How loss aversion can stop you getting results
How many times have we found ourselves in situations when we want to tell someone the right thing but don’t do it simply because it requires us to have an uncomfortable talk with them? Chances are, we’ve all been there. And where does this happen more often? At home, in our personal life or at work? For most people the answer is the latter for obvious reasons.
There’s no point. Things won’t change just because I say so.
I can’t go up again my boss. I just can’t.
Well I wish he changed his behavior. But I don’t want to show him the mirror. Why should I be the bad guy?
I don’t want a conflict with her. She doesn’t report to me and I have to get work done through her!
I don’t want to hurt his feelings.
Do any of these sound familiar?
Behind all of these statements is a mindset that wants us to avoid, at all costs, LOSS.
In decision theory this phenomena is called loss aversion. Loss aversion refers to people’s tendency to strongly prefer avoiding losses to acquiring gains. Studies suggest that losses are twice as powerful, psychologically, as gains. This leads to risk aversion since people prefer avoiding losses to making gains. Simply put, the fear of loss is much greater than the allure of gain.
In the context of profession life, this leads people to avoid perceived loss and the ensuing ‘risk’ rather than look for and anticipate gain from having these honest conversations.
From all of the statements above, the second situation is perhaps the most common. Why would anyone want to go up against their manager? The loss is easy to quantify. After all, your performance assessment is in their hands and you certainly don’t want to ruin your relationship with them. The fear of ‘relationship loss’ takes over. We never probably stop to think about prospective gains if we did go ahead and told them frankly what they needed to hear (but not necessarily wanted to!).
Now for a moment think about a space where you could have such a conversation minus any (adverse!) consequences for you. What would you say? Once we start thinking about this, we can then learn how to frame our message, how to carry on the conversation without fear, how to show the immense benefit of not only this ‘Hard Talk’ but the ensuing corrective action.
But before we can do that we have to work against our tendency to worry more about potential loss than we anticipate potential gain.