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Losses Hurt More Than Gains Help: What Prospect Theory Tells Us +Video

Tuesday, October 25, 2016 16:47
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(Before It's News)

 

By Adam Taggart  /  PeakProsperity.com

As biological organisms, humans are motivated by pain and pleasure.

But interestingly, while we tend to think of these as equal motivators, they aren’t. We humans are wired to be more risk averse than pleasure-seeking. As the works of Nobel recipient Daniel Kahneman explained:

Humans may be hardwired to be loss averse due to asymmetric evolutionary pressure on gains and losses. For an organism operating close to the edge, the loss of a day’s food could amount to death, while the gain of an extra days food could lead to increased comfort but (unless it could be costlessly stored) would not lead to a corresponding increase in life expectancy.

And through the related findings of Prospect Theory, we actually know how much more we hate losses than we like gains. About twice as much:

The short video below uses these insights to deliver a simple message: In today’s over-inflated, over-leveraged, over-manipulated markets, why on earth would a rational person not be prioritizing protecting their financial wealth?

Given the outsized risks, as well as our natural programming to feel losses more severely, pursuing incremental gains at this point is downright dangerous if one doesn’t already have a contingency plan in place for a market downturn.

While most PeakProsperity.com readers already appreciate this message, there are many people out there who are still simply following the herd. We created this video for each of you to share with anyone you know who might benefit from a brief but direct “wake up call”. Please take a moment to share it, and let us know any feedback you receive.

https://www.peakprosperity.com/blog/102749/video-losses-hurt-more-gains-help

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