Most of our decisions are based on loss aversion. That means that we prefer not losing something to winning the same thing. For most of us (and I’m not counting people in need here), when we think about losing £500 or winning £500, losing the money raises stronger feelings than winning it.
Marketers use this concept all the time. “Stop losing £50 every month on your gas!” “Do you know that you could be saving £50 per month using X?”
Loss aversion can be a reason for not wanting to improve something in your business that needs to be done, not wanting to hire another member of staff, not wanting to make decisions that would bring you some initial loss.
Sometimes we need to lose something to win something. Not all the time, but it’s good to recognise when it’s stopping us making a good decision.
Good leaders focus on making good decisions, not on avoiding losses.