Growthink Blog

Entrepreneurship and Overstating Fear of Loss


Great article in the Washington Post today by Shankar Vedantam entitled "The Pain is Never as Bad as We Fear." Basic premise is that studies have shown that human beings greatly over-estimate the pain they think they will feel regarding a prospective future loss. For example, when it comes to money, people are much more able to emotionally "connect" with the pain of a hypothetical loss of a sum of money than they are to to connect with the pleasure/joy associated with a hypothetical gain. This "pessimism prejudice" makes people be far more conservative and risk-averse than is warranted by the evidence from psychological studies. Because we unnecessarily over-fear prospective losses, our decisions, especially our economic decisions, are overly conservative.

For entrepreneurs, the lesson is to TAKE MORE RISK. Take calculated, well-thought out risks, but beware the trap of over-conservatism in your strategic planning and thinking. If things go badly (as unfortunaely they often do), the consequences, emotional and otherwise, of the loss (or losses) are far less than we think they will be. In other words, if things don't work out with a new business initiative, you will both be ok and often learn very valuable life and business lessons that will serve you well in your next business undertaking or initiative. So go for it!

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