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When forecasting the outcomes of risky projects, executives too easily fall victim to the planning fallacy. In its grip, they make decisions based on delusional optimism rather than a rational weighting of gains, losses, and probabilities.

Loss aversion refers to the relative strength of two motives: we are driven more strongly to avoid losses than to achieve gains.

If you are set to look for it, the asymmetric intensity of the motives to avoid losses and to achieve gains shows up almost everywhere.

Loss aversion is a powerful conservative force that favors minimal changes from the status quo in the lives of both institutions and individuals.

Unfairly imposing losses on people can be risky if the victims are in a position to retaliate.

When you take the long view of many similar decisions, you can see that paying a premium to avoid a small risk of a large loss is costly.

…people tend to be risk averse in the domain of gains and risk seeking in the domain of losses.

…it is costly to be risk averse for gains and risk seeking for losses.

…your ability to reduce or eliminate the pain of the occasional loss by the thought that the policy that left you exposed to it will almost certainly be financially advantageous over the long run.

…you may be more loss averse for aspects of your life that are more important than money, such as health.