Disruptive benefits

Featured image: Dave Schumaker/Flickr BY-CC-ND 2.0

How a change of plans and expectations can act as shock therapy to help us properly consider our choices… or not

Imagine you’re going on a city break with your spouse to celebrate a special occasion. You’ve decided to push the boat out and book a suite in a swanky hotel for four nights, but as you arrive, the receptionist tells you that there has been a plumbing problem in the bathroom of your suite, making it unusable. All other suites were in use, but you are offered an ordinary room (at the ordinary price) until the bathroom is fixed plus £200 ($270, €240) in compensation. You are a little annoyed (who wouldn’t be), but it is a fair offer, so you accept.

As it happens, the ordinary room – while lacking the opulence of a suite – is perfectly good, and after a good night’s rest and a hearty breakfast, you cheerfully embark on an exploratory walk around the city. When you return in the afternoon, the receptionist informs you that the bathroom in the suite you had booked has been fixed. You can move into it straight away (and a hotel worker will move your luggage), but if you wish, you can also opt to stay in your current, lower-priced room. What do you do?

A change of perspective

Well, it might depend on the price, but this kind of situation gives you a perspective that you rarely have. When you face two purchase options, your baseline is that you have neither at present, and either spend the smaller amount for one option, or the larger amount for the other one. You compared what you’d get in each room (the benefit) with what it will cost you, and decide accordingly.

But now, you start from a different baseline: you already have the cheaper option, and have the opportunity the pay extra for the more expensive option: you consider the increment in cost with the increment in benefits of the more expensive suite. Chances are that the trade-off works out differently now, and you might no longer prefer the more expensive choice. How come?

Not how much for this, but how much more for this? (image: Club Med/Flickr CC BY-NC 2.0)

Perhaps your mindset at the time of the original booking was so focused on the special occasion that you did not even perform a real cost-benefit analysis: the situation merited an extraordinary choice. But even if you did explicitly compare the different options’ costs and benefits, your focus is now different. The experience of the perfectly adequate cheaper room reframes the perceived value of the posh suite: your choice is now between sticking with the room you have for no extra cost, or paying extra – an amount that you could spend on something else. The larger the difference in price between the two rooms, the more likely you will find better ways to spend the money, and stay put.

And while costs are neatly cumulative (the price of the suite equals the price of the ordinary room plus the difference between the two), that is not necessarily true for the benefit. Seen from your kitchen table at home, the suite may well look better value for money than the ordinary room, but seen from the cheaper room, its additional benefit is not worth the extra cost. There is nothing irrational about this. And so, ending up elsewhere than you planned may turn out to be a rather beneficial disruption, helping you reconsider and perhaps make a better decision than your initial one.

Disruption at work

An unexpected pipe burst in a hotel room is one thing, a pandemic that shocks the global economy in pretty unprecedented ways is quite another one. It certainly imposed two big changes on organizations: the sudden switch to remote working, and the suspension of international business travel.

Remote working did, of course, exist before COVID-19 threw a spanner in the global economy’s works, but in the last 18 months both workers and employers have had an unplanned opportunity to experience what it is like to abandon the old status quo. For many employees that experience has been quite beneficial: no more commuting to work, and much more flexibility to deal with domestic matters without having to take time off. If the employees had their say, more than 50% of them would work remotely at least three days a week, according to one survey in the US (one of very many, most of which tell a very similar story). That would be a major change from the pre-pandemic status quo, though employers may not quite go that far. The same survey found that more than 2/3 of bosses believe that, to retain a strong company culture, their staff would need to be in the office at least three days per week. Yet it is very likely that a new status quo will emerge, quite different from the pre-pandemic situation (according to an American survey, in 2019 only 6% of the workforce worked primarily (at least 3 days a week from home, and 75% had never worked from home).

Business travel too is unlikely to return to pre-pandemic patterns. A survey found that only 1% of companies would maintain or increase their travel budget, while 45% expects to reduce it by 25-50%, and 24% to even more than half.

Why, if boosting flexible working and spending less on business travel is now considered the right thing to do as the economy returns to normal (fourth COVID-19 wave notwithstanding), were those choices not made before the pandemic? The answer is the similar to that in the hotel anecdote: the difference in perspective brought about by a disruption enabled a deliberate evaluation of costs and benefit that was not carried out before.

Scaling up

[Out with the lockdown… and out with the clean air? (image: State Library of Victoria/Flickr CC BY-NC 2.0)

Might it also apply at a larger scale than individuals and organizations? Governments imposed a wide range of measures to stem the spread of the virus, but these had often additional consequences, from a drop in air pollution to a reduction in traffic casualties (not to forget a reduction in cases of other diseases like the ful). Lockdowns led to cleaner air in many cities around the world, with reductions in NO2 directly attributable to the measures ranging from 8% in London to more than 50% in Delhi. While there is considerable diversity across countries, road deaths declined during the pandemic in most of them, with reductions between 2019 and 2020 as high as 26% in Bulgaria (22% in Belgium, 14% in the UK). The flu, usually a considerable killer during the winter months, all but disappeared in 2020 (in the US, 700 people died of it, compared to 22,000 in 2019), mostly thanks to social distancing and mask wearing.

We could look at the relaxation of the specific pandemic measures as a policy change, with benefits (the enablement of economic and social life) and costs (a deterioration of air quality and more deaths on the road). What would the cost-benefit analysis look like? The natural experiment of the pandemic offered policymakers a rare opportunity to actually perform it. But was it actually done, and did the benefits of dropping the restrictions so great that they outweighed the consequences – more air pollutions, and more dead from traffic and disease? Or did nobody bother, because the pull of the old status quo, the old normal is so strong? We may never know.

Still, even though policy makers may ignore the opportunities of a new perspective brought about by a sudden shock, at other levels we can still happily make use of it. Of course, we don’t have to change our mind. The benefit of the disruption is that we are encouraged to think about it – something we probably didn’t do before – and make a conscious choice.

Moreover, the beauty is that we don’t even need to wait until the unexpected happens: with a little bit of imagination, we can pretend we have left the status quo behind already, and overcome our inertia (and maybe our status quo bias) without the downsides of the disruption. Imagine that!

About koenfucius

Wisdom or koenfusion? Maybe the difference is not that big.
This entry was posted in Behavioural economics, Cognitive biases and fallacies, Economics, politics, Psychology and tagged . Bookmark the permalink.

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