A permanent change in human behavior is rare, but its impact is profound

Horizons article
March 12, 2024

In recent years, the topic of human behavior change has received more attention, primarily because of the major challenges that require shifts in human behavior, such as consumerism and climate change. Interestingly, the COVID-19 pandemic led to expectations of substantial and lasting changes in our behavior: a reduction in air- and cruise travel, an increase in new types of online purchases (particularly food), and a surge in remote work. However, only remote work has emerged as a permanent behavioral transformation.

Several theories[1] suggest that lasting behavior change is rare because it depends on three factors that are difficult to engineer:

  1. a trigger external to ourselves to initiate change;
  2. the feasibility of permanent change (influenced by political support, technological tools and the viability of relevant business models); and
  3. the willingness of people to change (where the new behavior must improve our well-being).

In terms of expectations for behavior change around the pandemic, only remote working ticked all the boxes: it had a trigger, long-term feasibility, and a strong motivation among people.

Business models for new forms of e-commerce have failed

Despite the motivation for new types of e-commerce (as evidenced by the popularity of food delivery apps, for example), the lack of viable means to build profitable business models had led to prohibitive prices for consumers or business failures.

Indeed, investors believed that the pandemic would structurally increase new variants of e-commerce. This higher usage was expected to reduce logistics costs per order, making new business models with low value density, such as home furnishings (Westwing) and white goods (AO World), structurally more profitable. The same reasoning applies to business models with low profit contribution per order, such as food delivery (Delivery Hero and Hellofresh). However, due to the limited operating leverage, these expectations were not met and the profitability of these models remains under pressure as becomes clear from the following graphs:

Source: Bloomberg L.P.
Source: Bloomberg L.P.
People still love to fly and cruise

The pandemic led to a collapse in international air travel and cruises. Although it is possible to reduce air travel - and cruises in the long term (we have vacation alternatives such as trains and cars), the motivation is lacking. In fact, people's desire in this area remains relatively strong as the charts below show:

Source: Bloomberg L.P.
Sources: CLIA Passenger Data 2019–2021 and CLIA Cruise Forecast / Tourism Economics (December 2022)
Only remote work is here to stay

Unlike the previous examples, remote work has an external trigger (the pandemic), a willingness to change (the population’s desire for a different work-life balance), and a long-term feasibility (digital technology, laws and regulations). However, the impact of remote work has been underestimated, especially in terms of its impact on the commercial real estate market. Interestingly, we tend to overestimate the potential for permanent behavioral change, but underestimate the consequences of individual shifts.

Source 1 (office vacancy rates): REIS Inc., Bloomberg L.P. Source 2 (price development of US real estate investment trusts): Bloomberg REIT Office Property Index

In summary, permanent change in human behavior is rare because it depends on a variety of factors including politics, technology, and business models (which together shape the capacity for change) and considerations of well-being (which shape the motivation for change). In the next attention-grabbing event, we should also remember that although we tend to overestimate the potential for lasting behavioral change, we also tend to underestimate the impact of such change when it does occur.

[1] Examples of these theories are the Fogg Behavior Model, the Health Belief Model, the Social Cognitive Theory, and the Capability, Opportunity, Motivation-Behavior (COM-B) model.


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