2. What influences me?
3.2.2 · 35–55 minutes · reflect, test, discuss, review
2. What influences me?
Explore this area: What influences me?
2. What influences me?
Likierman elements: Trust + Feelings and beliefs
Understand why you trust a claim and how emotions, values and social pressures affect your view.
Trust with reasons
Trust concerns both people and information. Ask about expertise relevant to this claim, incentives, transparency, track record and independent checks. A prestigious role, fluent AI explanation or eight articles repeating one release is not enough. An incentive is a reason to investigate the evidence, not proof of dishonesty. A trustworthy person can be mistaken; a disclosed conflict does not settle whether a claim is true.
Notice the personal stake
Excitement, fear, loyalty, status, belonging and a desire to be right can influence what you notice and how you interpret it. Values also shape legitimate objectives: two people can reach different supported decisions because their purposes differ. The aim is to notice and examine these influences, rather than pretend to remove every emotion or label a classmate’s personality.
Area workshop · What influences me?
You like DailyCup’s founder. A popular classmate recommends it, a podcast guest holds shares, and an AI summary repeats the guest’s forecast. Build a trust map: distinguish each source’s role, possible incentive, original evidence and independent verification. Privately record one influence on your initial confidence.
Make your own attempt before opening feedback.
Area workshop model response
Separate the founder’s operating knowledge, the classmate’s opinion, the guest’s expertise and financial interest, and the AI’s unverified summary. Check original forecast assumptions and independently reconciled data. Ask whether all sources share one origin. Affection, prestige or a disclosed holding should prompt transparent checks; none alone proves or disproves the thesis.
Private reflection: Whose confidence affected mine? Which feeling or belief influenced the evidence I sought, and what safeguard helped?
Likierman · six elements explained by London Business School
Public LBS explanation checked on 1 November 2026. Six elements are attributed to Sir Andrew Likierman; the three-area grouping and investing exercises are On Judgement adaptations, not his published model or an endorsement.
Andrew Likierman · Judgement at Work: Making Better Choices
Publisher book page. The full book has not been reviewed; teaching uses the publicly explained six-element framework with original examples.
What you will learn
- Explain how a reference point can shape a gain or loss.
- Distinguish feelings about losses from current value.
- Reassess a hypothetical holding with forward-looking evidence.
3.2 · The Human Side
The Human Side
The Human Side · the work you will do
- 1What do I know?
- 2What influences me?
- 3How do I act?
- 4Record and review
Before you begin
Your first decision
In a fictional portfolio, you bought 100 shares at £10 each. They now trade at £7. Your first thought is, “I will sell when I get back to even.” A classmate who has never owned them asks whether £7 is a good price today. Why do the questions feel different?
Record your first answer before continuing.
Video coming soon · about 3 minutes
Losses and Reference Points
Use the narration below while the recording is being made, then try the decisions in this lesson.
Read the full narration
In a fictional portfolio, you bought 100 shares at £10 each. They now trade at £7. Your first thought is, “I will sell when I get back to even.” A classmate who has never owned them asks whether £7 is a good price today. Why do the questions feel different?
In this lesson, notice what affects your own judgement. You do not need to invest real money or share personal financial information.
The holding is worth £700 today. You might compare that with the £1,000 you paid, the £1,200 it was once worth, or what £700 could buy elsewhere. These are different reference points. Notice which one controls your reaction before you decide which is useful for the decision ahead.
Losing money can feel more powerful than gaining a comparable amount. Kahneman and Tversky’s prospect theory helps explain why the framing of gains and losses can change choices. You may have heard that losses hurt twice as much as gains feel good. Treat that as a popular simplification, not a fixed ratio for everyone or every situation.
Your 100 shares are currently worth £700, whether or not you sell. A sale changes what you own and can involve fees or tax. It does not cause the whole £300 decline at that moment. The business does not know your purchase price, and needing £10 to feel better does not make a recovery more likely.
Would you choose this holding now, given its prospects, current price, risk and alternatives? Your entry price can matter for records, tax and constraints. It cannot, on its own, tell you whether the shares are attractive. Holding and selling can both be reasonable. Support the action with current evidence, rather than a need to undo an uncomfortable feeling.
Pause for the worked example and the choices. Use the feedback to improve the explanation, then apply it to the fictional case. Keep your first view as well as any revision.
Did “getting back to even” influence your answer? Rewrite the recommendation without using your purchase price as the reason.
Your starting point changes the story
The holding is worth £700 today. You might compare that with the £1,000 you paid, the £1,200 it was once worth, or what £700 could buy elsewhere.
These are different reference points. Notice which one controls your reaction before you decide which is useful for the decision ahead.
Research and nuance
A purchase price, recent high or expected outcome can become a reference point. The same current holding may feel different when described as a loss from entry or an opportunity from today’s price. Kahneman and Tversky’s prospect-theory framework examines choices expressed around gains and losses. It helps frame questions about investor behaviour; it is not a rule that identifies the right action for every person.
Notice the pull of a loss
Losing money can feel more powerful than gaining a comparable amount. Kahneman and Tversky’s prospect theory helps explain why the framing of gains and losses can change choices.
You may have heard that losses hurt twice as much as gains feel good. Treat that as a popular simplification, not a fixed ratio for everyone or every situation.
