Transcript of the podcast:
SPEAKER 1: As more people are working from home, internet use has surged by 60%.
SPEAKER 2: And as the outbreak goes global, remote work could emerge as a vital public health strategy.
SPEAKER 3: The coronavirus has forced millions of people into quarantine and self-isolation. That means millions of people are working from home, some for the first time.
SPEAKER 4: Why is the corporate world playing catch up now? And will the coronavirus pandemic lead to permanent changes in the way we work?
KATY MILKMAN: The beginning of the pandemic was a huge shock to the system. Suddenly our daily routines were upended. Our lives were turned upside down. Some businesses were forced to close entirely, others made a rocky transition to remote work. Schools grappled with the best way to keep students engaged with online learning. There were countless challenges. And while the experience has been incredibly painful for most everyone, it has also strangely given us an opportunity, whether we wanted it or not, to test what works and what doesn’t in a socially distanced world.
And the unwanted experiment we’ve all endured has perhaps surprisingly taught us some things that we’ll likely find useful in post-pandemic life. Some businesses found that remote work was actually better for their bottom line. Some employees traded long commutes for more quality time with their families. Some students found they flourished without the distractions of a busy or crowded classroom. It’s not like remote work is new, there are some sectors where it’s quite common. But being forced to close offices and send employees home has changed some attitudes about the way remote work works for a wide range of businesses. Here’s my Wharton colleague, organizational psychologist Adam Grant.
ADAM GRANT: Three years ago, winter of 2018, I went to a bunch of the most influential CEOs in Silicon Valley. And I said, “Hey, I want to do a remote Friday experiment where you randomly assign people to work from home just one day a week. And I want to test the effects on productivity, creativity, collaboration—what does it do to your culture?” And they all declined. And they said, “Look, we don’t want to open Pandora’s box. People might never come back. We don’t know if ’they’ll get anything done.” And hilariously, at least three of those CEOs have now announced that they might never come back to an office.
KATY MILKMAN: Those CEOs missed an early opportunity to test remote work in a less dire situation, but the pandemic forced them to explore new ways of working together. For at least some of those CEOs, that exploration revealed that remote work could actually be better for business. In this episode, we’ll examine how being forced to try something that you otherwise wouldn’t—because you’re in a pandemic or you lose a job or a project you’ve been pursuing fails—can sometimes be a good thing. We’ll explore the general tendency we humans have to experiment and change course too infrequently, and how getting shoved down a new path can have benefits. And we’ll hear from author, speaker, and decision strategist Annie Duke about how to identify scenarios where quitting something to explore another path is likely to be your best bet.
I’m Dr. Katy Milkman, and this is Choiceology, an original podcast from Charles Schwab. It’s a show about the psychology and economics behind our decisions. We bring you true stories involving high-stakes moments. And then we explore the latest research and behavioral science to help you make better judgements and avoid costly mistakes.
It’s 1856, London, England. The city’s population is expanding quickly, and industry is booming. In the city’s East End, we find a young chemistry student named William Henry Perkin, but he’s not toiling away in a proper lab.
KASSIA ST. CLAIR: He was working from his father’s house on Cable Street, which is just north of London’s docking area. And just south of White Chapel.
KATY MILKMAN: This is Kassia St. Clair. She is a design journalist and the author of The Secret Lives of Color.
KASSIA ST. CLAIR: The Thames at this time was incredibly dirty and produced a stench that was said to make people absolutely ill, particularly in the summer when they got too close to the river. So this wasn’t a very salubrious part of town, but his father was relatively prosperous and had a big house on Cable Street in this not very nice area.
KATY MILKMAN: We spoke with Kassia about William Perkin, who is determined to create a synthetic version of a substance called quinine, or as the Brits say, quinine.
KASSIA ST. CLAIR: And so quinine was a substance that was extracted from a tree native to South America, and that was used as a treatment and a preventative for malaria. It was incredibly expensive; it was costing the East India Company something like 123,000 pounds annually to get hold of this stuff. And there simply wasn’t enough of it.
KATY MILKMAN: The British Empire extended across much of the world at this point in history, and malaria was a growing problem for these British colonial armies.
