The game-changing magic of knowing when to quit: An interview with Annie Duke

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Tanya Ott: Hi, I’m Tanya Ott. As host of the Press Room, I’ve had the opportunity to talk to people who spend their time thinking deeply on some of the most pressing business issues of the day. Over the last eight years, we’ve explored how embracing neurodiversity could create a better work environment for everyone; identified which behavioral hacks could keep you focused on your goals; predicted economic trends for the coming year; and looked into the future of everything from warfare to eSports, well-being to AI, [and] gender equity to work.

But I’m not the only one having these sorts of conversations within Deloitte. There are many podcasts hosted by or involving Deloitte professionals—some you may have heard of, some may be new to you. But all involve fascinating conversations that I want you to hear.

Today, I want to introduce you to The Provocateurs, a podcast produced by Thinkers50 in collaboration with Deloitte. This podcast gives you direct access to the thoughts, experiences, stories, and insights of remarkable leaders from around the world. The aim is simple: to provoke you to think and act differently through candid and thought-provoking conversations with fantastic leaders.

The episode I’m excerpting features a conversation with Annie Duke, the professional poker player turned author, speaker, and cognitive scientist specializing in decision-making.

Over the course of her professional poker career, [she] won more than US$4 million and took the title in the World Series of Poker Tournament of Champions and the NBC National Poker Heads-Up Championship. And knowing when to hold ‘em and when to fold ‘em applies to more than just cards—it’s also a vital skill for business leaders.

Duke spoke with Stuart Crainer, cofounder of Thinkers50, and Steve Goldbach, the Sustainability, Climate, and Equity leader for Deloitte LLP, about these and other lessons from her book Quit: The Power of Knowing When to Walk Away. She warns that businesses that are “in the losses”—seeing a setback in an area where they have invested a substantial amount—can forget that quitting may be the way to preserve value, and that sticking it out can lead to much greater losses.

In the excerpt that follows, Steve Goldbach speaks first.

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[Excerpt begins]

Steve Goldbach: Annie, one of the things that I’ve observed as a strategist is that when you look at industries where there are relatively few competitors, when you have a competitor who “gets sick”—where you maybe have a five-competitor market or a six-competitor market and one of the competitors gets really weakened—they start to make what other competitors may call irrational decisions, but they could be doubling down or [thinking] I’ve got to play to get out of my losses, I’m going to do things that don’t seem economically rational, but that might have a leg in the concept that you’re describing because they’re going to make moves to get out of this losing streak in some way.

Annie Duke: I think that one of the best examples of this problem is the California bullet train where we can really see what happens once you’ve started to dump resources into something. And if you quit, then what does that mean? Didn’t you just waste all of those resources?

Now, I just want to be clear, waste is a forward-looking problem, not a backward-looking problem. And this is where this problem of being “in the losses”—it’s related to the sunk-cost fallacy, that we take what we’ve already sunk into a project into account when we’re trying to decide whether to continue on and sink more into it. [But] what we’ve already spent is already gone. What we care about is, is the next dollar that we put into it worthwhile or is that going to be a waste? And what ends up happening is that we will dump more resources into something trying to protect what we’ve already spent, and that’s what actually creates the waste. That’s why waste is a forward-looking problem.

So, the California bullet train I think is such a good example of this problem. So this is a high-speed rail system that they want to build in California that’s going to connect San Francisco and Silicon Valley, which obviously are [the] economic engines of that state, to LA and San Diego to the south, also economic engines of the state. So what you see in California is that those two areas are incredibly economically prosperous. And then the Central Valley, everything that kind of is in between those two areas, is economically depressed. Not only that, the housing markets in LA and San Francisco are incredibly congested. Not just congested, but very expensive. So it’s actually hard for people to live anywhere near there in order just to work in those cities. So the idea was we’re going to create high-speed rail. That’s going to allow us to connect the Central Valley to these economic engines. That’s going to help to spread economic prosperity throughout the whole state, and it’s going to relieve these congested housing markets.

That all sounds great. So they floated a bond in 2010. The bond got approved for US$9 billion on a US$33 billion estimated budget to start building the bullet train. And they approved a bit of track to start with between Madera and Fresno. This is sitting in the Central Valley. They expected enough of the line to be running by 2021 that there would be an operating surplus, that along with some public-private partnerships would fund the rest of construction. That’s sort of their plan.

