142. Status Quo Bias: Why Change Feels Terrifying, a Behavioral Economics Foundations Episode

Welcome to episode 142 of the Brainy Business Understanding the Psychology of why People Buy Today's Behavioral Economics Foundation's episode is about status Quo Bias. Ready? Let's get started.

You are listening to the Brainy Business Podcast where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now, here's your host, Melina Palmer.

Hello. Hello everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. Today we will be talking all about Status Quo Bias. This is perhaps one of the most foundational foundations there is. It truly is at the center of so many biases and heuristics the brain uses to make decisions, which is why you've heard me talk about it a lot on the show. Most recently I talked about this on episode 139 on the endowment effect. And that's because these two are commonly combined with loss aversion to come up with a trifecta that keeps us stuck. The episode on the Endowment Effect and a link to an article with authors including our two Nobel laureates, Kahneman and Thaler on the trifecta of loss aversion. The Endowment Effect and Status Quo Bias are linked in the show notes along with other Great Episodes articles and your free freebie worksheet so you can take notes and begin applying your learnings from today's show right away. Those show notes can be found within the app you're listening to or atthe brainy business.com142 now let's talk Status Quo bias. You may be wondering why I said status quo bias is like the foundation of all the foundations. And to explain that, I want to revisit how the brain works. All our brains have a conscious and subconscious processing working concurrently all the time. Amongst behavioral economists and behavioral scientists, these are most commonly referred to as the fast and automatic system one, what I call subconscious, and the slow, more deliberate system two, what I call conscious processing. While we would all like to think we're in control most of the time and that our uber logical conscious brains are running the show, in reality the subconscious is in charge 99% of the time. If we use the analogy of a computer, it can process 11 million bits of information per second compared to only about 40 bits in the conscious brain, 11 million to 40 is a pretty terrible ratio. The subconscious is like a gatekeeper we or a receptionist. When you want to get a meeting with a busy executive, it's constantly scanning the world around you to determine what is worthy of those 40 bits of processing power. Only the most crucial things make it through the filter. But everything else still needs to be dealt with. Decisions still need to be made, and the average person makes 35,000 decisions every single day. So how does the subconscious make decisions to help you get through your Life? If only 40 out of 11 million bits of information can make it to the conscious brain every second, There are millions of little microchoices being made every single second. As an example, your eyes scan the environment around you three times every second. You may think you're focused on the street in front of you or looking at your phone, but that focus is broken up with a constant scan to ensure you're safe and preparing for what's coming up ahead of you. Your conscious can't be bothered with normal checks three times every second. And that's just one of the many things going on at any given time. So how does the subconscious decide so quickly that something should be considered normal, and if so, what to do in that instance? It does this by using biases and heuristics or rules of thumb, Things that have worked in the past that it believes apply to that specific situation by a millisecond choice. Those biases and heuristics, the rules of the subconscious, are what the fields of behavioral science and behavioral economics are built on, understanding them and using them to predict behavior. With the subconscious making 99% of the decisions and those being based on rules for what has worked well in the past, we can know that the subconscious really likes for things to be predictable. Your brain wants to have, as much as possible, processed by your subconscious because it's more efficient, it uses less energy, it's faster, and it thinks it knows best. Because the subconscious is a creature of habit and predictability, it isn't surprising that it has a very strong bias for the status quo. Change is scary because the subconscious doesn't like things it doesn't already have a rule for. It can't make decisions about those things and will therefore send them to the conscious brain for long, tedious processing as far as it's concerned, until it has been done enough times to become a rule, and it can be in charge of that choice once again. In that way, our penchant for the status quo is really rooted in the way the brain works for making any decisions to protect all those other rules and biases. So the subconscious can remain in control as much as possible. The status quo can change based on whatever we've become accustomed to, and that can change greatly over time. When we're presented with a change, we often become nostalgic, not wanting to lose out on what we have now. Because that fear of the unknown, the what if, is scary. This is the classic graduation goggles phenomenon. Most people hate high school and likely complain about it for the majority of the