Example: Retirement savings plan: most people pick an asset allocation and stick with it.
Insight: People have a strong tendency to go with the status quo or take the default option.
Insight: Loss aversion is one explanation for the tendency to stick with the current situation.
Insight: One of the causes of status quo bias is a lack of attention, it can make us mindless, passive decision makers.
Reference: William Samuelson and Richard Zeckhauser: named status quo bias for the tendency of people to stick with their current situation.
Definition: The preference for keeping things the way they are.
Examples: Leaving money in a bank account rather than investing it at a higher return, staying in a lower paying job rather than switching, failing to sell an investment before a price drop, delaying a purchase only to see the price rise.
Insight: The status quo bias is in part a demonstration of satisfaction or happiness with the present situation.
Insight: Most people want to avoid the pain of regret. Decisions to change impart a higher level of responsibility that doing nothing, as a result people are averse to sticking their neck out.
Definition: The tendency to continue doing something simply because we have always done it that way.
Example: Work systems including employee evaluation methodologies.
Insight: We can overcome the status quo bias by employing "zero-based budgeting": every expense and item in the budget must be justified from scratch, rather than using the past years figures. Use this principle to allocate resources based on current needs, not history.
Principle: Be aware of the status quo bias.
Principle: Apply zero-based budgeting.
Example: Sticking with house wine, default phone settings.
Insight: People crave what they know and will stick with it, even if change would be beneficial.
Insight: Loss aversion is a reason for the status quo bias.
Insight: Human behaviour can be changed by changing the 'default' setting.
Reference: Richard Thaler and Cass Sunstein in Nudge: a government can direct citizens by including a default choice - most people will follow this.
Reference: Eric Johnson and Dan Goldstein: making organ donation the default option increased donation from 40 to 80 percent.
Example: Automated savings, or pension enrolment.
Insight: Creating a new status quo can be a way to positively change behaviour, which can be applied to ourselves, or in business: (1) determine the behaviour you want (2) make the desired behaviour the default option.
Definition: People's tendency to prefer things to stay the way they are.
Example: Luke Skywalker not initially wanting to go with Obi Wan to Alderaan.
Insight: People tend to change only when a certain threshold of pain is reached.
Definition: The desire not to change anything.
Insight: Savings can be increased when we overcome the status quo bias, and take actions to automate increases in savings when we experience salary increases.
Definition: People stick to what they have unless there is a compelling reason to switch, or sometimes despite there being a good reason.
Reference: Economists William Samuelson and Richard Zeckhauser: named status quo bias.
Definition: Generally we want to keep things as they are.
Insight: Change is seen as difficult and painful.
Insight: Decision makers can often be excited about new initiatives, but reluctant to divert resources away from existing business units or projects.
Definition: The human preference for things to remain as they are.
Key Insights & Principles
Decision Making
People have a strong tendency to stick with the status quo or take the default option.
The tendency to stick with the status quo can make us passive decision makers.
We can overcome the status quo bias when we are forced to justify decisions, like the zero-based budgeting method.
We can use our bias for sticking to the status quo to our advantage, to increase savings for example.
Aim to justify each decision, and be aware of adopting the default when it is not the best option.
Use defaults to embed positive habits or decisions.
