What Is Loss Aversion?
Source: By Tomwsulcer (Own work) [CC0], via Wikimedia Commons We don’t like to lose things that we own. We tend to become extremely attracted to objects in our possession, and feel anxious to give them up. Ironically, the more we have, the more vulnerable we are. Having accumulated wealth implies that we have more to lose than to gain. However, emotion regulation, such as taking a different perspective, can reduce loss aversion and help people overcome potentially disadvantageous decision biases. Why are we so afraid of losing? We are more upset about losing $10 than we are happy finding $10. The idea of loss aversion is shown in consumer behavior. The principle of loss aversion also applies to the emotional pain of scaling back. Ownership is not limited to material things, it also applies to ideas. Even our views of mate value change the more time we spend together. In a nutshell, the loss aversion is an important aspect of everyday economic life. What is the cure?
Jedi Mind Tricks: 17 Lesser Known Ways to Persuade People
Want to know how to persuade people online and get what you want? The power of influence is usually all that separates the successful from everyone else. These are some tactics, discovered through psychological research, that you have probably not yet heard about, but have the potential to increase your persuasive abilities. I’m not going to cover reciprocity, scarcity or social proof and all those widely known persuasion principles. You already know all about those (in case you don’t, stop everything and read this book by Cialdini). Related: How Nike’s Making Persuasive Product Pages 1. The best way to persuade audiences that are not inclined to agree with you, is to talk fast. Want to boost persuasive power? Don Moore from Carnegie Mellon’s Center for Behavioral Decision Research has published research showing that confidence even trumps past accuracy in earning the trust of others. People naturally associate confidence with expertise. 2. Light swearing, that is. Image credit 3. 4. 5. 6.
Dopamine Suppression and the Neuroscience of Giving Up
A new study in mice suggests that dopamine-suppressing nociceptin neurons in the brain's reward-and-motivation center (called the ventral tegmental area) become very active just before a mouse reaches a breakpoint when it gives up on exerting effort to receive a sugary treat. According to the authors, nociceptin is "a complex molecule that suppresses dopamine, a chemical largely associated with motivation." This paper, "A Paranigral VTA Nociceptin Circuit That Constrains Motivation for Reward," was published July 25 in the journal Cell. article continues after advertisement Source: Pexels We all know the deflated feeling of realizing that a dream or goal you've been working toward is out of reach and unattainable. As an ultra-endurance athlete, I know from experience that the sudden urge to give up often seems to come out of nowhere. At first, one nose poke dispensed some sucrose, then it took two nose pokes, then five, and so on. Source: Max Huffman
Startup Therapy: Ten questions to ask yourself every month by
In the last post I beat you to death about ditching your business plan but failed to provide an alternative. Okay okay, “Planning == Bad,” but the supposed benefits of planning are still important: designing for profitability, understanding your customers and competitors, focusing your attention, deciding what’s worth doing next, changing directions, and ensuring the founders agree on important issues. To help you, I’m stealing a trick from therapists. Cartoon by Andertoons Therapists don’t tell you what to do. You’re smart. That’s where this article comes in: To splash cold water on your face, forcing you to face reality and continue to defend or change the important choices inside your business. What follows is your startup therapy session. In one sentence, what does your product do and who buys it? Cartoon by AndertoonsThe first thing this does is force you to nail down your monthly expenses and accounts payable. What tips do you have? To help you, I’m stealing a trick from therapists.
Why the Most Important Idea in Behavioral Decision-Making Is a Fallacy
Loss aversion, the idea that losses are more psychologically impactful than gains, is widely considered the most important idea of behavioral decision-making and its sister field of behavioral economics. To illustrate the importance loss aversion is accorded, Daniel Kahneman, winner of the 2002 Nobel Prize in economics, wrote in his 2011 best-selling book, Thinking Fast and Slow, that “the concept of loss aversion is certainly the most significant contribution of psychology to behavioral economics.” As another illustration, when Richard Thaler was awarded the 2017 Nobel Prize in economics, the phrase “loss aversion” appeared 24 times in the Nobel Committee’s description of his contributions to science. Why has such profound importance been attributed to loss aversion? Largely, it is because it is thought to reflect a fundamental truth about human beings—that we are more motivated by our fears than by our aspirations.
The Endowment Effect
A strange thing happens in the mind when you buy something. No matter what it is—a pair of jeans, a car or even a house—in that moment when an object becomes your property, it undergoes a transformation. Because you chose it and you associate it with yourself, its value is immediately increased (Morewedge et al., 2009). If someone offers to buy it from you, the chances are you want to charge much more than they are prepared to pay. That is a cognitive bias called ‘the endowment effect’. It’s the reason that some people have lofts, garages and storage spaces full of junk with which they cannot bear to be parted. When tested experimentally the endowment effect can be surprisingly strong. The endowment effect is particularly strong for things that are very personal and easy to associate with the self, like a piece of jewellery from your partner. Sometimes, of course, the sentimental value of things is justified; but more often than not people hold on to old possessions for no good reason.
