The Art of Thinking Clearly: Better Thinking, Better Decisions

See also Black Swan (ch. 75); Neglect of Probability (ch. 26); Base-Rate Neglect (ch. 28);
Availability Bias (ch. 11); Alternative Paths (ch. 39)

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81
WHY YOU GO WITH THE STATUS QUO
Default Effect
In a restaurant the other day I scanned the wine list in desperation. Irouléguy?
Harslevelü? Susumaniello? I’m far from an expert, but I could tell that a
sommelier was trying to prove his worldliness with these selections. On the last
page, I found redemption: ‘Our French house wine: Réserve du Patron,
Bourgogne, $52’. I ordered it right away; it couldn’t be that bad, I reasoned.
I’ve owned an iPhone for several years now. The gadget allows me to
customise everything – data usage, app synchronisation, phone encryption, even
how loud I want the camera shutter to sound. How many of these have I set up so
far? You guessed it: not one.
In my defence, I’m not technically challenged. Rather, I’m just another victim of
the so-called 
default effect
. The default setting is as warm and welcoming as a
soft pillow into which we happily collapse. Just as I tend to stick with the house
wine and factory cellphone settings, most people cling to the standard options.
For example, new cars are often advertised in a certain colour; in every
catalogue, video and ad, you see the new car in the same colour, although the
car is available in a myriad of colours. The percentage of buyers who select this
default colour far exceeds the percentage of car buyers who bought this particular
colour in the past. Many opt for the default.
In their book, 
Nudge
, economist Richard Thaler and law professor Cass
Sunstein illustrate how a government can direct its citizens without
unconstitutionally restricting their freedom. The authorities simply need to provide
a few options – always including a default choice for indecisive individuals. This
is how New Jersey and Pennsylvania presented two car-insurance policies to
their inhabitants. The first policy was cheaper but waived certain rights to
compensation should an accident take place. New Jersey advertised this as the
standard option and most people were happy to take it. In Pennsylvania,
however, the second, more expensive option was touted as the standard and
promptly became the best-seller. This outcome is quite remarkable, especially
when you consider that the two states’ drivers cannot differ all that much in what

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they want covered, nor in what they want to pay.
Or consider this experiment: there is a shortage of organ donors. Only about
40% of people opt for it. Scientists Eric Johnson and Dan Goldstein asked people
whether, in the event of death, they wanted to actively opt 
out
of organ donation.
Making donation the default option increased take-up from 40% to more than 80%
of participants, a huge difference between an opt-in and an opt-out default.
The 
default effect
is at work even when no standard option is mentioned. In
such cases we make our past the default setting, thereby prolonging and
sanctifying the status quo. People crave what they know. Given the choice of
trying something new or sticking to the tried and tested option, we tend to be
highly conservative even if a change would be beneficial. My bank, for example,
charges an annual fee of $60 for mailing out account statements. I could save
myself this amount if I downloaded the statements online. However, though the
pricey (and paper-guzzling) service has bothered me for years, I still can’t bring
myself to get rid of it once and for all.
So where does the 
status-quo 
bias 
come from? In addition to sheer
convenience, 
loss aversion
plays a role. Recall that losses upset us twice as
much as similar gains please us. For this reason, tasks such as renegotiating
existing contracts prove very difficult. Regardless of whether these are private or
professional, each concession you make weighs twice as heavy as any you
receive, so such exchanges end up feeling like net losses.
Both the 
default effect
and the 
status-quo bias
reveal that we have a strong
tendency to cling to the way things are, even if this puts us at a disadvantage. By
changing the default setting, you can change human behaviour.
‘Maybe we live our lives according to some grand hidden default idea,’ I
suggested to a dinner companion, hoping to draw him into a deep philosophical
discussion. ‘Maybe it just needs a little time to develop,’ he said after trying the
Réserve du Patron.