A while ago, I wrote an article explaining different definitions of value, indicating that people perceive value and worth differently. Behaviour economists and psychologists call this phenomenon the Endowment Effect.

The Influence and Impact of the Endowment Effect

Influence

Several theories attempt to explain the psychology behind the endowment effect, including loss aversion, identity establishment, and status quo preference.

• Loss Aversion: Psychologists believe that people feel more pain over losing something than the joy of gaining something else of equal value. Generally, people don’t like to lose, so they keep items they don’t need because of their perceived high value. Consequently, their homes become full of clutter.
• Identity Establishment: People can develop an emotional attachment to their possessions. These objects then become a way for people to establish their identity. For example, someone who owns various musical instruments might identify as a musician even if they never play or no longer play those instruments.
• Status Quo Prejudice: Some people simply prefer the status quo. They believe their current circumstances are almost perfect. They do not want to change.

Of course, in our consumerist society, marketers take advantage of these biases to encourage us to buy and shop more. For example, many companies offer free trials or free samples of their products and services. Once people start using them, they develop a sense of ownership or entitlement. Then, they are more likely to make a purchase. Software and apps are champions of this sales method, as are subscription boxes (loot bags for grown-ups).

Interestingly, even trying on clothes or interacting with items in the store can influence people to make a purchase. (If you ever wondered why employees at a particular tech store are so happy to teach you how to use their computers, tablets, and phones, now you know why).

Impact

The Endowment Effect causes people to buy more than they should. Additionally, they overvalue their possessions, so they have trouble letting go of them. As a result, they accumulate clutter.

Overcoming the Influence

The first step in overcoming the influence of this cognitive bias is to recognize that it exists. When we acknowledge our emotions are leading us astray, we can use our logical minds to make rational decisions.

If only it were that easy! Here are some tips that can help.

• Visualize Detachment: Use your imagination to visualize your home and life without those objects. Consider creating vision boards or writing in a journal. What does your home look like? How do you feel? What will your life be like? How can you cultivate a new identity without those things?
• Focus on Opportunities: Consider what you could gain by letting go of the items. For example, if you sell an extensive figurine collection, you’ll gain space in your home and spend less time dusting and cleaning.
• Objective Valuation: Determine the value of an item using a third-party appraisal. Research the market value of items through internet searches. Alternatively, ask a trusted friend or family member to do it so you won’t be tempted to look for the highest possible price. Consider hiring a professional appraiser for jewelry, art, antiques, etc.

Finally, call the Out of Chaos team to help. We have over two decades of experience assisting people to declutter and downsize. We are always discreet, confidential, and non-judgemental. We handle everything from start to finish, leaving you with the tools you need to build habits that keep you organized for the long term. Give us a call today.