They don’t break ground until 2015. By 2018, as they’re building this section between Madera and Fresno, they all of a sudden realized that they had an issue. There were two mountain ranges in California. One is to the north of LA called the Tehachapi Mountains, and one is to the south of San Francisco called the Diablo Range, which has a very precarious pass called the Pacheco Pass that you drive over—for anybody who’s driven that route. And they realized these are going to be really hard to engineer because it involves blasting through mountains in a seismically active area. Now the authority which runs this project says, oh, we’re not actually sure if we can do that.

From the perspective of California, if you stop now, won’t you have wasted US$7 billion in taxpayer money? Right now, they have an estimated completion date of I think 2033, and the budget is up to I think about US$115 billion at this point.¹ So here we have—and this is very common in public’s works projects—that once you start it, it’s really hard to stop once you get in the losses, once you start those spends.

Stuart Crainer: So these megaprojects should be run by poker players.

Duke: Well, I don’t know poker players, but maybe I would choose Astro Teller. Astro Teller is the CEO, otherwise known as captain of Moonshots, of X, which is Google’s in-house innovation hub. He’s actually dealing with these decisions about what to invest in that are big swings. Their charter is to take projects from initial idea to commercialization in five to 10 years. And they want a 10x change to the world. These are really big swings. These are moonshots. The reason why they choose that five to 10 years to commercialization is because they figure if they can do it earlier than that, someone’s probably already developing the tech. And if it takes longer than 10 years, by the time they do it, the tech will probably be obsolete. So that’s where they’ve come up with that idea as the charter. He’s going to take a lot of big swings.

And his idea is, look, if you understand the sunk-cost problem, if you understand this problem of not wanting to walk away from things when you’re in the losses, then you have to be really thinking in advance as you enter into a project about, “How do I get the answer of whether this is worth pursuing as quickly as possible so that I can get out of the project as quickly as possible when I get that signal that it might not be worth pursuing?” He’s developed a mental model called monkeys and pedestals that helps X think about this, and we can apply this to the California bullet train pretty easily. So monkeys and pedestals goes like this:

So Stuart, imagine that you’ve decided that you’re going to now create an act to make a lot of money, and the act is that you’re going to train a monkey to juggle flaming torches while standing on a pedestal in the town square. So people will obviously throw a lot of money in the hat for that. So my question for you is, if you’re going to do that, what part of the problem should you tackle first? Should you figure out if you can train the monkey to juggle the flaming torches first, or should you build the pedestal first?

Crainer: Well, the monkey’s the problem, isn’t it?

Duke: Yeah, exactly. The monkey is the unknown, it’s the bottleneck. We don’t want to build the pedestal first, really kind of for three reasons. Reason no. 1 is if you can’t train the monkey, what’s the point? Then you just have a useless pedestal lying around.

Problem no. 2 is that the pedestal actually represents false progress. It creates the illusion of progress. And the reason why is if you build the pedestal, it may feel like progress except that you already know that you can build it. You have learned nothing if you build that pedestal. We don’t actually want to do things that don’t actually create progress. The only pedestals we would ever want to build would be ones that are in service of figuring out the monkey. You could go buy some torches as an example. You need those in order to figure out if you can train the monkey to do this.

And then the third problem, which I think is probably Astro Teller’s biggest insight, is that building the pedestal first is going to stop you from quitting the project when it turns out the monkey is really hard to train. Because again, as you create that false progress and you’re building that pedestal, that’s time and effort and energy that you’ve put into building something that you now are endowed to, that you have ownership over, that you’re going to think is the most beautiful pedestal ever. Then when it turns out the monkey’s really hard to train, you’re going to say, “But I can’t quit now because I put all this effort and look at this pedestal I built.” 

So his whole thing at X is you have to approach things monkeys-first. You have to identify what are the monkeys, what are the unknowns, the bottlenecks, the things that we’re not sure if we can solve for? And then you’ve got to go at those first before you build any pedestals. 

Now, first of all, I know that again in the abstract, I know that this seems really obvious, but I’ll put it to both of you, Steve and Stuart. How many meetings have you ever been in where people say something like, “What’s the low hanging fruit? Where are the easy wins?”

Goldbach: Almost every one of them.

Duke: Every one of them. What they’re saying is, what are the pedestals? And then they’re telling you to go do those first so that people feel like they’re making progress. But that feeling of making progress is actually really bad because that’s what causes us to not abandon. We’re accumulating sunk costs, we’re getting endowed to the project. Our identity is getting tied up in what we’re doing. We become afraid of failure because we’ve invested so much already. 

Instead of that, we want to say, “What’s the hard part of the problem? What are the bottlenecks? What are the things that are going to really trip us up? Let’s figure out if we can do those first.” So let’s think about that for the California bullet train. I’ve just described the whole bullet train project for you. What’s the monkey here in the bullet train?