Research and nuance
People can respond differently to comparable gains and losses, depending on framing and context. The popular phrase “losses hurt twice as much” is not a fixed law for every person, stake or decision. Do not diagnose bias from a pupil’s answer to one hypothetical choice. Ask which reference point is being used and whether it is relevant to the forward-looking question.
The value has already fallen
Your 100 shares are currently worth £700, whether or not you sell. A sale changes what you own and can involve fees or tax.
It does not cause the whole £300 decline at that moment. The business does not know your purchase price, and needing £10 to feel better does not make a recovery more likely.
Research and nuance
If 100 shares fall from £10 to £7, their current market value is £700 rather than £1,000. Selling changes the form of the holding and may have costs or tax consequences; it does not create the whole economic decline at that instant. Returning to the old entry price is not a cash-flow mechanism. Current business prospects, price and alternatives remain central.
Make the decision from today
Would you choose this holding now, given its prospects, current price, risk and alternatives? Your entry price can matter for records, tax and constraints.
It cannot, on its own, tell you whether the shares are attractive. Holding and selling can both be reasonable. Support the action with current evidence, rather than a need to undo an uncomfortable feeling.
Research and nuance
Entry price can matter for records, taxes or constraints, but does not by itself establish future value. Holding after a fall can be sensible when the current evidence supports it; selling can also be justified. The useful question is what action now fits the owner’s objective, costs, risk and opportunity set. Write the argument without relying on a need to break even psychologically.
The recovery arithmetic
The base changes after a loss
Why does a 30% gain fail to reverse a 30% loss?
A hypothetical holding of 100 shares falls from £10 to £7 per share. Ignore distributions, fees and taxes. Calculate the decline and the percentage rise needed from £7 to return to £10.
- Initial cost £1,000; current value £700; change−£300, or−30%.
- Required rise from £7 is(10−7)/7=42.857%, about 42.86%.
- A 30% rise from £7 would reach £9.10, not £10.
The asymmetric percentages follow from different denominators. They do not establish whether holding or selling is the better decision now.
Put it into practice
1. Compare two frames
Describe a hypothetical current value £700 as a decline from £1,000 and as a current choice between the asset and £700 cash. What is shared and what differs?
Write your response in your workbook before opening feedback.
Compare with a model response
The current resource and forward prospects are shared. The historical reference and possible tax/transaction context differ. Consider both without assuming one framing proves bias.
2. Start fresh
Write a fresh appraisal at £7 using future evidence, estimated value, cash needs and alternatives.
Write your response in your workbook before opening feedback.
Compare with a model response
Explain current prospects, relevant valuation uncertainty and portfolio constraints. Purchase price alone is not the thesis. Accept hold, sell or defer pending evidence when justified.
3. Correct a slogan
Respond to “I have not lost anything until I sell” and “losses always hurt exactly twice as much”.
Write your response in your workbook before opening feedback.
Compare with a model response
Market value has already declined economically. Recognition/tax and cash realisation are separate. Responses to loss vary; no universal multiplier or individual diagnosis follows from the slogan.
Notice your own judgement
Did “getting back to even” influence your answer? Rewrite the recommendation without using your purchase price as the reason.
Original On Judgement teaching. Research and further reading: Likierman; Kahneman and Tversky; Yale teaching.
Jargon buster
Reference point
The comparison against which an outcome is treated as a gain or loss.
Loss aversion
Giving losses greater weight than comparable gains in a stated context.
Framing
How a decision is described or presented.
Unrealised change
A market-value change before the holding is sold.
Break-even attachment
Focusing on recovering entry price rather than current prospects.
Forward-looking appraisal
Comparing available actions using current evidence and future consequences.
Knowledge check
Make each choice on the page. Feedback explains the reasoning. Use Try again after revisiting an idea.
AQA connection and further reading
AQA 7138 applied links: AO 2–AO 4 evidence, analysis and evaluation (4.2); uncertainty and change (3.3.4), with quantitative interpretation in Annex 6 where used. Named psychological effects and calibration methods are investing enrichment, not specified AQA content. Classroom exercises illustrate processes; they do not diagnose individual traits.
AQA 7138 specification
Primary curriculum reference; links and original classroom rubrics are interpretive, not endorsement.
Likierman · six elements explained by London Business School
Public LBS explanation checked on 1 November 2026. Six elements are attributed to Sir Andrew Likierman; the three-area grouping and investing exercises are On Judgement adaptations, not his published model or an endorsement.
Andrew Likierman · Judgement at Work: Making Better Choices
Publisher book page. The full book has not been reviewed; teaching uses the publicly explained six-element framework with original examples.
Kahneman and Tversky (1979) · Prospect Theory
Primary research for reference-dependent risky choice; not a universal fixed loss multiplier. Advanced optional reading.
Understand yourself as an investor
Which reference point shaped your reaction? Rewrite your current choice without making recovery of the entry price the objective.
Keep this reflection private unless you choose to share. Use evidence from the fictional exercise; no personal finances or fixed investor-personality label is required.
Take forward
Explain how a reference point can shape a gain or loss. Distinguish feelings about losses from current value. Reassess a hypothetical holding with forward-looking evidence.