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This Week’s Summary:
Making changes today can be difficult.
We fear a loss today more than we look forward to a future gain.
We put more emphasis on the present than the future.
Loss aversion and present bias combine to make change tough.
Motivation theory offers a way for change to happen.
Change can be tough! Anyone who has tried to lose weight or stop smoking can testify to this. On the surface, it makes little rational sense. After all, we’ll live longer. Right?
I was one of the lucky ones who, after seeing a pair of long-time smoker lungs in a high school class, decided that I didn’t want my lungs to look like that, so I never started smoking. As a lifelong non-smoker I have coached, supported, and motivated dozens of smokers to become ex-smokers, with moderate success. Not because these folks were not strong people, but because the routine of smoking got the better of them. Plus, from honest conversations, I have learned that many smokers really enjoy smoking and would miss it if they stopped.
Many who were unsuccessful at quitting said that it was the pleasurable routines around smoking that became their undoing. They would be OK not smoking until they sat down with friends to have a few drinks, which they had done many time before while having a cigarette. That was often when they felt the overpowering urge to “light one up.” Or it might be the morning coffee. They knew that they shouldn’t and yet they did. I struggle with this myself when deciding to limit my diet to lose a few pounds, which my doctor has confirmed would help my blood test numbers, and yet I am still waffling! It is perplexing, for sure.
Image created by Ed Paulson using Copilot in Windows.
If we can’t get a handle on something completely under our control like stopping smoking or controlling our harmful eating, how can we expect to shift our actions with respect to creating a dystopian future? Or shift our company leadership from focusing on short-term profit to longer-term growth?
To me there are a few hidden brain biases at play that make change difficult. The first is loss aversion which is that our fear of losing something is greater than our excitement about gaining something. The second is present bias which gets us to place far more importance on the present day than something that may happen in the future.
Before we dig more deeply into the negative impact of these two biases, let me say that there is a cure. Motivation theory offers a framework for getting people to want to change from where they are to a different and better place. People who are motivated to change have overcome the stagnating effect of loss aversion and present bias. We will get to that later on, but first let’s get to know more about the invisible ways that our brains work against us when making changes.
Loss aversion is a sneaky mental characteristic that determines much of our daily decision making. In a nutshell, loss aversion describes an invisible brain bias whereby we are more fearful about the prospect of losing something than we are excited about the prospect of gaining something. As Kahneman states it, “the fear of losing $100 is more intense than the hope of gaining $150.”1 In essence, we tend to place more emphasis on what we may lose as opposed to what we may gain.
Loss aversion isn’t limited to money. Psychologists claim that it can extend to ownership of an ideology such as a sports team, political viewpoint, or something else we hold as important.2
Perhaps this is what we are seeing play out on the political scene where compromise is perceived more as losing something instead of as gaining a solution to a common problem?
Present bias is another hidden “gem” in our thinking and decision-making arsenal. It describes our natural tendency to value what is presently in front of us more than what may come in the future.3 For example, a person may choose to not deduct money from their paycheck today for deposit into a retirement account even though that account may (likely will) become larger in the future. They perceive the 401(k) deduction (loss) as being more valuable than the prospect of a larger retirement account balance in the future.
It is worth noting that present bias and loss aversion sound similar, but they are not. Present bias happens on a short versus long timeframe where loss aversion deals with the magnitude of something lost versus the magnitude of something gained.
The scary part is how these two reinforce each other to the detriment of making sacrifices today in search of a future benefit. For example, to lose weight I might (likely will) have to forego eating a hamburger with fries today, which I would perceive as a loss. The only reason I would not eat a hamburger for lunch is because I will benefit in the future. Hmmm … Loss aversion says that losing the hamburger today is more powerful than my potential future perceived benefit of a healthier state. Now, add in the effect of present bias, where I am more persuaded by what is happening today than what might happen in the future, and it starts to make sense why I might eat the hamburger even though my doctor told them that I should lose weight.
Loss aversion and present bias based rationale: Why experience a definite loss today in anticipation of an indefinite future benefit which may or may not happen?
Thinking about these two together helps me understand why diabetics keep eating sweets, smokers with emphysema continue smoking, and many young people refuse to save for their futures by investing in retirement plans. Why would I give up part of my paycheck today for something that may or may not benefit me 30+ years in the future?
When I was younger this was my attitude, and I didn’t start seriously saving for the future until I was well into my forties. I also found that setting up an automatic deduction made the 401(k) contribution (a paycheck deduction) invisible, so I did not feel like I was losing something every two weeks.
Our prospects for changing things today to create a better future look pretty dim in light of the reinforcing effects of loss aversion and present bias and yet positive change is all around us. Look at the recycling and conservation programs happening all around the world.
Folks are acting today to create a better future. Why? How does this relate to the way that our brains make choices? Here is where motivation theory comes into the picture. There are ways to think about today’s choices such that they motivate us to make sacrifices today with the anticipation that they will add up to a better future. Motivating for change is the topic for the next edition of The BizDoctor’s Gazebo.
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Daniel Kahneman writes about loss aversion in his book Thinking Fast and Slow.
https://www.psychologytoday.com/us/blog/presence-of-mind/202309/how-to-stop-the-present-bias-from-ruining-your-future
Interesting read. Like you, I never smoked, but I’m curious about what motivation you suggested for the friends who did -- and wanted to change. I await details in you next column.