Golden Lesson 8: Loss and Gain – Why Abba got it wrong

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Benny wanted to be faithful to the reality of behavioural economics, but Bjorn, always the snazzy one, insisted on the lyric actually rhyming.

“OK” said, Benny.  ”You win, and it’s me that’s standing small! But Bjorn – we’re definitely playing it in F sharp major!”.  And the rest is history and that lyric was agreed: ”The winner takes it all.  The loser’s standing small.”

Benny’s more accurate lyric, written on that crumpled piece of paper in the bin, read:

The winner takes it all, the loser feels at least twice as bad as the winner.

Because that’s just how it is.  We as humans assign much more weight (about twice) to losing, say £100, than we would to gaining £100.  Behavioural economics calls it loss aversion.

And out of all my lessons from Car Free Family-dom it is perhaps the most scary, important and useful- everyone focuses on the LOSS of the car, and not the gains of not having a car – many though they are (direct and indirect – see Golden Lesson 7).  And, as Benny knows, when the focus is loss it will be very difficult to give up.  Benny was a car driver.

I and others always speak about “giving up the car”.  This language will always stress the loss = double the gain.  It makes change difficult to contemplate.

To help people make (an informed) transition there’s a need to highlight the gain and present the loss and gain in different language and in different ways.  It’s called loss framing.  Its the key to helping us make a change – to counter the cognitive bias Benny was so aware of. Of course this links directly to Golden lesson 1.

It’s exciting the think of how to do this (building on some of the other Lessons) – something we’re working on in my day job.

Poker players need to manage the cognitive bias of loss aversion to stay healthy!  A nice insight into loss aversion:

 

** For a great review of loss framing from two academics who have great insight into this topic check the Behavioural Economics link – from an EC Project I co-ordinated 2009-2012.  Have a look at D1.1 in the Deliverables.  Written by two good friends and colleagues Prof Erel Avineri at Afeka College, Tel Aviv and Prof Owen Waygood at University of Laval in Quebec.

 

 

 

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