A Rose is Just a Rose - Unless it's YOUR Rose


It's MINE!


Every parent has heard that phrase countless times. Young children have a very difficult time giving up their possessions. Those crazy kids!

Now excuse me while I go watch Hoarders.

We, and that includes grown-ups, value things more just because we own them. Why? It’s not emotional attachment because it is true even if we have only owned the item for a few minutes. It’s much sneakier than that.


Well, Endowed

This is a crazy phenomenon called The Endowment Effect, and it messes up our thinking by distorting the truth. Study after study has shown that we would demand far more money to give up an item than the amount we would be willing to pay to acquire it.

Consider this example: A sampling of college students were divided into two groups. One group was asked to state the highest price they would pay for a ticket to the NCAA Final Four. The other group was told to imagine they had such a ticket and was asked for the lowest price at which they would be willing to sell it.

The median selling price was $1,500; the median buying price was $150. A ten-fold difference!


Defense Wins

Why do we do this? One common theory is called Loss Aversion. We are more sensitive to the prospect of losing something than we are to gaining something of the same value. For example, statistics prove that golfers try harder and are more successful at putting to avoid a bogey than at putting to make a birdy.

In the wild, animals defending their nest or territory are more successful than those going on the offensive. They try harder to avoid losing than to win.


Another theory to explain the endowment effect is that as soon as we own something we form a subconscious association between ourselves and the object. Somehow we manage to tie our identity to the object.

That association is even more pronounced if the object has a connection to a group we identify with. (Sure, I’ll sell you my WKU jacket - for $1,000!)


Should we care?

Does it really matter if we place a higher value on items we own? Of course! Most of what we do in a free society involves us determining how much things are worth, often subconsciously.


If you overvalue or undervalue something based on an arbitrary trait such as ownership, you are skewing your perspective. That will cause you to make irrational value judgments and cost you $$$.


What can we do? One way to avoid the endowment effect is to focus on how much value there is in having the thing in question. In other words, don’t think about how good it felt to acquire it or how bad it would feel to give it up. It’s a tricky exercise but it will give you clarity when deciding what you want to own, when you want to get rid of it, and for how much.


Think well and be well.


- Steve Haffner


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Copyright 2020 Steve Haffner    (502) 419-4272

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