean, look at what's happening with the market, right like you're

you're finding out information very rapidly every single day. So this is where the option to equip becomes so valuable because it allows us to start things even though we don't have all the facts that we know very little, because we know theoretically that when we find out new information, we can actually change our minds and we can change course. The problem for us as decision makers, though, is that

that decision is itself made under uncertainty. Right, So, like I got to cool you out on that though, because you are also a venture capitalists and this is what fascinates me. You're a seed stage venture capitalist, right. You invest in many companies, not all of them are going to be successful. So when did you have a founder sitting in front of you one of a hundred meetings you've taken that quarter of that year, how do you say, right, I have to say no, I have to walk away

from this potential opportunity. So you have to be thinking really struct in a structured way about the decision. So essentially you're taking all of your experience and you are thinking about what are the signals that I see that tell me that an investment is worthwhile? You know, given the constraints of like how much capital do you have? What what do you want your portfolio construction to look like?

And then you have to systematize that. So as an example, let's just say broadly, this isn't This is not nearly as complex as as you would actually approach the decision. So let's simplify it. Let's say that you know at seed what you care really care about. What's the quality of the market, Uh, what's the quality of the product? You know, do you think it's a good product, do you think it's going to achieve product market fit? So and so forth. What's the quality of the founder, what's

the quality of the team. You have to be systematic and in making very clear and precise ratings of those

things every time a founder comes into pitch. And then you also have to be thinking ahead, right like you have to make forecasts that are also very precise about what's the probability will fund at successfully funded Series A or Series B. And by doing that, what it allows you to do, first of all, is to overcome some bias, because it's harder to tell yourself a story or to ignore certain information that's a negative signal or ignore certain

information that's a positive signal, because you're you're thinking about the exact same things each time, and you're creating a record that then allows you, as you see how those companies do, to go back and check on them and say what was I thinking at the time, and like, how were my forecasts? You got less? Indeed, Kenny Rogers for you. But yes, you need to know when to

fold them. And that's what we're talking about with Annie Duke, former professional poker player, longtime professional poker player who did so well. Best selling author of many books, her latest one Quit, The Power of Knowing When to Walk Away, still with us via zoom in New York City. We mentioned too. She's the co founder of the Alliance for Decision Education, and nonprofit with the mission of empowering students through decision skills education. She's also a partner at first

Round Capital, a seed stage venture firm targeting tech entrepreneurs. UM. You know, I was looking at your book and you do. You're right, you know, we need to redefine what failed and wasted means. You know, when we worry so much about quitting UM, and that quitting means that we failed, what exactly are we failing at? If you quit something that's no longer worth pursuing, that's not a failure of

that's a success. Talk about Anie turning it upside down. Yeah, okay, So the problem, Carol is that we tend to think about waste as a backward looking problem. Right, So we're worried, like if we are in a job and it doesn't work out and we have to quit and walk away, that we'll have wasted our time in it. If we buy a stock at fifty and is trading at forty, were loath to sell it for fear that we can't

get our money back. So these have to do with like resources that we've already sunk into this, and this is part of the sunk cost fallacy. Um. Resources that we've already sunk into something prevents us from walking away because that's the moment that you go from failing to having failed. That's the moment you go from having a ten dollar lost on the books to having a realized ten dollar loss or a sure loss of ten dollars.

And the problem with that backward looking um perspective is that it causes you to put more time, effort, and money into something that isn't worthwhile. So the idea is like, look, if there's a stock that's trading at forty and you wouldn't buy it today, then the fact that you bought it at fifty shouldn't matter. You shouldn't hold it because

holding is the same as buying. You should sell it, but we don't do that because we want to get our money back and that's huge opportunity costs because we should be taking those that forty dollars and putting it into something that is worthwhile. So how do you think about it when you know we spend so much time and talking and I know Ed talked attle bit about this in terms of the tech universe. You know, entrepreneurs, you create these companies that become vehemous in the tech

