I am not a psychologist or an economist, and nothing here is advice about your money or your decisions. This is one curious reader’s reading of the work, and the studies behind it are findings from particular groups of people, not settled laws about everyone.
Here is a small thing I have noticed about myself. Find a twenty-dollar note in an old coat pocket and the lift lasts about as long as it takes to put it in my wallet. Lose the same twenty out of that pocket without noticing, realize it later, and the irritation hangs around for the rest of the afternoon.
Same amount. Wildly different aftertaste.
There is a name for this, and a number attached to it. The name is loss aversion: losses feel bigger than equal gains. It comes from Daniel Kahneman and Amos Tversky, who introduced it in a 1979 paper. As summaries of their work put it, losses tend to be treated as about twice as large as an equal gain. That is the popular shorthand: a loss feels roughly twice as bad as the same gain feels good.
The clearest way I have found to picture this is a simple graph. Picture how good or bad an outcome feels plotted against how much money you actually win or lose. Gains curve up to the right. Losses curve down to the left. The two halves are not mirror images. The loss side is steeper for losses than for gains. Step down on the loss side and you feel it more than you would feel the same step up on the gain side.
The exact multiplier is contested. A large 2024 meta-analysis by Brown and colleagues pooled hundreds of estimates and landed on a mean of about 1.955, lower than the familiar 2.25. The exact figure moves around. The lopsidedness itself keeps showing up.
The classic demonstration is a bet that should be easy to take and somehow isn’t. Someone offers you a coin flip: heads, you win £150; tails, you lose £100. The math is in your favor. Over many flips you come out ahead. And yet most people turn it down, because they weigh losses more heavily than comparable gains. The possible £100 loss looms larger than the slightly bigger £150 gain, even though a calculator would tell you to flip all day.
Prudence, or something older wearing its clothes.
I find this one quietly fascinating because the refusal feels like caution, like good sense. But the thing doing the refusing is not a careful weighing of odds. It is the response a primate has been trained over a long time to have: protect what you’ve got, and treat a possible loss as more urgent than an equal win.
Where this really cost me was holding on too long. When my coffee startup was sliding, I held hope for a good while past the point the numbers justified. Shutting it down would have meant admitting the loss out loud, making it real, and I didn’t want to. So I kept it on life support. When I finally closed it, what I felt was not relief so much as the weight of a wasted year and a half of stress I had been postponing by refusing to call it.
There is a tidy name for the investing version of this. It is the disposition effect: the tendency to sell winning investments too early and hold losing ones too long, partly to avoid locking in a loss on paper. A loss you haven’t sold still feels like it might come back. Sell it, and it’s just a loss. I saw the same pull from the outside during a stretch in venture capital. Startups that founders had poured time and money into were hard to admit weren’t working, and the project would limp on long after the signs were clear. Being an observer made it easier to see. For the founders themselves it was plainly harder, because it was their loss to realize, not mine.
Perhaps the strangest version of all this is how loss aversion makes us overvalue things simply because we already have them. The classic study is from Kahneman, Knetsch and Thaler in 1990. They handed coffee mugs to some students, then asked the owners what they would sell for and the non-owners what they would pay. Owners wanted approximately twice what buyers would offer. The mug hadn’t changed. Owning it had. They called this the endowment effect. I used to feel this strongly with stuff. Now, less so, and I think it’s purely from practice. Moving between Ireland and Southeast Asia each year has slowly worn the reflex down. When you carry your life in a bag, the cost of keeping a thing becomes obvious and the imagined value of owning it gets quieter. The decision still takes a beat. It just doesn’t ache the way it used to.
I don’t have a debiasing checklist for you, and I’d be wary of anyone who did. If anything weightier than money is sitting underneath a decision you’re stuck on, a good counsellor is worth far more than an article about coin flips.
So here is the question I’d rather leave you with than any neat lesson. What are you holding onto right now — a job, a position, a relationship, a story about yourself — mainly because letting go would mean calling it a loss out loud?
Not what should you keep. What are you keeping because selling it, closing it, walking away from it would make the loss real in a way it isn’t yet while you’re still gripping the thing?
You already know the answer. That’s the uncomfortable part. The asymmetry has been doing the choosing, and it will keep choosing for you until you name what it’s protecting.
