“If you dare nothing, then when the day is over, nothing is all you will have gained.” -Neil Gaiman
On Wednesday, a few hours before I started writing this, I was on the verge of what could have been a panic attack. I’ve only had a few mild panic attacks in my life and, for a reference point and comedy’s sake, I will tell the story of my most recent.
My junior year in college, I was an economics tutor at a company where I taught exam reviews to UGA students taking introductory economics courses. We had our sorority’s formal the Friday night before one of my reviews and I stayed out until the bars closed (blame my non-fully developed brain). I still had some work to do on my review packet the next morning before my review in the afternoon, so I woke up and took an energy shot to help me finish my prep work. When I got to the office, I told my boss I was still tired and she suggested that I take another energy drink while I finished up my preparation. As one might imagine, this was not a good idea. I was probably 115 lbs at the time, hungover and dehydrated as all get out, and not used to drinking much caffeine. I have a vivid memory of staring at my review packet ten minutes later and thinking, “Wait, is the demand curve supposed to slope down? Did I draw the demand curve wrong? I think it slopes up! No… it slopes down. I don’t know which way the demand curve slopes. I am SO SCREWED.” For those who didn’t take or don’t remember introductory econ, it slopes down and this is one of the most basic facts of economics. And then my mind went completely blank. And then I started bawling and breathing erratically. Thank goodness I had the two nicest bosses in the world, one of whom sent me home and handled my review for me and another who called me an hour later to tell me she had googled caffeine-induced anxiety and that I shouldn’t worry at all.
So, back to Wednesday. I was kind of starting to feel the same way. I’m moving in late July and I had plans to see a house and sign a lease in Nashville over the weekend (cue the champagne!). It just so happens that I had to miss out on a number of fun activities with friends in Atlanta to go do this. And this was the tipping point for it to finally hit me: in three short months, I am leaving my home. I am leaving the 90% of my friends who still live here. I am leaving my parents. I am leaving my career. Everything is going to change. And all of a sudden, I felt like I didn’t know anything at all. It was so much worse than not knowing which way the demand curve sloped; it was a feeling of disconnect between my past and future selves and not knowing how to bridge the gap between the two.
How I worked my way out of this almost panic attack is a story for another blog post (it involved some Hot Yoga and reading). But, these feelings made me certain that this week is the week to write about loss aversion and the endowment effect– equally as much for my own sake as for anyone else who is reading this.
I came across these two concepts about a year ago in Daniel Kahneman’s book Thinking, Fast and Slow. They struck me as so important that I actually have them written on a post-it note stuck to the bottom of my work computer, so that I can remember the effect that they might have on my decisions every day if I do not take them into account.
Loss Aversion – the tendency to overvalue losses and undervalue gains
Endowment Effect – the tendency to assign a higher value to something we possess, simply because we own it
In the book, Kahneman offers an example of the endowment effect that many of us can relate to: Suppose you were very proactive and bought a ticket to your favorite sports team’s playoff game or your favorite band’s concert right when the event went on sale. You were willing to pay up to around $100 for this ticket, but it was selling for $80 and you got the ticket just before the event sold out. A week later, you find out that tickets are selling for up to $300 on Stubhub for this event. Do you sell your ticket? Most people wouldn’t, which contradicts traditional economic theory. From the vantage point of losing the ticket, the ticket is worth at least $300 to you. From the vantage point of gaining the ticket, you perceived the ticket as only worth about $100. Once you own the ticket, your reference point has changed and you value it more simply because it’s yours.
While the research in the book is presented in terms of economic decisions, I believe that both of these concepts also apply to invaluable decisions that we make in our lives. We do not maximize our utility (or as I think of it, our happiness), when are are acting in a loss averse manner. We want to avoid losing anything that makes us comfortable, even if it is not what is best for us. How painful is it to accept that a friendship you once considered important has faded because you have both grown in different directions? How many times have you seen a friend unwilling to walk away from a relationship even though both parties appear unhappy the majority of the time? Anytime we decide that we want to try something new, we give something up. That is the nature of constraint, whether it is due to time, money, distance, or something more intangible. And unfortunately, we are wired to focus on what we are giving up. I’m about to pursue the first goal I have ever truly been passionate about, and I am still getting very caught up in worrying about what I am leaving behind. It is vital to value our potential gains honestly and not let the corresponding losses overpower us.
So, it’s with that nugget of logic that I can hopefully overcome the fear I am experiencing. I don’t know what my life will look like in Nashville, but I will trust that I can stumble my way through growing into myself when I get there; the opportunity that awaits me is worth what I am giving up.*
My grandma lives with my parents in Atlanta for about eight months out of the year. She recently left to spend the summer in Minnesota, so unless she decides to change things up and make Nashville her home, we will probably never live in the same city again. We had a farewell brunch for her, and as she was leaving her to me goodbye ended with, “Have all of the adventures”. Any advice from her seems pretty well founded, given her 92 years of life experience. So I promise, Grandma Ethel, I will have all of the adventures and I will do my absolute best to approach them with a sense of excitement and lightheartedness.
*As long as everyone I care about in Atlanta visits me
once a month every few months
This Week’s Highs
1. Gallivanting around Nasvhille as a 3rd, 5th, and 7th wheel and being 100% fine with it
2. Signing a lease and starting a new adventure with a great friend (cue the champagne, turned into cue the bottomless mimosas)
3. Officially ending my year as a pescetarian (vegetarian who also eats fish) with the most delicious grilled chicken salad from True Foods last night
4. A Tuesday night deep talk over wine and a Thursday night deep talk over dinner with best friends
5. Wise friends who are already in graduate school and are willing to provide long pep talks/advice
This Week’s Lows
1. Losing my car in the parking deck at work… two days in a row
2. As would follow from this post, almost having a panic attack
3. Forgetting my laptop at home this morning, for approximately the 20th time in two years (no wonder there is a running joke between my coworkers that anyone who is having an inconvenient day is having “an Erin day”)