Why real ownership builds stronger leadership incentives than options
In cognitive science and behavioral economics, loss aversion refers to a cognitive bias in which the same situation is perceived as worse if it is framed as a loss, rather than a gain.
Daniel Kahneman’s work on loss aversion shows that losing $100 hurts more than gaining $100 feels good.
This distinction matters when we think about ownership and incentives. When people invest their own money, the commitment is real. It often requires a conversation at home—with a partner or spouse—about risk, priorities, and trade-offs. That discussion alone changes the mindset. The investment carries real financial and emotional weight.
Option schemes rarely create the same effect. They usually involve no sacrifice and no downside. If the upside never materializes, nothing tangible is lost. Real ownership creates true skin in the game because real money can be lost—and as Kahneman showed, the pain of loss is a far stronger driver of focus, accountability, and long-term thinking than the promise of potential upside.
