Published in the San Diego Union-Tribune, June 26, 2023
by Neil Senturia
Professional poker players know that continuing to play until they win — however they define winning — is often a losing strategy. Expert players abandon about 80 percent of their hands; amateurs play their starting cards more than half the time.
The above words of wisdom come from Annie Duke, a former professional poker player who is ranked No. 5 in the world — based on total winnings — among women players. So pay attention.
This is the classic conundrum of knowing when to quit. Whether it is your job, your marriage, an investment, your company or your golf game — knowing when to “hold ’em and when to fold ’em” seems to be key to mental and financial health.
Duke is now a lecturer at the Wharton Business School and recently shared some further thoughts on decision-making.
It turns out we all set goals. And when you have a goal, your intention is to achieve it — sometimes at very high costs and risk (e.g. climbing Everest). Other goals may be more modest, but in the end, the issue in decision-making is picking the right goals.
With the idea of a goal comes the potential for “an escalation of commitment,” Duke writes. This is one of the most dangerous. “In for a penny/in for a pound.” We use this little catchphrase to justify the insanity of chasing a loser to the bottom of the barrel. It is the famous “sunk cost” puzzle.
This puzzle is personal for me at this moment. I am at the crossroads of throwing in the towel on a deal or pushing just “a little bit longer.” I assure you that I am not unique in this dilemma. It is faced by every entrepreneur at some time on that road.
Duke says “quitting is stigmatized. Sticking with hard-but-worthwhile things is celebrated.” We love the idea of “grit.” It defines your courage, your passion, your commitment — but it can also be the stick in the spokes of your bike that causes the crash landing. She says that what the entrepreneur should seek is “optimal quitting.” And that is not a lesson that can be book-learned in an MBA class.
Duke offers three techniques. “Set intervals to rerun the cost-benefit analysis of your goal.” I am a sailor. The first rule is simple, when the wind shifts, turn the boat.
“Add kill criteria to your goal.” Unless certain things happen by a certain time, then you need to stop. She calls them “unlesses.” They are lines in the sand to remind you of rational boundaries.
“Acknowledge incremental progress,” she says. This one is critical. You cannot make the only reward crossing the finish line. I spend a lot of time cheerleading. I know how hard it is to finish. There is honor in the effort. Sure, results matter, but in any failure, there is learning.
We lost a sailboat race last week. A terrible effort, lots of blame to go around. The good news, we get another chance next Wednesday, and for sure we won’t drop the kite in the water.
Celebrate small victories; we didn’t sink the boat. Everybody got a drink at the bar.
My personal recommendation is to continue to narrow the target area. When you can do everything, you do nothing. Get smaller and refine the targets. You only have a rifle, not an AR-15. You cannot afford to spray and pray.
Imagine playing a round of golf with one ball — lose it and the game is over. Head for the parking lot.
When you are willing to say that unless we get A or B as a customer or achieve XX dollars in revenue by a certain time, then we do not have a company, it makes it that much easier to pull the plug and let it sink.
One last caution. The mirage. In my own little company, I think I see an oasis. This time I know it is real. Product market fit. It is right there. I am sure the customer out there is not an illusion. But I also saw the movie “Lawrence of Arabia,” so I am carrying an extra water bottle — just in case.
Rule No. 767:
Light rays bend, reality doesn’t.