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Pain of loss Vs Joy of gain

Circa 2002. Cognitive psychologist Nobel Kahneman is awarded the Nobel Prize in Economics. So, what’s the big deal given that the prize is given every year to someone?

He was the first psychologist to win the coveted prize!

The inherent value in his research was the proof that decisions are not ruled by logic but by psychological principles that govern the perception of decision problems and the evaluation of options. One of the psychological principles that heavily impact human decisions is Loss Aversion.

Imagine India was going to experience an outbreak of a deadly disease that will kill 600 people and there were only two options for combating it.

Option 1: This option guarantees that 200 of the 600 people will live

Option 2: This option provides a one-third probability that all 600 people will live, but it also comes with a two-thirds probability that no one will live.

Which one of the two options would you choose?

I know you would have chosen Option 1. Most participants in Kahneman’s research chose Option 1.

Here is another set of options. Courtesy Kahneman again.

Option 1: This option guarantees that 400 people will die.

Option 2: This option provides a one-third probability that no one would die and a two-thirds probability that 600 people would die.

Which of these two options would you choose?

You chose Option 2, I know. Most respondents also chose Option 2.

Did you realize a minor shift in the way the options were worded has considerably changed the choices that were made? In both scenarios the options are identical!

Though the mathematical probabilities did not change, what was modified was how the options were framed. You just rejected the options that emphasized the loss. And so did most in Kahneman’s research.

Long story short, we feel the pain from losses about twice as much as we feel the joy of equivalent gains.

Think about two scenarios. You gain Rs. 10,000 in a lottery. You lose Rs. 10,000 in the same lottery. Which one impacts your emotions harder? Exactly!

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Words speak more than you think!

Imagine you are considering lending money to one of the two following people.  They are the same age, race and gender, live in the same area and have the same level of income and credit score.

Person 1: I am a hardworking person, married for 25 years, and I have two wonderful boys. Please let me explain why I need help. I would use the Rs. 10,000 loan to fix our roof. Thank you, God bless you, and I promise to pay you back.

Person 2: While the past year in our new place has been more than great, the roof is now leaking, and I need to borrow Rs. 10,000 to cover the cost of the repair. I pay all bills on time.

Which of these people do you think is more likely to pay the money back?

Person 2 will repay. Person 1 is a Vijay Mallya in the making!

Let me explain with an interesting study done by researchers who analysed more than 120,000 loans requests. While they studied financial and demographic material given by the applicants, they especially analysed the words used in the application.

Financial and demographic information were pretty useful in predicting who would default. No surprises there. But the words and text were as predictive in telling who would repay and who would default.

Researchers found that repayers were more likely to use words and phrases related to their financial situation or improvements in financial ability. They used words and phrases that indicated their financial literacy. They also wrote about their school, employment, interest rates, monthly payments etc.

Defaulters used a distinctly different language. They mentioned words or phrases related to financial hardships or their distress. They used words that tried to explain their situation more. Moreover, they pleaded for help or invoked God more often!

Also, defaulters focused more on the near term while repayers focused on the longer term. Defaulters talked more about others while repayers talked about themselves.

Thus, researchers were able to prove that our words reveal our future actions. No matter how much we try to hide our true intentions and feelings, our words reveal it in black and white. Literally!

By the way, dear reader, I am in desperate need of some money. It was not my fault. Some friends cheated me. I am in big trouble. Can you kindly lend me Rs. 10,000. I swear to God, I will repay it within two days. Please help me.

Hello…. bro……why the hell are you running away…. hey stop!

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As cliched as it sounds, a picture is still worth a thousand words. Images have a powerful impact on emotions and physiological states and a higher impact on brain function.

Scientists have proved that our brain’s language-processing abilities are much newer and less deeply wired than are our visual-processing abilities. When it hears words, the brain has to relate the words to concepts, then decode the concepts into images, which is what you and me understand!

What if the brain is spoken directly in its own language, i.e., images?

When you can and if you speak in pictures, you will have a greater impact on the receiver and your messages will be construed more memorable. Reason why, visionary charismatics deploy the full use of images and visual metaphors.

For instance, when Steve Jobs launched the iPod, he wanted to dramatically illustrate its small size and light weight. He first took the iPod out of the smallest pocket of his jeans thus proving just how small and slim it was.

Next, he compared its weight to eight quarter coins. He showed Nano on one side of his PPT slide and placed eight quarter coins on the other. By this, he was able to talk to the brains of millions across the world visually; and hence directly!

Talking in visuals can also help you convince the receiver to accept harsh messages. When Lee Iacocca was trying desperately to turnaround Chrysler Corporation, he had to close a few factories which would result in the layoff of thousands of workers. He wanted to avoid an emotional backlash that he knew would result.

So, used a battle metaphor to explain what he wanted to do and why. He compared himself to an army surgeon and said it was wartime, with hundreds of wounded men everywhere. He said he had to prioritize which ones to attend to first and was trying to help those with the best chance of survival and was forced to ignore the rest.

By this, he was made American people realize that the factory closing was painful for everyone, it had to be done for the benefit of others. Also, Lee Iacocca projected himself as one of those soldiers fighting in the war zone and a life-saver treating the organization which was at war. He even ended up writing a bestseller about it after he retired!

When you want to sell or convince someone, talk in visuals!

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