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This little behavior is paralyzing your startup

Entrepreneurship is hard enough without adding loss aversion. Here’s how to tackle this destructive behavior before it kills your business.

This little behavior is paralyzing your startup
[Photo: Photo-Dave/iStock]

There are about 8,000 people on my newsletter list.

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That’s not a ton of people–your email list may have five times that. But these are my people. I love them. It feels like I’ve scratched and clawed for each one, so I treat the list with kid gloves. I only send posts I deem “perfect.” So when one unsubscribes, it feels like a dagger.

My goal is to eventually get to 100,000 subscribers. Yet, I’ve only recently realized my subconscious goal has been to send emails that I think will yield the fewest unsubscribes. This is why I only send a handful of emails each year, despite having hundreds more sitting in drafts. I don’t want to lose anyone.

This is why there are 8,000 subscribers, not 100,000.

Loss aversion is hardwired into each of our brains and it’s killing us. The research behind Amos Tversky’s and Daniel Kahneman’s Prospect Theory from the late 1970s indicates that humans feel roughly twice as much pain and anger at losing something as we feel happiness at gaining something of the same magnitude. For example, if you buy a cup of coffee with a $10 bill, but later notice you received change as though you’d paid with a $20, you’ll feel pleasantly surprised–and maybe slightly guilty. But if you realize you paid with a $20 and got change for a $10, you’ll be livid.

Entrepreneurship is hard enough without adding loss aversion. It’s like we’re all trying to run a marathon while dragging an 85-pound weight. Give yourself a break. Here’s how to shed the weight.

Exactly when loss aversion becomes disastrous for founders

Let’s start with my email list. Being an entrepreneur is emotionally exhausting, so founders tend to optimize for what’ll create the least “emotional drag.”Worst of all, founders tend to overestimate what they have and the general instability of the lifestyle amplifies the feeling of loss.

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That means my goal for an email campaign is going to be to minimize unsubscribeswhether that’s a good business decision or not. Spoiler alert: It is not. I’ve seen many founders get a customer to sign up for their service before it launches. In an effort to not bother them until the full-featured product is live eight months later, they don’t contact them again. They didn’t want to lose the customer. But by the time they reach back out, that customer had long forgotten they existed and deleted the email.

This is how damaging the behavior can be

I’m currently letting the fear of losing 25 subscribers dictate when, where, and how I provide value to 8,000 people. I’m letting a handful of people who might not be interested enough in what I’m trying to do at Tacklebox (this is not a crime nor a personal attack) dictate how fast Tacklebox grows. Sheesh.

How do we combat this? By implementing systems to identify and minimize loss aversion. Here are three steps to take.

1. Focus on data points

Treating everything like an experiment that yields data points is a great way to remove harmful emotions. If I send an email and 25 people unsubscribe, that’s not a bad thing, it’s just a data point, the result of an experiment. If that same email leads to 10 new applications for Tacklebox, that’s another data point. These data points can all relate back to exactly who your customer is, and how well you’re solving a problem for them.

2. Only celebrate and prioritize things you do, not things that happen because of things you do

Don’t get upset over people who unsubscribe and don’t get happy about subscribers. Get happy about things you can control. I can control sending emails with good content. I can’t control if someone got a new job and no longer wants to launch a startup, so they unsubscribe. A process you can control is greater than people’s response to that process.

3. Create and follow metrics that optimize your goals, not ones that minimize loss

Understand the decisions you need to make, understand the data you need to make those decisions, and create and follow metrics that increase the experiments that’ll get you the data that’ll lead to those decisions. Everything else is irrelevant.

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Our goal as entrepreneurs isn’t to avoid losses. It’s to build things that help people.


Brian Scordato is the founder of Tacklebox Accelerator, a seven-week program in New York City to help idea-stage founders with full-time jobs validate and build their startups. He writes a popular bi-weekly newsletter on startup tactics and loves Tar Heel basketball.

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About the author

Brian Scordato is the founder of Tacklebox Accelerator, a four-week program in New York City for early-stage founders (many of whom have full-time jobs) to go from idea to validated product. He teaches at General Assembly, writes here, and loves Tar Heel basketball.

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