Have you ever felt like you cared more about “not failing” than you cared about winning?
That you cared more about “appearing to be badass” than you cared about doing the things required to become a badass?
Then you’ve experienced loss aversion.
In fact, those are some of the most common symptoms of loss aversion. Loss aversion is something that all of us experience from time to time: it’s a cognitive bias that’s wired into us.
But it can be dealt with. It can be fought. All the world’s top performers in fields such as poker, finance, sports, and business have found ways to overcome their loss aversion.
Guess what happens if you don’t do anything about it–if you completely neglect the fact that you have a bias towards being more afraid to lose the things you already have, than going after new things?
An extreme example of this would be hoarders.
You know, the people who cannot bear the thought of losing even a single one of their useless items. It seems strange to “normal people”. But to the hoarders, who suffer from a heightened form of loss aversion, this is no joke. Those people will literally cry and despair for fear of throwing away that old cage they used to keep their pet in, ten years ago.
You see, when the hoarder thinks about losing an item, even though it’s useless and ugly, his brain will distort reality for him and make it seem like it’s the most valuable item on earth. His brain will come up with a thousand rationalizations as to why he has to keep this specific item!
Pretty pathetic, huh?
If you saw it happen in real life you’d probably laugh at it.
–But you shouldn’t, because you’re under the very same delusion yourself. Just to a milder degree. You have a bit more control over your brain.
I remember reading in Seth Godin’s book, The Dip, that the best time to look for a new job is when you don’t need it, and the best time to switch jobs is just before you get too comfortable. Before you get too attached to your job and your colleagues. That way you avoid getting your reality distorted by loss aversion.
Let me tell you about a guy I know.
I know this guy because we have mutual friends. He is a relatively smart guy in his mid-twenties. He graduated with top grades from a decent college. He then felt entitled to getting a great first job. But to his surprise he never got it.
Then he spent nearly two years searching for more jobs like that. He still didn’t get it. So he started coming up with a ton of excuses about the job market and how unfair Sweden is.
After a while I told him to shut up and deal with it. I told him that perhaps it’s time he changed his strategy and stop expecting that the big companies he was applying to would do the heavy lifting for him. Big companies are notorious for treating applicants like crap–because they get thousands of them.
I also told him that his approach isn’t working: His good grades obviously weren’t enough to impress. I then told him that grades are for losers. Relationships, favors, and personal initiative are for winners. Losers wait to be picked. Winners assume they are picked, step up, and provide value in any way they can. And if they don’t know how, they humbly offer to do free work, and make sure that it’s good work.
The guy was quick to object,
But I don’t have any connections… I don’t know them?
–That’s exactly why you need to take the initiative. Pick up the phone. Ask to speak with the person who’s in charge. Ask that person what they’re working on right now. Then you use the magic words: “How can I help?”
I then specifically instructed him on how he could do this.
…By leveraging his main hobby–a hobby that happens to be very useful for just about any business. It also happens to be the case that this guy is a senior member with an official position in a club where he practices his hobby. He could therefore align his hobby with his job search and kill two birds with one stone.
All he had to do was to make a list of 10-20 interesting companies, call them up and offer a free consultation related to his useful hobby. He’d probably get at least 3-5 positive answers. Then he’d go there and teach those guys how to become better at this activity. This would normally cost them money, but because he’s such a nice guy he’d do it for free.
By doing this he’d get to know employees from this company. He’d form a relationship with them while at the same time providing a ton of value and putting his best foot forward. This would make the job application process a ton easier, because now they will like him.
Pretty smart strategy, right?
Beats competing from a stack of resumes, doesn’t it?
But he never even picked up the phone.
Instead he went back to school–for no other reason than fear. He got too comfortable being without a job and paradoxically didn’t want to lose what he already had–which in this case was…Nothing.
The fear of failure outweighed the will to win.
Loss aversion got the better of him.
Why You Must Overcome Loss Aversion
Because you need to overcome it if you want to become someone who thinks accurately. Someone who makes intelligent decisions. This is mandatory.
You will also need to overcome loss aversion in order to successfully promote yourself and your work.
Because you must believe in your own sense of value, and that whatever you do (product/content/idea/talent) is good enough to put out to the public and offer to other people.
If you don’t believe in whatever you’re doing, your ego’s defensive mechanism will overpower your desire for greatness. Your will to win will be overshadowed by your fear of failure. If that happens, you will not dare to put yourself out there and get the feedback required to improve over the long-term and win.
You must not let this happen to you, ever.
For if this is the case, you will not dare to make serious moves, and you will essentially be “playing the game not to lose”. You will care more about staying safe and maintaining your current appearance.
–That means you placed your sense of self-esteem in the hands of an external force, outside of your control.
I’d call that a losing strategy.
Would you agree?
How Overcome Loss Aversion and Develop the Will to Win
Here’s what you’re going to do — you’re going to create a list (four actually):
1) Why do you want to do this?
Figure out as many reasons as possible before moving on. Find your WHY.
2) What will happen if you don’t do it?
List as many things as you can here too. Further strengthen your reasons for taking action.
3) What are the risks? Why are you afraid? Why are you hesitating?
This is where it gets interesting. You might struggle with this, because your ego doesn’t want to face its fear. It prefers being afraid to seeing things logically — because then it might be forced to change.
Give step 3) some serious thought — and be honest. Describe each reason/excuse as well as you can.
4) Logically obliterate each one of those reasons/excuses
Take all the things you came up with in point 3), pick them apart, and analyze it as far as you can.
After having done this a while you will realize something cool: That your fear is irrational. That is lacks a solid foundation. That it exists as a result of inaccurate thinking which in turn made you jump to the wrong conclusions.
If you’ve read Marcus Aurelius’s Meditations, this is what he’s doing for most of that book, dissolving limiting beliefs and the like while carrying on a conversation with himself.
5) Rinse, wash, repeat
Do it some more, and if you come up with the same answers — be sure to remind yourself of them often.
Why do this?
Because negative emotions are stronger than positive emotions by default.
According to studies by Daniel Kahneman loss aversion is about 1.5-2.5 times stronger than your will to win, at least when it comes to money. The only way to beat that is by “practicing” the positive thought more than you practice the corresponding negative one. Eventually the neural pathway associated with the positive thought gets stronger than the negative one, and it becomes you baseline belief.
It sounds easy — and it is. But it requires a lot of concentration and courage.
If you feel that you’re lacking in either of these qualities, let me remind you that…
You must overcome loss aversion if you want the following things:
- To feel less scared, and stop giving a shit about losing things that don’t really matter
- To dare to promote yourself, your brand, your product, your business, or your ideas
- To take control of the development of your self-esteem and to increase your ability to think accurately
Most people unconsciously flinch and give into fear. Even when their future depends on it. Like that guy I told you about who’s now wasting his time in university reading some bullshit course he doesn’t need. He’s doing it out of fear.
Do not let this be you.
When you are faced with the situation of being forced to make an important decision, but find yourself feeling irrationally afraid, remind yourself:
What is the upside?
What is the downside?
What’s the worst thing that can happen if you try out something new? Probably nothing that you can’t handle.
What’s the best thing that can happen if you try out something new? Probably something you want very badly.
When in doubt, think about that.
Put it on your whiteboard or computer screen.
And assume control.
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