370. Rethinking Business as Usual: Adapting Strategy for Changing Times (Refreshed Episode)

Welcome to episode 370 of the Brainy Business Understanding the Psychology of why People Buy Today's episode is all about Normalcy Bias.

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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's episode is Digging in on Normaly Bias. I will of course get into what the normaly Bias is and why it matters throughout the episode, which is refreshed from an episode that initially aired on March 26, 2020. Enough said, right? But the reason I'm refreshing this today is so exciting. It's because of my guest on this upcoming Friday's episode. C.A. sunstein is here to discuss his new book, Look Again, which he co authored with Tali Sherritt, whose research on optimism bias has been showcased on the show often as well. I am so excited about this episode.

Cass is also a co author of.

Nudge, so even if you don't recognize the name, you definitely know the work if you're here. He was so nice and fun to talk to. I can't wait for you to hear that one. So if you haven't already subscribed to the Brainy Business podcast, now is a great time to do so. As you listen to this episode on Normalcy Bias today, consider all the things that were once novel and are now somewhat mundane, that have lost their color and sparkle.

Why is that?

Why do we crave normal but not appreciate it when we have it? There is of course an interesting twist on this when you listen. Since this episode first aired at the very, very beginning of the COVID 19 pandemic, before knew anything about what was ahead of us and it went on much longer than many of us expected. And I think it makes for a really interesting backdrop as you think about the things you currently love as they are and how we all talked so much about the new normal and what that has meant over time. Really fascinating stuff and a fun way to re listen to this episode and get ready for Friday's conversation with Cass. Don't forget that there are links for everything, including past episodes, books and articles, all waiting for you in the show. Notes for this episode, which are found within the app you're listening to and atthe brainy business.com 370. All right, let's talk about normalcy Bias.

Normalcy bias is the tendency for the brain to believe that everything will be normal and to wait for things to be normal again. In times of crisis or change, this impacts both sides of a change. First, that we don't want to believe that things will ever happen or be different. The mentality pre crisis is that because something has not happened to us before, it will not really happen that things will remain normal. This is why even though people know they should have an emergency kit or protect their identity by shredding every document or use different super complex passwords for every login, or that they feel comfortable speeding while driving because they don't normally get pulled over or into an accident, it's easier to assume things will stay the same and remain normal than to picture this change actually happening. This is what you expect and so it's easy to plan for things to always be normal. That combines with availability bias, where the things we hear about and experience more often have more weight and feel more likely to be true and than those which are less common. And also time discounting. It's easy to put things off and wait until tomorrow, especially when we don't think they'll actually happen or be a problem. Both of those past episodes, availability bias and time discounting are linked for you in the show notes. Before something happens, even if there's a lot of data to show us that it will happen, we have a hard time actually preparing for it in the way that we should. And it doesn't need to be a big negative change like a pandemic or earthquake or fire in the server room. This happens for other small changes as well. Just because customers have always bought your product in a certain way or employees have always worked together in that way, doesn't mean the change will not come around. This is the reason disruptors are able to come in and upset an entire industry in a way that the public looks at and says how did any of those other businesses not think of this? It's because those in the industry are too close. There's normalcy bias telling them that things will always be this way or that they have plenty of time and so they get comfortable and have a hard time taking the step back to look at how things could be different. A disruptor is able to see things those within the industry never could because they aren't subject to the same constraints of the brain. Netflix, Airbnb, Uber, Amazon and so many more, all able to change entire industries by not being constrained by normalcy bias. Could the CEO of Blockbuster or anyone on their team have seen the opportunity and created the Netflix business model. In theory, yes, once you know about normalcy bias, it is possible to break free of it when needed, but it takes effort. I attended a session at a conference once, probably almost 10 years ago now. That's scary, but I went to the Content Marketing World conference and the speaker was Jeff Charney, the CMO at Progressive who's responsible for creating the character Flo into the mega icon. She is, and before that the Aflac duck. So this guy knows messaging and not, for lack of a better term, it's just going with the flow of normalcy bias at a company, even a big giant corporation, that has a lot of how we've always done things. Even though I heard him speak seven or eight years ago, I still remember that presentation and him talking about how he has come up with such amazing ideas. He said he fires himself every 12 to 18 months and that everyone else.

Should do the same.