KASSIA ST. CLAIR: Clearly, if someone could come up with a synthetic alternative, that would have been immensely valuable and profitable for the creator. And this was something that appealed to William Perkin, aged 18, when he was beginning to think about what his career might look like and how he might make his fortune. And the branch of chemistry that he found particularly interesting and that he thought might provide the answer for synthetic quinine was looking at byproducts of coal tar. This was a kind of sludgy waste product of gas lighting. There was an awful lot of it about, it was relatively cheap, and already it had been proven to contain or to give access to a lot of very interesting chemicals and just interesting byproducts. And it was from coal tar that William Perkin hoped that he might find a synthetic alternative or version of quinine.
KATY MILKMAN: William was a student at the Royal College of Chemistry and worked under the well-respected professor August Wilhelm von Hofmann.
KASSIA ST. CLAIR: Professor Hofmann was not a man who was afraid of stating his opinions. And so there was quite a lot of pressure on this young man, William, to come up with the goods or to at least have persevered and to really have had a very good stab at creating quinine, which was after all was this possibly immensely profitable thing to create.
KATY MILKMAN: So during William’s spring break in 1856, the experiments continued despite his rather rudimentary home laboratory.
KASSIA ST. CLAIR: He considered the equipment that he was working with very, very basic, which isn’t surprising, given that he was working out of an attic. With regards to the coal tar, this was relatively cutting edge. And while it was very exciting to people, there was a lot of misunderstanding or gaps in the knowledge of exactly what you were looking for, how you might get there. It was a lot of trial and error, and that’s exactly how he describes it in his later accounts. He goes back and forth. He tries different things. He’s very experimental and intuitive in the way that he works.
So what he was looking for was a colorless liquid, and this was his goal. And on this particular morning, he was working on various methods when one of his experiments yielded, rather than this sort of colorless quinine, it gave him a reddish powder, which intrigued him. And he wondered whether if he repeated the experiment that had resulted in the reddish powder with a kind of simpler and purer base, he wondered what might happen. So he did so and ended up with not a reddish powder and not colorless quinine, but instead a black powder.
KATY MILKMAN: A black powder was essentially the opposite of what he was trying to achieve, but something about it intrigued William Perkin.
KASSIA ST. CLAIR: A lot of people, a lot of scientists, might have thrown this away and considered this a bit of a blind alley or a mistake. But instead he took this black powder and treated it with alcoholic spirits and found that what he was left with was a very bright purple liquid. Again, this was not what he was looking for. He might’ve just thrown this away and started all over again, but he didn’t. He decided that he would do some tests on this bright purple liquid and found to his astonishment that when he dipped in some silk cloth, that what he had created was a really colorfast, very vibrant purple dye.
KATY MILKMAN: William’s attempts at synthesizing quinine had failed, much to the disappointment of Professor Hofmann, but where others may have seen failure, William saw an opportunity, and he may have been uniquely positioned to do so.
KASSIA ST. CLAIR: Among William’s more creative pursuits away from chemistry, he was interested in music, but he had also dabbled in painting. And it is possible that his background in painting and his interest in pigments and art is what led him to experiment further when he saw that he’d created this bright purple. He went into business; he started a factory. He started talking to dyers first in London, and when he got pushback from them, he eventually spoke to some dyers in Scotland to see if they were interested in the samples of the brilliant purple that he had created. And fortunately for him, some dyers began taking a chance on him.
And also fortunately for him, one of the arbiters of European fashion at the time, Empress Eugenie, was very fond of wearing purple because she believed that it brought out the color of her eyes. She spotted an early piece of clothing that had been dyed with Perkin’s mauveine dye and wore it and kicked off a trend for his purple. And because she was so fashionable and because the press of the era loved commenting on what she wore, it soon got taken up by other prominent women, including Queen Victoria, who wore a dress in Perkin’s purple to the wedding of one of her daughters.
And from there, the color just took off.
KATY MILKMAN: Newspapers of the day raved about the new fashion trend taking over the city.
KASSIA ST. CLAIR: One London newspaper said London had come down with mauve measles because so many people were wearing it. Another wonderful article that says that the particular color, this particular mauveine, you would not imagine it coming from black, sticky, revolting coal tar at all. Rather you’d imagine it coming from cauldron fulls of wood violets, or wagonloads of pansies, which I just thought was a really wonderful description.
