Poor Charlie's Almanack: The Essential Wit and Wisdom of Charles T. Munger · chapter 1 · id poor-charlies-almanack-c1-07-mungers-deprival-superreaction

“Munger's 'Deprival-Superreaction Tendency' -- that people react more strongly to losses than gains -- directly maps to Kahneman and Tversky's prospect theory loss aversion, one of the most robust findings in behavioral economics.”

holdsconfidence: high✓ ZHP-verified + red-teamed

Receipts

Kahneman & Tversky, 'Prospect Theory: An Analysis of Decision under Risk,' Econometrica (1979)DOI registry: valid

The value function is steeper for losses than for gains, with a loss aversion coefficient of approximately 2.25.

Gal & Rucker, 'The Loss of Loss Aversion,' Journal of Consumer Psychology (2018)DOI registry: valid

Many canonical demonstrations of loss aversion can be explained by other mechanisms. The evidence for a general loss aversion coefficient is weaker than commonly believed.

Brown, Imai, Vieider & Camerer, 'Meta-analysis of Empirical Estimates of Loss Aversion,' Journal of Risk and Uncertainty (2024)FLAGGED: DOI not in registry

Across 607 estimates from 150 articles, the median loss aversion coefficient is 1.69, confirming losses loom larger than gains but less than the original 2.25 estimate.

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