Goldbach: It’s coming right through the mountains.

Duke: The mountains. So let’s imagine that we were thinking about project planning the bullet train using this monkeys and pedestals mental model. We would say, let’s identify the monkeys.

I think, in this case, there might be two monkeys. One would be the mountains. That would be monkey no. 1. I think there’d probably be another monkey, which would be a kind of “not in my backyard”-issue. Are townships going to allow the train and approve the train going through the backyard? But clearly the mountains, this problem of these seismically active areas and blasting through the mountains, are the biggest problems in the project.

So what did they do? They went at the pedestals first, right? If you build track on flat land in the central valley, that’s a pedestal. We already know we can build railroad track on flat land. We’ve been doing that for 200 years or so.

And this is another insight of Astro Teller’s, is that once you’ve started building those pedestals, when you butt up against a mountain, instead of quitting, you’ll go and build more pedestals instead.

Now, before you actually build anything, you just do this feasibility study, and then you figure out whether you can do this thing for a lot less money. You’ve reduced your sunk costs, you’re going into it understanding there might be a no at the end because you’re sort of preplanning for that. And then if the feasibility study comes back, yeah, I think we can do it, then you start building at the mountains instead of in the flat land. But obviously they approached it in the opposite way, which is the way most of us approach projects actually.

Goldbach: Yeah, I think the reason why the concept of monkeys and pedestals resonates so much with me is I’ve spent, as Stuart knows, a chunk of my career working closely with Roger Martin, who coined the phrase “what would have to be true.” And it’s an expression of applying that to the world of strategy where you’re trying to, and I’ll take a term from you, you’re effectively trying to “backcast” what would have to be present in the future for those sets of decisions to be the right ones to make now. But it’s a very challenging thing in a boardroom with many different personalities.

And maybe if I could talk about what you call the hardest thing to quit is your identity. That to me is an interesting thing when you think about boardroom dynamics and company dynamics where it’s very difficult to change who you are. Maybe talk a little bit about why that’s so hard in the world of decision-making.

Duke: Let’s talk about Sears for a moment in order to start to see where this identity problem really gets in the way of walking away from things.

We all know Sears, a retail company founded in the late 1800s with the Book of Bargains—512 pages.² You can buy anything in there, socks or a house, pretty much anything you could imagine. The idea was that mail routes had just opened up. There were people who lived in rural America. Remember this is before cars, so people couldn’t get to cities to buy things that were available to people in the cities. The Sears catalog was the way that people would be able to buy goods. Very, very, very successful company. I think in the twenties, Sears was worth US$26 million. I mean [Richard W.] Sears—the man, the founder—was worth US$26 million.³ So, this was a really successful company.

In the 1930s, cars started to become ubiquitous. What Sears found was that the catalog business was starting to dip because people could actually drive now to places where they could get these goods. So they had the idea at that point to open up retail locations, actual physical stores, sort of play off of the brand that they had already developed with the Sears and Roebuck catalog in order to have people go into these stores. That was also a very successful pivot. In the 1950s, Sears represented 1% of US GNP (gross national product)⁴—so it was a very big company.

The problem for Sears was that the Targets and the Walmarts and the Kmarts start to come along throughout the sixties, seventies, eighties, and nineties—the retail business starts to falter starting in the eighties. By the nineties, it’s actually no longer the no. 1 retailer.

After it falls to no. 3, the company kind of stumbles along trying to save this retail business until it merges with Kmart, which at that point had also faltered, in something that the press called a double suicide as merger.⁵ It gets acquired at some point, but eventually goes bankrupt. So we all kind of know the story of the rise and fall of Sears in that way from the 1950s being 1% of US GNP to this kind of sad decline that really begins for earnest in the early nineties. But there’s a story of Sears that most people don’t actually know. And that’s as Sears, the financial services company.

So as you recall, in the thirties, I said they opened these retail locations because people started to have cars, and that was hurting their catalog business. And when they opened those retail locations, they said, “Well, everybody has these new cars, they may need insurance for them.” And so they founded a company called Allstate Insurance, and that was originally desks inside of Sears stores where they would sell insurance to the people who had just come into the store, for their cars.⁶ That obviously ends up, it’s sort of a company on its own, but that Sears owns, which becomes the largest insurer of personal liability.⁷ So they move out of just insuring cars into all personal liability. And Allstate is a very, very big company at this point. They also, in the seventies, have Dean Witter,⁸ which was a big stock brokerage firm, and they also found the Discover card,⁹ which we all know is a credit card, and they acquire Coldwell Banker,¹⁰ which is a real estate company.