KATY MILKMAN: And Perkin’s purple was a lot more than just a trendy color. The synthetic dye was a major departure from the naturally sourced dyes previously used to color fabrics. The supply of natural dyes made from plants was subject to variations in the weather, meaning a bad crop could cause the price of a specific color to skyrocket. Say the indigo plant used to make navy had a bad crop. The price would shoot up compared to red made from the rose madder plant. Natural dyes were also more muted in color and tended to fade in the sun.
KASSIA ST. CLAIR: And Perkin’s purple wasn’t like that at all. It was a very, very, very, very vibrant, bright hue in contrast to a lot of the other dyes that were available at the time. It was very lucky that he created purple because purple dyes had a great historical legacy because one of the most expensive and most sought-after dyes in the entirety of history was a dye called Tyrian purple, which was made from mollusks native to the Mediterranean and had been the preeminent dye of the ancient world. It had been used by Roman emperors, and it had been this enormously profitable trading commodity for many centuries, to the extent that the mollusks were very nearly hunted to extinction, and purple dyes thereafter had been very sought after, but also very difficult to make.
KATY MILKMAN: After the success of mauveine, William went on to create several other colors from coal tar, otherwise known as aniline, but William wasn’t the only chemist reaping the rewards of this new commercial interest in applications of chemistry.
KASSIA ST. CLAIR: When William Henry Perkin’s purple becomes a commercial success, this inspires a whole lot of other chemists to follow in his wake. His professor, Professor Hofmann, who’d been incredibly scathing about mauveine, actually sees this as a commercial success and creates his own version of an aniline dye called roseine, which possibly made William smile, or maybe it made him a little bit annoyed that his professor who had been so doubtful of his early success had now followed along in his example and was trying to usurp his position as the coal-tar color king.
But Professor Hofmann was far from the only one. Lots of chemists started looking into coal tar byproducts and started thinking about the kind of colors that they could create. And it turned out that coal tar, as well as creating a purple, could also create greens, yellows, blacks, browns and spawned this whole industry of colors that were very bright. And this created a fashion trend for wearing what we would consider now really garish color combinations because suddenly these dyes were very cheap. It could be used not only on your best dress but could be used around your home and your home furnishings.
KATY MILKMAN: On the note of color trends, there may have been some unlikely trend predictors of the day.
KASSIA ST. CLAIR: William’s dyeworks was very close to a canal. And at the other end of the canal from the dyeworks was a pub. And there’s this apocryphal story that the regular drinkers in this particular pub liked to predict what colors would soon become fashionable because they’d see the waters of this canal turning some ludicrous color from the effluent from the dyeworks, and they’d know that that was the color that that Perkin was working on. And therefore, this was likely to be the next fashionable color.
KATY MILKMAN: It wasn’t long before people started looking at other applications of the chemicals that gave rise to these colors.
KASSIA ST. CLAIR: The initial discovery of mauveine also led to the discovery of saccharine. This avenue also led to the discovery of chemicals used in chemotherapy and also the creation of artificial musk used in perfumes. So it was really an incredibly fruitful avenue of chemistry. And because of Perkin’s success, it encouraged a lot of other scientists to crowd into the field to look anew at coal tar as a source of unexpected chemicals. We’re still reaping the benefits of this accidental serendipitous discovery well over a century, two centuries nearly, later. So this is something that has changed the world, even though not many people may know his name.
KATY MILKMAN: Kassia St. Clair is a design journalist and the author of The Secret Lives of Color. I have links to the book and to more information about William Henry Perkin in the show notes and at schwab.com/podcast.
William Henry Perkin never managed to synthesize quinine; he failed in that quest. In fact, it wasn’t until 1944 that two Harvard chemists announced the first formal synthesis of quinine, nearly a century after Perkin’s attempts. It’s easy to imagine how his story might have unfolded differently. Perkin might have thrown out the black powder and continued in his likely doomed search for synthetic quinine. Instead, he let his failure lead him down another path.
He gave up on his initial pursuit to explore the commercial potential of the chemical dye he had stumbled upon. Granted, Perkin was young, and the risk of a career pivot was relatively low. He would have time to pursue other opportunities if the dye business didn’t work out. But being forced to explore other avenues for his efforts led him to substantial success. There are many other cases where being shoved down a different path from the one someone originally intended to tread led to big payoffs. A well-known example is that Steve Jobs was fired from the company he helped create, but he spent that time away from Apple developing the ideas that would eventually transform the company when he returned. There are lots of examples of this phenomenon in other areas beyond being fired or failing at a chemistry experiment, particularly in the wake of the pandemic.
