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By:

Rashmi Kulkarni

23 March 2025 at 2:58:52 pm

Loss Aversion Is Why Your Good Idea Fails

Your upgrade is their loss until you prove otherwise. Last week, Rahul wrote about a simple truth: you’re not inheriting a business, you’re inheriting an equilibrium. This week, I want to talk about the most common reason that equilibrium fights back even when your idea is genuinely sensible. Here it is, in plain language: People don’t oppose improvement. They oppose loss disguised as improvement. When you step into a legacy MSME, most things are still manual, informal, relationship-driven....

Loss Aversion Is Why Your Good Idea Fails

Your upgrade is their loss until you prove otherwise. Last week, Rahul wrote about a simple truth: you’re not inheriting a business, you’re inheriting an equilibrium. This week, I want to talk about the most common reason that equilibrium fights back even when your idea is genuinely sensible. Here it is, in plain language: People don’t oppose improvement. They oppose loss disguised as improvement. When you step into a legacy MSME, most things are still manual, informal, relationship-driven. People have built their own ways of keeping work moving. It’s not perfect, but it’s familiar. When you introduce a new system, a new rule, a new “professional way,” you may be adding order but you’re also removing something  they were using to survive. And humans react more strongly to removals than additions. Behavioral economists Daniel Kahneman and Amos Tversky called this loss aversion where we feel losses more sharply than we feel gains. That’s why your promised “future benefit” struggles to compete with someone’s immediate fear. Which seat are you stepping into? Inherited seat:  People assume you’ll change things quickly to “prove yourself”. They brace for loss even before you speak. Hired seat:  People watch for hidden agendas: “New boss means new rules, new blame.” They protect themselves. Promoted seat:  Your peers worry the old friendship is now replaced by authority. They fear loss of comfort and access. Different seats, same emotion underneath: don’t take away what keeps me safe. Weighing Scale Think of an old kirana shop. The weighing scale may not be fancy, but it’s trusted. The shopkeeper has used it for years. Customers have seen it. Everyone has settled into that comfort. Now imagine someone walks in and says, “We’re upgrading your weighing scale. This is digital. More accurate. More modern.” Sounds good, right? But what does the shopkeeper hear ? “My customers might think the old scale was wrong.” (loss of trust) “I won’t be able to adjust for small realities.” (loss of flexibility) “If the digital scale shows something different, I’ll be accused.” (loss of safety) “This was my shop. Now someone else is deciding.” (loss of control) So even if the new scale is better, the shopkeeper will resist or accept it politely and quietly return to the old one when nobody is watching. That is exactly what happens in companies. Modernisation Pitch Most leaders pitch change like this: “We’ll become world-class.” “We’ll digitize.” “We’ll improve visibility.” “We’ll build a process-driven culture.” But for the listener, these are not benefits. These are threats, because they translate into losses: Visibility can mean exposure . Process can mean loss of discretion . Digitization can mean loss of speed  (at least initially). “Professional” can mean loss of status  for the old guard. So the person across the table is not debating your logic. They’re calculating their losses. Practical Way Watch what happens when you propose something simple like daily reporting. You say: “It’s just 10 minutes. Basic discipline.” They hear: “Daily reporting means daily scrutiny.” “If numbers dip, I will be questioned.” “If I show the truth, it will create conflict.” “If I don’t show the truth, I’ll be accused later.” In their mind, the safest response is: nod, agree, delay. Then you label them “resistant.” But they’re not resisting change. They’re resisting loss . Leader’s Job If you want adoption in an MSME, don’t sell modernization as “upgrade”. Sell it as protection . Instead of: “We need an ERP.” Try: “We need to stop money leakage and order confusion.” Instead of: “We need systems.” Try: “We need fewer customer escalations and less rework.” Instead of: “We need transparency.” Try: “We need fewer surprises at month-end.” This is not manipulation. This is translation. You’re speaking the language the system understands: risk, leakage, blame, customer loss, cash loss, fatigue. Field Test: Rewrite your pitch in loss-prevention language Pick one change you’re pushing this month. Now write two versions: Version A (your current pitch): What you normally say: upgrade, modern, efficiency, best practices. Version B (loss prevention pitch): Use this template: What are we losing today?  (money, time, customers, reputation, peace) Where is the leakage happening?  (handoffs, approvals, rework, vendor delays) What small protection will this change create? (fewer disputes, faster closure, less follow-up) What will not change?  (no layoffs, no humiliation, no sudden policing) What proof will we show in 2 weeks?  (one metric, one visible win) Now do one more important step: For your top 3 stakeholders, write the one loss they think they will face  if your change happens. Don’t argue with it. Just name it. Because once you name the fear, you can design around it. The close If you remember only one thing from this week, remember this: A “good idea” is not enough in a legacy MSME. People need to feel safe adopting it. You don’t have to dilute your standards. You just have to stop selling change like a TED talk and start selling it like a protection plan. Next week, we’ll deal with another invisible force that keeps companies stuck even when they agree with you: the status quo isn’t a baseline. It’s a competitor. (The writer is CEO of PPS Consulting, can be reached at rashmi@ppsconsulting.biz )

