Points, levels, badges, challenges, and leaderboards oh my!

Having played games much of my life, I’ve thought their function was to entertain us (although education is also possible).

Whatever the purpose is, one has to acknowledge that people enjoy interacting with systems and routines that challenge and reward them. From this psychological perspective then, there are lessons to be learned from game theory and mechanics, which can be applied to marketing, behavior change, and interaction design.

In reading Gamification by Design, the authors do a great job describing various types of games people play, motivations that keep them engaged, and how to employ tactics for doing so. In 109 pages (core topics) it’s an excellent primer that will help dispel many myths and biases against using game techniques.

Note: O’Reilly Media offered me a review copy of this book. While it was enjoyable, I recommend buying it from Amazon at $12 from 3rd party resellers. Alternatively, someone told me that Gabe’s other book, Game-Based Marketing, was a great book. So that may be of more interest to you.

For those of you who don’t care to explicitly make a game someday with such prominent features like points and badges, I still recommend reading and keeping it around for reference. For those very interested in gaming however, this book will be lite-fare, introductory material.

The more we can imagine ourselves as participants in designed interactions, the better we can build and adapt them for long term use and effectiveness. As an excellent complement, I suggest reading Emotional Design by Donald Norman.

As the first book I’ve read on entrepreneurship, The Republic of Tea tells the true story of the birth of a business, from an idea to launch. Chronicled through exchanged faxes, personal notes, illustrations, and business plans, it was exciting to read how co-founders Bill Rosenzweig and Mel & Patricia Ziegler (founders of The Banana Republic retail clothing stores), developed the company over two years.

The concept and business plan needed to mature at its own pace without any force or rushing. In the beginning, this entailed a concrete brand purpose, market research, and product development, then progressing into operations, distribution, funding, and financial analysis.

What I found most interesting was how much research (market & operations) was involved from beginning to end, a journey that led Bill from being an excited newcomer, to nearly an industry expert at 4 months before the company launched.

Although you or I may never be involved in launching a product company, it will give you appreciation for the process and what it takes to get there: patience, perseverance, curiosity, a critical mind, and a team of smart partners and advisers.

In his book “What Technology Wants“, Kevin Kelly takes us on a philosophical and historical journey of innovation. Its origins, its inherent nature, its relationship with us. By personifying the word technology and asking us to look at the bigger picture of writing, tools, science, methods of thought and action, we can understand it as a persistent entity.

Both matter and sentient life want to diversify and improve their own operational effectiveness. Through evolution and directed guidance from humans, nature, and the laws of physics.

If that feels a bit heady, you’ll understand why I’ll stop short here. Kevin’s contribution to appreciating technology and innovation is remarkable, and I highly recommend those with a passion for these subjects and for sociology to read it. For everyone else, I suggest going to your bookstore and reading just one chapter: “Lessons of Amish Hackers”.

How does technology affect our relationships with others? What impact is its use having within our families and community? The Amish really care about these topics, and technology is therefore judged within this lens. Can the same benefit be realized through other means? If not, can we modify its form or usage patterns so as not to negatively affect our existing way of life?

I think this is something we all need to periodically ask, while adopting a mindset of what I call: Selective Engagement for Enrichment.

Another great book I’ve listened to on a road trip from Los Angeles to Phoenix was Dan Ariely’s “The Upside of Irrationality“. Dealing with behavioral economics, Dan talks about a variety of subjects which I summarized from the individual book chapters, along with direct quotations. As usual, this summary can’t give you the stories and context behind the notes provided below, so I do recommend reading the book if you’d like to learn more

How Paying People a Lot More, Results in Less

Giving people high rewards/bonuses in games or for jobs can result in high performance for simple mechanical tasks, but the opposite can happen when asking people to use their brains. This is what companies try to do in paying executives high bonuses for work that requires a lot of creative/analytical brainpower and action. Game studies with cognitive challenges have shown that as the reward exponentially increases, actual performance suffers in comparison to other players with lower rewards. Increased desire for reward can create anxiety and the resulting thoughts become distracting and stressful, thus hindering the performance.

Does this necessarily mean high rewards are intrinsically bad? No. But there are some effects of the reward system worth noting. First off, is that bonuses are meant for actual great performance that can be concretely measured. They shouldn’t necessarily be expected either. If people expect an automatic reward at known periodic intervals because it’s part of the culture or traditions, then there’s no incentive for people to seek higher achievements, especially if performance measurement is subjective and opaque. What can end up happening as a result is that many people will start to buy things with debt, expecting to offset that with the expected future revenue. These types of systemic conditions and effects are in my opinion, an absolute perversion and travesty of personnel management.

