One of the things that I love most about working in the digital corner of the advertising world, is the ability to create and deploy programs with incredible speed. But why is it that we are always so quick to launch programs, yet so slow to kill the ones that don’t work out as planned?
The theory of loss-aversion may speak to this. We’re psychologically wired in a way that makes a loss feel much worse than a gain of equivalent value.
Kahneman and Tversky stumbled upon loss aversion after giving their students a simple survey, which asked whether or not they would accept a variety of different bets. The psychologists noticed that, when people were offered a gamble on the toss of a coin in which they might lose $20, they demanded an average payoff of at least $40 if they won. The pain of a loss was approximately twice as potent as the pleasure generated by a gain. Furthermore, our decisions seemed to be determined by these feelings. As Kahneman and Tversky put it, “In human decision making, losses loom larger than gains."