Fear is the Key

Terrorism, which is a near ubiquitous phenomenon today, raises its ugly and sinister head every now and then with frightening precision and disastrous consequences. Terrorism can be defined as the deliberate targeting of civilians to terminate or lessen their support of their political leaders.


In American military historian Caleb Carr’s controversial ‘The Lessons of Terror’ (2002), he analyses and describes how initially, this method was used by the Romans till the late eighteenth century under the name of destructive war. The Romans indulged in what they called punitive war (military campaigns that were carried out as punishment for treachery or rebellion) which were part of destructive war. These destructive expeditions were implemented to overawe newly conquered people with the fearsome power of Rome and thereby discourage any support for indigenous leaders. Also, there was an imperative need to permit the largely underpaid Roman legions to plunder and rape as a reward for their support and constant presence in the heat of battle.


Rome’s imperialism was replete with devastating warfare against civilians and savagely destructive tactics. This sort of warfare against civilians when waged without provocation resulted in retaliation in kind, and when resorted to for retaliatory purposes perpetuates a cycle of revenge and outrage that can ensue for generations. This is the most observed consequence of warfare against civilians. History suggests that violence is a poor servant and a worse master. Many of Rome’s most formidable rebels were products of Roman training itself. The implication is that states that cultivate violent auxiliaries often discover that such forces cannot be neatly dismissed once their utility fades.


The same pattern recurred later. Christianity and Islam preached restraint, yet emerged amid martial cultures that piety alone could not erase. The Crusades, begun with lofty intentions, degenerated into wars in which civilians became routine victims. Terror, once unleashed, proved self-sustaining.


Medieval Italy offered a milder variant. Mercenary captains (‘condottieri’) raised professional armies not to maximise slaughter but to minimise it. Even so, the lesson was that organised violence rarely remains under tidy control.


Piracy reached its zenith in the sixteenth century because of Spain’s rise to pre-eminence at that epoch, funded mainly by the gold and silver it extracted from the New World after the conquest and decimation of the Aztecs and Incas. Privateers like Sir Francis Drake, in the pay of Queen Elizabeth, first began to raid Spanish commerce with the Americas. Drake however displayed an admirable sensitivity in his dealings with his men and with captured enemies.


Oliver Cromwell, England’s only military dictator, first restored domestic stability and then the international might and prestige of England, all of which had waned under King Charles and the civil war. He accomplished this through strict military discipline. Stern officers drilled soldiers hard, punished them severely for infractions and forced them to wear uniforms.


However, when pursuing royalists in Ireland, Cromwell violated all the rules that he had established at home by violently punishing royalists, their Irish sympathizers and slaughtering civilians. His actions later fostered modern Irish terrorism.


Frederick the Great’s notion of limited conflict gave way, under Napoleon, to total war. Even America was not immune: British depredations in the War of 1812 including attacks on civilians and the burning of Washington, left many American officers convinced that enemies were to be crushed, not merely defeated.


Carr is unsparing about the legacy of 1919. The League of Nations, born at Paris, presided over a peace that humiliated Germany into future vengeance while smothering Arab aspirations under a patchwork of mandates and protectorates. Independence was deferred; Western access to oil was secured. The bill for those arrangements, Carr suggests, is still being paid in a region that has since become a fertile ground for terrorism.


The author ends by stating that the United States, in its war against terror, should not respond to unlimited warfare against civilians with similar behaviour. He also strongly advocates that the United States cease to arrogantly interfere in the internal affairs of other countries by limiting and eliminating covert operations by American intelligence agencies, particularly the CIA. A willingness to “fight a dirty enemy with dirty methods,” could, in Carr’s opinion lead to the collapse of the United States.


Finally, Carr concludes by saying that “evangelical Western capitalism must learn greater restraint and respect for other cultures, and Western governments, specifically the American, must acknowledge that the days of gunboat diplomacy are over. The American armed forces should protect American people, not American business.”


The book’s larger warning is sharper still: terrorism is not defeated by swagger or firepower, but by restraint. History shows that violence indulged abroad has a habit of returning home, usually with interest.


(The writer is a Mumbai based educator. Views personal.)


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