Blog post #7: Should I stay or should I go?
As we near the end of March and countries are going through various stages in their corona fighting battle--- an interesting phenomenon has taken hold in China which has mostly emerged from quarantine and people are free to move about—however, the country is reportedly seeing a spike in divorce rates. Apparently, most people can only take their spouses in small doses….. joking aside, I did start wondering that whether a marriage, a job, or your start-up you’ve been working on for 5 years---when should you actually call it quits? Conversely, when should you stick it out because there is light at the end of the tunnel?
The answer is --- drumroll please--- well there is no perfect answer--- this blog isn’t called crystalball.com for a reason. Not all hope is lost though, because I can provide the perspectives of those with way higher intellectual horsepower than me to help you solve these types of tough issues.
View from an economist: I know economists can seem kooky with their supply/demand charts and too many curves named about old dudes (Phillips curve, Laffer curve, and so on)—but I think the helpful view from them is that they assume everyone acts rationally--- unfortunately most people (def myself included) actually lets their emotions get the best of them so having a rational problem solving framework is helpful I think, especially when it comes to messy things like a marriage. In a podcast on Freakanomics radio (The Upside of Quitting), the hosts (surprise they are economists)--- use the concept of “sunk cost” and “opportunity cost” as tools to help in this decision. Let’s say you’ve been working on an e-commerce start-up selling essential oils for 3 years and you’ve invested most of your life savings into the project--- it’s slowly ticking along but sales have completely flat-lined in the past year. You want to keep going—afterall you’ve sunk 3 years of your life and $30k in cash into this--- the economist will tell you that the 3 years and $30k is irrelevant because that cost “sunk” and you can’t get it back regardless. Which brings me to opportunity cost--- let’s say you have the rest of your life savings in the bank but it’s slowly bleeding due to your business— then you can consider what else can you do with the money and your time for that matter) instead--- perhaps you have another startup idea—eg from the past 3 years, you’ve come up with an innovative accounting system to track your e-commerce sales that has promise to other small business owners—maybe it’s time to pivot or if you shut-down your business, you will no longer bleed money—and those funds can be invested into the stock market or other investment vehicle instead. ---- My hypothetical example (as silly as it sounds) is to help you not fall into the trap of crying over spilled milk, if you will. The past can’t be changed (that book The Time Traveler’s Wife is purely fictional!) and what really matters is what that thing (marriage, start-up, job, etc) is costing you right now in terms of your time, effort, money, mental capacity and what you can be doing with all those instead.
View from a best selling author and motivational speaker: Seth Godin actually wrote a book called “The Dip” answering exactly “when should you quit?” I’ll save you from reading the 76 pages—here’s the main idea to consider--- most things worth pursuing in life have temporary setbacks or challenging moments— what he calls “the dip”—consider medical students—both of my roommates in college were pre-med—and the first dip for pre-med students is organic chemistry (called “orgo” by those who have the pleasure of suffering through it)—I was a business major so fortunately don’t know anything about that. In any case, orgo is the weed-out class and the first of several “dips” that the student has to face in the pursuit of being a doctor. And apparently in a marriage there is the “7-year itch,” during which the honeymoon is now well over and initial magic and chemistry dwindles. However it’s important to distinguish between a “dip” and a “dead-end” or” cul-del-sac” as Godin calls it. Dips in pursuit of your endeavor are hardships that pretty much everyone endures and with the right amount of tenacity, a flexible mindset, and time--- you can overcome the problem--- the key is to ask yourself whether things are going in the right direction during the hardship--- eg you are working 12 hour days on your own business and are exhausted--- but the revenue numbers go up day by day--- then things are moving in the right direction. On the other hand, you’ve invested several years in a relationship including rounds of couples therapy, yet you still feel neglected by your partner and feel like you are constantly walking on egg-shells. Well, then hate to break it to you—things are not moving the right direction—and it’s maybe time to cut your losses.
Quit while you’re on top? This doesn’t apply in all cases but I ask that at least you entertain the notion that even when things are going well, there could potentially be upside to getting off the wagon. Consider these two examples.
A few years ago (2018), Jerry Seinfield turned down $100 million from NBC to do another season of Seinfield. The show was wildly successful after 9 running seasons—why NBC shelled out big bucks to keep it going--- but somehow Seinfield turned it down when seemingly the momentum was still on the up and up. One of the reasons stuck out to me---answering the question from a reporter, he says “ The most important word in art is ‘proportion.’ How much? How long is this joke going to be? How many words? How many minutes? And getting that right is what makes it art or what makes it mediocre.” I think what he was getting at is that things all have a shelf life and it’s hard to predict actually what audiences would find humorous. At that point in his career, success is actually his to lose---I know he cited other reasons for quitting the show, but seems like he did quit while on top.
Another example is General Electric ---Its famous CEO Jack Welch (who has been referred to as the Michael Jordan of business) built GE into the mega conglomerate that many of us know it today (when he took over, it was mainly a manufacturer of just lightbulbs)--- under his reign--- they expanded into industrials (think jet engine manufacturing), got into entertainment via ownership of NBC Universal, and was the 800 lb gorilla in financial services via GE Capital. He retired in the early 2000s and for lack of a better word, the company has been on the down and down since then--- the financial crisis hit and GE Capital bled out $$ and they’ve since then had to divest (sell off) a lot of their divisions. In hindsight, he got out really at the best time—he probably didn’t predict there to be a financial crisis and some of the subsequent events but whether by luck or skill, it seemed like the right decision to quit while ahead.
There is something in finance called “reversion to the mean”--- which often happens in life too—meaning a lot of things do go back to some sort of baseline. I do think this principle should be used judiciously and doesn’t necessarily apply to all situations—eg I’m not advocating you walk out on your marriage when things are still lovey dubbey or quit your job after 6 months right when things are going well. I think a key question is how long have the good times been around and do you expect it to continue? For that, I again don’t have a good answer—I’m merely here to offer some perspective—if you think I can solve your life’s challenging problems—you’ve overestimated my ability.
Until next time, stay happy, stay sane, and help yourself to a slice of your fave pizza (for me it’s a brick-oven Napoli style one)!
