Imagine that an electric company wants to build a loud, ugly power line on your property. “How much would we need to pay you to make this happen?” they ask. You would probably demand a lot of money. What if that power line already exists on your property? How much would you pay the electric company to get rid of it? Would you pay the same amount — or less?
Image remixed from Mihai Blanaru (Shutterstock).
Most people insist on a larger payment to build the power line than they would be willing to pay for its removal. This difference is an illustration of status quo bias, a cognitive trait most people share. When presented with a potential change, we usually weigh the potential losses more heavily than the potential gains. This tendency is completely understandable. Unfortunately, it can also prevent you from getting ahead.
Change is ubiquitous in most facets of our lives. On a basic level, you will likely change jobs more often than you might predict. In a recent study, US Bureau of Labor statistics found that the average person in their sample held 11 jobs between the ages of 18 and 46 — meaning a job-switch once every 2.5 years.
In the broader world, economic, demographic and technological changes are forcing us all to cope with change whether we want to or not. The financial crisis of 2008 was not some once-in-a-lifetime event; rather, it was one of six financial crises since 1986. On a longer time scale, an ageing population has slowed economic growth in Japan and Russia; a growing population has played a key role the impressive economic rise of countries such as Brazil and China. Meanwhile, computing power has consistently grown over the past 30 years, changing the way that people shop, learn and socialise, while also making business logistics much more efficient.
So how can you take advantage of a rapidly changing world? You shouldn’t set your career path in stone, or else you’ll be tremendously vulnerable to external events beyond your control. At the same time, if you blow whichever way the wind blows, you’ll get blown over. So how do you embrace change, while still standing for something?
Prepare for change by maximising your options at each step of your career, so that you can be ready to react to whatever the world throws at you. Be proactive. At your current workplace, look for untapped growth opportunities for your organisation. Can you expand the customer base? Or use cloud computing in a new way? If you’re the first to spot a possible new initiative, you’re the likely candidate to lead it.
Get comfortable with uncertainty. No matter your current line of work, you can make smarter decisions by recognising that the future is inherently unknowable. Be wary of “hockey-stick” projections that use facts from the past to predict fast-growing sales or profits far in the future. Those projections rarely take into account factors such as diminishing returns or potential competitors.
Carefully scrutinise mathematical models that use rigid assumptions about the past. For instance, many models for mortgage-backed securities in the mid-2000s relied on default rates from the previous decade, neglecting the fact that many current mortgage products were different in significant ways. These models failed spectacularly when their assumptions were proven false.
Standing for Something
Although change pervades most aspects of our world, two principles have remained the same over centuries: economic fundamentals and personal integrity. It’s easy to get caught up in daily buzz and the latest trends, but these principles are critical for long-term solutions.
In every generation, a group of companies seems to ignore the basic economic fundamentals of profits and losses. In the late 1990s, it was the dotcom companies; many of them shortly went out of business. In the near future, some social media companies might meet the same fate. While growing revenues and alluring ideas can capture the public’s interest, ultimately businesses can only survive if they turn a profit.
Similarly, your friends, colleagues, employers and customers will always put a high premium on your integrity and your reputation. Unfortunately, Warren Buffett was exactly right when he said, “It takes 20 years to build a reputation and five minutes to ruin it.”
So, it’s critical that you establish for yourself a clear code of ethics. Think about not only your ethical strengths, but also your ethical weaknesses. Write down a situation in which your ethics might be tested. What would you do to maintain your integrity in that situation? When in doubt, apply the New York Times test. How would you feel if your actions were reported on the cover of the New York Times?
In sum, be prepared to learn new skills, take advantage of new trends and adapt to unforeseen crises — if you don’t, you’ll be left behind as the world changes without you. But never lose focus on economic fundamentals and especially your own personal integrity.
Embrace Change, but Still Stand for Something [Harvard Business Review]
Robert C. Pozen is a Senior Lecturer of Business Administration at Harvard Business School. His forthcoming book, Extreme Productivity: Boost Your Results, Reduce Your Hours, will be available in October. Follow him on Twitter @pozen.