Lim Kopi Fridays Videos

Ep. 7 - The Status Quo Bias: Why We Often Stick to What We Know


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Hello everybody, My name is Adrian and welcome to another episode of Lim Kopi Fridays with Adrian. In this episode, we will explore this psychological phenomenon called Status Quo Bias and how it can affect your financial decisions. Let’s dive into it.

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Have you ever encountered a situation whereby you are hesitant to try new things, even though you knew that the new outcome might potentially be more beneficial for you? If you’re experiencing this, the good news is you are not alone. Personally, sometimes, I do feel the same way as well. This is what we call the status quo bias and this phenomenon refers to the fact that we have the tendency to stick to the original way of doing things, to stick to the current situation or scenario, even though, the other option is clearly better.

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Why do we behave this way? Firstly, it’s because it requires less effort for us to remain in status quo and because of the fact that there are a lot of unknowns that comes with change, we are hesitant to take the next step to move out of our comfort zone because that will take more energy, more effort and in return we don’t know what’s the outcome that is going to come for us.

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And that’s why it is human nature to revert to the comfort zone wherever necessary. The second thing is most of us tend to overestimate the risk that comes with change and underestimate the potential benefits that comes with the change as well. With this in mind, whenever there’s a decision that needs to be made, our mind would tell us that this change, even though it’s good

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but there are a lot of uncertainties and our mind will psychologically dissuade us from going into the new direction or to make the change, even though our logical mind will tell us otherwise. Thirdly, we may have some bad experiences in the past whereby the outcome that we wanted with the change doesn’t materialise or it resulted in a bad outcome, in an outcome that is not so welcoming. Because of some of these bad outcomes or bad experiences in the past, it prevent us from making decisions that clearly could have been better if we make the change.

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How then can we overcome this? There are few ways that we can do to really move us out of this status quo situation. The first thing is we may need to seek help from the experts or people who have done that before. By seeking their opinion, we will be better equipped with information that can make us move towards the change instead of staying at the status quo.

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But of course, we have to choose to understand or to listen to whom, because different people can have different opinions which is why it makes sense for us to look for someone who is trusted by people who have trusted before – for some advice.

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The second thing is we have to break the cycle of resistance. Because, we know that there are resistance and one of the ways that we can break the resistance is to incorporate this sort of breaking away from the status quo for decisions that are not so life changing. And because on a day-to-day basis we are making tons of decisions from waking up to buying breakfast, what breakfast do we want to eat, how do you want to go to the office, and how are we meeting our friends and even walking

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which path in front of us, we are all making decisions every day. By incorporating some of these changes into our daily lives that is not so life changing, it help us to build the confidence that can bring us to a higher level whereby when there is a decision that needs to be made that is life changing, that is crucial for our finances, then we will be able to take the leap of faith through the past experience and then jump onto the right opportunity when it comes.

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Last but not least is to set clear goals or clear financial goals if it’s about financials such that we will have an end goal in mind. Because, when we have an end goal in mind, we want to reach our end goal no matter what. And how can we do that? When we encounter a situation where it needs to be changed, then our logical mind that wants to bring us to the end goal may come in to tackle the original mindset of being in a comfortable situation.

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That can probably help us to improve our decision making and break away from status quo. In summary, being in a status quo is common for most people and because of the fact that we made a lot of decisions on the day-to-day basis, some resulting in good outcomes, some not so good But, we should not try to distance ourselves away from change that can potentially benefit us in the long run.

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So some of the ways that we can do is to try to break away from the resistance to give us some confidence. You can seek help from experts and you can also set some clear goals that can bring you from where you are right now to the endpoint that you want to be. So I hope that this helps and you the next time that you want to make another decision again, do think about this and try to break away from the status quo bias.