Crossing the Tape

Do you love to win, or do you hate to lose?

Photo: Public Domain. Source: Wikipedia

It’s two different things. People who love to win are motivated by the big payoff at the end. They love the thrill of victory that comes from crossing the finish line first, standing at the top of the podium. They can be gracious, too, not minding if someone else climbs higher, later. But nothing takes away from what they’ve done before.

People who hate to lose, by contrast, hate the humiliation that comes from being behind. They see problems as failures. Engineers, doctors, and corporate lawyers are often loss-averse in this way. An error can mean a company can lose millions of dollars, or someone dies. A programmer once had a “morning shower revelation” and had to call his client to tell them not to install some recently completed software – that it had a bug that would cause significant data loss.

In business, we need both kinds. Marketing people love to win. They love bringing home the deal that makes the company profitable. Risk managers hate to lose. They can’t stand the idea of falling short because of an overlooked factor. Most of us are loss-averse: we hate losses more than we love gains. That’s why companies use trial periods, rebates, and free returns: we value something much more once we have it, and we’re less likely to give it up.

Source: Kahneman & Tversky, “Choices, Values, and Frames.” (1983)

Investors need both approaches, too. The stock market is driven by winners: Apple and Amazon and Facebook, who came from nowhere to become some of the biggest companies in the world. By contrast, the bond market is a loser’s market: one Lehman or Puerto Rico bankruptcy erases hundreds of safe maturities. Managers continually need to be looking out for losers while prospecting for the next big deal.

Loving to win and hating to lose are the two sides to the coin of competition. And both drive us.

Douglas R. Tengdin, CFA

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