Yesterday’s post about Pigs and Chickens is related to the idea of having “skin in the game”. This phrase refers to not being a bystander. When people take risks in their work, they often care more about the outcome than those just watching. To be clear, both Pigs and Chickens can have skin in the game. And sports fans sometimes care way too much about who wins or loses a game!
Suppose someone gives you fifty dollars. You have the following choice: either put the money in your high-yield savings account or use it to buy a stock. If you put it in your savings account, it should be worth about $50 a month later. If you use it to buy a stock, it could be worth $25 or $75 a month later.
Which option do you choose? Is your choice the same if you have to work for that fifty dollars instead of it being given to you?
Loss aversion describes our tendency to avoid losses over achieving equivalent gains. We hate the thought of losing $25! While we might have a better chance of gaining $25, the second option feels more risky. Especially if you’re putting your own money at risk.
Life is all about taking risks.
When I was in high school, I was mostly too afraid to take the risk of asking any girls out on a date. The fear of rejection was too much. So, I probably missed out on some cool experiences.
The trick is to figure out what’s most important to you. Don’t take every risk that comes your way; take the risks that make you feel alive.
When you care a lot about something, that’s when you want to have skin in the game!
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