Top Ten Behavioral Biases, Illustrated #2: A Bird in the Hand (Loss Aversion)

“Victory is fleeting,” the great tennis champion Billie Jean King said. “Losing is forever.” Candace Parker added some gloss.

“I don’t remember the date of our title in high school. I don’t remember the date of when we won the NCAA tournament. But I can tell you when I got hurt. I can tell you when we lost. I can tell you the score. I can tell you, like, the play. I can see every play of what happened at the end of the Phoenix game when we lost on the last-second shot. Like, I can see every play that we made leading up to that. I don’t know. It just sticks out more.”

Fear and horror are what anthropologists call biocultural. We all carry the same sorts of fears. Note how Ray Bradbury described one of his characters: her heart “was a bellows forever blowing upon a little coal of fear … an ingrown light which her inner eyes stared upon with unwanting fascination.” As M.M. Owen noted, “we are creatures formed in no small part by the things to which we are averse.”

Fear rarely considers the long-term; it is usually fixated on the here and now and how it could all go badly wrong in a hurry. It is steeped in worry, especially of the unknown. Even good times are a calm before a terrible storm. No matter how good things may be, all isn’t as it seems. It’s easy to smell disaster and feel it lurking.

As Jeremy Siegel explains, “Fear has a greater grasp on human action than does the impressive weight of historical evidence.”

“Doctor, my eyes have seen the years / And the slow parade of fears.”

We all face fear. “Forty-five on the back of the jersey upon your soul.”

Every civilization believes itself on the brink of cataclysmic change. Every election is of the “Flight 93” variety. The apocalypse is always nigh. As Robert Louis Stevenson (is said to have) explained, “Sooner or later, everyone sits down to a banquet of consequences.”

Those overarching fears are at the root of our loss aversion – our preference for avoiding losing as opposed to equivalent gains. Duke Hall of Fame basketball coach Mike Krzyzewski adds, “Winners hate losing more than [they love] winning.”

PGA Tour golfers expend more effort on par putts than on birdie putts and, controlling for distance, have greater success with par putts. Being human, professional golfers are loss averse. Four-time major champion Brooks Koepka recognized: “Sometimes it’s just about how few bogeys and doubles you make.”

Per Kahneman, “the main contribution that Amos Tversky and I made during the study of decision making is a sort of trivial concept, which is that losses loom larger than gains. …As a very rough guideline, if you think two to one, you will be fairly close to the mark in many contexts” (some have questioned this finding, especially recently, but there are good reasons for thinking that questioning is in error, reasons that every financial advisor has seen among his or her clients).

As Tom Petty poignantly sang, “Yeah, and it’s over before you know it / It all goes by so fast / Yeah, the bad nights last forever / And the good nights don’t ever seem to last.”

Andre Agassi explained it well: “A win doesn’t feel as good as a loss feels bad, and the good feeling doesn’t last as long as the bad. Not even close.” David Letterman did too: “Maybe life is the hard way, I don’t know. When the show was great, it was never as enjoyable as the misery of the show being bad.”

Because we innately prefer safe to sorry, we often choose secure over sensational, leaving us both sorry and safe. That’s loss aversion.