• Nisa Bayindir

Loss aversion: What does 'cost' mean on the social internet?

Updated: May 20, 2019


The understanding of loss aversion is much younger than that of risk-taking. Loss aversion dates back to 70s when Kahneman and Tversky’s studied the behavioural dynamics when we face situations in which losses are perceived to be bigger than gains, ultimately affecting decisions and actions. Loss is an intense emotion and its impact is thought to be double what the positive effect of pure pleasure, so we’re naturally wired to refrain and we’re using system 1 and 2 thinking interchangeably - depending on the context - to avoid the costs.

Considering the plethora of experiences online that we take ‘risks’ for, we can argue that cost now means a lot of things to the avid social internet user (I avoid brushing over it as ‘social media’) which we can really understand if we get to grasps with the human ego and superego. I’ll try and scratch the surface on what loss may mean to the social internet user in this post.


Loss aversion usually comes to the fore in the context of [behavioural] economics but in today’s social and mobile-first digital landscape, loss aversion is becoming more than monetary or material loss; into more abstract shapes and forms, such as reputation or impression/image loss. We’re compelled to express and interact with the means available to us on multiple devices and platforms, so it’d be naive to translate or ‘reduce’ it to eCommerce and the online purchase behaviour.


Fundamental needs

I’m talking about the regular self publishing of thoughts, opinions, images, experiences on a multitude of platforms here (one of which I am doing right now!). Recognition and relating is a key driver for humans to validate the self, and socially connected internet gave us just that. It’s especially the case for digital natives who are ‘self-casting’ online’ as second nature. Regardless, it all boils down to human nature, as with all things you will read on this blog. As they expose themselves online without always knowing whose eyes they will ‘meet’, social internet users are exposing themselves to different kinds of risk and loss, completely voluntarily.


With material loss aversion, there is usually a signal or an indicator to the type of loss one may encounter as per the famous prospect theory, not to mention the actual concreteness of the potential loss. For the avid social internet user, however, there is absolutely no real signifier or categoriser for the self to base a decision to do or not do something (beyond the individual’s personal assumptions or experience of the virtual reactions from the online circle of connections - friends or a broad network). It’s dangerous and murky territory, because it’s relative. It actually can alter self expression, so cost in self-related loss is in how we realise and share ourselves. Expensive!  


Don’t lose your ‘Self’

Loss or damage of reputation, or the digital ‘mirror’ image of self, is a can of worms. It’s a crippling prospect and there is a myriad of studies based on the effects of online interactions on self perceptions. Not to mention real life examples we read about people who get sacked for posting certain posts/pictures, or people being shamed or bullied for extending themselves onto digital platforms. The sad irony is that all the sharing and expression that can lead to a loss emanate from the need to be seen/heard/related to. One knows what’s ‘available’ (what they [want to] express) and yet there’s no scenario two.

Availability heuristic, a concept connected to loss aversion, is what comes into play here. It’s what we’re inclined to choose, just because it’s available, and it gives us the illusion that it may be safe, feasible, legitimate - a gain. What’s ‘available’ to the avid social internet user is exactly what/who they are and what they own: a mobile phone to keep them connected… What’s not immediately available, however, is the reception they may get after the post with the rant or the selfie (public reactions are as unpredictable as anything, after all). So the lack of a concrete signal or proof of what loss will be - naturally not one product over the other - means that one’s judgment gets skewed and blurred - or ‘burned’ - no matter how avid a social internet user they may be. One learns from experience and may build a tendency to adjust impulses to be one’s 'alternative' self online.


The 'Self' as digital currency?

Loss aversion in the realm of self is a construct that is operating behind-the-scenes, and somewhat subliminally, in today’s communication landscape. Self censoring - or not - and the way we depict ourselves on social channels online is a bit like showing our 'best behaviour' in an interview or audition. Whether we like it or not, we’re traceable on the internet, and anyone would want the internet to remember them in our best form. If this is not you, you know someone who would. I’d invite you to welcome this manifestation of being: you’re human - right?


Is being self-conscious online a bad thing? Not necessarily. There are, of course, loads of ways one can utilise the socially connected internet, and we aren’t doomed to lose the wind in our sails every corner we turn. What’s important to acknowledge is that we evolved to be savvier from a material perspective, and neurons fire faster than ever to take on more complicated unknowns. Loss or gain are no longer just about saving up on the pennies.

Our currency is the self when we’re connected with the online race. It’s the impression that is at risk/gain for millions of social internet users, and they/we keep feeding a flippant, unpredictable beast. I just re-read my post about five times. I’m with you.