Unit 2 · Level 1 · Cognitive biases
Loss aversion: losses punch twice
Kahneman and Tversky measured it: losing €100 feels roughly twice as intense as winning €100 feels good. That asymmetry, called loss aversion, is the engine under Unit 1's hope demon. It's also why the same facts, framed as a loss or as a gain, can flip a person's decision entirely.
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What you get asked
Your portfolio drops 20%, from €10,000 to €8,000. What % gain on the €8,000 do you need to get back to €10,000?
€2,000 ÷ €8,000 = 25%. The deeper the hole, the steeper the climb out. The loss/gain asymmetry is mathematical, not just emotional.
A fund ad says 'positive in 9 of the last 10 years' instead of 'lost money 10% of the time'. This is:
Both statements are identical facts. Because losses loom twice as large, marketers always frame around them, and your brain falls for the wrapper.
Studies suggest losing €100 stings about as much as winning €___ feels good.
The roughly 2x weighting is one of the most replicated findings in behavioural economics, and the reason 'don't lose' dominates 'might win' in your gut.
Match each concept to its one-liner
One bias, many disguises. When a decision suddenly feels obvious, check which frame you were handed.
Knowing losses hurt roughly 2x more, the smart pre-commitment is to…
You can't delete the bias, but you can outvote it: rules written before the loss exists aren't distorted by it. 🐜
The rest of this unit
Loss aversion, echo chambers, anchors, hubris: the bugs in everyone's mental firmware.