Do you own a smartphone? Chances are that you’re reading this on a smartphone or a tablet.
One of the most interesting thing about these smartphones is that they allows you to customize everything – data usage, app synchronisation, phone encryption, even how loud you want the camera shutter to sound.
How many of these customization settings have you used? In my case – almost none!
Although I’m not technically challenged, but do suffer from, just like most of the other human beings, a cognitive bias.
Earlier in the latticework series, I wrote about Do Something Bias. It’s a cognitive bias where people get an urge to take action or make unnecessary decisions when ‘not doing anything’ is required.
Now let’s turn the table, and talk about a bias which is exactly opposite of Do Something Bias. It’s called Status Quo Bias. The tendency of people where they don’t do anything and continue to maintain the current state of affairs.
If we could boil down this cognitive bias to a more fundamental body of knowledge, it would be Physics. I am sure you must have heard of Newton’s laws of motion. The first law of motion states –
An object either remains at rest or continues to move at a constant velocity, unless acted upon by an external force.
This characteristic, called inertia, is exhibited by all physical bodies. And when it comes to human behaviour, this tendency manifests in the form of Status Quo Bias.
Here is a very intriguing case study which Dan Ariely, author of wildly popular book Predictably Irrational, mentions in his blog post –
This graph shows the percentage of people, across different European countries, who are willing to donate their organs after they pass away. When people see this plot and try to speculate about the cause for the differences between the countries that donate a lot (in blue) and the countries that donate little (in orange) they usually come up with “big” reasons such as religion, culture, etc.
But you will notice that pairs of similar countries have very different levels of organ donations. For example, take the following pairs of countries: Denmark and Sweden; the Netherlands and Belgium; Austria and Germany (and depending on your individual perspective France and the UK). These are countries that we usually think of as rather similar in terms of culture, religion, etc., yet their levels of organ donations are very different.
So, what could explain these differences? It turns out that it is the design of the form at the DMV. In countries where the form is set as “opt-in” (check this box if you want to participate in the organ donation program) people do not check the box and as a consequence they do not become a part of the program. In countries where the form is set as “opt-out” (check this box if you don’t want to participate in the organ donation program) people also do not check the box and are automatically enrolled in the program. In both cases large proportions of people simply adopt the default option.
This default effect caused by Status Quo Bias on human behaviour is so strong that a whole discipline of ‘choice architectures design’ has evolved around this idea of creating intelligent default options in different policy frameworks and various human interfacing systems.
If you really want to learn more about choice architecture, Nudge by Richard Thaler is an excellent book to read. Thaler writes …
People have a more general tendency to stick with their current situation… [It] has been demonstrated in numerous situations. Most teachers know that students tend to sit in the same seats in class, even without a seating chart. But status quo bias can occur even when the stakes are much larger, and it can get us into a lot of trouble.
…Those who are in charge of circulation [magazine subscriptions business] know that when renewal is automatic, and when people have to make a phone call to cancel, the likelihood of renewal is much higher than it is when people have to indicate that they actually want to continue to receive the magazine.
So next time when you apply for a new credit card and later figure out that you have been enrolled for couple of unnecessary “premium services” (which you of course don’t remember opting for), then don’t be surprised because the credit card application form probably had those options selected by default and you were actually required to specifically opt out of them.
An intelligent but manipulative practice. These very dubious tactics makes me feel that the credit card industry is largely evil.
In his awesome book Seeking Wisdom, Peter Bevelin writes…
We prefer to keep things the way they are. We resist change and prefer effort minimization. We favour routine behaviour over innovative behaviour.
The more emotional a decision is or the more choices we have, the more we prefer the status quo. This is why we stick with our old jobs, brand of car, etc. Even in cases where the costs of switching are very low.
…We are more bothered by harm that comes from action than harm that comes from inaction. We feel worse when we fail as a result of taking action than when we fail from doing nothing.
We prefer the default option, i.e., the alternative that is selected automatically unless we change it.
Of course people don’t blindly go with the current status. It’s only when they are either confused about the options or there is an uncertainty with a decision, that they choose to stick with the current state of affairs.
Shane Parrish, in his wonderful blog Farnam Street, writes …
What happens when people are presented with difficult choices and no obvious right answer? We tend to prefer making not decision at all-that is, we choose the norm.
In high-stakes decisions many options are better than the status-quo and we must make trade-offs. Yet, when faced with decisions that involve life-and-death trade-offs, people frequently remark “I’d rather not think about it.”
In other words, when faced with a complex decision, people tend to accept the status quo, as reflected in the old adage, “When in doubt, do nothing.”
What’s the reason behind this cognitive bias?
Behavioural scientists believe that Loss Aversion Bias could be the culprit here. Any kind of change in the status quo brings the possibility of disruption in your comfort zone.
