Why our fear of loss works against us

There a simple, two-word description that describes how everything in the world works, Peter Kaufman tells us.

Mirrored reciprocity.

“Your entire life… Every interaction you have with another human being is merely mirrored reciprocation,” Peter observes.

“You’re going to get back whatever you put out there,” Peter comments.

We get what we give.  

Yesterday, we looked at Peter’s 98-2 principle, which he calls “the elevator model.”  Upon entering an elevator and encountering a complete stranger, if we smile and say “Good morning,” there is a 98-percent chance the other person will smile and say good morning back,” predicts Peter, who is best known as the editor of Poor Charlie’s Almanack, the Wit and Wisdom of Charlie Munger.

Good things happen when we “go positive and we go first.”

And, yet, we don’t.  

We don’t smile and say “good morning.”

Why not?

Because there’s a two percent chance the other person will scowl and hiss at us.

Peter points to the research of Daniel Kahneman, the Nobel Prize winner in behavioral economics.

What did he win his Nobel Prize for? 

“For answering the question, why would people not go positive and not go first when there’s a 98 percent chance you’re going to benefit from it, and only a 2 percent chance the person’s going to tell you to screw off and you’re going to feel horrible, lose face, and all the rest of that.” 

What does Daniel’s research show?

“There’s a huge asymmetry between the standard human desire for gain and the standard human desire to avoid loss,” Peter says.

Our desire to avoid loss is so strong it wins the day even though there is only a two percent chance of it actually happening. 

Peter quotes the baseball player Lou Brock who set the Major League record for stolen bases who said: “Show me a guy who’s afraid to look bad, and I’ll show you a guy you can beat every time.”

“If you’re getting beat in life, chances are it’s because you’re afraid of appearing foolish,” Peter observes. 

How does Peter live his own life?

“I risk the two percent.” 

He quotes U2 lead singer Bono: “I know 10 percent of people are going to screw me. That’s okay. If I’m not willing to be vulnerable and expose myself to that 10 percent, I’m going to miss the other 90 percent.” 

“Those are his numbers—90–10.  That’s why that guy’s had such a great life,” Peter reflects. 

Go positive.  Go first.  Be patient.

__________________

Reflection:  Do I generally extend trust or make people earn my trust?  What would it cost me to extend trust first?

Action: Be intentional about extending trust first.

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