b) loss aversion except when threatened

People try to avoid loss and as a result are not generally big risk takers. However, when people feel the circumstances are safe enough, they will try new things and be adventurous. But when harm looms, this adventurous spirit disappears. In the Stone Age, the cautious approach to loss certainly increased human beings' chance of survival and reproducing. Furthermore, it stands to reason that when seriously threatened, human beings fought fiercely for survival.

"...thus we are hardwired to avoid loss when comfortable but to scramble madly when threatened...."

Nigel Nicholson, 1998

This natural reaction can be observed in organizations, despite rules and regulations. For example, an organization announces impending layoffs but does not specify which people will lose the jobs. Most staff will do anything to save their jobs and avoid such loss. On the other hand, when an organization announces that an entire division will close, no one can escape the loss and, as result, staff become very aggressive. Instead of acting rationally, they go into panic to survive. Thus, managers need to be aware that people are hardwired to act desperately when directly threatened.

Furthermore, when staff are asked to be creative, staff will feel uncomfortable as it could be perceived as risky and uncomfortable to challenge the status quo.

On average, people avoid risk except when threatened. Usually there is a small minority who are super cautious and will not take any risk; similarly, there is a small minority who are risk takers. Most of us fall in the middle.


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