So now they have this thriving financial services business. Now, just to give you an idea of how big this financial services business was, Allstate alone, I think the last time I checked its market cap was US$40 billion, I believe.¹¹ Coldwell Banker has merged with a few things, but that’s around US$2.2 billion.¹² Dean Witter Discover, it’s hard to know exactly what the value of that entity was. I think it was acquired by Morgan Stanley, and at the time, in the seventies, represented 40% in the Morgan family’s market cap.¹³ So it’s big, let’s put it that way.

So we’re talking about billions and billions and billions of dollars of value here. So the question then becomes if they owned this thriving financial services company, how on earth did they go bankrupt? Which I think is a reasonable thing to ask. And it turns out it has to do with the problem we have with quitting things that are associated with our identity.

In the nineties, it went to the board. We have to save this company because at this point, the retail locations are losing money. So what are we going to do? The retail locations are losing money. You tell us what to do, board. And the board obviously has a decision between this financial services empire that they have and the retail company that they have that’s faltering. And the board comes out of that saying, our decision is that we have to get back to our retailing roots.

So they spin off all of the financial services in an IPO (initial public offering) in order to raise money to be able to save the retail business, which obviously did not go well. Now the question is why on earth did that happen? And it has to do with what they said. “We need to get back to our retailing roots.” If I asked the person on the street, what is Sears? None of them would’ve even known that they owned Allstate Insurance or that they had Dean Witter Discover or that they owned Coldwell Banker. Everybody would’ve said this is a retail company where I go to buy my wrenches and my socks and I get my car serviced there. That’s what they would’ve said. And so this was wholly part of their identity.

And when they were faced with the choice, from the outside looking in, what was completely obvious [was to] save the thriving business and get rid of the faltering business; they saved the faltering business because that is who they were. And what is true for Sears is also true for us as individuals, not surprisingly, because companies are collections of individuals making decisions. But this is one of the biggest problems of quitting, the things that we do become part of our identity. And once it’s integral to our identity, it’s incredibly hard to walk away from them because what does that mean for who you are? Are you a consistent human being? Were the decisions that you made in the first place mistakes? And we will protect those to our own demise.

Goldbach: At the beginning of Quit, you talk about the way that we as human beings in society sort of perceive the quit versus grit issue. We perceive grit as being something of value and quit as being something that we want to teach people to avoid. How would you change either what we teach people to value, or how we think about, as society, the way we value things, in order to address this challenge where grit is probably something we overvalue and we undervalue quitting?

Duke: Yeah, I think that this is part of the problem, that the people who stick to it are the heroes of the story. And I don’t know, I feel like it’s a chicken and the egg problem for me. When we think about, this was one of the discoveries for me when I was exploring this problem of quitting, was that there are so many different cognitive biases that line up to make stopping things hard. From sure loss aversion, which is really, we don’t like to quit things in the losses, to sunk cost, to endowment, to status quo bias, to omission commission bias, overoptimism bias. These issues of identity, cognitive dissonance, desire for consistency. The way that goals set a finish line that we now can get in the losses in comparison to. So once we have a goal, until we’ve achieved the goal, we’re cognitively in the losses.

So all these things really are stacked up against us ever stopping anything. And then you also look at just the way that people think about quitting as this negative thing to do, this failure, this character flaw to walk away from things. Whereas grit is a way that you build character. It’s the hero of the story.

To the point where I tell a story of Siobhan O’Keefe who was a marathon runner. And she was running the 2019 London Marathon, and then on mile eight she broke her leg. I mean, her fibula bone snapped. So the medical personnel obviously advised her that she ought to stop running. She’s only on mile eight of the marathon. But we can see this idea of being in the losses, because while we can look at it as she ran eight miles, so technically in the gain, from her perspective, she’s 18.2 miles short.

So if you walk away, it is now a failure. Or I guess in her case, if you sort of limp away because she’s broken her leg. So anyway, she kept running and she finished the race. So that seems bizarre, except three other people in the same race did the same thing. And in every single marathon people do this. They break things, whether it’s their ankle or their leg, or they pull something horrible or they tear something and they keep running until they get to the finish line. And this is the problem with this idea of being in the losses because I think that we can see that this is a cognitive problem. She’s in the gains eight miles technically. But if that were a half marathon, she would’ve stopped at 13.2 miles. So it’s the fact that there’s this marker here that keeps her running.

