Loss Aversion-Strategy of Self-discipline 4

Niel Malan - Business Coach

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Full Transcript

[The following is the full transcript of this Vlog: “Loss Aversion – Strategy of Self-discipline “

NIEL MALAN:

Hey everybody. Welcome back to another edition of our weekly blog. I love doing this for you guys, I hope you have been enjoying the series on having more self-discipline and increasing your ability to achieve results by increasing your willpower. Now I hope you’ve been following our series, we’ve done three of these videos so far in our series of five videos on how to improve your willpower and how to get more done. Today I want to talk to you about a very, very interesting concept. I read a book a while back by a guy called Tom Ferris. You may have heard of Tim Ferris who wrote a book called The Four Hour Work Week. Have you seen it? It’s brilliant. He wrote a book recently called The Tools of Titans, and what this guy does he interviews world class experts in their field. Olympic athletes, people that’s created, you know, billions of dollars, etc. He interviews these people on a weekly podcast. And what he did was he asked these people what are the tools that you use to produce the best result humanly possible? Now I’m talking about world experts in everything, right, and what he did is he also responded to some of the questions that his huge e-mail subscriber list asked him all the time. And someone asked him and said Tim, if you were to do only one thing to help a person to lose weight long term, keep it off, if you could do only one thing, if you could make one change, what would you do? And without hesitation he said what he would do is he would get that person to commit to a weekly weight loss goal and every week that they did not achieve that goal, he would force that person to pay two hundred dollars to a person that he is having a contest with.

Right? Every week that the person did not achieve their weight loss goal, and they couldn’t back out of it, it was a contract, every week they didn’t achieve the weight loss goal, would lose two hundred bucks. And he went on to explain this concept called loss aversion. So loss aversion is basically a behavioural economics concept. And the question here is will people do more to gain something, will they be more motivated to get a gain or will they be more motivated to avoid a loss? So if someone could make R20 000.00, it was right in front of them, would they have more motivation to make R20 000.00 or would they have more motivation to avoid losing R20 000.00 that they already have? Well it wouldn’t surprise you to know that people are more than twice as motivated to avoid a loss than what they are to acquire a gain. So what happened, these two Yale University professors Dean Carland and Ian Aires what they did was they created this app called Stickk, and it’s got two K’s. Stickk. And what this app does is it puts this idea of loss aversion into practice. Let me go back to my weight loss example. Let’s say for example a person the size, okay cool, I want to lose weight, I’ve had it. I’m doing this and I’m committing myself. What they found is when a person creates a clear plan on how they’re going to do it, they’re more than twice as likely to succeed. Right, if a person gets a referee, right, if someone gets a referee, someone to monitor their results, also twice as likely to succeed than not having a referee and guess what? If someone creates a clear plan and they have a referee and they put a monetary stake on the progress every single week, they’re going to lose money unless they make the progress and they can’t back out of the contract, they are more than three times as likely to achieve results than otherwise. Now I’m talking about a 300% improvement, right, in your chances of success. That to me is massive, right. Anything that’s going to improve my chances of success by 300% is something I am going to pay attention to. So one of the ways that you can ensure that you follow through, that you can ensure that you follow through in any kind of a plan that you have, is accountability.

Accountability is powerful and accountability is the most powerful when you attach a loss to it. So here’s what you should do, right, get a buddy to do what you want to do with you. Someone that has the same aspiration as you. So let’s say for argument sake, I just use diet and exercise a lot because those are the goals that people say every single year and don’t follow through on. So let’s just say for argument sake your objective is to exercise five times a week. Get someone that has the same objective, a friend, commit yourselves to it and then once a week you have to report on it and the person that does not follow through, it doesn’t matter what the excuses are that week, they have to pay R1 000.00. Or if you’re the person who doesn’t follow through, you have to pay your buddy R1 000.00. Your chances of success will be three times greater. A very simple concept called loss aversion. There are four principles, make your commitments very specific, number one, number two find a supporter. Find someone who can kind of rally you on. People get very motivated when someone else rallies them on for their own objectives. Find a referee and put money into it. Go and have fun with this whole idea. Next week I will talk to you about the last principle on how to create lasting change. I hope you’ve been enjoying these blogs, please remember to comment below, I love hearing from you. And share this with your friends and have a rock star week, I will see you back here next week.