Annie Duke on Quitting, Part 3

In her book, Quit: The Power of Knowing When to Walk Away, Annie Duke shares her inspiration and recommendations to help us make better decisions.

These are some of my favorite recommendations from reading the book.

Chapter 3 Should I Stay, or Should I Go?

“A key finding of prospect theory is loss aversion, the phenomenon whereby the emotional impact of a loss is greater than the corresponding impact of an equivalent gain.”

“Loss aversion creates a preference for options associated with a lower chance of incurring a loss. It makes us risk averse.”

“When we are in the gains, we have a tendency to quit too early in order to avoid the risk of giving those gains back. In other words, we like to quit while we’re ahead.”

“When we are in the losses, we become risk seekers. We want to keep going, hoping we can avoid ever having to realize the loss. Daniel Kahneman has characterized this as sure-loss aversion. In other words, we like to stick when we’re behind.”

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

“Retail investors show this pattern of quitting when they’re ahead and sticking when they’re behind.”

“Even expert investors don’t get their quitting decisions just right. They outperform on their buying decisions but underperform on their selling decisions.”

“We naturally track and get feedback on the things we are doing. But once we quit something, we also quit keeping track of that course of action. This creates a problem with getting high-quality feedback, which in turn makes it hard to hone our quitting skills.”