But here’s the interesting thing. As much as we can say, “oh, that’s so ridiculous, she was sacrificing her ability to run other marathons in the future. Of course I would walk away in that situation.” [But] I’m betting there’s also part of you that’s saying, “I wish I were that tough. I wish I had that kind of grit, that I could finish a marathon under those circumstances.” Because we do admire it. And the question for me has always been, is that admiration for the people who stick to it? Sort of what causes all of these biases against stopping. Or is it that we have all these biases against stopping and then we create a narrative around grit being the hero of this story? So I’m not sure. I suspect it’s the latter. I suspect that the way that our brains are wired towards sticking to things is actually what causes us to create a narrative where it’s the hero of the story. But I think that what we have to do in order to get over this is start to really recognize the value of walking away from things. Because here’s the main problem.

What we’re trying to do in our lives is to gain the most ground toward our goals. We’re trying to achieve these great things over our life. We’re trying to make progress toward where it is that we want to go overall. So that’s what we’re trying to do in our lives. Now, it’s true that grit will get you to stick to things that are worthwhile that are also hard. It is a very good quality to have. I’m not dissing grit here. I think that Angela Duckworth, her work is brilliant. I think people should read that book because when things are hard, you still have to have a view of whether it’s worthwhile and be willing to stick to it, even though it’s tough. I agree with that. But the problem with grit is that that turns us into Siobhan O’Keefe, which is it gets us to stick to hard things that are not worthwhile, that are actually going to cost us in the long run.

That’s the issue. And that’s where quit comes in. Because what we want to do is when we discover, say a monkey that we can’t tackle, when we discover that something isn’t worthwhile, then it behooves us to quit that so we can switch to something that is worthwhile. We have this intuition that quitting is going to stop our progress. It’s going to slow us down. And that’s true. It’s going to stop your progress toward achieving whatever some interim milestone might be. But it’s actually going to speed you up toward the broad goals that you have in life. Because if you’re sticking to something that is no longer worthwhile, that’s what’s stopping your progress, that’s slowing you down. And quitting it and switching to something that is worthwhile is actually going to speed you up towards your goal.

If you are pursuing … let’s take a product. If you’ve got the wrong go-to-market motion and you’ve got all the information you need to know that that’s not the right way to go to market, you are going to slow yourself down by sticking to it. Whereas if you switch and you go to a different go-to-market motion, you’re going to now speed yourself up toward your goal, because that’s actually going to get you to where you want to go more quickly. And I think that that’s the thing that we have to realize—that life is mostly quitting. In the sense that we explore a lot of stuff, the stuff that isn’t working, we quit. And then occasionally we find something that’s working great and we stick to that. And I think that if we could change our mindset around that, that quitting is not failure, it’s a success. It’s successfully identifying that the thing you’re doing is not working and successfully switching to something new. Overcoming, by the way, a lot of cognitive biases, which is really hard. Often quitting to walk into the unknown, which is really, really scary, and quitting in a situation where you understand that other people might call you a failure. And I think that we need to flip the script and understand that it’s not grit that’s courageous. Because when you stick to things, people are going to admire you, like Siobhan O’Keefe. Even in situations where, when you step back and think about it, it’s clearly not correct to stick to it.

People are going to admire you. They’re going to write newspaper articles about how gritty you are and how amazing you are. In that sense, it’s the easy choice because everybody’s going to give you a pat on the back for trying so hard. When you quit in those situations, that actually takes courage, because now you’re going to have to walk away from your identity. You’re going to have to abandon what you already put into it, or at least that’s the way it’s going to feel to us. You’re going to have to walk into the unknown, and you may take a lot of flak for it. And so the ability to do that is actually the courageous act. And I think that’s where we need to start to get into that mindset of understanding that the road to success is actually paved with a lot of quitting.

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[Back to Tanya Ott]

Ott: That was Annie Duke, on The Provocateurs podcast, speaking with Stuart Crainer, cofounder of Thinkers50, and Steve Goldbach, the Sustainability, Climate, and Equity leader for Deloitte LLP. You can find The Provocateurs wherever you get your podcasts. Go check it out!

Also check out another podcast I’m working on here at Deloitte: Government’s Future Frontiers, which is looking at how the public, private, and not-for-profit sectors are working together to tackle some of the biggest issues facing society today. Look for it wherever you find your podcasts, and please subscribe—just like you do for The Press Room, right?

This podcast is produced by Deloitte. The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte. This podcast provides general information only and is not intended to constitute advice or services of any kind. For additional information about Deloitte, go to Deloitte.com/about.