Loss Aversion is Paralyzing Your Startup

Published: Oct. 26, 2018

There are about 8k people on my newsletter list.

That’s not a ton of people — your email list may have 5x that. But these are my people. I love them. It feels like I’ve scratched and clawed for each one, and I don’t want to lose any. Every unsubscribe feels like a dagger.

My eventual goal is 100k subscribers, but I really do hate those unsubscribes. So I treat the list with kid gloves — I only send posts I deem as “perfect.” I’ve only recently realized my subconscious goal has been to send emails that I think will yield the fewest unsubscribes. This is why I only send a handful of emails each year despite having hundreds more sitting in my drafts. I don’t want to lose anyone.

This is why there are 8k subscribers, not 100k.

Loss Aversion is hardwired into each of our brains and it’s killing us. We’re all trying to run a marathon while dragging an 85lb weight. Entrepreneurship is hard enough already. Give yourself a break. Here’s how to shed the weight.

Humans feel roughly twice as much pain/anger at losing something as we feel happiness at gaining something of the same magnitude (Loss Aversion is part of Kahneman and Tversky’s Prospect Theory from the late 1970’s, some links below, it’s interesting stuff).

If you buy a cup of coffee with a $10 bill, but later notice you got change as though you’d paid with a $20, you’ll feel pleasantly surprised / slightly guilty. If you realize you paid with a $20 and got change for a $10, you’ll be livid.

 
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LOSS AVERSION IS DISASTROUS FOR FOUNDERS. WHERE DOES IT SHOW UP?

First, on my email list. Being an entrepreneur is emotionally exhausting, so founders tend to optimize for what’ll create the least “emotional drag.” That means my goal for an email campaign is going to be to minimize unsubscribeswhether that’s a good business decision or not. Spoiler — it is not.

Worst of all, founders tend to overestimate what they “have,” and the general instability of the lifestyle amplifies the feeling of loss.

I’ve seen tons of founders get a customer to sign-up for their service before it launches only to “not bother” them until the full-featured product is live eight months later. They didn’t want to lose the customer. But by the time they reach back out the customer had long forgotten they existed and deleted the email.

HOW DAMAGING CAN THIS BE?

I’m currently letting the fear of losing 25 subscribers dictate when, where, and how I provide value to 8k people.

I’m letting a handful of people who might not be interested enough in what I’m trying to do at Tacklebox (not a crime nor personal attack) dictate how fast Tacklebox grows.

Sheesh.

HOW DO WE COMBAT THIS? IMPLEMENT SYSTEMS TO IDENTIFY AND MINIMIZE LOSS AVERSION. HERE ARE THREE.

1. Focus on data points.

Treating everything like an experiment that yields data points is a great way to remove harmful emotion. If I send an email and 25 people unsubscribe, that’s not a bad thing, it’s just a data point — the result of an experiment. If that same email leads to 10 new applications for Tacklebox, that’s another data point. These data points all relate back to exactly who your customer is and how well you’re solving a problem for them.

2. Only celebrate and prioritize things you do, not things that happen because of things you do.

Don’t get upset over unsubscribes and don’t get happy about subscribes. Get happy about things you can control. I can control sending emails with good content. I can’t control if someone got a new job and no longer wants to start a startup, so they unsubscribe. Process you can control > people’s response to that process.

3. Create and follow metrics that optimize your goals, not ones that minimize loss

Understand the decisions you need to make, understand the data you need to make those decisions, and create / follow metrics that increase the experiments that’ll get you the data that’ll lead to those decisions. Everything else is irrelevant.

Our goal isn’t to avoid losses. It’s to build things that help people.

https://pages.convertkit.com/bb930a3367/05fb305e41

If you need more help with gathering and synthesizing data points, that’s what we do. Happy to help.

Brian Scordato