Losing $100 hurts about twice as much as gaining $100 feels good

Loss aversion — discovered by Kahneman and Tversky — means losses loom roughly twice as large as equivalent gains. Offered a coin flip to win $150 or lose $100, most people refuse even though the expected value is positive ($25).

This asymmetry explains irrational economic behavior everywhere: homeowners refusing to sell below their purchase price (even in a down market), investors holding losing stocks hoping to "break even," employees turning down beneficial job changes because the known outweighs the potentially-better unknown.

The evolutionary logic: for our ancestors, losing resources could mean death, while gaining extra resources provided diminishing survival benefit. But in modern contexts with safety nets and diversification, loss aversion often leads to worse outcomes — the cost of missed opportunities exceeds the losses you're avoiding.