How to Know When It’s Time to Give Up

Throughout 2022 and 2023, I kept a close eye on economic conditions. As the government attempted to rein in inflation by quickly raising interest rates, everyone who monitored such things was anticipating a recession. However, months and months went by and the data continued to confound most market participants with every piece of news showing an economy as strong as it ever was.

Finally, in June of 2023, I found myself listening to an interview by the incomparable Stanley Druckenmiller, who was being questioned by Sonali Basak working for Bloomberg. Druckenmiller is a stock trader who came up under the legendary George Soros, and who boasts an average 30% a year return with no losing years over his career. If you’re a stock trader, when he talks, you listen.

Druckenmiller has been one of the voices predicting a hard landing (a deep, long recession) for some while now. Here is an except from the interview:

Sonali: “We haven’t seen it, we have not seen that hard landing yet, and there is going to be other people after you today that are predicting a soft landing, so to the extent that you believe a hard landing is ahead of us, when does it come, what does it look like, do we see it anymore?”

Druckenmiller: “A lot of people, because we haven’t had an economic decline, start to change the forecast from a hard landing to a soft landing, and a lot of others have changed it from a soft landing to no landing. I haven’t changed mine at all. The fact that it hasn’t happened yet, doesn’t change the probability, if it does happen, of the depths of it.”

Druckenmiller gave an example of our natural propensity, as people, to believe something is less likely to happen when its coming is delayed. This is an example of what psychologists and economists call a “heuristic,” and one that I’ve been trying to formally define for a long while now.

About Heuristics

Heuristics are essentially mental tools that humans naturally use to make quick, functional decisions but that might be irrational or inaccurate when studied in detail. Daniel Kahneman’s best-selling book, “Thinking, Fast and Slow” is full of heuristics. One example is the “availability heuristic,” which states that if a person can more readily bring examples of something happening to mind, they will assume it is more prevalent than something they cannot. This heuristic is why we assume politicians are unfaithful more often than professors. Politicians are in the public view, so we can recall more examples of politicians being caught in cheating scandals, which leads us to believe more politicians are unfaithful than individuals in another profession that doesn’t come with as much visibility.

To return to the heuristic I’m focusing on in this article, I’ll be referring to it as the “declining-probability heuristic,” and as we’ll see, it dictates a lot of the decisions we make throughout our lives. The declining-probability heuristic is the natural bias to believe that an expected occurrence becomes less likely as time passes, despite the fact that, if it is indeed going to happen eventually, it actually becomes more likely as time passes.

For example, earlier this week I was waiting for someone to come to fix my internet. They were supposed to get here at 1 PM. As 1:05 rolled past, I asked myself if I should call them to get their ETA. It occurred to me that if they are indeed coming, as each minute passes, it becomes increasingly likely that they will knock at my door the moment I pick up the phone to call. Yet, it doesn’t feel that way. As each minute passes, it feels increasingly less likely that they will come at all.

A few weeks before that, I went to the movie theater with my dad. As we arrived, we parked on the fourth floor of a parking garage and went to take the elevator down. (It was the type of elevator that doesn’t show what floor the elevator is on, until it opens before you.) And after a minute or two, my dad suggested we take the stairs. Thinking on my vague conceptualization of the declining-probability heuristic, I said, “Wait, wait, wait.” Within about ten seconds, the elevator doors opened. I felt what he felt: That we were wasting our time, and the damn thing is seemingly never coming, but this feeling is illogical. If there’s a high probability that some event will eventually occur, it doesn’t become less likely to happen over time but more likely.

It’s no wonder we use this often misleading heuristic in our daily lives. We could waste endless amounts of time and effort if we didn’t occasionally give up and move onto a different tact, but in big ways and small, it also works to undermine us. It is the mechanism by which we lose faith.

From Gold, to Junk, to Gold

Napoleon Hill, in his book, “Think and Grow Rich,” gave an example of this I’ll never forget: He told the story of a couple of men who went out West, back in the days of the gold rush, and found a plot of earth that yielded some of the precious metal, so they indebted themselves to buy the machinery necessary to mine the land. They pulled out the first car of ore, and it looked as if they were on their way to fantastic wealth. But as they continued their efforts, they found the vein quickly ran dry. Eventually, they quit the hunt and sold the machinery to a junk man for a few hundred dollars. The junk man, then, called in a mining engineer. The engineer said that the previous owners prospecting failed because they didn’t know about “fault lines,” but that by his calculations, the vein would pick back up just three feet from where they had stopped drilling! That’s precisely where it was found, and the junk man made millions.

For an even higher stakes example, we can use the real-life stories of when doctors have used chest compressions and other life-saving treatments to resuscitate a person who is legally dead or teetering on the brink. If we take one of those miraculous stories, where it seems that someone has passed, but medical personnel persist in their efforts for 5, 10, or 15 minutes, and then like magic, the person is brought back to life, we can conjecture that with each passing minute, they believed their efforts increasingly futile. The hope of being able to save the person before them surely dwindled as time went on, when in reality they were actually getting closer and closer to bringing them back.

Predicting the Future

The fundamental question is one that we all contend with on a regular basis: Will what I expect happen or not? You’re a fool to believe in what won’t happen, and equally foolish to lose faith in what will. However, there are many examples of things we anticipate over the course of our lives that involve a high probability: If a person wants to make a trick shot, or make a sale of a product, or get accepted into a school, or find a romantic partner — or any number of things that, though challenging, happen all the time — they can say to themselves with near certainty that they will eventually succeed at this. The declining-probability heuristic will each day whisper in their ear that their efforts are futile, but if they examine the underlying logic, they will find that each day that passes without success has actually brought them closer to attaining what they seek, not farther. We should be bolstered by the time that has passed and the failed attempts we’ve accumulated.

If I try to hit a bullseye on a dart board, I might think it impossible after a hundred attempts, but it’s not impossible. In fact, assuming I’m throwing in the general direction of the bullseye, my next throw is more likely to be the one that hits it than my first throw was. If you have a 1 in 1,000 chance of winning something, you obviously stand a better chance with a hundred attempts than with ten.

A friend is looking frantically for a job. They’ve applied for several, but have been turned down because they require some special conditions: perhaps they need a work visa sponsored or are a single parent who can only work select hours. As a month or two passes, they begin to lose their nerve. But if you can look on the circumstances and say to yourself that there must be some jobs that would accept them, and that they are not incompetent, or lacking in their résumé, then it is very likely they will find work in time. In this instance, the heuristic has them wanting to give up, while logic suggests that success is near. Life provides many opportunities, of more or less significance, for us to consider whether we are, and whether we should be, letting the heuristic govern our thinking.

Conclusion

In conclusion, the declining-probability heuristic is a cognitive bias that serves to keep us adaptive and help us efficiently allocate our limited time and energy. However, it is also the mechanism by which we lose hope. As time passes, our faith wanes, even though the probability of success may very well be rising. We can overcome the disadvantageous effects of this heuristic by deeply considering the real probability of what we anticipate. Is what we’re waiting for something that we can logically expect, or something that is even commonplace throughout society and the lives of others? If so, we should work to override our natural inclination to feel that the probability of said occurrence happening decreases over time, when it is very likely that we are in fact nearing that occurrence as time passes and attempts fail.

Enjoy this article? I’d recommend following it up with this one: “Is Having Children Unethical?”