A Key Principle in Behavioral Economics

A managing director with Deutsche Bank in New York, Manuel Maximino possesses over a decade of experience in managing finances. Manuel Maximino spends his time outside of work reading up on different topics, including behavioral economics.

The integration of economic theory and social science, behavioral economics is known to help entrepreneurs and businesspeople improve their companies’ chances of succeeding in their chosen markets. Using behavioral economics can help professionals plan their steps and grow their businesses.

To do this, they must focus on what they expect to lose, not just what they want to achieve. By instilling a fear of loss in themselves, businesspeople can prepare better for almost any issue.

Additionally, businesspeople are more likely to make sales if they tell clients about the losses that can be expected by not buying into a certain product. This is called loss aversion--the idea that a person would rather invest and gain something after they are aware of what they might lose by not doing so. Research suggests that loss aversion is a powerful motivator.