Loss aversion

Loss aversion refers to people’s tendency to prefer avoiding a loss to gaining something.

What this means is that people avoid taking chances if there is a possibility of losing something. There are a lot of studies on loss aversion that show that the gain has to be at least twice as big as the loss or even bigger for people to take that chance. This means that the pain of losing 100$ is perceived as bigger than the pleasure of gaining 100$, and it can be surpassed only by a possible gain of 200$ or more.

This is why you will always see the people fighting for the status quo being more active than the people who want change. When reforms, reorganizations, changes in companies or society are about to take place, the people who have something to lose will be more involved and will fight harder than the ones who could have something to gain, even if the ones gaining are a lot more or the gains outweigh the losses.

People fall in love with what they own, with a certain level of comfort and the false illusion that they can always preserve it.┬áThat’s why, the next time when you want to do something that involves changes that will affect certain people in a negative way, be ready and expect a strong resistance.

The good news is that this can be trained. People who take risks more often, either by the nature of their job, or by choice, will end up having a lower loss aversion.

Change, innovation and success mean taking risks, and this goes against our very nature.

Catalin Costea

If I had to describe myself in one word it would be polymath; Renaissance man if I had two. I strongly believe that everything you know will come of use sooner or later and that constantly challenging yourself and continuous learning are the key to success.