We are all naturally lazy. Even if we are excited or energetic about something, we revert to laziness once the thrill has worn off. This is the principle behind the behavioural finance concept of “Status Quo bias”.
Advertisers and Marketers trap us with this every day. How many of you have ever signed up for a gym membership? What generally happens is that we go for a while and then stop. We think: “I’ll start again once …(fill in the blank)… occurs. In the meantime, we continue to get billed for months before doing anything about it.
I have a rather embarrassing story myself, from when I started an Internet store. I paid a SEO company to do Search Engine Optimization to help with search engine ranking. I was billed every month, for a couple of months without any Sales or change in search engine visibility. Basically, I was depositing money into their bank account every month for doing nothing. Took me a while to stop the service, but in that time, they had been filling their coffers with my hard-earned money. This is “Status Quo bias” hard at work.
How can we make this work for us?
Status quo bias can also be turned around and used to our own advantage. The basic principle is to set up something that would have a positive effect on our lives and then make it mildly annoying to get out of.
Here is an example:
Have your employer direct-deposit 5% of your take-home pay into a savings account. You will notice that after a while you will not even miss the deduction. If you really need to, you can reverse the transaction, but this generally never happens because it is a pain in the you-know-what to do. Meanwhile your savings are merrily growing into a significant amount. You can do the same trick with investment and retirement accounts.
What other ways can you think of to use Status Quo Bias to your advantage?