Home topics news News Small Business Strategy News Regret avoidance: is it costing you business? Ananya Singh August 9, 2016 Risk is an unavoidable part of business, regardless of whether you’re a startup founder or operate a successful established business. As an owner, it’s likely your job involves making risky investment decisions. To invest or not invest? That’s what it boils down to. Business is mostly conducted with the mind, rather than the heart, but have you heard of the feeling that drives people to forego investment opportunities? What is ‘regret avoidance’? ‘Regret avoidance’ is an economic theory based on the idea of this feeling. The word ‘regret’ immediately conjures past business decisions that ended up costing you. The theory is that people will often try to avoid making decisions because they fear the consequences of – and the regret associated with – making a decision that might turn out to be wrong. In other words, this fear of future regret influences a person’s judgment about making a decision in the present. Risk tolerance is defined as a person’s willingness to take risk. The higher the risk a person is willing to take, the higher their risk tolerance is. Bailey and Kinerson conducted a study on this topic. The study involved giving the participants hypothetical information on a) shares in which they previously invested that had resulted in a loss and b) a savings account which also caused loss. The study produced the following results: A person’s risk tolerance is