> These costs can easily outweigh the cost of a bad hire.
How so? You're right that I've relied a good bit on the anecdotal, but aren't you doing so a bit here? Bad hires are ridiculously costly--especially on a small team--because they aren't just expensive. On a good team, almost every new hire lowers everyone else's productivity initially.
Hiring more people because of loss aversion also falls prey to the trap of "more people = more productive" that's been pretty thoroughly debunked in the software industry (http://a.co/3ierKnl)