#101 - Why every founder needs a quitting coach
What you leave behind can free you up
Hello everyone and welcome to all the new members! 👋
A fortnight ago on the way back from Panchgani, we stopped at a nursery for my mum-in-law to pick a couple of potted plants. It was heatstroke-hot outside, in the car was a cranky toddler, and no pot cost more than 250 bucks ($3). My mum-in-law approached the choice of her two plants as if she were choosing furniture for her dream house. The value of what she was giving up by being outside and haggling a better price was inconceivable to her. That got me thinking. How do we value time and effort? How do we look at commitment? Who has the most to lose from the tendency to cling on?
Turns out that a world-class economist has something to say about this act from my mum-in-law. But let me put a pin in that and first share with you the highlights of this week’s piece.
We’ve been told quitting is for losers. This is scarcity-age wisdom in an age of abundance.
Every founder needs a quitting coach to help guide them to better opportunities when the one they’ve poured themselves into fails.
There’s a difference between knowing the right thing to do and doing it. That difference is big enough for us to never leave a sinking ship.
Quitting is not failing. It is gathering new information about our own preferences and about a changing world.
Quitting is a strategy. Sticking to a failing project means we’re wasting our time at the thing and giving up all other available opportunities. Quitting at least stops the opportunity loss.
On to this week’s issue…
Every founder needs a quitting coach.
There are a few ways to justify such a declaration, but at the core of it is the reality that we live in an age of abundance with the mindset of someone in an age of scarcity. This makes us, especially founders, tend to stick to failing ventures.
Why is the founder’s case worth our attention? Because they’re at the sharp end of what we as humans experience. And their behavior today holds a mirror to our behavior tomorrow.
Founders are smart, they are persevering, they have social capital. These are traits with high lifetime value in the market. For a cohort with such traits, the opportunity costs of pursuing goals no longer worthwhile are high. They are likely to not just be able to hatch one backup plan, but a few good ones.
But there’s a hitch. Human beings are programmed to survive in scarcity. We are used to foraging for food, not having a buffet spread awaiting us. We’re maladapted to consistently make good decisions in an age of plenty. No wonder founders find it hard to give up one path for another, even when the one they’re on is heading to a dead end. Hence, someone–maybe a professional–to help them navigate a world of choice and abundance. Someone to tell founders, Just because a thing is hard to do doesn’t mean it is worth doing. Someone like a quitting coach.
Meet the poster children for gritting it out: startup founders
From a Mar 2023 TechCrunch piece:
A growing number of investors have begun suggesting that certain venture-backed startups that have yet to find so-called product-market fit throw in the towel.
Let this counsel sink in. Where else have you heard such advice for quitting? Growing up, I like everyone else around was told about the virtues of sticking it out. Grit was a badge of honor. Broken fingers, unsavory friends, meaningless goals? One simply stuck it out. What do these investors know?
The piece goes on:
Their [investors’] argument is that some startups simply raised too much, at valuations into which they will never grow, and that clean, well-planned exits are better for everyone than messy ones. After all, the money could be invested in something more impactful. Importantly, the founders’ time could also be focused on more productive endeavors, greatly improving their mental and emotional well-being.
When a founder/entrepreneur recognizes a need in the market and builds something that customers want to buy, that’s finding product-market fit (PMF). Every startup comes up with a natural fork in the road—finding (or not finding) PMF.
Finding PMF means your path ahead needs more fuel (capital). You probably also need a better engine (team). If your startup cannot find PMF, it means you have a decision to make. What to do with the fuel and engine you already have? A seed round typically stocks you up for 2-3 years. If you find in that time that the problem isn’t worth solving, or that the market isn’t big enough, do you return capital? Or do you exhaust it in the hope of turning things around?
The curse of being a flag bearer
Founders are committed to prove their non-obvious idea for a business has legs. They’ve poured a lot into this bucket, in all possible currencies—social, financial, emotional, intellectual. They’re the sole flag-bearer for their idea and they cannot put that flag down.
It’s no surprise that founders tend to want to grit it out. They continue to burn cash, hire more, and even raise more funds. Or they slow down, lay off people in tranches, focus on the narrow. Or they chase another pivot, build a new mousetrap. Do whatever it takes to not concede defeat.
The founder curse is captured in this tweet from investor Gokul Rajaram:
Many founders who raised large amounts of money ($10m+) in 2020-21 but subsequently realized they don’t have PMF, are going through an excruciating psychological journey right now.
On one hand, they feel beholden to employees and investors to keep building, pivoting, doing anything to live up to their perceived commitment to their stakeholders to build an enduring company.
On the other hand, they have a sinking feeling that they are just rearranging deck chairs on the Titanic. Their heart just is not in it. There is a deep-felt malaise.
The more money a founder has raised, the deeper this predicament.
What does quitting mean for a founder?