Think about when you start a new job. You come in and look at everything with fresh eyes. You want to make an impression and make sure you do a good job. You're taking the time to learn everything, how departments work together, the types of questions customers ask. You're asking questions and learning and wondering why do we do it that way? After a little while, you get into a groove, normalcy bias sets in and you get comfortable and expect things to stay the same within your role department, company, industry, and the global marketplace. If you were to fire yourself every year to 18 months and come into your job as if you were just hired, you can reset some of that and not get complacent now that things truly have changed for us all. With the coronavirus pandemic, we're having to take a critical look at our businesses the way we've all always done things. The norm, the way we set up our companies may not truly be an option anymore. As an example, I built the brainy business around a lot of public speaking and in person consulting. I had a whole lot on the calendar for 2020 that has basically evaporated overnight. Normalcy bias led me to expect that that type of business would always be wanted, in demand and available to occur. And while it's still wanted due to social distancing and travel restrictions, it simply isn't an option right now. And so a shift is needed to diversify during this time in a way that still aligns with the vision and intent of my business. Every business should be doing this now, and even when we aren't presented with a big obvious shift in the environment, it's important to shake things up and fire yourself. Take that real look at what you're doing in your business and what might be going away later on, what could happen to make sure that you're preparing for all these different catastrophes, things that could be happening, big changes you're not ready for until you think about them and prepare for them, diversify. You're not going to be ready to weather those storms. I'm going to put a pin in this for now, and I'm going to continue the story of the actions for my own business and how you should be looking at yours. And after explaining the flip side of normalcy bias so you already know that normalcy bias makes it so we all don't properly prepare for or anticipate a big change. The other side of this is that once change is thrust upon us while we're in the midst of it, we cling to normal more than ever. The brain sort of grieves for what used to be, what it was used to, and its inclination is to ride out the storm until things are normal again, even if it's clear that normal will never be that normal again. It's really hard for our brains to see and accept that. To keep the grief analogy going, we essentially go into denial about the change. It's just a temporary setback, you might say, or let's see how this plays out. Or I'll just work on some of this busy work until things get back to normal. Have you said these things or thought them either recently during the coronavirus pandemic or otherwise? Me too. That's because it's our brain's natural tendency to have this normalcy bias. All our brains love the status quo and what they're used to. You've heard me talk about that often on the show before. Now I want to give an example of how I've seen normalcy bias play out in the financial industry also for the better part of a decade. When I started at the credit union in 2010, mobile apps were starting to become much more commonplace and digital payments were in constant conversation. I attended conference after conference where the message from the stage was, your financial institutions need to come up with the solution for this. You want and need to be first to get ahead of the digital curve. The mindset and response from those in the audience was, we should wait and see. Let someone else take that risk and we can follow quickly after once their model is out in the world. To be fair, a lot of the financial institutions at these events were Too small to bring on global change. Trying to be at the forefront of this type of trend would be a huge investment. And the fear was that you'd get something created and then a big guy would come in with different technology and render all that useless overnight. So it was better to wait. Then eventually the message was that one of these big companies, Apple, Google, Walmart, Amazon, they're gonna be coming out with a digital payment option and that whoever was first would define the space. So the rest of the industry needed to be watching closely and ready to act when that change came. Last year when Apple Card was announced, a lot of those in the industry got scared and started to panic a little bit. This led to me doing an episode about Apple Card, which is included for you in the show notes. But as I say, in that episode, pretty much everything that Apple put into their credit card could have been done by any financial institution, not just the biggest competitors out there. They had the data saying that people don't like fees and don't really care about interest rates, but didn't create a card that touted no fees ever, in many cases, due to normalcy bias and hurting. And everyone else does it this way. It's always been this way, we've always done it this way. Mindset kept them from creating this card first. So when Apple Card came out via an announcement that the card would be coming in the next six months or so, did all the financial institutions take the opportunity that they said they would to jump on the bandwagon and get their no fees ever credit card out and available, possibly even before Apple Card hit the proverbial shelf?

No.

