This mental model validates the old expression, ‘a bird in the hand is worth two in the bush’. In fact, researchers ...
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Non est enim vitium in oratione solum, sed etiam in moribus. Sed quoniam et advesperascit et mihi ad villam revertendum est, nunc quidem hactenus; Vos autem cum perspicuis dubia debeatis illustrare, dubiis perspicua conamini tollere. At tu eadem ista dic in iudicio aut, si coronam times, dic in senatu. Nam Pyrrho, Aristo, Erillus iam diu abiecti. Eademne, quae restincta siti? Ergo, si semel tristior effectus est, hilara vita amissa est? Qui est in parvis malis.
Hoc enim constituto in philosophia constituta sunt omnia. Illud quaero, quid ei, qui in voluptate summum bonum ponat, consentaneum sit dicere. Sed mehercule pergrata mihi oratio tua. Haec para/doca illi, nos admirabilia dicamus. Hanc ergo intuens debet institutum illud quasi signum absolvere. Non risu potius quam oratione eiciendum? Expressa vero in iis aetatibus, quae iam confirmatae sunt. Certe nihil nisi quod possit ipsum propter se iure laudari. His singulis copiose responderi solet, sed quae perspicua sunt longa esse non debent. Quia nec honesto quic quam honestius nec turpi turpius.
Duo Reges: constructio interrete. Cur tantas regiones barbarorum pedibus obiit, tot maria transmisit? Quae autem natura suae primae institutionis oblita est? Octavio fuit, cum illam severitatem in eo filio adhibuit, quem in adoptionem D. Ex quo intellegitur officium medium quiddam esse, quod neque in bonis ponatur neque in contrariis. Intrandum est igitur in rerum naturam et penitus quid ea postulet pervidendum; Quod, inquit, quamquam voluptatibus quibusdam est saepe iucundius, tamen expetitur propter voluptatem. Piso, familiaris noster, et alia multa et hoc loco Stoicos irridebat: Quid enim?
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Consider using penalties over rewards.
Your instincts m ...
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quo modo autem optimum, si bonum praeterea nullum est? Quia nec honesto quic quam honestius nec turpi turpius. Tum ille timide vel potius verecunde: Facio, inquit. Sic enim censent, oportunitatis esse beate vivere. Vulgo enim dicitur: Iucundi acti labores, nec male Euripidesconcludam, si potero, Latine;
Quem Tiberina descensio festo illo die tanto gaudio affecit, quanto L. Duo Reges: constructio interrete. Non enim solum Torquatus dixit quid sentiret, sed etiam cur. Bork
Ex quo illud efficitur, qui bene cenent omnis libenter cenare, qui libenter, non continuo bene. Aliter homines, aliter philosophos loqui putas oportere? Etenim nec iustitia nec amicitia esse omnino poterunt, nisi ipsae per se expetuntur. Quam illa ardentis amores excitaret sui! Cur tandem? Illa argumenta propria videamus, cur omnia sint paria peccata. Quodsi ipsam honestatem undique pertectam atque absolutam.
There are a number of studies, including the original ones by Tversky and Kahneman that provide compelling evidence behind Loss Aversion. However, there are also exceptions.
This study found that: “When the outcomes were actually experienced, losses did not have as big an emotional impact as predicted. These authors suggested that the purported asymmetrical impact of losses vs. gains was a property of affective forecasts and not of actual experiences.” In other words, the researchers seemed to argue that what initially presented as Loss Aversion had more to do with emotional responses, which did not always align with losses vs gains.
Other studies have found that Loss Aversion does not seem to arise in repetitive situations or single events with low stakes — indeed the latter phenomenon has been called ‘magnitude dependent Loss Aversion’. Another theory is that Loss Aversion is actually resultant from losses gaining your attention more effectively, so is less about the loss and more about the arousal or focus it initiates. This has been reframed as Loss Attention.
‘Stickk’ to a commitment.
No, that is not a spelling error, this example is about Stickk the web site created by a Professor of Behavioural Economics at Yale University that uses Loss Aversion to help you stick to your behavioural commitments.
Stickk is an online service where you make a public commitment to do something and, if you fail to do it, you will make a donation to a cause or group that you detest. This has proved to be more motivating than rewarding yourself with donating to a group you admire.
Save more tomorrow pension.
In the book Nudge, Sunstein and Thaler describe the story of the ‘save more tomorrow pension.’ This initiative was designed to encourage young people to invest in pensions using Loss Aversion. The pension plan cost nothing until the individual received a pay rise, and then that pay rise would automatically be directed into their pension fund.
The resultant user experience was that the individual did not see a reduction in their disposable income, there was no loss, there was only less gain. This resulted in a 200% increase in contributions amongst the target group.
Pensions part two — matching payments.
In another initiative linked to pensions, some initiatives have experimented with ‘matching contributions’, so if an individual pays x, the employer would match it. Leveraging Loss Aversion involves paying that match upfront and then taking it away if the individual does not make their payment.
‘No one ever got fired for hiring IBM’.
Have you heard of that familiar business saying? It refers to the fact that if you’re a manager and you hire the predictable ‘safe’ consultants to do work, you will not get fired, even if they don’t deliver results. However, if you go with the innovative, unknown group that might deliver more gains — the risk perception is higher and your job is more at risk as a result. It's essentially a tale in Loss Aversion.
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Loss Aversion was first identified by psychologists Amos Tversky and Daniel Kahneman as part of their foundational work behind behavioural economics. The term was coined in 1979 but was more popularised in 1992 when Tversky and Kahneman started to actually measure the asymmetrical nature behind losses versus gain as part of their seminal work on Prospect Theory.
Thinking, Fast and Slow is a mental model that I often reference at ModelThinkers, and it was originally a book that you should definitely dive into for more on Loss Aversion and associated heuristics.
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