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18 December 2012

The endowment effect

Something that really made my day since I was trapped in a sad mental trick before reading this:

Phase 1: When we really have clarity of purpose, it leads to success.
Phase 2: When we have success, it leads to more options and opportunities.
Phase 3: When we have increased options and opportunities, it leads to diffused efforts.
Phase 4: Diffused efforts undermine the very clarity that led to our success in the first place. [...]


First, use more extreme criteria. Think of what happens to our closets when we use the broad criteria: “Is there a chance that I will wear this someday in the future?” The closet becomes cluttered with clothes we rarely wear. If we ask, “Do I absolutely love this?” then we will be able to eliminate the clutter and have space for something better. We can do the same with our career choices.

Second, ask “What is essential?” and eliminate the rest. Everything changes when we give ourselves permission to eliminate the nonessentials. At once, we have the key to unlock the next level of our lives. Get started by:
  • Conducting a life audit. [...]
  • Eliminating an old activity before you add a new one. This simple rule ensures that you don’t add an activity that is less valuable than something you are already doing.

And then:


[...] Third, beware of the endowment effect. Also known as the divestiture aversion, the endowment effect refers to our tendency to value an item more once we own it [...]
As a simple illustration in your own life, think of how a book on your shelf that you haven’t used in years seems to increase in value the moment you think about giving it away.
Tom Stafford describes a cure for this that we can apply to career clarity: Instead of asking, “How much do I value this item?” we should ask “If I did not own this item, how much would I pay to obtain it?” And the same goes for career opportunities. We shouldn’t ask, “How much do I value this opportunity?” but “If I did not have this opportunity, how much would I be willing to sacrifice in order to obtain it?”


Source: The Disciplined Pursuit of Less – Harvard Business ReviewGreg McKeown, 2012

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