space and then maybe have to pivot. And you do wonder, like I think, as you're talking about Facebook meta metaverse, like this is something that may take years to play out. It's who knows whether it will be a really art decision or not. But you do wonder about somebody like a Mark Zuckerberg so identified with this company so entrenched, is it possible that he won't know maybe when to walk away from something that could ultimately pan out to

be nothing. Yeah. So I mean, look, the thing is obviously that the more uncertainty there is, the harder it is to figure out that you're supposed to quit, and more importantly, the easier it is to rationalize that you should keep going. So when there's lots of uncertainty, like you know in the startup world, it's easy to say it's just around the corner, like next quarters, when I'm going to start acquiring customers, I'm going to start accruing net new a r R that's going to show me

that I'm successful. So where I go with that is Ron Conway, with the founder of s v angel Um. I think really has the right tactic here, and he's probably one of them. I think he might be the most successful. I think he is the most successful angel investor ever. So he's dealing with this problem of you know, when do you grit it out even though things look

like they're going bad, and when you actually quit. And he demonstrates this thing like you've got to get people to help you with the decision, because he, as someone who has invested in company after company after company, has a better perspective than the founders who are actually in the decision. So he'll go to them and he'll say, look,

I don't think things are going that well. They'll say, oh, I can turn it around, which is what they you know, naturally, they believe these are gritty people who are brilliant, who believe in what they're doing, and he'll agree with them, and he'll say, yeah, okay, I agree that you can turn it around. So how long, like, how long can you keep going like this? Let's say they agree a quarter and then they set benchmarks for the end of that quarter. So it's about being clear because otherwise you

can rationalize it away. Right, So if you say clearly that we have to generate two thousand and net new a R in the next quarter, then um, if you fall short of that, you have to have a conversation about walking away, because you've agreed about what it is that shows you that you're on your path, because otherwise

you can just stay on that treadmill. I know I can turn it around, and then you have the conversation in three months and you know you can turn it around again, and then all of a sudden you're out of money. And the problem is that if you knew it a year before, that's a year that you, as a brilliant human being, cannot be spending on another idea that might actually change the world. So this is the

kill criteria. Is that correct? Yes? That is kill criteria is thinking in advance about what are the signals that I might see that things are going poorly? And obviously the flip side is what are the signals that I might see that things are going well? And it turns out that we're just way more rational when we're thinking ahead than when we're actually in the moment. So if we can think ahead, which is what wrong Conway is getting his founders to do, that can get us to

that decision in a more rational way. And, as he says, life's too short not to do that, because if you're so, founders are brilliant, right, they're gritty. We want them working on the best problems that they can be working on. So if they find out that the thing that they're working on isn't worthwhile, we want them switching as quickly as possible to something that is going to change the world. It's really kind of funny in a week that we've been spending so much time talking about elon us on

Twitter and announcing the deal. Kind of a second, it's it's just kind of staggering. Hey, we have about a minute left. Was there a real life lesson that you learned and where you didn't quit when you should have? Oh, my gosh. Absolutely so. I think I, like most people, have stuck to things too long. And that's true, whether it's uh, you know, playing sports with an injury. I think that I probably I should have quit poker earlier.

I wasn't happy. And the other thing was that the game was changing in a way where players were getting better, way better than me, and I honestly at that point in my career didn't want to put in the time to keep up and um, and so I think I took too long to get to that decision. And I think part of the reason why, and this is a really important lesson is that when you're when your identity is wrapped up in it. I was a poker player, I think it becomes very very hard to walk away.

And we need to be thinking about that in these types of decision agents. Is is it because you know, am I happy? Or is it because I feel like it's kind of who I am? Yeah? I know that's a really good point. I'm thinking about Tom Brady, just Al Bunch in this week you know. Yeah, sorry, okay, okay, listen, Annie, this has been so much fun. Good luck with the book. Come back soon, Annie Duke uh, former professional poker player, as we said, author, she's an investor. Her new book

Quit The Power of Knowing When to walk Away. It is out, so check it out. Alright, folks, that's a wrap for our hul Bloomberg Business Week team or thanks to Ed Ludlow for joining us. I'm Carol Masser. Have a great evening.