Is quitting underrated? A new book takes a new perspective

Annie Duke, the professional poker player and popular author on decision making, has written a new book, Quit: The Power of Knowing When to Walk Away which addresses a provocative question. Is quitting underrated? We celebrate those who are not quitters, those who persevere, and those who will never give up, yet success may come to those who give-up, quit, and throw-in the towel. 

For Annie Duke, heroes are usually made from those who learn to walk-away. This is not what you would expect as a good answer. This is not what you would expect as a book worth reading, but it provides some useful thoughts that make sense and should be incorporated in your decision-making. In fact, quitting is an important tool in your decision-making box of choices. 

For investing, there is a special valor with learning to quit. We often call it risk management. Stop-losses are a mechanistic form of quitting. Lose a set amount of money and walk-away from a trade. The investment quitters enter a trade and think about an exit upon putting the trade on. Behavior finance has focused on the disposition effect of selling winners and holding onto losers. We quit on our winners and do not quit on our losers, yet quitting is a decision skill that adds to our return potential. Every good trader thinks about opportunity cost and exit strategies. In fact, quitting is the core skill for protecting principal. 

Keynes talks about changing his mind which is a form a quitting. "When the facts change, I change my mind." There is no evidence that Keynes actually said this, but it has been attributed to him and seems to fit. Quitting is not just an action but part of good thinking. We must learn to quit on bad ideas or quit on views as data are updated.

Quit is skill just as betting is a skill. Knowing when to stop losing is as important as when to act. I have started the Duke book, but I am excited by the whole concept of quitting. It is so simple to have this discussion, yet it has been avoided when talking about true heroes and great traders.