Cut Your Losses - Know When To Give Up | Episode 3

CAT Study Planner

How can 'I' not get success? How can 'I' not solve that problem? Only I give it a little more time and 'I' will crack this.

Notice the 'I' in this. Eventually, it becomes a battle with your ego. We feel we cannot fail. We feel we are unique and we will definitely do it. Sometimes we get attached to the problem itself. Ego is often a good thing. It drives us to do extraordinary things. However, we must learn when to let it take over and when to allow our rational mind to rule.

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The CAT is a classic example of an event where every test sees thousands of students not making it simply because they didn't know when to cut their losses. You will hear of stories of people who get 'stuck' on a question. I have never understood this. How can you get stuck - you have the option to move on. Why don't you take that option? It doesn't matter how good you are at that topic or that section. If on the day you are unable to solve it, just accept defeat quickly and move on. Why waste time and jeopardise everything else? No CAT scorecard shows which tough question you were able to answer nor does any IIM call you because you spent 20 mins but got that really difficult question right.

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You see this in the world of investment as well. Investors and traders keep on holding poorly performing stocks. In fact, they keep trying to come out victorious and keep adding more money to it as it keeps falling down. The stock never recovers or takes 15 years to come back to the original price and your money is lost forever or stuck. Look up this excellent post on Yes Bank by Zerodha founder Nitin Kamath. He explores a crucial concept called the Disposition Effect.

As a start-up founder, I have learnt this the hard way myself. There are certain business models that won't work no matter how long you keep at it. At that stage pulling out from spending resources (time & money) from it is not a weak move of giving up. It is the right thing to do. It doesn't matter how much time and money you have spent on it before the moment of realisation.

People often mistake giving up with lack of tenacity and resilience. Does giving up go against the values of persistence and determination?

Let me flip this and say that cutting your losses and moving on is not just the right thing to do but it is the brave thing to do. It takes courage to admit that you were wrong. It is a brave move to change your mind.

Maybe you are not fully equipped in that moment to solve a particular problem. So you focus your remaining time and energy on things that you can still gain out of. Whether it is moving out money from the losing stock, or pivoting to a business model that has a higher chance of working out, or to move on to the next or the easier question that you know will give you the points you need - cut your losses quickly.

The smartest people in the world are adept at doing that.

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Curated Story of the Day

'The more time someone has spent making a relationship work, harder it is to breakup'.

This might seem like a controversial statement but watch this video (from Better than Yesterday) and you will know what I am talking about today. It will introduce you to the concept of Sunk Cost fallacy if you haven't learnt about it before. It will take just 9 mins of your time today!

I also have a book recommendation for you - 'Thinking Fast and Slow' by Nobel prize winner Daniel Kahneman. Some of the experiments he ands colleague have run will make a lot of valuable psychological concepts crystal clear to you. It requires your full attention but if you're preparing for the CAT it is a great book to read 30 days before the test!

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The mental conditioning required for one of the toughest exams in the world comes with practice, knowledge and presence of mind. But there is one central idea to all three of these; self-belief.

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