BFI NewsJan 30, 2015

To Quit, Force a Moment of Truth

Levitt argues that even a coin flip is better than waffling on big decisions

Steven Levitt, by his own confession, is a lousy quitter—but he’s not alone.

Behavioral economists and other social scientists have shown that to avoid risk and pain, we might stay in a soul-killing  job, a romance going nowhere, or a career path for which we’re woefully unsuited long past the point of reason. Or, because we put too much value on the next hour or next day relative to the long term, we might quit too soon.

Deciding to quit is a matter of weighing costs and benefits, yet oddly, economics has little to tell us on how to pinpoint the optimum moment to quit. There’s no solid research or data—and that fascinates Levitt, the William B. Ogden Distinguished Service Professor of Economics. He shared his personal experiences with quitting to a crowd of assembled undergraduates to underscore his recent fascination with the economics of quitting–more broadly, what pushes us to make major life changes.  He seeks to understand what ultimately tips us over the edge from waffling to to action, and how the tools of microeconomics can guide or explain our decisions.

Steve Levitt delivered his idiosyncratic take on quitting.

In the moment, that tipping point can be anything but obvious. As a teenager, Levitt was committed to a career as a professional golfer, playing eight to ten hours a day.  But at one tournament, a four-foot-tall, round-bellied golfing prodigy made him realize that a lot more practice than that would be required if he wanted to go pro. “He didn’t look like he could play golf at all, but he shot the ball 50 yards further than I could,” recounted Levitt. “[Today] he makes $20 million a year playing golf.”

Although the costs sunk into his future PGA superstardom seemed huge, Levitt realized that the hours of practice he was willing to spend would never allow him to best his naturally talented pear-shaped rival. In retrospect, it was a simple cost/benefit analysis–he decided that quitting to move on to something else made the most sense. The same goes for changing careers, bailing on that TV show you’ve been watching for too long, or deciding whether that gym membership is actually going to keep you on a fitness regimen.  “It’s the answer to virtually every question,” explained Levitt.

But what economic theory can explain why we quit or why we stick with it? Levitt, coauthor of the Freakonomics series,  argues that there is virtually no literature on the matter. There’s the idea of hyperbolic discounting– most of the students in the room preferred to have a candy bar during his talk, rather than a promise of two candy bars at the end of the week. Levitt’s quick poll illustrated the tendency to overly discount T the promise of later, bigger payoffs in favor of immediate gratification. Similarly, staying at a job and avoiding the immediate pain of quitting might seem more appealing than the promise of long-term happier outcomes at a new job.

Conversely, Levitt said that a quitter might suffer from overoptimism, believing that leaving school or dumping their boyfriend will turn out great for them due to an inflated sense of the outcomes that their brains, talent, or looks will earn them later down the line.

But none of this really helps people on the margins–people who simply cannot decide–figure out whether they will be better off.. Levitt told students the best way to find out would be an experiment that randomizes people’s decisions and tracks their experiences. But forcing a treatment group to get divorced or quit their jobs–while a control group stays put and stays miserable–isn’t really feasible or ethical.

But what if people agreed to make life changes on a question they were struggling with based on a random decision? We could learn a lot from a coin flip–or 61,735 coin flips, to be precise. Levitt and his Freakonomics co-author Stephen Dubner asked their readers and podcast listeners  currently struggling with a difficult choice to let Freakonomics decide with an online coin flip. Levitt turned this pool self-identifying maybe-quitters into a randomized experiment. The treatment group received a “heads” and a go-ahead to make a change in their life; the control received a “tails” with the recommendation to stay put. He then surveyed these participants on their happiness with the decision two months and six months after the decision.

“On almost every material decision that people had to decide, after both two months and then six months, the people who got heads reported being happier than those who got tails,” said Levitt.

Levitt stayed after for excited undergrads to ask questions, gather advice, and snap a few keepsake photos.

Satisfaction with their choice varied a bit depending on the nature of the change in question. 20 percent more of people who got ‘heads’ considering quitting their jobs and quit based on the flip, feeling good about it immediately. People contemplating dropping a miserable diet reported being very happy after two months, but not so much after six. For people who decided to break off a relationship, most felt indifferent about their relative happiness after two months, but felt much happier about it by the half-year mark.

Levitt said that even the limited sample provided evidence for his hypothesis. “In almost all cases, it looked like making the change was better than not making the change,” said Levitt. “It supports my intuition from life–people change way too little.”

Moreover, Levitt concludes from his experience that results like this should make us more inclined to confront decisions head on–waffling endlessly just wastes time and energy. said Levitt. The coin toss just simplifies the process, forcing a ‘moment of truth.’ “If you can’t decide, you should always make the change.”