In the intricate tapestry of human psychology, certain tendencies emerge that can be particularly pernicious in the realm of business. Two such tendencies are the deprival-superreaction tendency and the inconsistency avoidance tendency. When these forces converge, they can lead even the most astute businessperson down a treacherous path, ultimately culminating in ruin.
The deprival-superreaction tendency can be encapsulated by the age-old adage, "Losses loom larger than gains." When faced with the prospect of a loss, especially a significant one, our natural inclination is not just to feel a pang of pain, but to react disproportionately, often making irrational decisions to prevent or reverse that loss. This can be observed in the way an individual might chase stock market losses by doubling down on poor investments, fueled by an emotional need to recover what has been lost, rather than a rational evaluation of the situation.
Pair this with the inconsistency avoidance tendency, where one remains committed to a prior decision or course of action, primarily to remain consistent with past decisions, and you have a recipe for disaster. This psychological inertia can blind individuals to the evolving realities of a situation, leading them to pour good money after bad or to continue down a path that is clearly detrimental, merely because they've already invested so much.
In the business arena, these combined tendencies can manifest in particularly harrowing ways. Imagine a business venture that starts showing signs of distress. An entrepreneur, influenced by the deprival-superreaction tendency, may feel an amplified sense of loss, a sting sharper than the objective situation might warrant. This emotional amplification can then drive desperate attempts to salvage the situation, often at great cost. When married with the inconsistency avoidance tendency, where the entrepreneur's prior decisions weigh heavily on their current choices, there's an added reluctance to pivot or abandon the venture, simply because of the sunk costs or previous commitments.
In such a vortex, a slow bleed can turn catastrophic. Instead of cutting losses early, reevaluating, and potentially redirecting resources to more promising avenues, the entrepreneur, trapped by these psychological tendencies, might drain all valuable assets in a futile attempt to rescue the floundering venture. The end result? Not just the loss of the initial venture, but often the erosion of all the good assets that could have been the seeds for future success.
To navigate the tumultuous waters of business, it's imperative to recognize these tendencies within ourselves. It demands the discipline to periodically step back, divorce emotion from the equation, and evaluate situations with fresh eyes. Only by consciously countering these deeply ingrained psychological tendencies can one hope to make decisions that truly align with the evolving realities of the business landscape, ensuring not just survival, but thriving success.