Endowment Effect

The tendency to overvalue what is ours, simply because we feel a sense of ownership of it.

• Holding on to physical items that have no objective value to us.
• Valuing our own opinions more highly than others, because they're ours.
• The IKEA Effect.
• Holding on to assets/investments for too long because of an emotional attachment.

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Key Insights & Principles

Decision Making

1. We feel the pain of losing something we own more than the pleasure of gaining it, which is why we tend to overvalue what we own.
2. Tangible or physical items have a strong endowment effect because they are easily visible
3. People will demand more money in exchange for an item they already own than what they would be willing to pay to obtain it.
4. The endowment effect explains why it is often difficult to declutter.
5. We cling on to things, and the hope that we may find a use for them in the future.
6. Accumulation is costly at any price. Things consume our time, space and energy.
7. Money back guarantees and free trials work in business because people are reluctant to give up what they already own.

1. Be deliberate about objectively valuing the things that you have.
2. For what you don't own ask: "Do I need this?"
3. For what you do own ask: "If I did not own this, how much would I pay to obtain it?"
4. Be cautious about what you acquire.

Book References