Quitting in the losses would mean accepting defeat. It would mean realizing losses. If founders persist—as long as they persist—any loss is imaginary, all gain is possible. Pushed to the wall, we become risk-seeking. We take bigger swings in the hope of not just recapturing what we have lost but accruing net gains. Lotteries, casinos, startups.
Kahneman and Tversky’s prospect theory shows how much deeper we feel losses compared to wins. Source: Wikimedia Commons
Founders may devote anywhere between 5-10% of their life (and 10-20% of their working life) to an idea—their unique and dear idea. That’s a non-trivial share, and when that does not seem to work, it creates cognitive dissonance. I am smart and independent but all these business data points seem to suggest otherwise. They must not reflect reality. Let me correct this anomaly.
Elizabeth Holmes, anyone?
Knowing is not doing
Research shows that there’s a difference between knowing the right/logical thing to do and doing it. We tend to not do the right thing to correct a previous poor choice, not because we don’t know what the right thing is but because we are too committed to the wrong thing.
The virus of grit often manifests as self-rationalization. So much so that even when we know what to do we may not do what needs to be done. We’ll come up with new reasons to explain away the urge to stick on. This tendency is particularly acute in founders.
Founders are smart enough to know there may not be a path ahead. They are also smart enough to convince themselves and others around them that they possess the power to bend that reality to their will. This is not time to quit; this is the time to commit.
It is also hard for founders to be their wisest selves because they cannot help but look at those around. Entrepreneurship, among other things, brings with it a hall pass to change (a part of) the world. If all you can do with the permission to change the world is fail at that very endeavor, and be reduced to watching others like you succeed, it cracks the mirror. Founders are wired to compare.
‘Entrepreneurship has many recognized occupational hazards,’ reflects serial entrepreneur turned writer Luke Burgis in his book Wanting, ‘from mental health risks to burnout to substance abuse and financial instability. None is so conspicuously absent from public discourse as envy.’
What may a quitting coach’s job be all about?
When decision strategist Annie Duke, who (was forced to) quit a budding career as a researcher to become a professional poker player in her twenties, asked Daniel Kahneman, perhaps the first name in behavioral economics, about the secret to being a good quitter, he said, ‘What everybody needs is the friend who really loves them but does not care about hurt feelings in the moment.’
Very true but how easy is it to find one? Ever had to tell a friend their partner is a jerk and that your friend just can’t see it? How did that go? Kahneman’s model friend may or may not cut it, but a quitting coach will.
A quitting coach’s job, as I imagine, would be to simply be an outsider with the permission to hurt feelings. To embarrass today in order to save from ignominy tomorrow. To point out the spinach stuck in the teeth.
A quitting coach should drive home three simple messages:
1️⃣Quitting is not failing. Failing is not setting clear milestones to measure progress. Anything else is just finding out another way something doesn’t work (with an Edisonian hat tip). Sticking to projects no longer worthwhile eats up our limited time for better opportunities. Quitting frees us up to pursue the best opportunity.
2️⃣Quitting is learning. When we set goals based on their expected value to us, we assume our preferences will remain the same and the world outside will remain the same. But often, both change (COVID happened and it has convinced me that I quite like working from home). And what’s more, we may call out the change in the world without ever sniffing the change in ourselves. Goals as Annie Duke says in her book Quit should not be treated as fixed objects in a changing world.
3️⃣Quitting is a strategy. When we have given ourselves to a project and it fails to take off, carrying on is a double whammy. We are not just wasting our time on the project, we’re also pouring down the drain the promise of all other opportunities we’re not pursuing. Quitting at least stops the loss of those opportunities. It frees us up to pursue something better. It allows us to take more shots, armed with what we’ve learned from previous experiences.
I said earlier that what founders experience today, the world will experience tomorrow. What I meant was that we can perhaps imagine a world where AI automates a chunk of basic jobs, employment is more provisional than what it is today, and people work on projects without having to remain loyal to employers for decades. People should not have to wait for their jobs to suck to consider quitting. They could actively look out and switch if the world outside offered something better. It would be conceivable to quit one’s dream because a better one was right round the corner.
Economist and author John List who has found out in a large-scale study that people tend to wait to dread going to work before calling it quits offers a glimpse into a deeper reason why we’re not built to make the most of optionality.
…what I see in the business world and in government is that people don’t quit enough. They don’t quit enough because they’ve been taught not to quit. They also don’t quit enough because they don’t understand or appreciate the opportunity cost of time. When you think about the person who moves to a different job or they move to a different apartment, nearly every time they’re doing it because something bad happened in the workplace or something bad happened in the apartment. That’s all well and fine, but you should also be moving when you get better opportunities.
If List’s words reminded you of my mum-in-law and her tryst with potted plants on a summer’s day, you’re excused. The point is, when optionality is more common, and it already is for swathes of the developed world, every meaningful project will present us with a fork in the road. At that point, life will ask us to pick a path. When that happens, perhaps we too will need a quitting coach.
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What is the biggest thing you’ve quit recently? Was it easy? Let me know in the comments. Thank you for your attention.