Jocko Podcast - Jocko Underground: Loss Aversion: You'd Rather Not Lose Than Actually Gain | People Always Trying To Intimidate You?

Episode Date: October 3, 2022

Loss Aversion: You'd Rather Not Lose Than Actually Gain.Jocko's Training program / schedule.Active, but fat? A solution and tips.Dealing with people always trying to intimidate you.Good influence Uncle VS. Bad influence Father.More tips on injuries and lowering standards with physical activity.Support this podcast at — https://redcircle.com/jocko-podcast/exclusive-content

This is the Jocko underground podcast sitting here with Echo Charles going back to the biases Taking a look at the biases. Let's face it if you're not paying attention to biases That are in your head you're gonna make some bad Decisions they're gonna be things that you don't recognize that's what's scary about them It's just like anything else if you don't know it's happening and it's happening that's the scariest thing That's like in fighting you know they say the punch that you don't see is the one that's gonna catch you Yeah, right if you see a comment you're gonna be all right Right.

Bias is if you don't see them, they're going to catch you and you're going to do dumb stuff. One of them that hit me the other day was the loss aversion bias. And there's a website called the decision lab.com. I think I was reading through a bunch of different websites, but this one kind of had a cool definition here. This is something you got to pay attention to. If you're not paying attention to this, you're making so many bad decisions. Loss aversion is a cognitive bias that describes why. for individuals the pain of losing is psychologically twice as powerful as the pleasure of gaining.

So if you think about right there the way, how much that inhibits your thought process, it goes on to say the loss felt from money or any other valuable object can feel worse than gaining that same thing. Loss aversion refers to an individual's tendency to prefer a voice. avoiding losses to acquiring equivalent gains. Simply put, it's better not to lose $20 than it is to find $20. And they had like a little cartoon. You find $10 on the ground.

You're like, oh, cool. You're excited, but you're limited excitement. Yeah. But if you're looking for $10 and you lost it, you're bummed. It's true. So a couple other points about this. Loss aversion is it gets stronger, the big. the stakes are obvious I guess that's an obvious correlation the more you stand to lose

the more your loss aversion is and you start to weigh that against the gains and you think this is why this was a cool an interesting thing I didn't think of this is why free trial periods work that's why they work because right you get the hey join you know this website join this streaming service for free for three for three three month trial period. And you're kind of, you know, so you get it. Look, one part of is you might just forget about it, right? And all of a sudden you're getting like build or something.

You don't really remember it. But also, you don't want to have to give it up. Yeah. You feel like you got to give it up. You feel like you're losing it. And you'd rather just hang on to it. And that's a problem. So the scary thing from a decision is it causes us problems because we don't want to take risks

because we don't want to lose anything. And a lot of decisions that we have to make, there is the risk of losing. And so what do we do? We don't execute. We don't like to lose. I've seen this ruin people, right? Now, that's a strong statement.

I can't say that. That's a little strong. I've seen people fall victim to this and it has a big negative impact on their life. And, you know, from a tactical perspective, you know, you hear me talk about default aggressive. And you hear me talk about the fact that default aggressive, the reason you have to be default aggressive is because when something's going

wrong on the battlefield and you're going to go do something about it, there's risks that you make a bad decision and you look like an idiot or something bad happens. Like, you know, you make a call, you make a decision. There's a risk that someone, you know, you say go assault that building. There's a risk someone gets killed assaulting that building. So what we have a tendency to do is we don't want to take that. at risk so we're not going to do anything and when you're not doing anything now the enemy's maneuvering on you they're flanking you and you're getting you're getting worse in a

worse situation so that's the that's the tactical example but it makes it real obvious that if you have an opportunity in business and you're like well it's going to cost me that you know this much money to you know and there's a chance I lose that money and you're like you know what I'm just not going to do it I'm not saying be stupid I think think people get worried about how, you know, it's the ego. It's the ego loss that people avoid as well. Like, oh, I don't want to get, you know, I don't want to lose here. I don't want to look bad.

I don't want to look stupid. So they're like, I'm just not going to do it. So that's a problem. A couple things about how to avoid it. And this is going back to that decision lab, had a couple examples in there, was frame the decision in a way that highlights the upside. So you're like, man, I could lose $1,500. Yeah, but listen, Echo, you could lose $1,500.

But if this thing's successful, you could quadruple that money, you could have a long-term stake in this bit, whatever. Yeah. You start looking at it from that direction. Which is, you know, what's funny is when someone's trying to, like, hype you up or sell you something, they're always focused so hardcore in that I look out for those bastards as well, right? Because I like, no, no, that's right.

