Status Quo Bias

Status Quo Bias is also called as Do-Nothing Syndrome.

We prefer to keep things the way they are. Why?

  1. Less or No effort(physical and mental)
  2. Worried by harm that comes from action than the harm that comes from inaction.


I am a Software Engineer and I add a lot of new features to the existing code. Some of the existing code will be very hard to read/maintain and I had patched the same code over and over instead of refactoring it. Why did I do that? The fear of breaking the existing functionality and introducing bugs by refactoring the code(Status Quo Bias In Action).

Auto Insurance

We prefer the default option, i.e. the alternative that is selected automatically unless we change it. Excerpt From “Seeking Wisdom From Darwin To Munger

In a real-life experiment on auto insurance rates car drivers in New Jersey and Pennsylvania were given the choice of a limited right to sue for pain and suffering in exchange for lower insurance rates. But the default option was different for each state. Car owners in New Jersey were automatically given the limited right unless they made an active decision and said differently. In Pennsylvania, the default option was the full right to sue. What happend? Citizens of both states preferred the default option. 79% of New Jersey drivers preferred the limited right to sue, whereas 70% of Pennsylvania drivers preferred the full right to sue. The difference in amount spent on insurance in the two state was about $200 million.

Organ Donation

Over 99% of the people in Austria are willing to donate their organs after death. Only 4% of the people in Denmark are willing to donate. Why is their a huge difference? It turns out that it is the design form at the DMV.

In Austria this is set as “opt-out” i.e. people have to check this box if they do not want to donate their organs. In Denmark as you have already guessed it is set as “opt-in” i.e. people have to check this box if they want to donate their organs.

Mutual Funds

In the excellent book ‘The Little Book That Builds Wealth‘ – Pat Dorsey, talks about ‘Switching Costs’ as one of the 4 moats. Excerpt from the book

Back in financial services, asset managers have switching costs that are somewhat analogous to those of banks. Money that flows into a mutual fund or wealth management account tends to stay there – we call these sticky assets – and that money generates fees for many years. For example, during the market timing scandals in the mutual fund world, even when some asset management firms were caught doing blatantly illegal things, most retained enough assets to remain solidly profitable, despite legal costs and investor redemptions.

What should I do

Deciding to do nothing is also a decision. And the cost of doing nothing could be greater than the cost of taking an action. Remember what you want to achieve. Warren Buffett’s Noah Principle

“Predicting rain doesn’t count; building arks does.”