MENTAL MODEL · M13109

Decision Loss

DecideHigh supportDecision Science

Included

Updated 2026-08-17

Loading revision record…

INTRODUCTION

English translation pending.

CORE DEFINITION

A decision discipline that evaluates a choice by its downside first: what can be lost, how likely that loss is, and whether the decision maker can absorb it. It builds on Kahneman and Tversky's prospect theory, which showed that losses loom larger than equivalent gains, and on the observation that an opportunity cost attaches to every option, including doing nothing. The criterion is not risk avoidance but affordability: a risk is acceptable only if the worst credible outcome leaves the decision maker solvent and still able to continue. Losses that cannot be survived are treated as constraints rather than as trade-offs.

SCAFFOLDING EFFECT

psychology

Reduce cognitive load

- Stating the downside: Write the worst credible outcome and its rough probability before making any upside case. - Testing affordability: Ask whether you could absorb that outcome and keep operating afterwards. - Pricing the default: Include the cost of doing nothing as one of the options on the table.

anchor

Anchor fast decisions

Losses register more strongly than equivalent gains, so an unaided evaluation systematically overweights the upside and underweights the chance of ruin. Forcing the downside to be written first makes that asymmetry explicit and converts a vague fear into a number that can be compared with the gain. Ruin is also asymmetric in a way averages conceal: a single unrecoverable loss ends the sequence of future bets, so avoiding it carries value beyond its expected value. That is why affordability, not expected value alone, drives the choice.

MINIMUM ACTION

In progress 0/1

Practice this model in one real situation:

Write the decision and the maximum you could lose in absolute terms, not as a percentage. 2. Estimate the probability of that loss and multiply it by the amount at stake. 3. Ask whether you could survive the worst case and still make the next decision. 4. Price what doing nothing costs, then compare all options on downside first. 5. Drop any option whose worst case is unaffordable, regardless of its expected value.

Check to track your progress (stored locally)

Learning progress0%

account_treeGenealogyexpand_more

menu_bookReferencesexpand_more

Source support: Explicit

link
analogypkm.comhttps://analogypkm.com/experience/mental-models/zh/039_决策损失.htmlZH · Explicit
verified

RELATED MODELS