“The present may stink, but I still don’t want to lose it,” This is how we comfort ourselves when we face a need to change.
Several investors fall in love with their stocks in the garb of “buy and hold”. So they tend to protect the status quo by inventing new reasons to hold onto a dud investment. They will remain stuck in a status quo mode because they hate to admit they’ve lost money.
Talking about status quo bias in the context of making the most efficient use of capital, Warren Buffett writes …
We are free of historical biases created by lifelong association with a given industry and are not subject to pressures from colleagues having a vested interest in maintaining status quo. That’s important: If horses had controlled investment decisions, there would be no auto industry.
Benefits of Status Quo
I might have created a very negative picture about Status Quo Bias. It isn’t that bad either. It’s something which mother nature and evolution has ingrained in our psyche so it must have some purpose after all. There are some upsides to this bias too.
The noted psychologist, nobel laureate and the father of behaviour economics, Daniel Kahneman, writes in his book Thinking Fast and Slow …
Loss aversion is a powerful conservative force that favours minimal changes from the status quo in the lives of both institutions and individuals. This conservatism helps keep us stable in our neighborhood, our marriage, and our job; it is the gravitational force that holds our life together near the reference point.
Nassim Taleb, in his book Antifragile, argues that Status Quo bias has been made to look unnecessarily bad and it can coexist with Do Somethings Bias. He writes …
Few understand that procrastination[possibly caused by Status Quo Bias] is our natural defence…I use procrastination as a message from my inner self and my deep evolutionary past to resist interventionism[do something bias] in my writing. Yet some psychologists and behavioural economists seem to think that procrastination is a disease to be remedied and cured.
Psychologists document the opposite of interventionism, calling it the status quo bias. But it seems that the two can co-exist, interventionism and procrastination, in one’s profession (where one is supposed to do something) and in one’s personal life (the opposite). It depends on domain. It is a sociological and economic problem, one linked to norms and incentives rather than mental property.
One of the ways in which Status Quo can be exploited for your benefit is to start an investment SIP. The reason SIP works is because once it’s setup people aren’t willing to take the pain of changing or stopping the SIP.
Don’t Let Status Quo Kill Your dreams
Status quo bias holds a lot of relevance in how we live our lives. Most of us born in a middle-class family, and with protective parents, must have heard and experienced endless stories of the dangers of being curious, standing up, standing out or breaking the tradition.
Believe it or not, this bias manifests in minor things like taking the same driving route, shopping from the same old store, using the same old brands coffee, soap, toothpastes and washing powder. Deliberately building habits and consciously creating routines is a nice hack to simplify life and focus on important things but please understand that following a set pattern unconsciously could ruin the possibility of a promising future.
Settling for the status quo is living for something less than God desires for us. It’s not the way you make your dreams come true. The defender of the status quo appeals to the known against the unknown, to the bird in the hand against the bird in the bush, to present possessions against future dreams, to established precedent and well-tried methods against all kinds of dangerous innovations.
“Dreamers have no respect for the status quo.” says Steve Jobs in this famous ad by Apple…
May be it’s the time to question your assumptions about career, work, money and relationships. I hope you’re not running your life on autopilot mode.
“Only one thing would be worse than the status quo. And that would be for the status quo to become the norm.” – Elizabeth Dole, 1999 campaign speech
Remember that deciding to do nothing is also a decision. And the cost of doing nothing could be greater than the cost of taking an action.
So how do you overcome Status Quo Bias?
One trick is to periodically revisit your processes and ask whether they are serving their purpose.
The 19th Century British biologist Thomas Henry Huxley said:
Perhaps the most valuable result of all education is the ability to make yourself do the thing you have to do when it ought to be done whether you like it or not. It is the first lesson that ought to be learned and however early a person’s training begins, it is probably the last lesson a person learns thoroughly.
Take care and keep learning.
Wonderful article..Amazed to see how our choices are driving by our tuning of mind to stick to status quo.
Besides financial knowledge you provide, you also write very beautifully about the human brain. That is why, I like coming to this blog.
Have you read any book by V. S. Ramachandran ?
Anshul Khare says
I remember seeing a TED talk by V.S. Ramchandran. Although I haven’t ready any of his books.
Article is excellent, but a small correction in the First quote it is not Newtons third law, it is First law.
Thanks and regards
Anshul Khare says
Thanks Vijay. I have fixed the error.
I’m studying mental models, and I really enjoyed reading your article Anshul.
I especially liked the part: “Don’t let Status Quo kill your dreams”. I will revisit my routines and daily choices to see If I can reach more desirable outcomes by changing them.
Anshul Khare says
Great to know that Glenn. Happy learning!