⚖️Loss aversion

People weigh outcomes as gains and losses from a reference point, not as final amounts, and a loss counts for more than a gain of the same size. Kahneman and Tversky put it at the centre of 🔬 Prospect Theory - An Analysis of Decision under Risk (1979). Later estimates say roughly twice as much, though the number moves with the stakes and the person.

The reference point is the quiet part. Move it and the same outcome changes sign.

Example, from the pricing workshop on 11 April:

• A price rise is a loss measured from the current price. A new, larger package at a new price has nothing to be measured against.
• Taking a feature out of a plan hurts more than its price suggests. Better to stop adding it to new plans.

Often confused with: risk aversion. Someone facing a certain loss will often take a gamble to avoid it.

Notes: 📖 Kahneman and Tversky on losses. Two days after the workshop it explained me: 💎 I fear a loss more than I want the same gain. Half-heard first on 🎙️ Freakonomics Radio and 🎙️ Hidden Brain, which is how I knew the phrase years before I knew the paper.