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Parko told
Inside Football in 2011 that he’d studied this area more than anyone in football and that loss aversion was “a whole lot of bullshit”. Not two weeks later he appeared in a TV documentary talking about the three-quarter time speech of Hawthorn coach John Kennedy in the gruelling 1971 Grand Final, with his Hawks trailing St Kilda by almost four goals. Kennedy needled his men by saying: “And after all this, you’re going to LOSE?!” Parkin, bristling at the memory, says: “I couldn’t believe he was talking about LOSING – we were going to WIN!” Now that is loss aversion gold! In 2012, inducted as a legend by the AFL coaches' association, Parkin said that all he ever felt at the final siren on Grand Final day was "a massive sense of relief", even after winning comfortably. All we can say, Parko, is if after your extensive study you think loss aversion "a whole lot of bullshit", you must have been reading the wrong books!

Herald Sun, Grand Final day 2011):
Asked whether the pain of defeat was greater than the joy of victory, AFL great Wayne Carey replied: "The pain walking off – it sticks with you for so long. There was not a minute or a day went by without thinking about the one that got away. That stays with you forever." In the same article, former Swan Barry Hall said the pain of a narrow loss in 2006 "really got to me". He added that he was so driven for redemption that he trained "too hard" the following year and was hit by injuries. And former Lion Jonathan Brown said the 2004 loss to Port Adelaide – suffered after three premierships in a row – was "one of my most vivid memories in football". He added: "There was not a dry eye in the rooms, not even Leigh Matthews. It just shows you how hard it hurts."


These two pillars of the SANFL have played in an incredible 17 CONSECUTIVE grand finals, and won nine senior premierships each for Central District. At 34, they were planning to pull stumps last year, until Central's shock three-point defeat in the big one. Now they are going to play on. James told
Inside Football: "The fact we lost last year is the main reason why we’re having another crack.That (loss) has been mentioned most nights this pre-season – just how we played so badly on the one day that counted. Everyone’s been training hard to rectify it."

What is loss aversion again?

In economics and marketing – where this psychology is well understood – loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Some studies have found that losses are twice as powerful a motivator as gains.
It works like this: suppose a friend gives you $100 then some time later says he has changed his mind and wants it back.
Your reaction is to feel a keen sense of loss. You have already accounted for that $100 as yours and feel aggrieved at losing it. You will resist returning it and argue the point.
But what if that friend simply promises you $100 tomorrow, and the next day changes his mind and says you won’t be getting it?
You will feel disappointed, but not aggrieved. You will not argue the point nearly as strongly.
People are therefore more driven, and will fight harder, to avoid loss than to seek gain.
The bottom line is that human beings are wired to be cautious about taking risks for gains, but to throw caution to the wind in order to prevent losses.
This phenomenon can be seen in many areas of life. For instance, we are nearly all prepared to pay hundreds of dollars for insurance against losses of various kinds, but mostly unwilling to gamble the same amount of money to secure potential gains.

Why are we loss averse?

For many years, economists assumed that this was simply an irrational fact of human nature. Recently, however, evolutionary psychologists have been arguing that it demonstrates a sort of “deep rationality,” because in our evolutionary past, losing anything — from food to the few possessions our forebearers might have had (tools, clothes, kin) — would have been potentially catastrophic.
In marketing, the use of trial periods and rebates tries to take advantage of a buyer's tendency to value the goods more after they begin to account for them as theirs. (Car salesmen, to give one example, love the technique of giving a potential buyer the use of a car for a period – “taking a puppy home” – after which it’s harder to resist the sales pitch.)
Whether a transaction is framed as a loss or as a gain is very important: would you rather get a $5 discount (gain), or avoid a $5 surcharge (loss)? “Buy now before the price goes up!” Most find the latter more motivating in the buying decision. So the same price framed differently has a significant effect on consumer behavior.
The effect of loss aversion in a marketing setting was confirmed in a study of consumer reaction to price changes of insurance policies. It found that price increases had twice the effect on customers switching policies, compared to price decreases.
When you think about it, loss aversion underpins modern society and our tendency to acquire possessions and wealth.
If we lacked a stronger aversion to loss and instead were more motivated by the possibility of gain, TAB Sportsbet would have all our money – we’d have gambled away our assets long ago!
Bottom line: gain is great, but averting loss is greater!
And really, if we were really honest with ourselves, whenever we compete – at anything – our motivation is usually about “not losing” rather than winning. (More on the difference between relief and jubilation below.)

