Loss Aversion: Why People Tend to Sabotage Their Own Success
The human mind weighs some things more than others.
Hi everyone,
I hope your weekend is going well! I had a splendid writing week and have an outgoing weekend ahead of me.
Life Update
I’m finally undergoing surgery that I’ve been putting aside for nearly 10 years.
I injured both my knees when I was 15 and my ACL was torn. As of now, it’s deficient. I don’t have ACLs in my knees and delaying the surgery further is going to put me at risk of early osteoarthritis. I’m preparing myself mentally for it because it will be one hell of a long rehab post-surgery.
Can I admit something very embarrassing though? I’m really scared to put on weight and lose my good health post-surgery. I’m quite bummed about not being able to work out for months thereafter…. But I’m excited to come back stronger!
The tentative date, for now, is mid-September. I’ll get more clarity on the surgery date in about 10 days.
On self-employment
My transition is getting smoother, and I’m thoroughly enjoying 4-hour workdays. Can’t wait to tell you all about it in my ebook about side hustles.
Ebook update
My website designer is on leave for a week due to a family tragedy and to be honest, I’m also contemplating sending it to a few friends to test out if the product is how I want it to be. I want it to be a one-stop-shop for anybody looking to kick off a side hustle, and hopefully get an alternate income source before 2021 ends no matter how little. I will still aim to release it before my surgery.
I took part in a writing competition!
Medium opened a writing challenge in the first 3 weeks of August.
I submitted three stories and they completely challenged my writing skill and style. I was pushed out of my comfort zone and I wrote with more vulnerability than I otherwise would.
If you’re a voracious reader, you won’t be disappointed with these reads:
The Horrifying Stories of the Space Beneath My Feet Shook My World
I Was Born in the Wrong Place, and I Had to Act Crazy to Live a Worthy Life
If you read them, I’d love to hear from you. :)
See you next week!
Loss Aversion: Why People Tend to Sabotage Their Own Success
I asked my mom to invest some money in the mutual funds I’ve invested in. I’ve been convincing her for a year, and she’s even seen me make good returns from these funds.
It’s so hard to get her to agree, which is understandable because she doesn’t know much about the market. But the real reason is she’s afraid of losing all her money (again). Years ago her friend advised her to invest in stocks and help her with it. She lost all her money in the process and vowed to never put her money in things she doesn’t understand.
This month, we finally invested some of her money where I recommended her.
So what holds back humans from making decisions which could potentially be life-changing and bring them success?
What about you? Have you heard of crypto or certain stocks doing really well? Do you still hold back from investing, because you’re not entirely aware of the market to take huge risks?
I feel you and am on the same boat as you. Even though Bitcoin fell down, I continued feeling that I missed the boat and never bothered with it.
Introducing to you, loss aversion. According to Investopedia,
Loss aversion in behavioural economics refers to a phenomenon where a real or potential loss is perceived by individuals as psychologically or emotionally more severe than an equivalent gain. For instance, the pain of losing $100 is often far greater than the joy gained in finding the same amount.
Loss aversion isn’t just about money or stocks, but about life. In life, we’re so afraid to lose something little that we let go of the big picture — a perspective that could be sabotaging your success.
The psychological effects of experiencing a loss or even facing the possibility of a loss might even induce risk-taking behaviour that could make realised losses even more likely or more severe.
In simple terms, your brain makes a bigger issue out of things than the issue itself.
I’ve tried to recognise loss aversion, and here’s how it helped me.
Think about the area you wish you could improve in your life. For me, it was work. And no, I’m not telling you that because of the side-hustle or leave-your-9-to-5 porn that has been going around the web, but because I was genuinely frustrated.
My work didn’t have an awful boss or a toxic workplace, but I was the issue.
I felt like I’m in the wrong place, doing the wrong kind of work. Not just that, but no other kind of work excited me.
No jobs on LinkedIn looked appealing. Hell, I didn’t even dream of becoming a Vice President or a CEO. Why on earth would I want to live with that kind of stress and long working hours?
But what was the other way? Quitting my job and asking my parents for money? That wasn’t a viable option, either.
So after side-hustling for nearly 10 months, I finally became self-employed. And since then, I question the underlying fears that prevented me from making this decision earlier.
Here were some fears that I confronted rationally:
Being broke: keep a client in the pipeline and have sufficient savings.
Being alone: make friends online, people are genuinely nice.
Failing: If it gets closer to your big goal, it’s a failed experiment, not ‘failure’
People making fun of me: you’ll know who your true friends are.
Parents being ashamed: keep this as a motivator to work harder.
Plan not working out and everything falling apart: get a job.
What's the worst that could happen? This is a question I ask myself each time I’m overthinking negatively. Surprisingly, the huge negative events only exist in my head because the worst probable outcome isn’t so bad after all.
As something to keep you thinking, I encourage you to analyse what is it you’re so afraid of losing that it’s preventing you from taking bigger strides. Often, it’s that one hunch in your head that is making the loss seem way bigger than what it is.
As humans, it’s common to experience negative bias.
The negative bias is our tendency not only to register negative stimuli more readily but also to dwell on these events. Also known as positive-negative asymmetry, this negativity bias means that we feel the sting of a rebuke more powerfully than we feel the joy of praise.
We weigh negative more than positive and get so blinded by it that we lose the sense of what could we potentially gain.
Maybe your $100 will become $10, but it could also be $150. Could it be a risk worth taking? Maybe people will laugh at you when you start a Youtube channel, maybe your colleagues will think you’re stupid. But maybe you’ll enjoy it a lot and make great videos, is that not a risk worth taking?
What are the areas in life where you’re fearing the loss to be way more than it really is?
When you find yourself second-guessing opportunities you really want to undertake, think — what's the worst that can happen? And see if that dilutes the loss.
After all, life is all about taking chances. Some will work out, and some won't. How would you know if you never try?
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Maybe consider being a Medium subscriber? It pretty much changed my life.
Well written Niharika.
Maybe you're having slight loss aversion just thinking about the post surgery recovery phase. Just my two cents. :)
Quite sure both your surgery and the road to recovery would be great and you'd be raring to go again soon. Good luck and more power to you.
I love to workout, so I had the same fears when I had ACL surgery. Trust me, if you follow the rehab/physical therapy after surgery, you will not gain weight and you will get an exhausting workout! I think I even lost a little weight!!