How to Avoid Losing (Wise Decision Maker Guide 20)

Greetings Decision maker,

You meet a kind stranger who offers you your choice of a great deal, something for nothing. She gives you $45. Then, she asks if you want to keep that money, or give it to her in exchange for a coin flip, where if it’s heads, she’ll give you $100, and if tails, you get nothing.

Which do you choose? Decide before reading further.

When I present this scenario in my speeches to business audiences, about 80 percent say they’ll take the $45 from the kind stranger. Well, let’s run the numbers. The chance of getting heads is 50 percent, so in half of all cases you’ll win $100, and in the rest you won’t win anything. That’s equivalent to $50 on average, versus $45.

Imagine you flipped a coin 10 times, 100 times, 1,000 times, 10,000 times, and then 100,000 times. At 100,000, on average you would get $5 million if you chose the coin flip for $100 each time, versus $4.5 million if you chose $45 each time. The difference: a cool $500,000. Your professional life – anyone’s professional life – is made of 100,000 coin flips. The stranger’s gift represents the series of opportunities we face in our lives, and we can either win $5 million or $4.5 million depending on the choices we make for each one.

But wait, you might be thinking: I presented this as a one-time deal, not a repeating opportunity. Maybe if I told you it was a repeating scenario, you’d have thought about it differently.

Here’s the problem. Research shows that our gut treats each individual scenario we see as a one-off. In reality, we face a multitude of such choices daily. Our intuition is to treat each one as a separate situation. Yet, these choices form part of a broader repeating pattern where our intuition steers us toward losing money, a cognitive bias called loss aversion.

So how do you address this problem? The answer is in this blog.

Audio interview on how independent professionals can make the best decisions for the “Unleashed” podcast

Video interview on how to deal effectively with COVID-19 on the “Break it Down” show

Audio interview on overcoming unconscious cognitive bias bias on the “Psychology in Seattle” podcast

Audio interview on addressing unconscious cognitive bias on the “Something You Should Know” podcast

Audio interview on making the best decisions in customer experience on the “Voices of CX” podcast

What’s Up With Me

I’ve been so concerned about the terrible decision making I’ve been seeing around the COVID-19 pandemic. With that in mind, I’m proud of finishing my new book, Resilience: Adapt and Plan for the New Abnormal of the COVID-19 Coronavirus Pandemic (Changemakers Book, 2020), available in digital or paperback formats.

I had to write it super-fast, as you can imagine, and am pretty exhausted. Still, writing it is only half the battle. The next step is helping people learn about it, to help them make the right decisions so that they can survive and thrive in this pandemic. I hope you will read the book yourself and recommend it to others who you want to survive and thrive in these troubled times.

Let's be safe! 👍
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