What is Loss Aversion?
Loss Aversion is the psychological phenomenon where any scenario with something at stake, humans tend to try "not to lose" rather than "try to win".
A simple example of this is Poker, a test of your ability to calculate risk and make risky decisions on the fly. Different size "pots" or the amount of money at stake has a huge effect on whether or not a player chooses to play or fold.
Given a solid hand with a decently sized pot, a good player may choose to take a risk and continue betting in hopes that they have the winning hand, or their opponents choose to fold.
Regardless of other factors, since you've already invested so much into the pot and your upside is high, you may as well continue betting.
But given that same hand some players may choose to fold, thinking "oh my opponents probably have better hands" even when they have no idea what they actually have. They don't want to continue putting money in the pot and potentially losing out on more money.
This is Loss Aversion, playing the game to "not lose any more money" rather than continuing to bet with the "try to win" mindset.
Humans encounter loss aversion everywhere in their daily lives, wanting to offer opinions and speak up at work but they choose not to in fear of looking dumb. Selling a stock that is up a big because you're afraid the price is going to plummet soon.
Even taking the risk of approaching and talking to that girl you've had a crush on; assuming the worst without even making an attempt.
I think all humans innately struggle with loss aversion. We're taught all our lives that failure is bad and we should do everything in our power to avoid it. Think about our school systems, and how we push our whole lives to get the best grades, afraid to fail and actually learn.
How to overcome it
To be honest, I struggle with Loss Aversion everyday, unconsciously not taking certain "asymmetric" bets that I probably should be. And unfortunately, there isn't an end all-be-all solution.
Taking everyday step by step and just doing the thing.
Don't think about it, don't over-analyze it, just doing it a lot of the time will help you push towards getting past loss aversion. Because lets face it, A lot of the times you do actually know what you should be doing. It's a matter of you just doing it, and not thinking about the consequences.
No risk, no reward. And usually the bigger the risk, the bigger the reward. Most of the time, it's 10 seconds of awkwardness or a lifetime of regret.
When the stakes are high, it's up to you to make the call. But it's usually best to just do it.
-> Kyle