You have this old T-shirt in your closet. It’s been there for years now. The color is faded. The cloth is warned out.

Yet, you wouldn’t let that go. You could toss it out in the dustbin. But you don’t.

What has made you stick with it?

In the book The Catalyst: How to Change Anyone’s Mind, the author Jonah Berger shares interesting research.

Tell me, who would recover faster?

Someone with a shattered knee or the one with a slight knee injury?

You’d say it’s obvious. The one with a slight injury.

But the study found something different. The person with severe injury was likely to recover more quickly than the one with mild injury.

Why?

Because someone with a serious injury is more likely to take it seriously — check with doctors, get the right treatment, stay cautious, and take care of themselves. If they don’t take enough care of it the injury would increase. They might lose their ability to walk properly.

Someone with a mild injury is casual about it. There isn’t much to lose.

This points us towards a psychological bias.

Loss Aversion

We feel the pain more than we feel the pleasure. Loss motivates us more than profits.

This is why you feet the pain of losing $20 more than the pleasure about winning $80.

In the book The Catalyst, Jonah shares a story about Gloria Barret, a financial adviser. She helped people manage wealth. Her younger clients invested aggressively.

But some were very cautious.

Keith was one of her clients who was just too conservative. He was in his mid-forties. Half of his money was in savings and he just didn’t agree on investing.

Gloria showed him reports and analyses. As if she was guaranteeing higher returns.

Yet, Keith didn’t agree.

Keith was satisfied with the minimum he was making through the bank interest. He wasn’t convinced to invest. Nothing was working with him. And, this got Gloria frustrated.

She decided to take a different approach.

Instead of highlighting the upsides, she started talking about how he was losing money by keeping it all in the savings.

Gloria started to share how much he could have made if he had invested.

At first, it was a few dollars. That didn’t move the needle.

In a few days, it was in the hundreds, and then thousands.

“You’re losing this money,” She said.

“How am I losing it when my savings account balance is going up?” asked Kieth.

“Sure” She replied, “but that doesn’t account for the inflation. And compared to what your performance would be, even in a conservative investment, you’re losing a good bit.”

Kieth grumbled about it.

When the losses reached a few thousand dollars, he broke down. He switched most of his savings into investments. And, he made good returns.

That’s how loss aversion works.

So, if you want to convince someone to do something you want, show them what they’d loose if they don’t do it.

On a side note, if you’ve been demotivated to do something good, write down a list of all the things that would go wrong if you don’t do it. It will push you to stay motivated.

- Noman Shaikh

P. S.

This newsletter is about actionable and easy-to-digest information from books. It is not specific to a genre of books. Any book that’s interesting will be broken down and shared here. If you have a suggestion, let me know.

Spread the word about The Book Nerd with your friends. I appreciate it.