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Skin in the Game

People are motivated by different things. Most people are much more motivated to not lose something than to gain something even if the thing is the same. This is called loss aversion, and it's a well known cognitive bias.

Many businesses take advantage of this phenomenon. For example, many gyms will offer a 12 week challenge where you pay a non-refundable fee to enter. If you lose a certain amount of weight, you get your money back. If you don't, you lose your money. The gym is taking advantage of loss aversion to motivate you to lose weight. In this scenario, the gym is the one taking the risk, but you can also use this to motivate yourself.

I have always had an aspiration to build a small SASS product. I have had many ideas over the years, but I have never been able to motivate myself to actually build one. It's not that I didn't know how or didn't have the time. I just never had the motivation to do it.

That is until recently, when I decided to put some skin in the game. I bought some entrepreneurial coaching where each week, I along with some other guys get on a call with a coach and talk about our progress. Let me tell you, most everything we talk about I already knew! I haven't learned any ground breaking techniques or insights.

But, I have made more progress in the last 3 months than I have in the last 3 years. Why? Because I have skin in the game. I have to show up each week and tell the coach and others what I have done, am going to do, and what I need help with.

I find this frustrating, hilarious, and somewhat reassuring all at the same time. Frustrating because I feel like I am "wasting" money on something I already know. Hilarious because I am subject to the same cognitive biases as everyone else. Reassuring because I know that I can use this to my advantage and make progress.

Now, there are definitely other ways to take advantage of loss aversion without spending money. For example, you could tell your spouse that you are going to do something and if you don't you have to do laundry for the rest of the month. You could tell the people you carpool with that you will be early to pick them up every day this week and if you are late you will drive next week too. You get the point!

As we are starting this new year, take advantage of your own aversion to loss and put some skin in the game.