The Boomerang Effect

What a time the human race is going through. Nobody would have ever thought the world will nearly come to a standstill. Expectedly, there are two contrasting perspectives, pro lockdown, screw the economy, and save lives or get busy living, let us see what happens. Time will tell if the former approach is right or balanced, but for now, it appears that enough damage is done, it is actually savage. Been itching to write my perspective on this, but will save it for another day. Most businesses have suffered, a few got away with minor scratches on the back. We are one of the impacted parties, selling software to restaurants to improve their profitability and efficiency. An investor once told me,” Dude, as such SaaS is tough in India, plus you are selling to restaurants, it is like milking a bull”. Essentially, he meant that it was a dead end. But we know how some entrepreneurs are; crazy, rebels, dreamers, paranoid, go-prove-the-world-wrong deranged lunatics.

Anyway, as this juggernaut moved, it left us and our customers with more than just a gash. One of the burning questions is what will transpire post lockdown, will businesses in certain sectors ever live to see the light? Specifically, restaurants. And what about government and her people? Here’s my take based on psychology. 

Reactance psychology:

Reactance is unpleasant motivational arousal (reaction) to offers, persons, rules, or regulations that threaten or eliminate specific behavioural freedoms. Reactance occurs when a person feels that someone or something is taking away their choices or limiting the range of alternatives. For at least a few more weeks, the lockdown, either in full or in part, will continue. Now, will people go back to restaurants or will they be paranoid? 

There isn’t an easy answer to this, but if I go by what people have been through, my bet is they will. The greater the proportion threatened or eliminated, the greater will be the total level of reactance*. People have been bottled and confined to their 4 walls for far too long and humans love entertainment. What are the avenues available today? 

‘But we can already with confidence that density is not an enemy in the fight against the coronavirus’

Malls, movies and more importantly, restaurants. Well, wait. Restaurants have a lot of people, what if we get infected? As per this blog from World Bank, density isn’t playing a part in transmission. Enough literature has been written about hygiene, sanitation post lockdown. We can be reasonably sure restaurateurs will be smart enough to handle those with adequate measures. After all, if something wrong happens they’ll have to face the music. 

*It is to be noted that women did not conform to the theory of resistance, as much as men did, according to a study by Hammock and J. Brehm. In fact, it had no overall effect on them, even when their freedom to choose was taken away. Well, this study was in 1966, so chances are this might have changed today, at least a sizeable percentage.

Boomerang effect and cognitive inertia:

Psychologists have also coined a term “Boomerang effect”, sort of an offshoot of reactance theory, according to Wikipedia it “refers to the unintended consequences of an attempt to persuade resulting in the adoption of an opposing position instead”. If we add cognitive inertia to above concepts, one can then potentially argue that contrary to the current belief that people won’t visit such places, they might end up doing just the opposite. Historian Tom Dicke, explains cognitive inertia as a factor for group behaviour during the 1918 Spanish flu in the US. 

Restaurants weren’t doing great, even pre-Covid days, margins were already in single digits, aggregators were alligators, taking a good bite. About 27% of the restaurants were anyway shutting down within a year of operations, in the normal scheme of things. In a few months, we will see about 20% of the existing restaurants going down. This was a pure cash flow business and not a lot of them have the cushion to survive. Whatever the demand is, this will drive business to existing ones, bigger brands who were associated with high quality and trust will attract more people, whilst the smaller ones will have to make extra efforts in terms of marketing to tell the story that they’ve changed. Those who loathed home delivery or registering with third-party aggregators will change their strategy. Menus will have to be engineered to optimise for delivery, pricing adjusted to compensate for aggregator margins. 

Problem with Predictions:

Predictions create an illusion of certainty. They act on human psychology of safety and certainty, particularly when so-called ‘experts’ do. Future is simply unknown, whether it is stock market, economic crashes, business sentiments. But humans love guarantees and loathe risks. Today, we have hundreds of people (including my supposition above) signing paeans about how some business will do well and how others will be decimated. Time will always have the answer, though in future. As Bertrand Russell said, “The demand for certainty is one which is natural to man, but is nevertheless an intellectual vice”.

People change opinions, that’s okay!

As we move into more days into lockdown, you will start seeing opinions changing dramatically. Typically we are used to politicians doing it and we are okay with it, we actually expect it from them and are usually disappointed if they are consistent. Politicians and public who were worried about the virus, human life will start singing opposite lyrics. We already see glimpses of this from industry and government leaders. They’ve started worrying about the economy and impact on humans. Consistency though has been an expectation of many. They will be quick to ask “But you said completely different the other day”, “Why have you changed your stance”? In real-world, this isn’t happening. Because as facts change, so will opinions.

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