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Annie Duke on the Power of Quitting

EconTalk

The Cognitive State of Being in the Losses

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Tillman: What we're talking about is the cognitive state of being in the losses. He says if you buy a stock at 50, it goes up to 75 and it's now trading at 60. But on your actual physical ledger, I'm in the gains $10. On my mental account, I am in the losses $15 because I'm 15 short of 75 right? Tillman: It doesn't matter that I was up 10. If I only complete 13.1 miles in comparison in the context of a marathon, I am short. And as Richard Taylor points out, we do not like to close mental accounts in the losses."

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