In Episode 406, David and Camden visit with Annie Duke about how to better manage our investment portfolios including when and what to sell. We also discuss a number of behavioral finance topics such as mental accounting, sunk costs, and goal myopia.
Annie Duke is an author, speaker, and consultant in the decision-making space, as well as Special Partner focused on Decision Science at First Round Capital Partners, a seed-stage venture fund. Annie’s latest book, Quit: The Power of Knowing When to Walk Away, was released on October 4, 2022. Her previous book, Thinking in Bets, is a national bestseller and is highly influential on the investing philosophy of Money for the Rest of Us.
As a former professional poker player, she has won more than $4 million in tournament poker, won a World Series of Poker Bracelet, and is the only woman to have won the World Series of Poker Tournament of Champions and the NBC National Poker Heads-Up Championship. She retired from the game in 2012.
Prior to becoming a professional poker player, Annie was awarded a National Science Foundation Fellowship to study Cognitive Psychology at the University of Pennsylvania.
These days, Annie loves to dive deep into decision-making under uncertainty. As can be seen from her new book, her latest obsession is the topic of quitting.
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David Stein: Welcome to Money For the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein.
I’m here with my son, Camden, and we have a special episode, episode 406, where we interview and have a discussion with Annie Duke on investing, including when to sell investments, and on quitting, as well as just decision-making in general. Camden, why don’t you go ahead and introduce Annie Duke in terms of her background and bio.
Camden Stein: I’m really excited for the special interview episode that we have today. Annie Duke is an author, speaker, and consultant in the decision-making space, as well as a special partner, focused on decision science at First Round Capital Partners, a seed-stage venture fund. Annie’s latest book, Quit: The power of knowing when to walk away was released on October 4th, 2022.
Her previous book, Thinking in bets, is a national bestseller, and is highly influential on the investing philosophy of Money For the Rest of Us. As a former professional poker player, she has won more than $4 million in tournament poker, won a World Series of Poker bracelet, and is the only woman to have won the World Series of Poker Tournament of Champions, and the NBC National Poker Heads Up Championship.
She retired from the game in 2012. Prior to becoming a professional poker player, Annie was awarded a National Science Foundation fellowship to study cognitive psychology at the University of Pennsylvania.
These days, Annie loves to dive deep into decision-making under uncertainty. As could be seen from her new book, her latest obsession is quitting, and in particular, she’s on a mission to rehabilitate the term and get people to be proud of walking away from things.
As David mentioned, we had an opportunity to sit down with Annie to discuss, among other things, quitting, how we can be better at investing and know when to sell, and what to consider when making financial goals. So let’s go ahead and jump in.
Thank you so much for being here with us today. We’re really excited to have you. Your work in your first book, Thinking in Bets, was really influential to a lot of what David had set up initially on Money For the Rest of Us.
We also know that you are one of the people that were one of the earlier readers of the Money for the Rest of Us book; we have that blurb on there from you, and so we’re really excited to actually have this opportunity to talk with you on the podcast, and to have this conversation.
Annie Duke: Well, I’m so excited to be here. This is gonna be a fun conversation, I’m sure.
David Stein: Having read the book, and we’ve spent a lot of time on our show contrasting decision-making under risk versus decision-making under uncertainty. In the first part of the book, you talk about the expected value analysis, where we’re outlining a range of possible outcomes, and then assigning probabilities to them.
In my mind, a red flag went off, and I was an investment advisor, institutional money manager for 15 years, looking at quitting, and was trying to do that at one point. I remember being on a plane, doing this decision tree, assigning probabilities. It didn’t work very well, because when I think of uncertainties, I think of “We don’t know what the possible outcomes are.” If we can’t assign probabilities to that, how do we do an expected value analysis when we just don’t know?
Annie Duke: So David, I love this question. This is, I think, a common pushback that I get. And in particular, I get this pushback when people talk about things like marriage. “How can I possibly do that? I can’t possibly know what the probability of success is.” this is a weird one-time decision for most women; for me, it was a two-time decision. But it’s rare.
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