In Blackjack a player is dealt two cards face up and the dealer is dealt two cards, one face up and one face down. If the dealer’s card is an ace then the player can take insurance against the dealer getting a Blackjack (21).
The insurance is a side bet that protects the player from the chance of the dealer getting a Blackjack and winning. The mathematics of the game means that the player will be better off by never taking out insurance (assuming they aren’t counting the cards!). Yet some players do take out insurance, and they can be right to do so.
Why could it be right for a player to take out insurance when it will lose them money in the long run?
It is because whether it is a right decision or not is not just down to the money. It is about how the player feels whilst they are playing. Studies have shown that people feel more pain from a loss than happiness from a win. This is known as ‘loss aversion’.
So a Blackjack player might be happier with more small wins and fewer losses, which they will get if they take out insurance, rather than fewer large wins and more losses, which will happen if they don’t take out insurance.
This can be applied to your customers and your staff. Lots of small wins and the occasional loss will make them feel better than lots of small losses and a few big wins. A salesperson may have to take a lot of rejections before they seal the big order, so make sure that you find a way to celebrate the small successes along the way. That could be getting through to the right person on the phone, securing a meeting etc.
Emotions are more important in decision-making than facts.