{"id":1122,"slug":"rule-price-in-affordable-loss-terms-not-expected-return","title":"R1 — Price and scope in affordable-loss terms, not expected-return terms; headline = \"maximum you can lose,\" not \"projected upside\"","kind":"rule","scope":"business","status":"current","audiences":["kevin","candid-team"],"topics":["psychology-aversion","entrepreneur-cognition","persuasion-design"],"reference_body":"**Rule:** Every Candid proposal makes the **bounded exposure** explicit before the projected outcome. The headline number is \"maximum you can lose,\" not \"projected upside.\" Pricing structure surfaces the affordable-loss number, not the expected-NPV calculation.\n\n**Why:** Expert entrepreneurs do not maximize expected return ([[sarasvathy-effectuation-bird-in-hand-affordable-loss]]). They set a bounded downside and proceed only if downside is acceptable. The loss-domain value function ([[kahneman-tversky-prospect-theory-loss-aversion-2to1]], [[brown-imai-vieider-camerer-2024-meta-analysis-lambda-1955]]) makes the bounded-loss number the salient anchor whether we surface it or not — surfacing it brings the framing under our control.\n\n**How to apply:**\n- Proposal first line: \"Maximum exposure over the engagement: $X.\"\n- Second: \"Kill points at month 2 and month 4 — no further obligation if metrics aren't hit.\"\n- Third: \"Projected outcome: [the probable upside].\"\nNever lead with the third item. The first two engage the decision rule the buyer is actually using.","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":"sarasvathy-effectuation-bird-in-hand-affordable-loss","title":"Sarasvathy effectuation (2001, 2008) — expert entrepreneurs decide on affordable loss + bird-in-hand, NOT on expected value","kind":"reference","scope":"business","link_type":"depends-on"},{"slug":"brown-imai-vieider-camerer-2024-meta-analysis-lambda-1955","title":"Brown, Imai, Vieider, Camerer (JEL 2024) — meta-analysis of 607 loss-aversion estimates; mean λ = 1.955, CI [1.820, 2.102]","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":[]},"created_at":"2026-05-25T13:13:31.082Z","updated_at":"2026-05-25T13:13:31.082Z"}