While I can't speak for every financial institution out there and say with 100% certainty that no one did this, the vast majority did not. Instead, they let normalcy bias set in and say, let's just wait and see if people actually want to adopt this thing or if things go back to normal. This desire to wait and see, to weather the storm, see how many you lose when you're in the midst of change, is normalcy bias keeping you stuck. And if you aren't careful, it can cause you to miss the boat and your business could be in serious trouble. In the case of Apple Card, which complements Apple Pay, the digital payment option, it hasn't seen the wave of acceptance and adoption that would upset industries, at least not yet. But in doing a quick search, I found estimates showing that 2 and a half to 3 million cards were issued in the first three months, many of them early borrowers. And those getting credit cards for the first time, which is a demographic a lot of financial institutions are very interested in. Right now, those people are choosing Apple over another lender, and that's important and something to keep in mind as time goes on. If those financial institutions had offered their own no fees ever credit card before Apple Card came out, would they have been competitive and kept or brought on some of those customers or members to their own financial institution? Possibly. But normalcy bias kept them waiting, hoping and looking to see what would happen. Now let's get back to the story of my business and yours and how we're all being impacted by normalcy bias. Now for my company, my brain is constantly wanting to say things like this is a temporary setback. Conferences will be back in full force soon enough. They'll still need speakers and I'll be here when they're ready. In the interim, I'll get caught up and ahead on content. And while that might be true and I can be here to speak when there are conferences again, I can't rely on that being the case. My business model needs to adapt to the possibility that there may only be a few conferences in the coming months. The question to ask myself is what if I can't earn any more income from speaking or in person consulting for the next 18 months? What does that look like? Preparing for this scenario is hopefully an overstatement. For all of our sakes, I hope things do get back to normal and much sooner than that time frame. However, if it it doesn't, sitting and waiting for things to be normal is not in the best interest of my business. This is the time to look at other opportunities. What can be done virtually? Why would someone choose to work with me in this environment? Why is behavioral economics a necessity for business success and worth investing in what product lines can be added that people can access from home, including existing courses and the membership group, plus adding more of those books or other worksheets, templates or tutorials that are available for purchase electronically. And the next step is Just because these are easy for me to create, it doesn't mean that they're things people want to buy right now. So I also need to make sure that I'm investing time and energy into what's the best fit for the market. What do people want and need, and where does that coincide with with my expertise? And assuming everything does go back to a version of normal soon, how will this be able to be maintained into the future state? How does anything I do now align with the brand I've built and want to maintain over the next five to ten years and beyond. The good news is I have some time to focus on these projects now that I'm not traveling for the next two and a half months as previously expected. And as with the advice from Jeff Charney, I could have fired a line of business at any time and asked these questions without there having to be a big global shift that made it an immediate concern. Just like firing myself, Firing a line of business is important to say, what if this was gone? Would I be okay? From time to time, having too much reliance on any particular product line, client or type of service is always something that needs to be reviewed. Diversification is important in any business, and one of the things that keeps us from ever really tackling this looming problem is Normalcy bias. The signs could all be pointing to this being a problem in the future, but we expect things will remain normal, will have time, and once they do change or become threatened, we underestimate how long there'll be a problem and expect things will get back to normal quicker than they actually do.

So what got your brain buzzing as you learned about Normalcy Bias today? For me, as I mentioned in the intro, I'm so glad that this episode got a chance to have another moment in the sun. Everything that came out in that early 2020 time period, especially late March and early April, got get lost in the shuffle. But at any time of our lives, Normalcy Bias is really important. Something I'm so excited to say you're going to be hearing much more about in this upcoming Friday's episode with Cass Sunstein, where he will be sharing about his new book, Look Again, the Power of Noticing what Was Always There. This book shares why we habituate and what could happen if we regain sensitivity to both the great and and the terrible things in life. Yes, believe it or not, we want to do both. And you'll hear all about that on Friday.

It's going to be so good I.

Can'T wait to share it with you. In the meantime, check out the show notes for the episode with links to related past episodes like Optimism Bias, featuring the work of Cass's co author Tally Sharat, and some episodes from the Nudge series, as well as my episode on Sludge, another great book from Cass.

It's all waiting for you in the.

App you're listening to and at the brainy business.com 370 and just like that, episode 370 on normalcy bias is done. Join me Friday for a brand new episode with Cass Sunstein to discuss his new book, look again. 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 be thoughtful.

Thank you for listening to the Brainy Business Podcast. Molina offers virtual strategy sessions, workshops and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness.com.