Loss aversion
Feeling losses more strongly than equivalent gains.
What Is Loss aversion?
Loss aversion is a thinking trap where feeling losses more strongly than equivalent gains.
How It Tricks You
It can make one option feel obvious before the tradeoffs have been checked.
Real-World Example
A person avoids a fair risk because the possible loss feels larger than the possible gain.
Examples in Daily Life
Refusing a fair trade because giving up what you own feels worse than receiving something equally valuable.
Rejecting a promising change because its visible transition costs feel larger than its less vivid future benefits.
Holding a falling investment mainly because selling would turn an uncomfortable paper loss into a recognized one.
Seen Online As
- I would rather avoid losing this than risk gaining something better.
- Giving it up feels worse than getting it ever felt good.
- The possible loss is louder than the possible upside.
Loss aversion vs. Risk aversion
Risk aversion generally prefers a more certain outcome. Loss aversion specifically gives losses greater weight than comparable gains, often depending on the reference point.
How To Reduce Loss aversion
- Describe the choice without labeling one option as the current possession.
- Compare equal-sized gains and losses on the same scale.
- Ask which option you would choose if starting without the existing position.
What To Ask Instead
Am I avoiding a loss or choosing the best option?
Related Thinking Traps
Common Situations
Related Reading
Quick FAQ
What is Loss aversion?
Feeling losses more strongly than equivalent gains.
What is an example of Loss aversion?
A person avoids a fair risk because the possible loss feels larger than the possible gain.
How do I spot Loss aversion?
Am I avoiding a loss or choosing the best option?
How can I reduce Loss aversion?
Describe the choice without labeling one option as the current possession. Compare equal-sized gains and losses on the same scale. Ask which option you would choose if starting without the existing position.