BRIAN & RUTH
Bias #9 · Loss aversion
Why can't we sell a losing stock?
Losing money hurts more than winning the same amount feels good.
What happened to Brian
“Sell that stock? No way! It's down forty percent, but it will come back. Babe, trust me!”
The study
Kahneman and Tversky, 1979: a loss feels about twice as strong as an equal gain.
THE MOVEAsk: would I buy it today?
No. The money is gone either way. Ask: would I buy it today?
And with AI?
Robo-advisers feel no loss pain, yet we override them. Are we ready for AI money? Are we prepared for a full AI life? Tell us in the comments on YouTube.
Source: Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263-291. Read the study