You hear those, have you been pitched, like, things before, like businesses and stuff? Sure. Yeah, they're like, look, this is gonna be, this is a 10x opportunity unicorn, the whole nine yards. And you're like, bro. No, no, you're a unicorn. Here was another one that I thought was, this is something that I think I do.

This is, so the first, the first way to avoid it is to like frame and focus on the upsides. The other one is to look at the worst case of what could actually happen. This is something I do. You know, hey look, worst case, I'm gonna lose 1500 bucks. Is that that big of a deal?

No, at this juncture of my life, losing $1,500, I'm going to be able to weather the storm financially. You know, it's not going to impact me in a big way. I, you know, you look at a situation, you go, hey, what's the worst thing that could happen? What's the worst? You know, when I try to chill people out that are going to speak, you know, they're going to speak in public and maybe they're nervous about it? What's the worst thing that could happen? The worst thing that happens, you know what? Hey, I shouldn't have said what I just said.

I meant to say it like this. No big deal. No one cares. no one notices, you know, just, just it's not going to be that bad. What's the worst possible thing that could happen? And you look at an opportunity and you say, well, what is actually the worst thing that could happen? It's probably once you analyze it, you think, well, that's actually not that big of a deal. Okay.

I can push forward. And then like I said, my thing is to make things, you know, to, you know, to, to go into that default aggressive mode where I'm gonna make things happen. And listen, it's seven out of ten. This doesn't mean you always run to the sound of the guns with, you know, charging into the combat without checking out what's going on.

It's not that. It doesn't mean you throw money at every investment that comes along. It doesn't mean that you attack every problem without analyzing it. But your default mode should be to take action. And once, it doesn't mean you have to take massive action, but take some action,

maybe a little iterative decision. A little iterative movement and it's going to help you. So check that out. That's a good way to counter this natural bias that we all have, which is loss aversion. So when you're looking at a situation, when you've got to make a decision, tell yourself, hey, I, like every other human being, likely has some loss aversion that I'm trying to watch out for, and I need to counter that. Know your biases so that you can overcome them.

Yeah, that's interesting. You brought up the sales tactic of the free. trial because a lot of times sometimes that doesn't work right because in you mentioned like oh yeah if it's if you forget about the thing or if that thing isn't that big of a deal but if it like if it recalibrates your standard of life in whatever way and then now you have to basically lose a little bit of that standard then it feels like it works a lot um but it can that's kind of how the sales people kind of get you yeah where they'll be like they'll

they work on or they try to anyway in my experience that they try to recalibrate your standard of life so they feed like a lot of times like they'll feed you uh like ideas of a dream a new life right like a different life and improved life and they keep that in your mind right like a i remember i used to work with this guy who used to sell cars oh yeah they get him in that upgraded model yeah yes there's all these little tactics that they kind of they teach him how to do or whatever but one of the small little things that i was like oh i see that A lot of it was like, okay, that makes sense. I wasn't surprised. But one of them was he'd have this kind of spiel. And it was something along the lines of, well, let me, you know, let me go ahead, run these numbers and see if we can't get you driving home in your brand new car today. So he'll say, get you driving home in your brand new car today, right?

So it puts this image of your head of driving home in your brand new car, right? Which is like, it's like living life, right? Kind of a thing with your new standard of life, kind of a thing. And I remember thinking, oh man, that was kind of powerful the way he said that right there because the idea of driving home in your new car is always exciting, right? Or having that. Yeah. So, and I remember thinking that and let's say it doesn't work out. That little model that you recalibrated in your head gets, you suffer this right here.

100%. So you're like, oh my gosh. That's the plan. So now they can sort of jack up the price here and there because you're trying to like, they got you on the hook with this exact thing. So yeah, they end up getting you. like with whatever like the show models of like condos right well yeah we can definitely uh oh you want to buy a one bedroom condo yeah that's great hey you know what we don't have a floor model ready right now to show you let me show you the two bedroom you know and then you're walking in there

you're all fired up and like dang this could be like an office and i got all this extra room and then and then they might even show you the three bedroom then they take you in the one bedroom and it seems tiny and you in your mind you already had that three that two bedroom at a minimum So you're ready to step up. There's another thing called anchoring, too, which is, I guess it kind of like feeds into this a little bit too. It's like anchoring is like when they show you the really good one first. Yeah. And then so that's like the standard.

That's the positive anchoring. Yeah. There's negative anchoring too, which is when I'm offering you, you know, you want to sell me your car for 10 grand. And I say, well, how much you wanted to pay for it? And I go, I don't know, I'll give you like that. That is a little excerpt of what we are doing. on the Jocko Underground podcast. So if you want to continue to listen, go to jocco underground.com and subscribe.

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