This article was published on June 21, 2010

Battling Loss Aversion


Battling Loss Aversion
Boris Veldhuijzen van Zanten
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Boris Veldhuijzen van Zanten

Founder & board member, TNW

Boris is a serial entrepreneur who founded not only TNW, but also V3 Redirect Services (sold), HubHop Wireless Internet Provider (sold), and Boris is a serial entrepreneur who founded not only TNW, but also V3 Redirect Services (sold), HubHop Wireless Internet Provider (sold), and pr.co. Boris is very active on Twitter as @Boris and Instagram: @Boris.

Loss Aversion is a term that describes the difference between how you feel when you lose or gain something. Tests have shown that one person who loses $100 will lose more happiness than someone who gains $100 will gain in happiness.

Another way to put it: if you find 10 euros and lose 10 euros you won’t feel the same (didn’t lose, didn’t gain) but you will feel less happy than before.

Entrepreneurs tend to be risk taking people who make mistakes, lose money, miss deals but always press on. By default they must be insensitive to loss aversion, right?

Although we all get into business to end up with more than we invested financially, starting and growing a business tends to take a lot of energy and time. You mind end up with more money but that time and energy is gone for good.

If we, as entrepreneurs, would be sensitive to loss aversion I don’t think we would become entrepreneurs. I wonder if there is a way to test a bunch of entrepreneurs and see if I’m right. Any suggestions?