Grit can also 'get us to commit to hard things that aren't worthwhile': Expert

Annie Duke, decision-making strategist and author of"QUIT: The Power of Knowing When to Walk Away," joins Yahoo Finance Live to talk about quiet quitting and how quitting can often lead to success.

Video transcript

DAVE BRIGGS: The Great Resignation may have given way to quiet quitting in the eyes of social media, but those actually quitting remain strong. A number 4.2 million quit their jobs in August as the number remains historically high. Annie Duke literally wrote the book on this subject, "Quit, The Power of Knowing When to Walk Away." And she joins us now. Annie, nice to see you. So when is quitting a good thing? And did you learn this from your days at the professional poker table?

ANNIE DUKE: Yeah, I mean, I think I definitely learned this lesson from poker. So when quitting isn't a good thing is when the thing you're doing is no longer worthwhile, either on its own or in comparison to other things that you might do with that time instead. So this is a concept that's really important to understand. In poker, you have this option to fold, which means to quit the hand.

And you do that when the hand is no longer going to have a positive return on investment, at least, in your sort of forecast. And that allows you to keep those chips to be able to invest in other hands that would have a positive return. And this skill for poker players is so important that I think it's actually the thing that distinguishes great players from really good ones. Great players fold somewhere between 75% and 85% of their two cards, starting cards, hands, and amateurs fold less than 50% of them. So this is a big distinction between great and good.

RACHELLE AKUFFO: And it's interesting because quitting used to be associated with failing, but you say that's not the right way to look at it. How do you equate that with success?

ANNIE DUKE: Yeah, I mean, I wouldn't say it used to be associated with failure. I would say it is associated with failing. I mean, if I called you a quitter, I'd be insulting you, right? So I'd be calling you a loser or something like that. The reason why it's such a key skill that we really need to get good at is because there's all these cognitive biases that stack the deck against us actually stopping things when we ought to.

So we have the intuition that when we get involved in something, when we start something, we find out new information that we'll actually stop doing it when that information is bad, when it's a negative signal. But we actually don't, right? We will often double down. We'll increase our commitment to the cause. And the problem with that is it costs us a lot because it means that we're spending our time and our resources, our money, on things that really aren't worth doing.

And we want to be able to switch that to things that are because there's this huge opportunity cost with sticking to something that isn't worthwhile. And that's true, whether it's a stock that you bought at 50, and now it's at 40. And even though you wouldn't buy it today, you stick with it because you don't want to have to turn that loss on paper into a realized loss. And so you kind of keep the bet on, hoping you can get the money back. And think what that's doing to you because you can't take that money and put it into an investment that might be worth more-- like better for your money.

DAVE BRIGGS: I love the analogy. I understand it. Annie, I just don't play poker. My son does. And I'm trying to teach my son, you need grit. Grit will carry you through the tough times. Is there a danger in emphasizing quit over grit?

ANNIE DUKE: I don't think-- I think there's a danger in emphasizing one or the other. In other words, thinking that being gritty is heroic, and quitting is cowardice, or vice versa-- all of a sudden, saying that we should just quit things willy nilly. I mean, the great thing about quitting grit is it gets you to stick to hard things that are worthwhile. In other words, those worthwhile things where you encounter obstacles, grit is going to allow you to sort of stick to it regardless, right?

The problem is that it also gets us to stick to hard things that aren't worthwhile. So a good example is there was this woman, Siobhan O'Keeffe, who, in the 2019 London Marathon, started experiencing pain on line-- on mile four in her leg. And then mile eight, she had snapped her fibula bone. So she literally broke her leg. But she kept running because anything short of the finish line is failure. And so the problem is, like, we need to make sure these are finish lines that we should still continue to run toward.

And in this particular case, she was risking very, very serious injury that could have made it so that she could never run again. Now, lest you think she's a strange story, there were three other people who did the same thing in that same marathon. And this happens in every marathon.

And so when we emphasize grit and we sort of elevate it above anything else, we can start climbing mountains and snowstorms when we shouldn't be, or running marathons with broken legs, or staying in a job with a toxic boss, or sticking with an investment where the world has completely gone against your thesis, just because you don't want to give it up, and you feel like you need to stick to it.

RACHELLE AKUFFO: I mean, it really is true because it's so ingrained in us to try and stick with things, even when they aren't serving us. And it's interesting because the stats in your book, the pros play fewer than 25% of their hands before the other cards even hit the table. And most amateurs, you have it play about 50%. So when people are trying to think of how they can really master some of these skills and their instincts, how should they go about it?

ANNIE DUKE: Yeah, so there's two main strategies for dealing with this because we really do need to understand that, like, cognitively, we have a huge bias against quitting. I think most of your listeners are probably familiar with the sunk cost fallacy, that we take into account what we've already lost in trying to decide whether to continue. So that's a bias against stopping.

So given that we're not going to be very good at deciding to stop once we started to accumulate those losses, like, if the stock is already trading at 40 when we bought it at 50, there's two strategies. One is think ahead. So a simple example of think ahead would be a stop loss or even a take gain. These are ways that we can think ahead to what are the conditions under which we would let this particular endeavor go, or this investment that we have go.

The other thing you can do is get what I call a quitting coach. So like, Rachelle, I mean, I assume that you've seen people who are sticking to things. And from the outside looking in, it's very obvious that they should be quitting them, but they're not. And if we assume that that's true, then we can realize that probably happens to us as well.

So why not recruit those people who can see it better than you can, because they're on the outside looking in, and get them to help you with these decisions? I mean, it's kind of what a financial advisor is, right? They're trying to coach you, when is it right to stick to it, and when is it right to walk away, because they understand that we're not going to be very good at making those decisions ourselves.

RACHELLE AKUFFO: It's true. Sometimes when you're too close to a situation, you can't see the forest for the trees.