'You Need Grit to Quit' – Knowing When to Walk Away With Annie Duke

Episode #299 | February 27, 2023

Episode #299 | February 27, 2023

'You Need Grit to Quit' – Knowing When to Walk Away With Annie Duke

In This Episode

We're eager to have former professional poker player, public speaker, and bestselling author Annie Duke on this week's episode. Before retiring from the game in 2012, Annie won world tournaments and racked up more than $4 million in winnings. Prior to becoming a legendary poker champion, she was a PhD candidate in cognitive psychology at the University of Pennsylvania. Thanks to her expertise in the science of decision-making and critical thinking, she has become a highly sought-after corporate speaker and consultant.

Annie's first two non-poker-related books – Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts and How to Decide: Simple Tools for Making Better Choices – teach you how to be a smart decision-maker. But her latest book, Quit: The Power of Knowing When to Walk Away, teaches you how to be a smart quitter.

See, it's not all about picking winners.  Knowing when to sell is equally important for investing success. According to Annie...

"Quitters never win, winners never quit." That's not true. Winners actually quit a lot. And it's in fact how they win. When you look at the best investors, they are so good at getting off the positions that aren't so worthwhile that they can then reinvest that capital into things that are worthwhile [...]

When you are a good quitter, you get to where you want to go faster.

You can't just have an investment thesis to be a successful investor. Annie explains you need to have an exit strategy with "kill criteria," or specific signals occurring at a specific time. When a kill criterion is triggered, you should take it as a sign that the odds are shifting out of your favor... and that it's time to put emotions aside and get out.

Annie also highlights the value of stop losses. She says they're "one of the simplest ways you can do that [advance planning]" in investing – and in poker...

People do cancel stop losses. We need to understand that whether it's a checklist or whether it's a trading plan that we're not going to be perfect in following them. But we would be better than we would be if we didn't have them, and that's going to make all the difference to your results. So if you have a stop loss, yes, you sometimes are going to irrationally cancel one.

I had a stop loss in poker when I played. Did I sometimes blow past the stop loss? Of course. But I did it a lot less than I otherwise would've if I didn't have that particular mechanism in place for when I was supposed to walk away from the table.

Annie also discusses the psychology behind other common pitfalls for retail investors, like loss aversion, focusing on portfolio outliers, relying on intuition, and more. Today's episode is one you won't want to miss.