Loss aversion is an interesting psychological trick that our minds like to play on us. One of the perks of working for my employer is that they offer company stock as their long term incentive bonus program. They give you stock each year based on performance of the company, board approval and your contributions to the success of the company. After the 3 year mark, the stocks become fully vested in your name. You can cash them in and do whatever you want or you can hold onto them and let the stocks rise. It’s a funny thing. The stocks are free to us employees. So whether I cash them in at $90 a share or $125 a share, it is free money. Yet, if the price goes up the day after I sell it, I feel a sense of loss. In reality, I was given free money no matter how you spend it.
Another spin on it is say you found $25 laying on the ground. You’re pumped but the feeling wears off after a little while and you forget about it. Next thing you know, you realize that you accidentally left it at the dinner table at a local restaurant. You rush back to find it is gone. Does the weight of your elation match the weight of your loss? Most people would say that they feel far worse having lost it, than they felt when they found it. We naturally give negative feelings more weight.
When it comes to the discipline of simplicity, it is about training ourselves to break the cycle. Our bodies release dopamine when we go shopping or when we gain something. And our perpetual conditioning to fight off loss aversion means that we hunt to gain. Whether it is through shopping (sometimes called a “shoppers high”) or status in social circles. Simplicity challenges that destructive cycle. It helps our minds to engage in healthy purchases because they are based on reason, not emotion.
In addition to the psychological benefit, simplicity saves you money. Think about everything that is involved in owning stuff. You have to take care of it, wash it, protect it, and store it. If you don’t have room for it, you have to purchase storage, all of which costs money. And if you don’t take care of it, the stuff diminishes your quality of life. Living a simpler life just makes more cents (pun, although cheesy, was intended.
So try moving forward by asking yourself on your next purchase what is your motivation behind the purchase (whether physical or status). That’s not to say you can’t buy things to enjoy. I bought a set of kites for my kids this weekend. I didn’t need them. But the smile on their faces and the quality time at the park was well worth purchase.
Discipline of Simplicity Series
- Spiritual Discipline: Simplicity
- Simplicity: Lens of Tradition
- Simplicity: Lens of Reason
- Simplicity: Lens of Experience