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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 )

West Bengal’s Dual Power Play

The Mamata Banerjee-ruled state is beginning to look eerily like colonial Bengal’s dual tyranny.

At the height of the British Raj, writer and dramatist Dinabandhu Mitra wrote his classic ‘Nil Darpan’ in the 1860s to expose the brutal economics of empire. His play, a thinly fictionalised account of Bengal’s indigo revolt, portrayed a province ruled twice over: once by a hapless Nawab who held the seals of authority, and again by an East India Company that held the purse, the police and the whip. Robert Clive’s ‘dual government’ inaugurated in 1765, perfected this arrangement. The Company collected revenue and enforced its will, while the Nawab shouldered responsibility for law, order and famine.


Two centuries later, while Bengal is not under foreign rule, the sensation of being governed twice has returned - once by the Constitution, and again by the parallel power structure installed by the state’s ruling political party that has shredded constitutional norms.


Like Mitra’s indigo planters, this parallel power structure – which only answers to the ruling party and not the law - operates with impunity, secure in the knowledge that officialdom will look the other way.


New Duality

The events that unfolded recently in and around the Calcutta High Court were a vivid demonstration of this new duality. The immediate trigger was an Enforcement Directorate (ED) investigation into a coal-scam-linked money-laundering case. That, in itself, was unremarkable. What was extraordinary was the response of West Bengal’s Chief Minister Mamata Banerjee.


She physically stormed the premises, accompanied by senior officers, police and bureaucrats. Laptops, pen drives and hard disks were seized by the state government. A constitutional authority, operating under federal law, found itself dispossessed by another constitutional authority acting in the name of a state.


The premises raided belonged to Indian Political Action Committee (I-PAC), a political consultancy that works closely with the ruling Trinamool Congress (TMC), and to its head, Prateek Jain. Among the documents carted away by Banerjee’s officials were said to be government files. Why, precisely, state records were sitting in the office of a party-linked consultancy is a question that has yet to be convincingly answered. The ED, alarmed, rushed to the High Court seeking urgent relief.


What followed should worry anyone who believes courts are meant to be sanctuaries from the street. The ED’s plea for an urgent hearing was brushed aside.


When the matter eventually came up, a crowd of TMC supporters descended on the court complex. Proceedings were drowned out by slogans and lawyers were heckled. One of the judges, Justice Souvra Ghosh, was forced to walk out, recording in his order that the atmosphere had become “unfit for hearing.”


Brazen Assault

This was a physical assault on the judiciary. Bengal’s third pillar of democracy was literally shouted down by a mob aligned with the ruling party. That the Kolkata police, despite being present, could only partially restore order only reinforced the sense that there are now two systems of authority in the state.


The ED’s petition accused the state’s top police brass, including the director general of police and the Kolkata police commissioner, of stealing evidence and wrongfully detaining central officers. Banerjee’s counter-charge was that the agency was acting as a tool of the ruling Bharatiya Janata Party at the centre, and was fishing for political data ahead of election. Both claims may contain a grain of truth. But the deeper issue is not who is right in this particular quarrel. It is that a constitutional dispute was settled by force.


In January 2024, when the ED raided the home of notorious TMC enforcer Shahjahan Sheikh in Sandeshkhali, a mob attacked the agency, smashing computers and driving officers away. In September last year, a routine army exercise in Kolkata was turned into a political crisis when troops removed a protest stage erected by the TMC. Banerjee accused the Centre of ‘misusing’ the armed forces even as retired officers took to the streets to defend the military’s neutrality.


These episodes have revealed a pattern where central agencies are obstructed and courts are intimidated in Banerjee’s Bengal. Paramilitary forces are politicised. And the state government presents itself as the aggrieved party in every clash.


That is where the analogy with ‘Nil Darpan’ bites. Clive’s dual government worked because the Company could exploit the ambiguity between formal sovereignty and real power. Today, Bengal’s ruling party thrives in a similar twilight. When it suits, it invokes the Constitution and the rights of states. When it does not, it deploys the police, the cadre and the crowd. The result is a polity in which legality and loyalty are no longer the same thing.


Should the Centre respond with President’s Rule, that blunt instrument of constitutional surgery? History cautions against it. Article 356 has been abused often enough to justify scepticism. Yet history also warns of the cost of inaction. When a state’s institutions can no longer protect themselves, the promise of self-government has already been hollowed out.


At the very least, the Supreme Court should step in. The Chief Justice of India has the power to take suo motu cognisance of a breakdown in judicial functioning. Such intervention would be a defence of the idea that disputes in a democracy are settled by arguments, not by mobs.


Bengal has seen what happens when dual power goes unchecked. In Mitra’s time it led to famine, revolt and the slow destruction of rural society. Today the stakes are different, but the principle is the same. A state cannot long endure when its citizens are ruled by two masters, one written in law and the other enforced in practice. If that new Nil Darpan is not shattered, the reflection it shows will only grow darker.

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