time they spend there, saying things like, ugh, I can't wait to get out of here, or when will this nightmare be over? That happens until there's maybe a month left of school and you start to realize that change is coming. It's inevitable now. You may be moving states or to another country for college, or having to go out and find a job and new friends or a significant other move out on your own for the first time. That's a lot of change. And all of a sudden you become really nostalgic for what you're going to leave behind. Every walk down the hall has a this is one of the last times I'll do this vibe, and you might start to say, you know, this wasn't that bad. Or even go so far as to start saying these were your golden years and I'm going to miss this place. You know, that place you've hated for four years and couldn't wait to get out of. So what happened? Of course, you know, it's status quo bias. Now that the change is upon you, the stuff you know and are used to looks pretty darn good. This same phenomenon can make it hard to leave a job for a new one. Even if you get a great offer, you start to second guess and your brain will convince you of all the great stuff you've got going for you. A promotion that might be just around the corner, or a new level of vesting in your retirement, or your friends that are there or whatever. You also see this in relationships. This feeling that the devil you know is better than the devil you don't is inherent in the choices we make every day to maintain the status quo. Taking the same route to work, ordering the same food from a restaurant, buying the same toothpaste, and even brushing with the same hand in the same way every single day, wearing the same staples when you've got a closet full of unworn options. These are all examples of habits born out of our bias toward the status quo. When researching for this episode, I found an interesting article in Psychology Today which is of course linked for you in the show notes@thebrainybusiness.com142 and it talks about a thought experiment from two different angles. I'm going to read this piece from the article for you here. To help show how powerful this bias can be, consider this thought experiment from the renowned philosopher Robert Nozick. Suppose there was an experience machine that would give you any experience you desired. Super duper neuropsychologists could stimulate your brain so that you would think and feel like you're writing a great novel or making a friend or reading an interesting book all the time. You'd be floating in a tank with electrodes attached to your brain. Of course, while in the tank, you. You won't know that you're there. You'll think that it's all actually happening. Would you plug into this machine for life? For most of us, our intuition is to say no. We might say something like there's more to life than pleasure, and cite the importance of our relationships with loved ones and connection to reality. And perhaps that's true. But consider this variant on the above proposal. It's a Saturday morning, and you're planning to stay in bed for at least another hour, when all of a sudden you hear the doorbell. Grudgingly, you step out of bed to go open the door. At the other side, there is a tall man with a black jacket and sunglasses who introduces himself as Mr. Smith. He claims to have vital information that concerns you directly. Mildly troubled, but still curious, you let him in. I'm afraid I have some disturbing news to communicate to you, says Mr. Smith. There's been a terrible mistake. Your brain has been plugged by error into an experience machine created by neurophysiologists. All the experiences you've had so far are nothing but the product of a computer program designed to provide you with pleasurable experiences. All the unpleasantness you may have felt during your life is just an experiential preface conducive toward a greater pleasure. For example, when you had to wait in that long line to get tickets for that concert, remember? Unfortunately, we just realized that we made a mistake. You are not supposed to be connected. Someone else was. We apologize. That's why we'd like to give you a choice. You can either remain connected to this machine and we'll remove the memories of this conversation taking place, or you can disconnect. However, you may want to know that your life outside is not at all like the life you have experienced so far. What would you choose? This question comes from an experiment by Philippe de Brigard, a researcher at Duke University, who challenged the intuitions many of us hold when we read the original Happiness Machine thought experiment. One might think that individuals, when faced with the choice between reality and simulation would consider contact with reality to be critical, and therefore a clear majority of people would opt to exit the machine. However, when when DeGregard posed this question to participants and measured the responses, he found the opposite result. Among the respondents, 59% said that they would prefer to remain connected to the machine, while only 41% said they would prefer to be disconnected. The result of this study has interesting implications for the way we think about our capacity for change and our preference for the familiar. The article goes on from there, but as I said, it's linked if you want to check it out. So what about you? Did your opinion toward the Experience machine change from one