{"id":1090,"slug":"fourfold-pattern-risk-preferences-gc-cognitive-signature","title":"Fourfold pattern of risk preferences — the cognitive signature observed in GC sales conversations","kind":"reference","scope":"business","status":"current","audiences":["kevin","candid-team"],"topics":["gc-vertical","psychology-aversion","behavioral-economics"],"reference_body":"**Claim:** Combining the value function (concave gains, convex losses, asymmetric slope) with the inverse-S probability-weighting function ([[tversky-kahneman-1992-probability-weighting-certainty-effect]]) yields the fourfold pattern of risk preferences:\n\n- **Moderate-to-high probability gains → risk-averse** (prefer a sure $80 to an 80% chance of $100)\n- **Moderate-to-high probability losses → risk-seeking** (prefer an 80% chance of losing $100 to a sure loss of $80)\n- **Low-probability gains → risk-seeking** (lottery tickets)\n- **Low-probability losses → risk-averse** (insurance)\n\n**Source:** Tversky & Kahneman 1992; consistent across decades of replication.\n\n**Confidence:** Verified.\n\n**For Candid — what we actually see:** A GC offered a marketing investment with moderate probability of meaningful upside *resists* (cell 1: risk-averse over moderate-probability gain). The same GC, three months into a failing in-house website build, *throws another month at it* rather than write off the loss (cell 2: risk-seeking over moderate-probability loss — the sunk-cost trap, mechanically driven by the convex loss limb). These are the two cells of the fourfold pattern Candid sees most often. Both are predicted by the theory; both are the empirical signature of prospect-theoretic cognition.\n\n**Implication:** Pitches must (a) anchor on certain rather than probable upside ([[rule-lead-with-certain-deliverable-not-probable-outcome]]) to defeat cell 1, and (b) provide explicit kill criteria ([[rule-engineer-explicit-kill-criteria-into-engagements]]) so engagements don't become future cell-2 sunk-cost traps for the GC.","rationale_body":null,"metadata":null,"links":{"outgoing":[{"slug":"research-brief-risk-aversion-post-failure-may-2026","title":"Research brief: risk aversion, loss aversion, and post-failure decision patterns in GC and trades-business decision-makers (May 2026)","kind":"reference","scope":"business","link_type":"relates-to"},{"slug":"tversky-kahneman-1992-probability-weighting-certainty-effect","title":"Tversky & Kahneman 1992 (JRU) — cumulative prospect theory; probability weighting w(p); certainty effect","kind":"reference","scope":"business","link_type":"depends-on"},{"slug":"kahneman-tversky-prospect-theory-loss-aversion-2to1","title":"Kahneman & Tversky prospect theory (Econometrica 1979; JRU 1992) — loss aversion ratio ~2:1; fourfold pattern; certainty effect","kind":"reference","scope":"business","link_type":"depends-on"}],"incoming":[{"slug":"rule-engineer-explicit-kill-criteria-into-engagements","title":"R2 — Engineer explicit kill criteria into every multi-month engagement; date + metric in writing; converts open-ended commitment to bounded prospect","kind":"rule","scope":"business","link_type":"depends-on"}]},"created_at":"2026-05-25T13:13:30.949Z","updated_at":"2026-05-25T13:13:30.949Z"}