Risk v Reward
Resistance arises because, in the eyes of the other person, the perceived risk of following your proposal is greater than the potential reward. If you are trying to sell me your car, I may be very happy with the car itself and yet playing on my mind is the question, “Could I get a better deal somewhere else?” To make me feel more comfortable you could:
- reduce the risk – show me evidence of similar cars at higher prices or give me a guarantee that you will take the car back should I find a similar one for a much lower price
- increase the value of the reward – emphasise the unique features of this particular car
- reframe the risk – persuade me that the risk of me not getting a great deal is more than balanced by the risk of me losing out on this particular deal
This last point brings out an interesting cognitive bias.
People are risk-averse (play it safe) in relation to gains, yet loss-averse (gamble to avoid losses).[1]
Thus I am risk-averse when I think in terms of gaining the car and yet, if you can change my perspective so that I fear missing out on the car, I am more likely to buy.
“Losses gain twice the emotional response of gains”[2]
When choices involve possible gains people tend to avoid risks, but when choices involve possible losses they will take risks in order to minimize those losses. People of all backgrounds and ages would rather minimize the displeasure of loss than maximize the pleasure of gain. In one study, two health videos were made to try to persuade women to undertake both a breast examination and a mammogram. Both were nearly identical and presented the same medical and statistical facts. But one emphasized the gains of having the scan, the other the risks in not having it. As the theory predicted, more women who had watched the risk-focused film chose to have a scan. Studies show that if you want people to indulge in healthy preventative behaviour (like using contraceptives and condoms), the best messages highlight the benefits of using them. However, if you want to get people to take up detection medicine (HIV tests), then focusing on the negative works best. Whether one sees the behaviours as low risk or high risk dictates whether a loss- or gain-framed message works best.
This ‘safety first in making gains, gamble to avoid losses’ bias is well illustrated by the following research study. Participants were told that they would be given $100 and then would have two options:
1: flip a coin with and receive an additional $100 if it came down heads, nothing more if it landed tails
2: accept another $50 immediately
The vast majority of people chose option 2, safety first in making gains.
For another group, the setup was slightly different. They were given $200 with a choice of:
1: tossing a coin, and if it came down heads, they would have to hand back $100
2: handing back $50
This time, the vast majority chose option one, gamble to avoid loss.
Of course, in each case the odds when flipping the coin are 50%; flipping the coin will result in them having $200 or $100. Yet people view the odds differently based on whether they perceive potential loss or gain, risk or reward.
So, during your discussion, it would seem to make sense that you should spend at least some of the time emphasising what the other person will lose by not following what you are proposing. Take a broad view encompassing not only tangible, logical benefits but also addressing the unconscious emotional triggers: status, certainty, autonomy, relatedness, fairness together with, conformity, scarcity and authority. For example, if you would like a colleague to make a presentation on your behalf, you might consider these alternative approaches.
| Gain / Reward | Risk / Loss |
Status | This is a great opportunity to gain recognition of your work from senior managers. | If you don’t present, people may assume that others were responsible for achieving results. |
Certainty | You will be able to make sure that there are no misunderstandings about the results. | There is a real possibility that results could be misinterpreted and bad decisions, which affect you, made. |
Autonomy | By making the presentation, you can ensure that things are done your way. | If you don’t present, you may be forced to follow the orders of others; people who don’t understand. |
Relatedness | When you present, you can ensure that all the team gets due recognition. I think they will really appreciate that. | There’s a danger that the team will feel cheated if their input is not recognised and that could affect their relationships with you. |
Fairness | Your presentation can help to ensure that work is fairly distributed across different teams. | A presentation delivered by Mr X would have a different emphasis and may lead to your team receiving the least interesting work. |
The impact of losses can be felt even more strongly when another individual stands to gain: if they don’t make the presentation, one of their colleagues will. However, be careful not to over-play ‘loss’, as this could create a degree of anxiety that prevents any decision being made. Again, active listening and questioning are essential to gain an understanding of the other person’s thoughts and feelings.
[1] Described in the Prospect Theory, by Kahneman and Tversky, winners of the 2002 Nobel Prize Prize in Economics
[2] Warren Buffet