story to the next? Did the thought of leaving all you've become accustomed to behind, even if it meant leaving fiction for reality, feel stressful in a way that you might not have expected? This shows you just how powerful status quo bias can be in our lives. Wanting to keep things the same or feeling immense stress or fear about the idea of starting something new doesn't mean the old thing is better or that the new thing is worse or a bad decision. It just means that it's new and you know that already. That's probably what drew you to the opportunity in the first place. One thing I tell my clients to do is to embrace that feeling when you're looking to start something new and spend all your time planning and get ready to pull the trigger and start to question yourself and get scared. And you likely will then remind yourself this is a natural reaction of your brain to keep itself safe and predictable. It doesn't mean the decision is bad or that you're on the wrong path. If you were looking to do something new and have done the due diligence, embrace that feeling as a good sign and move forward with confidence. It'll become a habit before you know it and be a new status quo you can't imagine living without. The pandemic has been a huge time of change for all of us. There are many examples I could use from this time, but let's just focus on virtual meetings and remote work. How many people said they couldn't meet with clients virtually that they couldn't sell without being in person, or that it it wasn't possible for the company to function without having staff physically present together in the office? That was a lot of status quo bias talking. It would have been some work and transition to make that change happen. And when it wasn't absolutely necessary, it was easier to say it was too hard or wouldn't work when it had to happen, and fast, it miraculously worked. Luddites began embracing Zoom and Slack and Microsoft Teams. Now, if those same people were with a mandate to go back to the office from nine to five every day and be in meetings in person and have to commute, does that feel like a terrible shift? That's way worse than the freedom to work from anywhere and have more flexibility in your schedule. In many cases, yeah. This has become the new status quo and the idea of giving it up isn't exactly appealing. There are always exceptions, but there are also lots of people who don't ever want to go back to work in an office environment. A massive forced shift in circumstance caused essentially everyone on earth to have their status quo bias shaken up in a way that we had to try new stuff to find a new normal. Solutions that were once unfathomable are now easy. There are a couple of lessons for you here in your business. First is looking at yourself and your teams. When presenting changes, it may feel like a new approach can't be done, or that you may worry that if people resist change when it's first brought up that they will never get on board. That's generally not the case. When the status quo shifts, our bias will move along with it. Some people may choose to not go with the company shift, but that's okay if they aren't a cultural fit anymore. If there's a new direction the company needs to take to stay relevant, it's important to important to make that change and make it so it's non optional so that status quo will actually shift. Also, it is important to always put in the effort to communicate as best you can. I teach a class on change management and internal communication at Texas A and M through the Human Behavior Lab, which is one of the core classes for the Certificate in Applied Behavioral Economics. So if you want a bunch of insights on how to apply BE concepts to big changes like this, I recommend signing up for that class. There is a link in the show notes. Just know that there are ways to work with the biases of the brain so they will be less impactful when presenting change. And if you do that well, people will generally adjust to the new norm and establish a new bias toward that status quo. That being said, it's important to note that when we're overwhelmed, when there's a lot going on, or if people are presented with a lot of choices, they tend to defer to their existing status quo and really hunker down on it. So when people are already stressed and overwhelmed and overworked, it isn't a great time to present a change in their status quo. Instead, be thoughtful and aware of the circumstances, and if you can wait until a better time, maybe when a project is completed or when you can relieve some of that stress, it will make a really big difference for you. I've also linked to the episode on Change Management from the podcast, in which I talk about how a slight shift in the way that you present a change can make a difference so that the trifecta works for you instead of against you. And I use the example of getting people to change their desks, which is something that's been notoriously problematic for a lot of businesses around the world. So looking at those sorts of changes and considering the status quo in the right way can make a really big difference in whether people are on board early or not. And know that when you are presenting a really important change, it is important to make sure that it becomes the new status quo for people and that they can get used to it, and that there aren't a lot of ways or options that they can revert to something