Loss aversion and sport

Remember that the loss aversion mindset is more powerful a motivator than the “gain anticipation” mindset.
It produces aggressive risk-taking. Gain anticipation produces defensive risk-aversion.
A team going into a game that it cannot afford to lose – a knockout final, say, or a game where its pride or reputation is at stake – enters in a loss-averse mindset.
But how about a team going in against a lesser-performed opponent and expecting to win? The players always SAY they take nothing for granted, but the whole football world expects a particular result, including, subconsciously, the players.
This is the “I’m going to give you $100 tomorrow” scenario. When tomorrow comes and I change my mind – “Sorry, you can’t have that $100” – you are disappointed but not going to fight me desperately for it.
This is the danger for top teams playing lesser teams. When the game does not go as anticipated, they cannot sufficiently change the mindset from gain anticipation to loss aversion so they don’t fight hard enough to reverse the situation.
Many footballers will be familiar with the difficulty of shaking off a mental malaise during a game. Often the way you start is the way you finish. Very few footballers are able to recover from a poor first half to be a star in the second half, even with the help of the 20-minute break to refocus. Those who can are the most naturally competitive (ie., loss averse) players.

Loss aversion and the Olympics

Five minutes watching the Olympic Games and listening to the interviews with gold medal winners will confirm that loss aversion – fear of not winning the gold – is a vastly stronger motivator than gain anticipation – the glory of winning.
Note how many successful athletes report that their primary emotion is one of overwhelming relief.
Not jubilation but relief!
Cathie Freeman collapsing to the track after the 400 metres final in 2000; Sally Pearson in 2012... any number of others.
Relief is the emotion you feel at having averted a loss, not at having achieved a famous victory.
Many commentators noted that Pearson was “in the zone” for the Olympic hurdles and never gave her opponents a chance.
She was indeed – because she was supremely loss averse.
Afterwards she said she knew she was going to drag her rivals through in a fast time, because she’d been doing that for the past three years, “but no way was I going to let them beat me”.
That is the mindset of a winner, a competitor who was accounting for the gold medal as hers. She considered that she deserved it and would give everything to avoid defeat.
Should such as competitor come up against another who is “just happy to make the final – because anything can happen from there”, which do you think will win the gold medal?
Every time!
Yes, of course, there comes a point when talent wins over motivation.
Motivation can take you only so far. (It doesn’t matter how much I hate losing to him, I will never beat Usain Bolt in a foot race.)

How about jubilation?

The greatest jubilation comes with victory against the odds – after anticipating or staring into the face of defeat. Defeating the hot favourite – who probably got out to a match-winning lead, but then choked.
Or leading, then having your opponent snatch it away, before snatching it back at the death.
The favoured team coming through in those circumstances feels relief, at having averted the humiliation of an unexpected loss, rather than jubilation. (For the perfect example of that, see Mick Malthouse’s tears of relief after narrowly winning the 2011 preliminary final, having trailed Hawthorn until the dying seconds.) The underdog feels utter jubilation at the unexpected gain.

More reading on loss aversion in US sport:

Loss aversion in the NFL
Are NFL coaches loss averse?
And in business:
‘Loss’ as a winning strategy
Risk aversion is really loss aversion
Loss aversion in marketing
Praise is fleeting but brickbats we recall

How do I get loss averse?

Here are the short answers:

1. Be born into the right family.

Loss aversion – which you can also think of as extreme competitiveness – is most obvious in younger siblings. It is seen in the child who is competitive at “everything”. But on close examination, it becomes apparent that what’s really important to that child is not so much winning as
not losing. It all boiis down to that fundamental need for parental approval/love and to prove oneself worthy of that. Often this need is magnified where greater competition for attention/affection exists – such as when a kid has one or more high-achieving older siblings. This is the genesis of the “competitive nature”. Middle children can also end up competitive, by the way, as the older sibling is the first, and the young one gets the “babying” attention, so the middle child feels left out and a consequent need to compete harder for attention and resources. But it does all come down to parenting. “Tough love” from hard-to-impress parents seems to beget competitive kids. One thing is for sure, none of the molly-coddled, spoiled generation – for whom everything is presented on a platter – will end up particularly loss-averse individuals. These kids don’t face defeat by becoming even more fiercely competitive, they just crack the sads! And that’s no good to an elite football team!

2. Suffer a bad loss.
The more devastating/humiliating the better! Footy history is littered with examples of how experiencing a loss strongly focuses players’ motivations to avert another loss.
Here are some that immediately spring to mind – losses that motivated players on the losing team and drove subsequent performances:
• Essendon, 1999 Preliminary Final
• Geelong, 2008 Grand Final
• Carlton, 2009-10, both Elimination Finals
• Geelong, 2008 Grand Final; 2010 Preliminary Final

3. Don’t get “ahead of yourself”.
What does that piece of common sporting parlance mean, exactly?
It means anticipating a gain before the job is done and sacrificing your loss aversion in the process. It means forgetting that you could actually lose the game (classic example #1627: Collingwood in the 2011 preliminary final, which it all but lost to Hawthorn.)

4. Believe you are good enough.
On Grand Final day, to cope with the pre-match nerves and doubts, five-time premiership player Dermott Brereton would remind himself that he was “born to play on the big stage” – that Grand Final success was his destiny.
You can’t generate real loss aversion if deep down you believe yourself unworthy of success.
You must believe it’s rightfully yours – and the opposition is trying to take something off you, or to deprive you of your just rewards.
A very interesting article in The Age (Feb 12, 2012) by Darren Berry on what it takes to play cricket at the elite level explores this necessity:
read it here.

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