Nir’s Note: This post is a little different from my normal writing. For one, its much shorter. You’ll notice I provide fewer citations and the ideas are less developed than my previous essays. This is intentional and I need your help. I’m considering writing a chapter on this topic in a forthcoming book but wanted to test the ideas with my most loyal readers first. Give it a quick read and tell me what you think. —
Habits are good for business. In fact, many industries could not survive without them. The incentive systems and business models of the companies that make habit-forming products require someone gets hooked. Without consumer habits, these enterprises would go bust.
While most of us think of cigarettes or gambling as habit-forming products, the fact is, a much wider swath of industries rely on consumer’s using their products without thought or deliberation.
These companies have no secret agenda or nefarious ambitions. They are in business to give people what they want, even if at times, what the consumer wants isn’t necessarily good for them.
But like every other company, habit-forming businesses are run by well-intentioned people. Hard-working folks with families and dreams of their own. So how then can these two realities coexist? How can companies seek to hook their customers, while also being run by decent people who have just as visceral of an aversion to manipulation as the rest of us?
Recently, MessageMe announced it had grown to 1 million users in a little over a week’s time. The revelation captured the attention of envious app makers throughout Silicon Valley, all of whom are searching for the secrets of customer acquisition like it’s the fountain of youth. “Growth hacking” has become the latest buzzword, as investors like Paul Graham profess it’s functionally that matters.
Clearly, everyone wants growth. To someone creating a new technology, nothing feels better than people actually using what you’ve built and telling their friends. Growth feels validating. It tells everyone the company is doing things right. At least that’s what we want to believe.
Good Growth, Bad Growth
Sometimes viral loops drive growth, because the product is truly awesome, while in other cases growth occurs for, well, different reasons. As an example of good growth, it’s hard to top PayPal’s viral success in the late 90s. PayPal knew that once users started sending money to each other, mostly for stuff bought on eBay, they would infect one another. The allure that someone just “sent you money” was a huge incentive to register.
PayPal nailed virality. Both sides of the transaction benefited from utilizing the platform and a classic network-effects business was born. In order for users to get what they wanted, they had to open an account and the product spread because it was useful and viral.
If there is one altar at which Silicon Valley worships, it is the shrine of the holy network effect. Its mystical powers pluck lone startups from obscurity and elevate them to fame and fortune. The list of anointed ones includes nearly every technology success story of the past 15 years. Apple, Facebook, Microsoft, eBay, and PayPal, have each soared to multi-billion-dollar valuations on the supreme power of the network effect.
But today, the power of the network effect is fading, at least in its current incarnation. Traditionally defined as a system where each new user on the network increases the value of the service for all others, a network effect often creates a winner-takes-all dynamic, ordaining one dominant company above the rest. Moreover, these companies often wield monopoly-like powers over their industries.
IN THE BEGINNING
Once, all a company needed to do to leverage the network effect was facilitate communication between a critical number of customers. If enough people used a particular system to exchange information, a leader would emerge and become the de facto platform. Companies who could either form a marketplace or facilitate the flow of information between parties became tremendously powerful as central hubs of data transfer.
In fact, the first network effects platform was Bell Telephone, which established a government-sanctioned monopoly nearly 100 years ago. Since then, successful network effects businesses have sung from essentially the same hymnal.
“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.
Let’s admit it, we in the consumer web industry are in the manipulation business. We build products meant to persuade people to do what we want them to do. We call these people “users” and even if we don’t say it aloud, we secretly wish every one of them would become fiendishly addicted.
Users take our technologies with them to bed. When they wake up, they check for notifications, tweets, and updates before saying “good morning” to their loved ones. Ian Bogost, the famed game creator and professor, calls the wave of habit-forming technologies the “cigarette of this century” and warns of equally addictive and potentially destructive side-effects.
When Is Manipulation Wrong?
Manipulation is a designed experience crafted to change behavior — we all know what it feels like. We’re uncomfortable when we sense someone is trying to make us do something we wouldn’t do otherwise, like when at a car dealership or a timeshare presentation.
Yet, manipulation can’t be all bad. If it were, what explains the numerous multi-billion dollar industries that rely heavily on users willfully submitting to manipulation? If manipulation is a designed experience crafted to change behavior, then Weight Watchers, one of the most successful mass-manipulationproducts in history, fits the definition.
Much like in the consumer web industry, Weight Watchers customers’ decisions are programed by the designer of the system. Yet few question the morality of Weight Watchers. But what’s the difference? Why is manipulating users through flashy advertising or addictive video games thought to be distasteful while a strict system of food rationing is considered laudable?
Right now, someone is tinkering with a billion dollar secret — they just don’t know it yet. “What people aren’t telling you,” Peter Thiel taught his class at Stanford, “can very often give you great insight as to where you should be directing your attention.”
Secrets people can’t or don’t want to divulge are a common thread behind Thiel’s most lucrative investments such as Facebook and LinkedIn, as well as several other breakout companies of the past decade. The kinds of truths Thiel discusses — the kinds that create billion dollar businesses in just a few years — are not held exclusively by those with deep corporate pockets. In fact, the person most likely to build the next great tech business will likely be a scrappy entrepreneur with a big dream, a sharp mind, and a valuable secret.
Where are the Secrets?
I believe secrets about human behavior, which provide insights into the way people act even though they can’t tell you why, are levers for creating user habits and competitive advantage. These kinds of secrets are also relatively cheap to uncover but can be the basis of massive enterprises.
Once, only large companies had the resources to discover monetizable secrets. Throughout the twentieth century, companies like GE, Dupont, Chrysler, and IBM specialized in discovering the optimal form of physical goods and their insights lay largely hidden in the discipline of industrial design. For these companies, uncovering secrets required massive R&D investment to find the best way to create a better, cheaper, or faster product.