SPEAKER 8: I started training for half marathon after my football league was shut down due to COVID. I would have never imagined training for a half marathon before.
SPEAKER 9: Because of COVID I couldn’t hang out with my friends in person who live in the same town as me. And then once you move to Zoom, you may as well invite friends who live on the other side of the country, or we reconnected with a friend who moved to Australia a few years ago. So, in that way, reconnecting with people without the geographical barrier was such a positive.
SPEAKER 10: I’m an avid dancer, and when COVID hit, I was pretty devastated at the idea that I couldn’t take my weekly classes. But it turns out I actually dance more now. Not only have I joined Zoom parties with thousands of people and silent discos and video conferences, as silly and cliche as it may sound, I dance for half an hour a day by myself. I put on my favorite song or record of the moment, and I move my body. And if anything, COVID has given me more dance in my life.
KATY MILKMAN: There’s a reason I want to focus on the unexpected upside of some moments when we’re pushed in a direction we otherwise wouldn’t have gone. That surprising upside helps illustrate a bias we humans have. We tend to explore too little in life and stick to our plans too doggedly for our own good. So when a road closure prevents us from taking our usual route to work, or a business venture fails and we’re forced to try something new, or when a pandemic leaves us working and studying from home, it can force us into the kind of experimenting and exploration that we would otherwise have failed to do—but that is sometimes needed to help us discover a better path.
I asked author and decision strategist Annie Duke to join me to discuss the upside of a phenomenon she has started to call forced quitting. We reached her at home in the Philadelphia suburbs. Hi, Annie. Thanks so much for joining me today. I really appreciate it.
ANNIE DUKE: Hi, Katy, I’m so excited to be here. I was so happy when you asked me on, and I love any chance to get to talk to the fabulous Katy Milkman.
KATY MILKMAN: Aw, likewise. Well, I’m really glad to have you here. First could you explain what exactly forced quitting is?
ANNIE DUKE: Yeah, absolutely. So I think that we think about quitting, that it’s a voluntary act, but it’s not always voluntary. Sometimes we’re forced to quit things. And like an example would be being fired, right? So we think about it from the frame of someone fired you, but really you were forced to quit what you were doing. But there’s other things that can happen that sit a little bit more in the middle of that. For example, if you’re an athlete and you get injured, you would be forced to quit, a variety of things like that. And I think there’s really interesting lessons to be learned from a variety of situations where people are essentially forced to quit by their environment.
KATY MILKMAN: I love that. And I would love to dive in a little bit to some of the evidence suggesting that forced quitting can be a good thing.
ANNIE DUKE: Actually, I have to credit you with my starting to really think about forced quitting. When we were talking back about what habits might change and what might stay during COVID because obviously COVID has actually created a lot of forced quitting. I was forced to quit for traveling for work, for example, and I sort of got to think about my preferences around that. And you mentioned a study that was done by a team of scholars who were looking at when a line got shut down on the London tube. And obviously if a line gets shut down on the tube, it means that people have to find other ways to work because they can’t take their normal way to work. And so you can think about what that forced quitting did was caused some forced exploration, so where people otherwise might not have been exploring other ways to get to work, they’re now doing that.
So then the question became all right, well, what happens when that line opens back up? And what you find is that while most people go back to the way that they were going, but something like 5% of the people actually have discovered a better route for them to take. And I think that happens a lot in our lives, that we get forced to do this exploration because we’re forced to quit something. And that some percentage of the time you actually get some high-impact, high-value new things to try that you might want to stick to, out of it.
KATY MILKMAN: Yeah, that’s so interesting. I’m curious if you have any thoughts on why it is that people don’t naturally recognize they should quit and experiment more often and why it seems like maybe there’s an under-quitting phenomenon going on?
ANNIE DUKE: You know, I’ve been thinking about this concept of a gaffed scale. So a gaffed scale would be like if a butcher put their thumb on the scale in order to try to charge you more—that would be a gaffed scale. And when I think about this issue of quitting versus sticking to the thing that you’re doing, this is once we’ve already committed to the course of action, there is actually so much working against our quitting that the scale is essentially gaffed.
