Gut Punched

I like playing cards. My wife and I play gin rummy all the time. My dad and I play pinochle whenever we have the chance. My daughter is not quite a year and a half old and I’m already I’m excited to teach her how to play Uno, and Slap-Jack, and War, and Speed, and just about every other card game. And that’s just playing cards for fun.

When I turned 21 my dad and I did two things: First, we went to a card room in San Jose and spent a night playing low-stakes Texas-hold ’em poker. Next, we spent a weekend in Vegas drinking and gambling at various poker and blackjack tables. Few experiences in my life have been as memorable as that weekend. It was a crossing-the-threshold moment. We didn’t do anything extraordinary, and we definitely didn’t win very much money. It was just special to hang out with my dad, as a legally sanctioned adult, as an equal (in the eyes of the law at least), and do adult stuff together for the very first time. But I digress…

For me, blackjack and poker are the best options when it comes to playing cards for money. I am of this opinion for a few reasons, but mostly because they are the games I understand best. Further, I subscribe to the theories that poker is a game of skill and blackjack is fundamentally a game of chance (fantasies about Bringing Down the House aside). That said, sustained success at a poker table requires a minimum commitment of 4 hours and I usually don’t have the time or patience for all that, so I usually end up playing blackjack.

There’s a predictable set of emotions one experiences when gambling at a blackjack table:

• Prior to placing your bet, you are hit with a wave of uncertainty: How much should I bet? Will the cards be better or worse than last hand? Is this the right seat? Is this the right table? It this even worth it? Why do I do this to myself? Etc.
• Once you are committed, each new deal brings the hope that this time, finally, you’ll get good cards.
• More uncertainty when it’s your turn to hit or pass.
• As the deal makes its way around the table, you become momentarily consumed with fear that the player at third base (the person seated immediately to the dealer’s right) is going to take the dealer’s bust card and ruin everything.
• As the dealer turns his cards over, revealing your fate, you are frozen in anxious anticipation.
• When you win, you feel a rush of elation.
• When you lose, you feel like you’ve been gut-punched.

This is the universal emotional arch experience by the blackjack gambler. It is beautifully illustrated in a scene from the movie Swingers, in which couple of broke, struggling-actor friends have just driven from Los Angeles to Las Vegas and unknowingly saddled up to a $100 minimum blackjack table with only $300 in hand. As you watch the scene unfold, it’s impossible not to empathize with the characters. Uncertainty. Hope. More uncertainty. Anxious anticipation. Then, mercilessly, the gut-punch. It’s actually painful to watch. Every time I do, it feels like I’m right there with him. It resonates because it’s true. And the part that resonates the most, by far, is the gut-punch at the end.

That’s what we’re here to talk about: Why does losing feel like a gut-punch?

Loss Aversion

We may be hard-wired to hate losing. Evolutionary theory strongly suggests that loss aversion is a result of our interest in maximizing the probability that we are able to pass our genes on while minimizing the probability that we won’t. The gut-punched feeling is a physical manifestation of that evolutionary calculus. Simply put, “it’s better to be safe (and avoid that gut-punch) than sorry (and experience the pain of being punched in the gut).”

If you’ve ever gambled and lost, on cards or otherwise, you know the gut-punched feeling. If you have money invested in the stock market or if you own a house, you know the unshakable feeling of dread that a “correction” that would erode the value of your investment(s) could be right around the corner. If you’ve ever misplaced a few bucks, you know the out-weighted negative effect that has on your day. And it’s not just money.

Advertisers and marketers use tropes like “For a limited time only!” and “Only X items left in stock!” to leverage fear of loss (along with other innate human biases) in motivating consumption via broad-based inadequacy marketing strategies. Football teams literally have a “prevent defense” specially-designed to protect them from losing. Competitors from all walks of life express the deep-rooted sentiment “I love winning, but I hate losing more.” Ask a person to recall a time they were wildly successful, and you’ll likely hear a relatively fuzzy recollection of the details. Ask that same person about a time they failed miserably, and they will recount the experience in vivid detail. Human beings are so innately averse to loss that we literally remember it better.

Loss aversion, as a behavioral science concept, was popularized in 1979 by psychologists Amos Tversky and Daniel Kahneman in their Prospect Theory behavioral model, which uses the principles of loss aversion to explain how people assess uncertainty. A coin flip bet provides a classic illustration: If a flipped coin lands on heads you win $20. If it lands on tails you lose $20. Would you take that bet? Research shows that most people require greater winnings relative to the amount at risk of loss before taking the bet. Put another way, we are more motivated to avoid losses than we are to pursue gains. That’s loss aversion. (Recently there has been some very deep-in-the-weeds push-back regarding various nuances loss aversion, but the vast majority of the behavioral science community still firmly acknowledges its existence.)

Loss aversion is also closely related to one of Robert Cialdini’s universal principles of persuasion: Scarcity. Basically, scarcity is something increasing in demand as it becomes more limited in supply. People fear missing out on the deal or the “limited time only” thing, so their demand for it increases. In other words, we are averse to missing out or losing the opportunity (see the inadequacy marketing comments above).

I categorize loss aversion as a contextual framing bias. The way potential losses (or wins) are framed, or presented, within a given context dictates how people will instinctively respond to them. In my view, there are three types of contextual biases: Comparisons, Relating to Others, and Loss Aversion. A few better known examples of Loss Aversion biases are the sunk cost fallacy, the ostrich effect, and risk compensation.

Loss aversion is among the strongest and most deeply-ingrained of human biases but, while it has greatly furthered our understanding, behavioral science didn’t open our eyes to loss aversion. We already knew about it.

Be Careful

“It’s better to be safe than sorry” has been codified in the annals of behavioral science, at least in part, as a negativity bias: negative experiences have a greater effect on one’s psychological state neutral or positive experiences. Sound familiar? That is basically the remembering your losses better than your wins phenomenon we talked about above. The negativity bias another example of a loss aversion bias.

Focusing on safety as a means to avoid loss has long been top of mind for the human animal:

• Sumerian men and women knew this phenomenon so well that they had a saying for it: “You don’t speak of that which you have found. You talk only about what you have lost.”
• For generations wise doctors have told their patients that “prevention is better than cure.”
• Ronald Reagan famously used a well-known Russian proverb in the context of nuclear disarmament discussions with the Soviet Union: “trust but verify”.
• Every time I buckle my daughter into her car seat I reminder her, “Safety first”.

As for those the three loss aversion biases mentioned above, they have also been unmasked for generations:

• The sunk cost fallacy — continuation of a behavior based on previously invested resources, especially in the face of negative outcomes — was known simply as “throwing good money after bad” before behavioral science got all technical with it. Further, we do this so often that we even have a saying to counter it: “cut your loses”.
• Before there was an ostrich effect — avoidance of negative information — we simply “buried our heads in the sand” (which, incredibly, is not something ostriches even do).
• Long before we knew of risk compensation — behavior adjustment based on perceived level of risk, greater caution being taken with a greater sense of risk — we encouraged each other to “err on the side of caution” or simply “be careful” when exploring uncharted and risky territory.

The Bottom Line

Whether experiencing the gut-punch of losing money at the blackjack table or erring on the side of caution when presented with an unfamiliar circumstance, the motivation to avoid losses is as instinctively human as the desire for one’s genes to live on in future generations. As time passes, behavioral science will deepen our understanding of the causes and effects of loss aversion. As it does, I’m sure we’ll be able to look back and re-discover lost or forgotten idioms, proverbs and sayings that confirm we knew about them all along.