April 29

Cut Your Losses: How To Find The Courage And Know When To Quit

The English language, or for that matter, most other cultures, have some version of the saying, “Don’t throw good money after bad.” Yet, we do it. We continue to sink in perfectly good time and resources into ventures that aren’t working for us, hoping for miracles to occur. Today’s post is about knowing when to cut your losses and call it quits. It’s a skill we need to learn because quitting is sometimes harder than staying put.


The media world was stunned when the newly merged corporate entity Warner Bros. Discovery announced that they were shutting down their infant streaming service CNN+ less than a month after its launch. Here’s the kicker: a whopping $300m had already been spent on the platform to garner a long-term subscriber base.

The launch statistics for CNN+ weren’t exciting—the platform averaged less than 10,000 views a day. Any half-decent home-filmed cat video on TikTok could beat that number.

The decision to pull the rug couldn’t have been easy to make. People’s jobs, lives, and livelihoods were at stake, and so were many reputations. Many high-profile media celebrities were associated with the streaming service, and there was a lot of marketing hype at launch time.

Pulling the plug

So, in the face of so much publicity, how do you cut your losses and write off $300m?

Answer: By evaluating facts in a cold and calculating manner. And that’s what the executive team did when they pulled the plug on CNN+. (No wonder business can be, and often is, ruthless.)

Whether or not the shutdown of a fledgling streaming service was right or wrong isn’t the subject of this article. But it does make us ponder:

When the odds are overwhelmingly stacked against you, how do you find the courage to cut your losses and fold instead of trying to save face by hoping for miracles?

Sunk-cost fallacy

Ever sit in a theater through a movie you hate just because you made the effort (and paid for the expensive popcorn) to get there in the first place?

How about when you hire a bad contractor to do your yard and don’t fire him despite his shoddy work just because you’d already paid him a 30% deposit?

Behavioral economists have a term for this: the sunk-cost fallacy. It’s a cognitive bias. The sunk-cost fallacy is why we tend to continue an endeavor or behavior simply because we previously invested resources (money, effort, or time) into it.

But as explained in this post, sunk costs are irretrievable. They are resources we’ve already spent and do not really influence future outcomes.

Status-quo bias

While there are many reasons we fall victim to the sunk-cost fallacy, one factor stands out overwhelmingly. We don’t like to admit we are wrong, even when the writing is on the wall. Less so to ourselves. It was this fact that made the CNN+ shutdown story even more shocking: it is very rare to witness such public admission of failure and backtracking.

Behavioral economists have determined that our tendency to dig in and bury our heads in the sand in the face of failure can be attributed to another cognitive bias—the status-quo bias, which, in turn, leads to loss aversion behavior.

Loss aversion

Research has proven that not just humans, even capuchin monkeys, showed a preference to hold on to what they already had, even when they had the opportunity to exchange it for something better. Here’s a quote from the paper: “Foregone gains are less painful than perceived losses.”

In short, we hate losing.

We are likely to keep pouring more time and resources into a project that is going awry than admitting a mistake and walking away. This loss aversion tendency, coupled with the cultural messaging we often hear about how to never give up, is a double-whammy.

It’s not glamorous and is seen as a sign of weakness, to cut your losses and accept defeat when things don’t go to plan. Over and over again, you hear about the need to have grit—to stay and fight.

But, here’s the $64k question: when should you exhibit grit and stay to fight another day, and when is it time to cut your losses and walk away? 

The answer to this question is with the one person who seems to get it right almost always. Goldilocks.

Knowing when to cut your losses

There is a reason Hamlet’s soliloquy, “To be or not to be,” is one of the most widely quoted lines in the English language. The emotions and the indecision experienced by Hamlet apply to numerous situations in life, although they may not be as dark or deep.

One such example is finding out whether to cut your losses and walk away or continue to plod along. The answer will depend on why you feel like quitting:

Is it because you are outside your comfort zone? Or,

Are you really in a no-win situation where it’s best to cut your losses and move on?

Here are a few guidelines that can help you uncover your own Goldilocks zone in the face of indecision.

1. Third-person view

Pretend for a few minutes that it’s not you but rather a dear friend in a sticky situation. What advice would you give them?

It’s easy to take the rose-colored glasses off and get a reality check by coldly evaluating the pros and cons when it’s not your problem but someone else’s. This exercise can help provide perspective without pressure. You’ll have a clear idea of what you stand to gain (or lose) by the end.

2. Opportunity cost

If you’re stuck on a project that either feels like or is actually a losing proposition, evaluate what alternatives you have.

What else could you be doing with your time?

Perhaps, by giving up the current project, you may find the time to move on to something better and more fruitful, and maybe this loss may not matter after all.

Finding alternative options makes it easy to cut your losses.

3. The magic of hindsight

Indulge in some wishful thinking because that could give you a clue on whether you are on the right track or not.

Ask yourself this question: If you get a do-over, would you work on the same project again, knowing what you know about it today? The answer to this question will help you confirm your choices or provide you with a clear reason to quit.

4. Ego-check

Would you cut your losses and leave the project this very minute if you were guaranteed that no one else would find out? Your answer, in itself, will give you a clear indication of whether you are staying put to simply please others (or your reputation) or if your heart is in the game.

5. Is it harder to quit than to stay on?

If you’ve always described yourself as “not a quitter” and your personal brand is of someone with enormous willpower, it can be very hard to cut your losses and leave. After spending a lifetime building and living up to the reputation of someone who never leaves a battlefield, it’s perfectly natural to feel guilty and shameful when quitting.

Check-in with yourself to see if you are a victim of the status-quo-bias. Is the option of quitting more difficult than simply staying on?

6. Putting all eggs in one basket

It can be difficult to cut your losses when you only have one thing going on because you don’t have something else to flank to. But if you’re constantly experimenting and trying things out, you will get better at judging what’s working and what’s not.

This is not to suggest that you litter your life with unfulfilled projects. But before you put all your eggs in one basket, make sure it is the right one.

Finally

Life is too short to spend your days hoping for miraculous turnarounds that you know aren’t coming. Staying in dead-end jobs or relationships just because you’ve already wasted too much time on it isn’t a testament to your perseverance or willpower. Instead, it is a reflection of your inability to cut your losses.

The best poker players in the world are the ones who know when to hold ‘em and when to fold ‘em. The best way to win is to know when to quit.

Forget the failure but keep the lesson.

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