That if you think that it’s an even choice—should I quit my job, or should I stay in my job? That the fact that that thought has gone through your head probably suggests that you should be quitting, because there are so many forces working against your quitting, and there are many. There’s endowment. Barry Staw has done such amazing work in escalation of commitment, where he’s really shown that there’s not just sunk cost issues, right? That we’ve put resources into something. And then we think those resources should count toward whether we should continue to do it, but there’s also issues of internal validity, which would mean how do I justify the course of action I’ve already taken if I quit? Doesn’t that mean that I made a mistake? And what does that mean for who I am?
So that would be internal validity, and then external validity would be in a work environment, in an organizational environment. How do I justify that I decided to start this project to the people who are evaluating me if now I’m quitting? So we end up doing all of these kinds of justifications of why should we should stay on the course that don’t just have to do with resources and trying to recover resources that we might already have in the project, but also things that have to do with identity and validity and these kinds of things that really force us to stay sort on the path that we’re already on.
KATY MILKMAN: That’s really, really interesting. And we’ve talked a little bit about escalation commitment on past episodes of this show in particular, but you highlighted that the need to quit is broader than the need to break that kind of escalation of commitment. Could you say a little bit more—you said that identity, you think, plays a large role in it. What elements of identity do you think are critical to preventing us from quitting enough?
ANNIE DUKE: So I think number one, we become endowed to the decisions that we’ve already made, right? They become objects that we own. Our beliefs, the courses of actions that we’ve taken. And so that certainly plays into this identity piece, but we can also think about the way we think about the stuff that we do. So, for example, if you ask a child, “What do you want to be when you grow up?” They don’t say, “I’d like to be somebody who does these things that have these certain features,” right? That, “I’d like to do something that has something to do with doing science and maybe exploring the behavior of molecules” or whatever. They say, “I want to be a scientist.” “I want to be a doctor.” “I want to be a firefighter.” So on and so forth. So we really take on, for example, our careers as our identities.
We also think about, I’m a nerd, or I’m a jock, or I’m a football player. I’m a professional skater. We don’t think about the things we’re doing as a set of features that we might be exploring. Some of those features we like, and some of them don’t. We actually take these on as part of our identity, so that if we abandon, it’s like we sort of have to abandon part of who we are. And I think you can look at one of the more famous and very early results in the space, which is Festinger, right? Where you have these people who believe in this cult, and this is kind of who they are that they believe in this cult. And they believe that the aliens are going to come and save the cult members but destroy the world. And it’s going to happen on a particular date.
KATY MILKMAN: I should add here for listeners who may not be familiar. Leon Festinger was a social scientist known for his work studying cognitive dissonance, the uncomfortable state of having competing or inconsistent thoughts, beliefs, or attitudes, which we tend to resolve by abandoning one of those inconsistent beliefs.
ANNIE DUKE: So this is a belief that they obviously strongly held that this really does become your identity. And so Festinger was asking, well, what happens when that date comes and the aliens don’t come, do they abandon? And of course we know that they don’t. In fact, they sort of escalate their commitment to the cult, and why is that? Well, it’s so wrapped up in their identity, how are they supposed to let this go? And it’s like, we’re all sort of members of a cult in some sense in the sense that, well, maybe I’m a football player, and that’s become part of my identity in the same way that it was the identity for the people in the Festinger work, right? Or I’m a doctor, and how do I give that up? Who am I if I leave and go try to do something else? And I think these are very deep problems that work against us actually being willing to switch enough.
KATY MILKMAN: How can our listeners use these insights about the importance of quitting and the value of being forced to quit to try to make better decisions in their own lives?
ANNIE DUKE: Oh gosh, yeah, so that’s a really good question. So if we go back to the people who are on the London tube, obviously 5% of those people had available to them a better, more efficient way to work. But they didn’t see it. They weren’t exploring it. And this is true in a lot of cases—as an example Mount Everest is littered with people who did not necessarily see their situation clearly, sadly. And I think those people that are on the top of Mount Everest are a very heartbreaking monument to our inability to pay attention to the signals that the world is giving us that we ought to explore a different choice.
KATY MILKMAN: And by the Mount Everest, you’re talking about sort of the famous example, which we also covered on the show actually, of escalating commitment to getting to the top, even when the world and the weather are telling you you need to stop. And then people have perished in making that poor decision, unfortunately.
