Here’s the thing about behavioral economics.

People are crazy.

— Phil Pearlman (@ppearlman) August 15, 2018

I love the above tweet for any number of reasons. People ARE crazy. One of the main findings from behavioral economics is that it is really difficult to change people’s minds (and behavior). Even when we are presented with cold, hard evidence we find ways to cling to our beliefs. There are all manner of biases that our brains use to protect our egos from the difficult challenge of having to change course. Some of the biases involved include, but are not limited to: confirmation bias, hindsight bias, recency bias and status quo bias.

These biases help describe our psychological need to maintain our current belief structure. The challenge in changing people’s minds is obvious in the political arena, but it is also present in business and finance. That is why when you see attempts at change it is worth highlighting. Two items this week show the lengths to which the big soda makers, Coca-Cola ($KO) and Pepsi ($PEP) are going to diversify their away from the product that made their companies: cola.

Warren Buffett famously invested in Coca-Cola, some 400 million shares, in part because of the wide consumer moat the company had constructed. Even the disastrous introduction of New Coke couldn’t derail the company’s prospects. However even Buffett now recognizes that moat has shrunk and consumer preferences have unalterably changed.

Coca-Cola began acquiring non-soda brands 1960 when it purchased orange juice maker Minute Maid. The company is now pushing internal units, especially overseas units, to launch new products. Eric Bellman and Jennifer Maloney in the WSJ write:

Coke has pushed harder to diversify, launching more than 500 new products and variants last year, a record for the company and an increase of roughly 25% over the previous year. Recent launches include a cucumber-flavored Sprite in Russia, a line of whey shakes in Brazil, a sesame-and-walnut drink in China and a salty lemon tonic water in France and Belgium.

None of those flavors sound good to me, but you never know. The company will garner some hits out of those 500 new products. Rival Pepsi has gone so far to acquire DIY soda maker SodaStream to diversify its product stream. This pivot away from soda (and cola) started years ago and will continue indefinitely.

The lesson in all of this is that is difficult to maintain market position for any number of reasons. You could argue that in some ways there is a first mover disadvantage. This disadvantage is more acute in technology but is increasingly present in consumer packaged goods as upstart brands have found a way to grow their consumer base without having to resort to mass market advertising. As Fred Wilson at VC writes:

First movers can and often do maintain their market leadership. But doing so is a lot harder than people think.

This, of course, says nothing about the stocks of Coke and Pepsi. In fact, I deliberately didn’t look at either before writing this post. I have no idea whether these diversification efforts will pay off or not. Even industries in secular decline, like tobacco, can generate worthwhile returns for shareholders.

Another example of change at work this week is JP Morgan Chase ($JPM). The big bank announced this week that it will begin offering customers free stock trades. Whether that will be enough to attract new customers remains to be seen, but it shows a willingness to change in light of increasing competition.

Change isn’t easy. It isn’t easy for individuals. It isn’t easy for companies. So when you do see it, it is worth taking note.