Startup Idea - Earn your money back with loss aversion goal setting


I forget where I read this, it was a few years ago and I’m trying to find the research again right now. The psychology is that people changed their financial behaviors not from when they were given a penny for doing well, but when they had a penny taken away from what they already have by doing bad. So they started out with a certain amount and preferred not to lose it versus started out with zero and strived to earn it.

HackerFinance loss aversion goal setting is a gamification on this psychology with the goal of helping people help themselves.

The user sets a long term goal and the level of “financial pain” they will be charged if they fail to reach their goal.

Here’s an example goal.

My 2019 New Years Goal:

Run 2,019 miles.

Using the Goal Setter setup, I would set a level of pain based on how badly I wanted to achieve the goal. I really want to achieve this goal as I believe running frequent enough to achieve 2,019 miles in a year will improve the relationships in my life. For that reason, I’m going to put a value of $1,000 on the goal. I signup on HackerFinace Goal Setter and Goal Setter tracks my $1,000 loss aversion commitment.

I’m motivating myself by putting $1,000 on the line if I completely failed the goal. If I achieve 50% of the goal and run 1,009.5 miles in 2019, HackerFinance will charge me $500 for failing my goal (painful). If I achieve 75% of my goal (run 1,514 miles) HackerFinance will charge me $250 at the end of the year (painful, but maybe more acceptable than crushing 300 miles in the last two weeks of my goal). If I achieve my goal, I pay nothing to HackerFinance and received the smart goal system using loss aversion for free.

This idea came to me while brushing my teeth a couple minutes ago and I had to get it down, so it has obvious rough edges that I need to figure out.

Why Loss Aversion goal setting?

It’s better to achieve at least 50% of your goal versus 0%. With Loss aversion goal setting you face a rather significant financial loss for abandoning your goal early on. My running goal is a great example of this. If I at least get to 90% of my goal, there’s a great chance some of the benefits of achieving 100% of the goal (increase personal relationships) would have occurred. While I would still have failed the complete 100% of the goal, the benefits of the goal were achieved to a degree. If I abandoned the goal early on and only completed 300 miles of running, there’s a seriously good chance mid year I would pick myself up off the couch and get outside to save myself the pain of a $700 bill coming up. That impending pain would force me to get closer to 100% of my goal.

Documenting my research: - about reward based systems - closer to the research I remember reading

“the responsiveness of ordinary citizens to incentives is demonstrated daily in our economy. Consumers cut consumption in reaction to the “penalty” of a price increase and raise purchases in reaction to the “bribe” of a lower price. The price system efficiently allocates scarce resources precisely because it rewards people who conserve and penalizes those who fail to respond. Can it be true, as Kohn seems to think, that people respond to monetary incentives when they spend their income but not when they earn it?”

What’s really wild is how my brain works, I can’t remember the book this psychology was referenced in, but I can remember where i read the specific story - It was walking in the morning in Santa Monica. I can almost remember the weather, the temperature, walking out of the yard gate and the direction (to the right) in which I traveled on that mornings walk. I’m using these pieces to place what book I was reading at that time and I think this ends up being during my Tony Robbins readings. So I’ll have to dig through which book of his I was reading and maybe that gets me closer to the study.

“Also, Larkin believes that awards are more effective when they recognize good behavior in the past, rather than behavior going forward. Plus awards for past performance aren't likely to see as much gaming, he says.”

This would be a good example of how with hacker finance goal setting, you are being rewarded for a constant pursuit towards your goal vs paying you only on past performance.

Getting closer!

Reward vs. Punishment: What Motivates People More?

“Turns out, your employees will work harder to avoid a loss than to seek a gain, according to research.”

Nailed It! Found it. Success!!! Loss aversion goal setting by Hacker Finance now I have the original study and now I have the exact book, tony Robbins Unshakeable is where I originally came across this loss aversion.


It turns out this idea is not original or different enough. After some review on loss aversion based goal setting I found a solid competitor.

Here’s some great evidence based research on the concept:

"losses loom larger than gains"

I could focus on a specific niche, such as sports based goals and integrate with device trackers like Garmin and Strava, but those platforms already have mature goal setting offerings: