Jocko Underground: Loss Aversion: You'd Rather Not Lose Than Actually Gain | People Always Trying To Intimidate You?

This is the Jocko Underground podcast. Sitting here with Echo Charles. Going back to the biases, taking a look at the biases. Let's, let's face it, if you're not paying attention to biases that are in your head, you're gonna make some bad decisions. They're gonna be things that you don't recognize. That's what's scary about them. It's just like anything else. If you don't know it's happening and it's happening, that's the scariest thing. That's like in fighting, you know, they say the punch that you don't see is the one that's gonna catch you.

Yeah, right.

If you see a comment, you're gonna be all right. Biases. If you don't see them, they're gonna catch you and you're gonna do dumb stuff. One of them that hit me the other day was the loss aversion bias. And there's a website called thedecisionlab.com I think I was reading through a bunch of different websites, but this one kind of had a cool definition here.

This is something you gotta pay attention to. If you're not paying attention to this, you're making so many bad decisions. Loss aversion is a cognitive bias that describes why for individuals, the pain of losing is psychologically twice as powerful as the pleasure of gaining.

So if you think about right there, the way how much that inhibits your thought process, it goes on to say the loss felt from money or any other valuable object can feel worse than gaining. That same thing. Loss aversion refers to an individual's tendency to prefer avoiding losses to acquiring equivalent gains. Simply put, it's better not to lose $20 than it is to find $20.

And they had like a little cartoon. You find $10 on the ground, you're like, oh, cool. You're excited, but you're limited excitement. Yeah, but if you're looking for $10 and you lost it, you're bummed.

So a couple other points about this loss aversion is it gets stronger the bigger the stakes are obvious. I guess that's an obvious correlation. The more you stand to lose, the more your loss aversion is. And you start to weigh that against the gains and you think, this is why this was a cool. An interesting thing I didn't think of. This is why free trial periods work. That's why they work. Because, right, you get the, hey, join, you know this website, join this streaming service for free for three month trial period. And you're kind of, you know, so you get it. Look, one part of it, you might just forget about it, right? And all of a sudden you're getting like, billed or something. You don't really remember it. But also, you don't want to have to give it up. Yeah, you feel like you got to give it up. You feel like you're losing it and you'd rather just hang on to it.

And that's. That's a problem. So the scary thing from a decision is it causes us problems because we don't want to take risks because we don't want to lose anything. And a lot of decisions that we have to make, there is the risk of losing.

And so what do we do? We don't execute.

We don't like to lose. I've seen this ruin people, right? Or no, that's a strong statement. I can't say that that's a little strong. I've seen people fall victim to this, and it has a big negative impact on their life. And, you know, from a tactical perspective, you know, you hear me talk about default aggressive, and you hear me talk about the fact that default aggressive. The reason we. The reason you have to be default aggressive is because when something's going wrong on the battlefield and you're gonna go do something about it, there's risks that you make a bad decision and you look like an idiot or something bad happens, like you, you know, you make a call, you make a decision. There's a risk that someone, you know, you say, go assault that building. There's a risk someone gets killed assaulting that building.

So what we have a tendency to do is we don't want to take that risk. So we're not gonna do anything. And when you're not doing anything now the enemy's maneuvering on you, they're flanking you, and you're getting. You're getting worse in a worse situation.

So that's the. That's the tactical example. But it makes it real obvious that if you have an opportunity in business and you're like, well, it's going to cost me, you know, this much money to, you know, and there's a chance I lose that money. And you're like, ah, you know what? I'm just not going to do it. I'm not saying be stupid. I think people get worried about how, you know, it's the ego. It's the ego loss that people avoid as well. Like, oh, I don't want to get, you know, I don't want to lose here. I don't want to look bad, I want to look stupid. So they're like, I'm just not going to do it. So that's a problem.

A couple things about how to avoid it. And this is going back to that decision. Lab had a couple examples in there.

Was frame the decision in a way that highlights the upside. She's like, man, I could lose 1500 bucks. Yeah, but listen, Echo, you could lose 1500 bucks, but if this thing's successful, you could quadruple that money. You could have a long term stake in this bit. Whatever. Yeah, you start looking at it from that direction.

Which is. You know what's funny is when someone's trying to like hype you up or sell you something, they're always focused so hardcore and that I look out for those bastards as well. Right. Cuz like. No, no, that's what I mean. You hear those. Have you been pitched like things before, like businesses and stuff? And they're like, look, this is going to be. This is a 10x opportunity unicorn, the whole nine yards. And you're like, bro, no, not a unicorn.

Here was another one that I thought was. This is something that I think I do. This is so the first, the first way to avoid it is to like frame and focus on the upsides. The other one is to look at the worst case of what could actually happen. This is something I do, you know, hey, look, worst case, I'm gonna lose 1500 bucks. Is that that big of a deal? No. At this juncture in my life, losing 1500 bucks, I'm gonna be able to weather the storm financially, you know, it's not gonna impact me in a big way.

