Taking Bigger Bets. On Loss Aversion

Loss aversion is strong. Prospect Theory states we see losses as worst than equal amounts of gains. It is interesting that one of the things I’ve been struggling with is looking at my revenue and profit in terms of my salary as an engineer back when I had a full time job. My goal is to make an engineering salary. Below that I feel a loss and sometimes don’t put in the effort or appropriate risk to get bigger gains than that.

Sometimes you need to gamble $20k so you can make $100k or more. Instead I’m averse to the loss and try to do everything myself. It is a problem because I’m defending against losses for the company but not taking the risk to gain. This is further punctuated on being bootstrapped.

It may be one thing to bet with someone else’s money. Sort of like playing Zanga Poker vs playing at a casino with your own. The game feels and is different. I need to take risks.

So how am I mitigating risk?

It seems one of the best ways to assess and reduce risk is significant amount of planning before writing the first line of code. I think this is why Amazon has been so successful they seem to derisk problems by writing before building.

I’m trying to do that this next quarter. Have a specific plan with literally everything defined to a t. Then I am assigning owners to each task. The goal is to move from contributor to entrepreneur. It is a much different shift.

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