Why we should all fear failure

Martha Gill's Irrational Animals column.

At one point in Ben Ainslie’s first heat he dropped to 11th place. As other boats sped past him, the on-board camera showed him looking more and more put out. But then the sailors changed direction, moving against the wind, and Ainslie began to recover ground. He worked his way up the stretch through sheer strength, moving from tenth to ninth to eighth (although his expression didn’t vary), and finishing the heat in second place.

After winning a gold medal overall (his fourth in four Olympics), he wrote in the Telegraph: “The pressure on me in the build-up was intense. For months – years – I kept getting told I was going to win. No matter how many times I said it wasn’t a foregone conclusion, people kept building me up. That begins to have an effect on you no matter how focused you try to remain.”

As a defending champion, you're in the unpleasant position of trying not to lose, rather than simply trying to win. Yet the effect might not be a bad one. Economists talk about the principle of “loss aversion” – the theory that we care much more about losing than making an equivalent gain. The indignity of being in 11th place at the first mark prompted Ainslie to find a sudden source of strength, and it seems the pressure to defend a title generally might give sports champions an extra motivational nudge.

The economists Devin Pope and Maurice Schweitzer studied this in golf – a sport that will incidentally make a return to the Olympics in 2016. In golf, it is fairly easy to see how you’re doing at each stage of the game, as the number of strokes needed to make a par is fixed for each hole. When a player approaches a hole, he might either be putting to avoid a stroke over par (a bogey) or putting to gain a stroke under par (a birdie).

The researchers looked at 2.5 million near-identical putts by 421 professional golfers (no mean feat) and found that players performed better when trying to avoid a bogey, or a loss, even though the motion of the club was exactly the same.  They calculated that if Tiger Woods had performed equally well for birdies as he did bogeys, he would have improved his earnings by $1m per season. Players fight harder, they concluded, to avoid losses than they do to make gains.

Odd thinking

This strange, asymmetrical thinking is evident in other areas, too, but it isn’t always a good thing. A 2003 study by Ernst Fehr and Lorenz Goette showed how bicycle messengers make silly economic choices just to avoid the feeling of missing their daily target. On days when they are paid more commission per hour, they reach their target earnings quickly and knock off early. On days when pay is low they stay out much later. This isn’t logical. They should stay out longer on days when business is good, and take time off on the slow days. They can’t help themselves, though – they are programmed to focus on losses.

One final example: as Chris Adams of the Financial Times has noticed, Twitter’s attention to the markets seems to rise in inverse proportion to the markets themselves. Bad news is always more interesting than good.

Ben Ainslie. Photograph, Getty Images

Martha Gill writes the weekly Irrational Animals column. You can follow her on Twitter here: @Martha_Gill.

This article first appeared in the 13 August 2012 issue of the New Statesman, The New Patriotism

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.