ANNIE DUKE: Yeah, and this is something that Barry Staw, who’s done so much work in this area, has really shown is that if you ask people to do some decision analysis when they’re in the decision, when they’re in the middle of the problem, that they’re actually quite poor at it, and they continue to sort of stay on the wrong course. So the question then becomes, how can you sort of see your situation as if you were forced to quit, which essentially causes you to see your situation as if your situation is new, which is sort of what we’re trying to get to.
And I think there’s two ways to do that. One is in advance of entering into a course of action to really pay attention to writing down and making a plan for what the conditions are under which you would quit and at what points on the journey, metaphorical or physical, if you’re going up Everest, you should stop and reassess? How can I set markers for myself as to when I should actually explore new options and what should cause me to want to redirect? Because if we know that we’re not going to be good at that in the moment, it’s better to do that beforehand, and that’s what the science shows is that you’re better off if you make some pre-commitments and you sort of think about that landscape.
KATY MILKMAN: Absolutely.
ANNIE DUKE: Ahead of time. Make a plan for how you might exit. So don’t just sort of think about when am I going to reassess and what are the signs that I might want to, but actually if you don’t have a plan for what the thing is that you might do instead? That’s also really helpful. But then I think the other thing is just that what I think forced quitting shows us is that we don’t actually explore enough.
It’s like when we’re dating, we worry too much about whether the person’s going to say no. And we imagine, should we go out on this date with this person as if this is someone who you’re going to marry. As opposed to just this is someone who I’m going to go on a date with. And we’re so afraid of the things that we might be exploring failing that we set way too high a bar for being willing to explore those. There’s opportunity-cost neglect, and we don’t actually see the other opportunities that are available to us.
So one of the things that I think is really helpful that we can take from forced quitting is that we ought to be spending some small percentage of our time exploring. So you have the things that you’re sticking with that obviously should be pretty high-value, and hopefully you’ve chosen those really well. But as you’re sticking with those things, you should also have some exploratory lines going. So if we were to apply it to something like dating, for example, most of the people that you date should probably be people that you think that you would really like, but reserve some portion of your dates for people that actually you think would be quite out of type. And that allows you to explore your preferences a lot more. And it’s actually a better strategy for dating.
KATY MILKMAN: I love that example. That’s excellent.
ANNIE DUKE: It’s a weird one, but I think it works really well.
KATY MILKMAN: Yeah, it’s very clear why that might be, whenever you’re taking in information and sampling a new space, you want to make sure you don’t get too stuck in your ways and that you look outside of the norm. I love that.
ANNIE DUKE: Yeah, exactly. And if you think on an organizational basis, within an organization, why would this be important? Well, because you don’t want to be Sony with the Walkman, or then the Discman, getting disrupted by Apple with the iPod. I think that this is really a tough problem, right? At some point you get forced to explore because you’ve been completely disrupted, but maybe you should be trying to force yourself to explore and try to develop other products prior to you actually getting disrupted by somebody outside.
And I think the Sony Discman versus Apple iPod example is particularly interesting because there’s actually an evidentiary record of not thinking about, should we be exploring, right? Should we actually be thinking about disrupting ourselves? What’s the probability we’re going to be forced to quit? So there was a memo within Sony where they say, “Well, we think that this digital storage thing is probably coming, but we don’t want to start developing that ourselves because it will disrupt our core business,” which of course was I have a box that you stick something in and it plays music for you.
And think about how odd it is that those two statements live together, right? I think this is coming, so really what you can translate that to is, I think at some point we might be forced to quit this business, but we don’t want to quit the business now. That’s basically what they ended up saying. And of course we know what happened, which was of course they were forced to quit, and then Apple owned that space. So this happens in organizations all the time, too, that they don’t have enough exploratory lines open.
KATY MILKMAN: So fascinating. Annie, thank you so much for taking the time to do this. I really appreciate it. This was just fascinating.
ANNIE DUKE: Oh, I appreciate you having me, and I so love that you brought me on to talk literally about my favorite topic right now.
KATY MILKMAN: Annie Duke is a speaker and decision strategist. She’s also the author of How to Decide. I have links in the show notes and at schwab.com/podcast.
Knowing when to quit an investment—that is, when to sell—is one of the more fraught decisions that investors make, with the endowment effect, loss aversion, and other biases all coming into play. On a recent two-part episode of the Financial Decoder podcast, host Mark Riepe and his guests consider when it makes sense to sell different investments—from individual stocks and bonds to mutual funds and ETFs. Check it out at schwab.com/financialdecoder or wherever you get your podcasts.
As Annie Duke mentioned, we don’t quit enough. That’s not to say you should go out and quit your job today or abandon the piano lessons you just started to take. Annie Duke is pointing out that because we have a general tendency to under-explore before committing to a job, hobby, commute, project, or other endeavor, forced or voluntary quitting can have surprising upsides, exposing us to sometimes valuable opportunities we otherwise would’ve missed.
As discussed on an episode of this show from our very first season, people have the tendency to stick to a chosen path with a fervor that can be suboptimal. This well-studied bias is called escalation of commitment. And people have been shown to escalate commitment to everything from their past investments to new products they’re developing to basketball players they’ve picked early in the NBA draft. Rather than recognizing that their investment, new product, or star draft pick just isn’t working out as hoped and turning to their new and better options, people regularly dig in their heels and throw good money after bad.
The flip side of this bias is that we experiment and explore too little. And as a result, research has shown that there can be an unexpected upside when life throws you a curve ball that forces you off your chosen path. When your subway line shuts down due to a strike, you may find a faster way to work. When you’re forced to work from home during a pandemic, you may find that you can be more productive in that environment. A key lesson from this is that you’re probably not experimenting quite enough in life. That isn’t to say you should abandon your family or your job—that would be terrible advice—rather, it’s to encourage you to re-examine where you’ve become stuck in your ways and where a little exploration might lead to some real upside.
You’ve been listening to Choiceology, an original podcast from Charles Schwab. If you’ve enjoyed the show, we’d be really grateful if you’d leave us a review on Apple Podcasts. You can also follow the show in your favorite podcasting app so you don’t miss an episode. And if you want more of the kinds of insights we bring you on Choiceology about how to improve your decisions, you can order my new book, How to Change: The Science of Getting From Where You Are to Where You Want to Be. Or sign up for my monthly newsletter, Milkman Delivers, at katymilkman.com/newsletter. Next time we’ve got an encore presentation of an episode featuring Nobel Laureate Daniel Kahneman to coincide with the release of his highly anticipated new book Noise: A Flaw in Human Judgment. I’m Dr. Katy Milkman—talk to you soon.
SPEAKER 12: For important disclosures see the show notes or visit schwab.com/podcast.
After you listen
Knowing when to quit an investment—that is, when to sell—is one of the more fraught decisions that investors make, with the endowment effect, loss aversion, and other biases all coming into play.
Knowing when to quit an investment—that is, when to sell—is one of the more fraught decisions that investors make, with the endowment effect, loss aversion, and other biases all coming into play.
Knowing when to quit an investment—that is, when to sell—is one of the more fraught decisions that investors make, with the endowment effect, loss aversion, and other biases all coming into play.
- Check out the recent two-part episode of the Financial Decoder podcast titled "When Should You Sell?" to learn when it makes sense to sell different investments—from individual stocks and bonds to mutual funds and ETFs.
If you've ever lost a job, or been through a breakup, or failed an exam, you'll know that the aftermath can be painful and disorienting. But for some percentage of those who experience these disappointing outcomes, unforeseen opportunities will arise.
In this episode of Choiceology with Katy Milkman, we look at the occasional upside of being forced to quit a career, or a relationship, or even a favorite route to work.
Kassia St. Clair brings us the story of William Henry Perkin. As a young man in 19th-century London, Perkin had set his sights on a career in chemistry and medicine. He devoted his time and energy to the search for a treatment for malaria, which was a growing problem around the world. Unfortunately, he failed in his quest, but his failure opened the door to a surprising new discovery that transformed an entire industry.
Kassia St. Clair is a design journalist and the author of The Secret Lives of Color.
Next, Annie Duke joins Katy to explain how events like a shutdown of the London subway system, or the COVID-19 pandemic, can sometimes surface new and previously unexplored options. She also discusses how our identities can be wrapped up in our choices, blinding us to alternatives that may actually serve us better.
Annie Duke is a speaker and decision strategist. She's also the author of How to Decide: Simple Tools for Making Better Choices.
Finally, Katy explains that while giving up on important jobs, relationships, or habits may not always be the best option, the behavioral bias of escalation of commitment can cause us to experiment and explore too little in life.
Choiceology is an original podcast from Charles Schwab.
If you enjoy the show, please leave a rating or review on Apple Podcasts.
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