A friend called me heartbroken, crying. She had spent months looking for investors to fund her fledgling startup and now she had a big problem. Someone was ready to give her the money.
Trouble was, the cash came with a catch. The only investor willing to pony-up the money was someone she didn’t like. She also got the feeling he did not like her much either, and yet, he wanted to invest. “If he was involved, I have the feeling I would quit my company down the road,” she told me over the phone.
Time was running out, she needed the funds and with no other investor ready to commit, she feared she’d have to take the money from someone she couldn’t stand. The very thought made her sick in the stomach.
I felt for her and her dilemma piqued my curiosity. What differentiates a great early-stage investor from someone no entrepreneur wants to take money from unless they absolutely have to? I wanted to know what separated angel investors — those who add value to a company — from devil investors — those who destroy it.
Last month, famed investor and Sun Microsystems co-founder, Vinod Khosla, shocked a tech conference audience claiming, “… 95 percent of VCs add zero value. I would bet that 70-80 percent add negative value to a startup in their advising.” Can Khosla be right? Can investors be a liability rather than an asset?
In improv comedy, there are really only two words that matter: “Yes, and.” You share a premise, form a scene, create a character, and if everything works out right, kill the audience. Then, you try and do it again with another, “Yes, and.”
Before I began developing for iOS, I performed stand-up and improv as a hobby. I never thought “Yes, and” would apply to the development of software and how to work with clients. But, in my best Louis CK voice, “It TOTALLY did.” This essay is about what I learned working with the artists who hired my company to create “A Beautiful Mess,” an app that went to #1 in the App Store 15 hours after its release (it’s still near the top of the app store).
Elsie Larson & Emma Chapman, the creators of the do-it-yourself blog ABeautifulMess.com are amazing at what they do. Over the past six years, their mix of recipes, photography projects, and other fun arts and crafts ideas, have amassed them a following of over 1.5 million visitors per month.
Nir’s Note: This guest post is by Max Ogles, a writer and entrepreneur based in Utah. Connect with him on Twitter at @maxogles.
In the beginning of 2010, when daily deals site Groupon was really hitting its stride and copycat businesses were popping up left and right, a small startup called Yipit was just getting off the ground. Yipit was involved in daily deals, too, but rather than creating the deals itself, Yipit simply aggregated the deals offered by the other companies to offer a nice tidy list in a daily email.
Like any startup, the Yipit team planned PR and marketing around their launch and hoped that the buzz would yield a nice base of users, who in turn would share with friends and create steady word-of-mouth growth. They managed to secure the spotlight from a major tech publication and then rode the wave. “After months of toiling away in obscurity, you feel like you’ve finally made it,” wrote Vinicius Vacanti, Yipit’s CEO, on his blog. “People know what you’re working on now. People all over the world are now using your product.”
But all of that attention was, in reality, for naught. The end result was an unimpressive 200 active users, much lower than Vacanti expected given the size of the audience that read about the launch. For one exciting day, it seemed like the whole world knew about Yipit–until the following morning, when Vacanti and his team discovered the unfortunate truth about the spotlight: That is, it’s always brighter when you’re in it.
We are a species that depend on one another. Scientists theorize humans have specially adapted neurons that help us feel what others feel, providing evidence that we survive through our empathy for others. We’re meant to be part of a tribe and our brains seek out rewards that make us feel accepted, important, attractive, and included.
Many of our institutions and industries are built around this need for social reinforcement. From civic and religious groups to spectator sports, the need to feel social connectedness informs our values and drives much of how we spend our time. Communication technology in particular has given rise to a long history of companies that have provided better ways of delivering what I call, “rewards of the tribe.”
However, it’s not only the reward we seek. Variability also keeps us engaged. From the telegraph to email, products that connect us are highly valued, but those that invoke an element of surprise are even more so. Recently, the explosion of Web technologies that cater to our insatiable search for validation provide clear examples of the tremendous appeal of the promise of social reward.
The endless search for rewards of the tribe, and the variability that often comes with it, are key components of the Web’s largest technical question and answer site, Stack Overflow. As with other user-generated sites like Quora, Wikipedia, and YouTube, all of Stack Overflow’s content is created voluntarily by its members. In Stack Overflow’s case, over 5,000 questions are posted and answered daily, all of which cost nothing to view. Many of these answers take hours to complete and require a high degree of technical expertise.
A reader recently asked me a pointed question: “I’ve read your work on creating user habits. It’s all well and good for getting people to do things, like using an app on their iPhone, but I’ve got a bigger problem. How do I get people to do things they don’t want to do?” Taken aback by the directness and potentially immoral implications of his question, my gut reaction was to say, “You can’t and shouldn’t!” To which his response was, “I have to; it’s my job.”
This gentleman, who asked that I not disclose his name, is the corporate equivalent of the guy the mob sends to break kneecaps if a worker doesn’t do as they’re told. For the past decade, he has run the same methodical process of cajoling, and at times threatening, people to do things they don’t want to do. “It’s really unfair and mean. I know it is,” he said. “But people have to comply or else people get hurt.”