that you don't want them to be using anymore. The next category to consider are your customers. They're absolutely influenced by status quo bias as well, and there are times when it works in your favor and others when it doesn't. I talked about this in the episodes on Habits and my interview with Wendy Wood, which you can check out Again. They're linked in the Show Notes. It's very important to consider the context of your relationship with the customer when determining how to present information for them and which way to use status quo bias. When someone is your existing customer, you are the status quo. They are likely to stick with you and prefer staying to going somewhere else when you're already the established brand they use. Status quo bias can work in your favor if something goes a little off kilter. The effort to change and fear of the unknown, and if it might be worse, will nudge people to generally stay where they are unless things get really bad if you bombard them with lots of ads for new products or encourage them to shake things up and switch to a new item that you're offering. Too often you might just be nudging them to go look for someone else and move everything to a competitor. One article I've linked for you in the show Notes shares a study which found that messaging that reinforces the customer's natural propensity for status quo bias increased their intention to renew by 13%. And when a more provocative message was used, it increased switching by 10%. The way you frame your message is really critical and a subtle shift in the way you talk about the status quo can mean a huge swing in retention rates. So in general, when communicating with existing customers, you want to remind them that you're the status quo, even if you're talking about adding a little something on top but not making it seem like it's a whole big move or a shift. And of course, it is important to watch for when customers might have their status quo shifted already and know that is a great opportunity for a new business to swoop in and encourage them to switch. This can be both to your benefit or your detriment. If someone is your customer and something has shifted their status quo, it's a good time to reinforce why they should stick with you and offer something to encourage them to stay before someone else persuades them to leave. On the other hand, if someone is not your customer and they've had something shift their status quo, it's a great time to message them and encourage them to give you a try as they're more likely to do so at these times. And whatever you do, make sure the messages are clear and not too confusing. Don't include too many choices or too much extra stuff, because as I already said, when people get overwhelmed, they're more likely to go with the status quo. That same article said that 60% of deals are lost to no decision, as opposed to being lost to the competition. That means if you can show why you are a fit and make it easy to do business with you in a clear and concise way with potential customers, you can make it so status quo bias isn't as much of an issue and potentially close sales an extra 60% of the time. So a pretty big motivator. Now to summarize what you learned about status quo bias in this episode. And don't forget your freebie worksheet waiting at the brainy business.com142 along with all those great links in the show notes the first most important thing to remember is that status quo bias is a foundation for a reason. It is firmly rooted in the way our brains work and it will always be present. You need to be mindful about what you want to try and shift for both yourself, your peers and your customers. And don't attempt to take on too much at once when you are looking or planning for a change. Know that the feeling of fear as you get close to pulling the trigger on it doesn't mean you're on the wrong track. In many ways. It can be a good sign and a reframe to realize that is a valuable thing and it can make a big, big difference in pushing through changes your subconscious brain might resist when considering Status Quo Bias as you look at selling to customers or presenting changes to a team at work, consider the context. What is their existing status quo? Is it you or someone else? Has it already been upended or do you need to put in some work to shift it? If they're a new client, of course you're seeking, or do you need to put in some extra work to help retain them? If they are an existing client and across the board, make all the communication and processes as clear and frictionless as you can so people don't get overwhelmed and bury their heads in the status quo sand. Too much information, choices or confusion means the likelihood they will do nothing and not work with you. If you aren't at a point where you can be taking notes now, don't forget to grab that freebie worksheet@thebrainybusiness.com 140. It'll keep you on track and give some simple reminders so you won't have to rewrite them. And just like that, episode 142 on status quo Bias is done. Next week I'll be joined by Michael F. Shine to talk about how hype can be a great thing for business and some of the 12 rules from his book the Hype Handbook to use it for your advantage. It's going to be a lot of fun. You don't want to miss it. Until then, thanks again for listening and learning with me, and remember to be thoughtful.

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