Why are so many of us resistant to change?
Now this might not be all of us. I’m sure some love to get out of a routine and tackle different challenges. But I’m sure you know people who drag their feet when they’re forced to do something different.
According to the Harvard Business Review (HBR), there are 10 reasons why we resist change. But instead of going through all 10, let’s just look at five.
The first is loss of control. ‘Change interferes with autonomy and can make people feel that they’ve lost control over their territory,’ the HBR writes.
‘It’s not just political, as in who has the power. Our sense of self-determination is often the first thing to go when faced with a potential change coming from someone else.’
The second is due to excess uncertainty. ‘If change feels like walking off a cliff blindfolded, then people will reject it,’ according to the HBR.
‘People will often prefer to remain mired in misery than to head toward an unknown. As the saying goes, “Better the devil you know than the devil you don’t know.”’
The third has to do with surprise. Now, I don’t need to tell you that surprises aren’t always good. The HBR explains:
‘Decisions imposed on people suddenly, with no time to get used to the idea or prepare for the consequences, are generally resisted.’
Fourth is unfamiliarity. Change brings something different. Whether that difference is good or bad, our routine is jolted in an uncomfortable way.
And fifth has to do with losing face. ‘By definition, change is a departure from the past,’ HBR writes.
‘Those people associated with the last version — the one that didn’t work, or the one that’s being superseded — are likely to be defensive about it.’
So what does this all have to do with investing?
Well, often investors believe the immediate past will be exactly what happens in the future. We are always looking back in the rear view mirror and whether it looks bad or good, we tend to assume things will stay the same.
Since 2008, equity markets around the world have enjoyed amazing runs. Of course they were coming off lows made during the financial meltdown. However, should we now consider that this long run bull market could soon come to an end?
While our market, All Ordinaries, hasn’t moved up much this year, the S&P 500 is up more than 12% year-to-date and investors continue to pile in. As reported by The Australian columnist, Byron Wein:
‘Everyone is aware that the economic expansion and the bull market have continued for a long time. Equities bottomed in March of 2009 and the US economy began to strengthen in June of that year, so we have been in a favourable period for investing for more than eight years.
‘Cycles usually do not last this long. We all know it can’t go on forever, but I believe we could continue on a positive course for several more years.’
But what if Wein is wrong? What if investors at large are wrong? I’m sure many just want the bull market to continue and are deathly afraid of any change on the horizon. Don’t follow the masses and be complacent. If there is a coming financial crisis, be prepared.
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Junior Analyst, Markets & Money