By: Gabriela Garcia

It was a tragic and heartbreaking story. On March 13, 2010, a woman and her 1-year-old god-daughter were struck and killed by a train as the woman tried to cross the railroad tracks at the North Chicago Metra station while carrying the baby girl in her arms. They were both declared dead.

Witnesses told police that warning bells and lights were fully activated and the train was adamantly blowing its horn, yet the woman still crossed, trying to beat the train. Although all the warning signs were present and clearly visible and obvious to all those in the area, what would make someone do such an irrational thing? Why would this woman, with a baby in her arms, try to cross the railroad tracks when a train was in clear and present danger? As ABC 7 news Chicago points out, the woman was on her way to catch a train into Chicago from the north side. Perhaps she feared she would miss it? However, there were many scheduled trains into Chicago that day, in fact, one every 10-15 minutes. Could an extra 10-15 minutes really have mattered that much?

In the New York Times Bestseller Sway: The Irresistible Pull of Irrational Behavior, authors Ori Brafman and Rom Brafman point out that, "For no apparent logical reason, we overreact to perceived loss." This can apply to anything: loss of time, loss of money, loss of a relationship, etc. Sometimes we get so caught up in focusing on avoiding losses, that we lose sight on maximizing our gains.

For the woman, her perceived loss was being late by 10-15 minutes; the gain that she lost sight of was her and her god-daughter's safety under such a risky circumstance.

This is called loss aversion. Daniel Kahneman and Amos Tversky first introduced this principle of loss aversion in 1979. The theory goes: "Losses loom larger than corresponding gains." To summarize, it is suggested that losses are as much as "twice as psychologically powerful as gains."

Loss aversion creeps into the business world every day. Several business and non-profit organizations face this principal; some consciously some unconsciously. Najera Consulting Group recalls a Texas based client, who kept selling a product that our financial analysis showed to be highly unprofitable. We pointed out to the client that the company would be better off giving customers a $100.00 bill rather than selling the product to each customer that wanted to purchase the product. Why the resistance? The client did not want to lose the immediate "cash flow" (however little) that the product was generating even when they knew by getting out of this product line it would result in enhanced profitability for the company in the long run. The company was committed to continuing down the road that it had always walked, because in the end, there was at least a little cash at the end of the road. To change paths would admit defeat after so much time had been invested in the product. The company's perceived loss: short term cash flow, time and energy invested; the company's gain that it lost sight of: increased profitability down the long road.

It is very easy and comfortable for organizations to remain with the status quo. However, it is imperative for organizations to attain a panoramic view of themselves

Every day we face situations where loss aversion skews our thinking. Some consequences of this can be minor, while other consequences can be tragic. The human brain is a complex and never-ending abyss of thoughts, emotions and senses. We will never fully comprehend its powers; however, when we can better understand forces that can derail our thinking, we can be better at making decisions that will benefit us.