You know, you look at a situation, you go, hey, what's the worst thing that could happen? What's the wor. You know, when I try to chill people out that are going to speak, you know, they're going to speak in public and maybe they're nervous about it. What's the worst thing that could happen? The worst thing that happens. You know what? Hey, I shouldn't have said what I just said. I meant to say it like this. No big deal. No one cares. No one notices.

You know, just, just. It's not going to be that bad. What's the worst possible thing that could happen? And you look at an opportunity and you say, well, what is actually the worst thing that could happen? It's probably once you analyze it, you think, well, that's actually not that big of a deal. Okay, I can push forward.

And then like I said, my thing is to make things you know, to go into that default aggressive mode where I'm gonna make things happen, then listen, it's 7 out of 10. This doesn't mean you always run to sound of the guns with, you know, charging into the combat without checking out what's going on. It's not. That doesn't mean you throw money at every investment that comes along. It doesn't mean that you attack every problem without analyzing it. But your default mode should be to take action and once. It doesn't mean you have to take massive action, but take some action. Maybe a little iterative decision, little iterative movement, and it's going to help you. So check that out. That's a good way to counter this natural bias that we all have, which is loss aversion. So when you're looking at a situation, when you've got to make a decision, tell yourself, hey, I, like every other human being, likely has some loss aversion I'm trying to watch out for. And I need to counter that. Know your biases so that you can overcome them.

Yeah, you. That's interesting. You brought up the sales tactic of the free trial.

Because a lot of times sometimes that doesn't work. Right. Because then you mentioned like, oh, yeah, if it's, if you forget about the thing or if that thing isn't that big of a deal, but if it, like, if it recalibrates your standard of life in whatever way, and then now you have to basically lose a little bit of that standard, then it feels like it works a lot. But it can.

That's kind of how the salespeople kind of get you.

Yeah.

Where they'll be like, they'll. They work on. Or they try to anyway, in my experience, that they try to recalibrate your standard of life. So they feed, like a lot of times, like they'll feed you like ideas of a dream, a new life. Right. Like a different life, an improved life. And they keep that in your mind. Right. Like, I remember I used to work with this guy who used to sell cars.

Oh, yeah. They get him in that upgraded model.

Yeah. Yes. There's all these little tactics that they kind of. They teach them how to do or whatever. But one of the small little things that I was like, oh, I see that. A lot of it was like, okay, that makes sense. I wasn't surprised. But one of them was, he'd have this kind of spiel and he's in the. And it was something along the lines of, well, let me, you know, let me go ahead, run these numbers and See if we can't get you driving home in your brand new car today. So he'll say, get you driving home in your brand new car today.

Right.

So it puts this image of your head of driving home in your brand new car, Right. Which is like that. It's like living life, right. Kind of a thing with your new standard of life kind of a thing. And I remember thinking, oh, man, that was kind of powerful the way he said that right there. Because the idea of driving home in your new car is always exciting, right? Or having a. Yeah. So. And I remember thinking that. And let's say it doesn't work out, that, that little model that you recalibrated in your head gets you. You suffer this right here. So you're like, oh, my gosh. So now they can sort of jack up the price here and there because you're trying to like, they got you on the hook with this exact thing. So, yeah, they end up getting you.

It's like with whatever, like the show models of like, condos, right? Well, yeah, we can definitely. Oh, you want to buy a one bedroom condo? Yeah, that's great. Hey, you know what? We don't have a floor model ready right now to show you. Let me show you the two bedroom, you know, and then you're walking in there, you're all fired up. You're like, dang, this could be like an office. And I got all this extra room. And then. And then they might even show you the three bedroom. Then they take you in the one bedroom and it seems tiny and you in your mind, you already had that three, that two bedroom at a minimum.

Yeah.

So you're ready to step up.

There's another thing called anchoring too, which is, I guess it kind is like feeds into this a little bit too. It's like anchoring is like when they, when they show you the really good one first. Yeah. And then. So that's like the standard.

That's the positive anchoring.

Yeah.

Negative anchoring, too, which is when. When I'm offering you, you know, you want to sell me your car for ten grand and I. And you say, well, how much you want to pay for it? And I go, I don't know. I'll give you like. That is a little excerpt of what we are doing on the Jocko Underground podcast. So if you want to continue to listen, go to jockounderground.com and subscribe. And we're doing this to mitigate our reliance on external platforms. So we are not subject to their control and we are doing this so that we can support the Jocko podcast, which will remain as is free for all as long as we can keep it that way. But we are doing this so we don't have to be under the control of sponsors. And we're doing it so we can give you more control, more interaction, more direct connections, better communications with us. And to do that, we are we're building a website right now where we'll be able to utilize to strengthen this legion of troopers that are in the game with us. So thank you. It's Jocko underground.com it cost $8.18 a month. And if you can't afford to support us, we can still support you. Just email assistance@jockounderground.com and we'll get you taken care of. Until then, we will see you mobilized. Underground.