How to Beat Loss Aversion Bias to Become Wealthier and Get Better at Sales
A lot of people are affected by loss aversion because of the way our brain works. It is like a bug in our brain that prevents us from achieving true wealth in a lot of cases. This is quite a rampant thing I see over and over.
I read in a book, Brain Bugs, there was a study done where they had $50 and a participant. They told the participant that either the participant gets $30, or they can gamble with the possibility of losing everything, and get $50. In that situation, because it is safer to get the $30, people chose to get the $30.
The wording was changed to say the participant was going to lose $20, keeping only $30, and the participant can gamble to keep, or lose, the whole $50. Suddenly, more than 60% of the people chose to gamble even though their risk was the same in the first scenario.
Just because they were “losing” something, people were more likely to gamble.
This is very useful in business, marketing, and in sales. For example: if you have an offer or are on a sales call and tell the customer that they are going to lose the opportunity if they do not take it, people are going to be more likely to get in on the deal, buy from you, and take the more-risky path. I use to use this on some sales calls, with scarcity and other techniques, to improve results.
This does not just apply to sales and marketing but the larger picture in businesses as well. A lot of business for example, invest into a super expensive website and they feel deeply invested in it. At a certain point, because they are so invested in it, losing all the work the company did is too painful. Even if they would make more money by ditching the old system, website, or old way of doing business, they will not do it because of this principle and the way human brains work.
If you can disconnect from this and decide that you are not going to fall into this trap like so many business owners, salespeople, and marketers, you can make a lot more money. You are going to be able to increase your wealth if you use this properly in your business and do not fall into this trap. It is a very simple concept but most people and businesses fall into it over and over.
Seek maximum return
Another example is from my life. When a landlord does not want to give back a $100 deposit, some people, including my past self, would freak out and spend hours calling and explaining that they need to give it back. In that same amount of time I could have made thousands of dollars in my business instead of wasting time trying to get that loss of $100. But because my brain works the same way that your brain works, I was more inclined to try to get that $100 back.
Now, I actively stop myself from trying to do that anymore. When my time can be spent doing something more profitable than something else, I do not care if I lose something. It is not important anymore. I block that part of my brain, I refuse to comply with that part of my brain, and I go for it in maximum gain and minimum loss. I try to maximize my time on Earth, I do not try to listen to that little part of my brain that is trying to trick me into chasing that thing that I lost. Instead, I go at it in maximum return on time investment. This is what works for me and for a lot of people who are making a lot of money on the internet.