Scarcity vs Abundance

Before you cut your expenses…

You should be wary of a human psychological response called "Loss Aversion.”

To put it simply: most people feel more strongly about losing $100 than they do about gaining $100.

A 1979 study titled “Prospect Theory: An Analysis of Decision under Risk” is credited by Columbia University as “the most cited paper in economics and is among the most cited in psychological science” and singularly defined how Loss Aversion affects people.

We humans tend to have much stronger emotions when it comes to losing something we have, when compared to gaining something we don’t have.

I suppose it’s a good survival technique, but it does limit how we view the possibilities in the world (Scarcity vs Abundance). Regardless, it exists. Your employees and suppliers feel it.

Keep this in mind when cutting costs, and tread lightly.

This is from Trail #2 of Profit Hiker: 11 Trails to gain lasting elevation in your business. Find the book right here and the program over there.