Common psychological barriers lead us to overvalue our possessions. That can be a problem when it’s time to get rid of them. Some possessions truly are priceless—we wouldn’t part with them for any amount of money. Others are virtually priceless, or “pseudosacred,” according to Harvard Business School professor Max Bazerman. We might claim that these possessions aren’t negotiable, but we would consider making a trade under certain conditions.
Your mother’s engagement ring might be permanently sacred, for instance, but your great-uncle’s watch may be another matter when money is tight. What happens when you decide you’re ready to part with a pseudosacred possession?
You’ll be prone to resist beneficial tradeoffs and compromises and to respond to counteroffers with anger and rigidity— not a recipe for a successful deal.
Consider what often happens when a family’s longtime home goes on the market. Sacred memories lead family members to set an irrationally high asking price for the house. After an initial flurry of interest, the house sits on the market for months, even years. Price cuts fail to attract much interest, and a once beloved home becomes a source of stress and anxiety.
Contrary to rational economic theory, we seem to view almost anything as more valuable once it belongs to us. Why? Ownership, like any stroke of good fortune, is accompanied by the threat of loss relative to the status quo. This “loss aversion” can lead us to overvalue our assets and ask too much for them. And it’s not just individuals who succumb to loss aversion. Companies often find themselves reluctant to divest themselves of plants or product lines they would never consider buying.
You can work on avoiding loss aversion by answering these questions:
Would I want it if it weren’t mine?
How much is it really worth?
What if it doesn’t sell?
What other value can I offer?