This man is an identity and access management auditor at a well-known public accounting firm. Not exactly Good Fellas, but high-stakes nonetheless. His Fortune 500 clients pay his firm to ensure managers complete lengthy inquiries involving hundreds of employees collecting thousands of pieces of information, usually on tight deadlines. “Ever since Sarbanes-Oxley, these user access reviews just have to get done.”
Though the auditor’s job is unique, getting others to do uninteresting tasks (specifically those that are infrequent and involve work done outside normal responsibilities) is a common challenge.
“Successful entrepreneurs recommend reading this article about the persuasion techniques companies use to drive engagement.”
Scratch that, how’s this? “Tons of people are tweeting this article. Find out why.”
OK, here’s one more. “This article will only be on the TechCrunch front page for a few hours before fading into the information abyss.”
Perhaps your preference for one of the opening lines above is a matter of taste, but for companies leveraging the explosion of personalized data, it’s very big business.
Marketers are increasingly personalizing their products and services to meet their customers’ changing needs. But customization used in conjunction with powerful persuasion techniques is arming marketers with new weaponry to boost customer engagement and drive profits.
The tools of influence, such as authority (seen in the opening line), social proof (second line), and scarcity (third line), have been used to persuade consumers since Edward Bernays launched the public relations industry during the first World War. Bernays, the nephew of Sigmund Freud, applied his uncle’s theories of the human subconscious to drive consumer behavior. Back then, marketers, including tobacco companies and the CIA, hired Bernays to shape public opinion and influence the masses.
Bernays, and the PR and advertising industries he spawned, sold consumers goods and ideas by tapping deep into the human psyche. For example, Bernays engineered demand for cigarettes among women by associating smoking with the desire for independence and freedom from male domination.
As the web becomes an increasingly crowded place, users are desperate for solutions to sort through the online clutter. The Internet has become a giant hairball of choice-inhibiting noise and the need to make sense of it all has never been more acute.
Just ask high-flying sites like Pinterest, Reddit, and Tumblr. Thesecurated web portals connect millions of people to information they never knew they were looking for. Some have started monetizing this tremendous flow of traffic and though it’s too early to call winners and losers, their strategy of driving user engagement by creating daily habits is clear. These companies are following a plan implemented by web titans like Amazon and Google and are hoping to yield similar results.
Creating user habits leverages two critical factors that should be considered by every company attempting to build high-engagement products.
Action Without Cognition
Habits are one of the ways the brain learns complex behaviors. In order to allow us to focus our attention on obtaining new insights, neuroscientists believe habitual behaviors are moved to thebasal ganglia, an area of the brain associated with actions requiring little or no cognition. Habits form when the brain takes a shortcut and stops actively deliberating about the decision being made.
The brain quickly learns to codify behaviors that provide a solution to whatever problem it encounters. For example, nail biting is a common behavior, which occurs with little or no thought, typically triggered by the unpleasant feeling of stress. The biter associates the satisfaction of nail chomping with the temporary relief it provides. As any habitual nail bitter knows, the conditioned response is extremely difficult to break.
Step 1: Build an app. Step 2: Get users hooked to it. Step 3: Profit. It sounds simple and, given our umbilical ties to cell phones, social media, and email inboxes, it may even sound plausible. Recently, tech entrepreneurs and investors have started to look to psychology for ways to strike it rich by altering user behavior. Perhaps you’ve read essays on how to create habit-forming technology and figured you’d give it a shot?
Well hold your dogs Pavlov! Though I’m an advocate for understanding user behavior to build high-engagement products, the reality is that successfully creating long-term habits is exceptionally rare. Changing behavior requires not only an understanding of how to persuade users to act — for example, the first time they land on a webpage — but also necessitates getting them to behave differently for long periods of time, ideally for the rest of their lives.
The good news is that that companies that accomplish this rare feat are the ones associated with game-changing, wildly successful innovation. Google, Apple, Twitter, and Android come to mind. As we enter a world where, according to Paul Graham, everything is becoming more addictive, the companies that successfully form and control habits in the future will come to dominate the industries of tomorrow.
Habits or Hype?
But claiming that habits are the keys to success is a tall order. If people like me provide ready-made formulas and guidebooks on how to create habits, why isn’t every company that alters user behavior succeeding?
The belief that products should always be as easy to use as possible is a sacred cow of the tech world. The rise of design thinking, coinciding with beautiful new products like the iPhone, has led some to conclude that creating slick interfaces is a hallmark of great design. But, like all attempts to create absolute rules about how we should interact with technology, the law that design should always decrease the amount of effort users expend doesn’t always hold true. In fact, putting users to work is critical in creating products people love.
Several studies have shown that expending effort on a task seems to commit us to it. For example, when buying a lottery ticket, players are able to either choose their own numbers or play a set of digits generated randomly. Certainly, choosing either option has no effect on the odds of winning. Traditional thinking would predict that the less effortful path would be the one users prefer.
However, the opposite is true. Despite the considerable effort required to pick the lottery numbers, a process reminiscent of filling out multiple choice questions on the S.A.T., players who choose their own numbers play more. This phenomenon isn’t just about a skewed perception of luck. According to a classic study by Ellen Langler, even when players are explicitly told their chances of winning, they choose to trade worse odds for the ability to play the numbers they spent the time and effort picking.