Welcome to the blog post #123! Click here to read more from previous posts.
A friend of mine has been in the coffee & bakery business for a few years. Her cakes and drinks quickly gained popularity, customers grew, and she expanded into a bigger store with more offerings. But when the economy turned tough in the last two years, her business was hit hard. The store was underutilized, and high operating costs became a burden.
Some close friends advised her to scale down — focus on her best products, cut costs, and move to a smaller, cheaper location. On paper, it was the obvious solution.
Yet she refused. The store wasn’t just a business; it was part of her life, filled with memories of her business journey. She understood the logic of moving, selling unused equipment, but the fear of losing what she had built weighed heavier than the potential gains.
Her struggle made me wonder: why do we resist change, even when the benefits are clear?
Behavioral economics offers an answer. Daniel Kahneman and Amos Tversky described a cognitive bias called loss aversion — people suffer more from losing something than they enjoy from gaining something equivalent.
Later, Richard Thaler coined the endowment effect — people assign extra value to what they already own, compared to what they would pay for the same thing if they didn’t own it.
Put together, we get an equation:
Status Quo Bias = Loss Aversion + Endowment Effect
It made me reflect on my own decisions. Often, clinging to the present isn’t because we don’t see the upside of change — it’s because we fear losing what we already have.
Think of a relationship that brings more misery than joy. An investment held for years, not because of future potential, but because of sunk time and money. Or an old way of working we keep using because it feels comfortable, even when a better approach exists.
Loss Aversion
Loss aversion is when the fear of losing outweighs the joy of gaining. For example, we often rush to buy discounted products — not because we truly need them, but because we fear missing out.
Our brains are wired for survival: losses are perceived as danger, so we instinctively avoid them. That’s why failures or setbacks stick in memory more vividly than successes. Gaining something may feel normal, but losing it feels miserable.
This bias makes change seem riskier than it is, because potential downsides loom larger than potential upsides.
Endowment Effect
Daniel Kahneman, Jack Knetsch, and Richard Thaler demonstrated this in a classic experiment. Participants were divided into two groups. One group received coffee mugs (the “owners”), while the other received nothing.
Owners valued the mugs at about $5.25 (what they’d accept to sell).
Non-owners valued them at about $2.75 (what they’d pay to buy).
Simply by owning the mug, its perceived value almost doubled. This is the endowment effect: we overvalue what we already have, and the thought of losing it hurts more than the prospect of gaining something new.
Status Quo Bias in Action
When loss aversion and the endowment effect combine, they create a powerful pull toward keeping things as they are.
Take BlackBerry as an example. Its leadership overvalued existing strengths — physical keyboards, secure email, dominance in corporate markets. That’s the endowment effect.
At the same time, they feared pivoting too far toward consumer-friendly devices, worried they’d lose their core business customers. That’s loss aversion.
Together, these biases anchored BlackBerry to the past. While Apple and Android embraced full-touch smartphones and app ecosystems, BlackBerry stuck to incremental improvements.
The rest is history: by January 2022, BlackBerry ended phone production and shifted to cybersecurity and IoT solutions.
What We Can Learn
This isn’t just a story of business failure — it’s a mirror for our own growth. Just as BlackBerry clung to its “keyboard identity,” we too may cling to habits, skills, or roles that once made us successful.
But what got us here may not get us there.
Skills that once worked may no longer be relevant. Experiences that once opened doors may fail to unlock the future. The fear of letting go blinds us to what’s possible.
How to Break the Equation
Tackle Loss Aversion
Reframe the question. Instead of asking “What will I lose if I change?” try asking, “What am I losing by staying the same?” By reframing inaction as the bigger threat, you create urgency to act.
Make it safe to try. Not every decision has to be all-or-nothing. Test small, reversible steps — like a minimum viable product in business. Do it fast, fail fast, and learn fast. The fear of loss shrinks when you know you can always adjust.
Challenge the Endowment Effect
Try the fresh start test. Ask yourself: “If I didn’t already have this habit, skill, or role, would I continue to do it today?” If the answer is no, then holding on is not growth — it’s attachment. This question helps separate what still serves your future from what only belongs to your past.
Get an outside view. We all have blind spots. A trusted friend, mentor, or colleague can often see what we’re too attached to notice.
The hardest part of change isn’t seeing the upside — it’s letting go of what we already have.
Once we understand how loss aversion and the endowment effect shape our decisions, we can break free from the status quo and move forward with clarity and courage.
That’s all for today. Till next week!
Cheers,
Do Thi Dieu Thuong