What’s the solution then? Well, for one be extremely wary of massive financial rewards in lump sums. The possibility is that people will underperform either due to stress (where performance can be concretely assessed), or because they know they can simply get away with it by fudging some numbers or communicating well.

Secondly, consider rewarding people smaller amounts based on performance in more, shorter time intervals. This can work great in many scenarios, although it can present ethical challenges in certain functions where cutting corners in quality and ethics (production, sales, service, other) may present a long-term loophole for people to advance their rewards.

Lastly, consider how randomly given rewards (financial, non-financial, and social recognition) can affect people’s behavior. It’s natural and not-expected! A friend of mine used such a system with a group of employees where he built financial bonuses into their annual salary for accounting purposes (as opposed to maintaining a separate account), but didn’t let them know about it. Based on their actual performance at any given time, he’d variably reward people with that extra line item on their paystub. Awesome! I can imagine such a system could be difficult to design and manage, but at least it did help he claimed with improved morale, accomplishments, and lower absenteeism.

The Meaning of Labor

Breaking tasks into smaller parts and creating local efficiencies reduces errors, increases productivity, and allows scale production.

“…each person can become better and better at the small thing he does. (Henry Ford and Frederick Winslow Taylor extended the division-of-labor concept to the assembly line…[however] the division of labor can also exact a human cost. As early as 1844, Karl Marx…pointed to the importance of what he called “the alienation of labor.” For Marx, an alienated laborer is separated from his own activities, from the goals of his labor, and from the process of production. This makes work an external activity that does not allow the laborer to find identity or meaning in his work.”

Employee happiness and motivation beyond monetary compensation alone are increased and sustained by seeing one’s contribution to the whole. A feeling of meaning, purpose, sense of completion.

Dan tells the story of one young gentleman that went to a great school, was hired by a large reputable management consultancy, paid handsomely, but was miserable as a glorified researcher and Powerpoint presentation designer whose job consisted of analysis and reporting assignments for consideration by higher management that needed insights on a variety of projects. These projects however stood naked. There was no transparency about why it was being considered, who it was for, the impact on the client or the consultancy, if the project would even be reviewed later, or if there was to be specific action taken on the project if it were to be reviewed.

Related, is the concept of distributed information logging and micro-tasking within software platforms like ERP (enterprise resource planning). While a hive participation in such information systems do significantly help management and individuals make better decisions, there is a real need for feedback into how one’s participation is helping other individuals and the larger organizational goal. People may understand and assume their contributions’ benefits, but feedback is really helpful. This could be delivered by managers who run reports and personally acknowledge people, as is an important part of being a manager over people. Alternatively, such feedback could be provided automatically by the information systems themselves, preferably with a little bit of anthropomorphic messaging and graphics for a more humanistic delivery.

Lesson: Although some work may not be glamorous, don’t mess with the process of labor, human psychology, and the personal need for feeling that one is doing meaningful work that is part of a larger goal.

We Overvalue What We Create

The more effort you exert into making something, the more valuable it is to you, regardless of its fair market monetary value. Small individual contributions to the process make it more meaningful. Ex: IKEA furniture, pottery, crafts, cakes, and origami.

As a result of experiments, Dan describes 4 principles of human endeavor (as quoted):

1. The effort that we put into something does not just change the object. It changes us and the way we evaluate that object.
2. Greater labor leads to greater love.
3. Our overvaluation of the things we make runs so deep that we assume that others share our biased perspective.
4. When we cannot complete something into which we have put great effort, we don’t feel so attached to it.

We’ll Believe it If We Own It – Not Invented Here Bias

Same as previous principle but applied to ideas. If we can’t paint scenarios or provide people the clues and means to figure out something (perhaps to an intended outcome, feeling, or belief), then they’re not going to be as willing to trust the ideas you’re putting forward. A sense of ownership (individual or collective) will bring people on board much better than trying to convince them through facts and objective reason.

ME: Rhetorical questions are a powerful means of stimulating creative thinking and idea ownership.

The Case for Revenge

In interactive exchange scenarios with much transparency, people tend to play by the rules and expect others to do so as well. This is the common outcome of the Ultimatum Game. But go against the rules of perceived fair exchange, and the case for revenge is quickly established. Revenge is the flipside of Trust; a reaction to a sense of betrayal. I think enough’s said.

Adaptation to Pain and Change

We adapt to Pain (physical, mental, emotional, financial), somehow or another. Change as “pain” is also clear from an Eastern perspective, as a result of attachment & disruption of happy scenarios, temporary/long-term.

Hedonic Adaptation: The process of getting used to events and change. Influencing factors: predictability and our expectations.

One of my favorite phrases is the concept of the Hedonic Treadmill:

“By failing to anticipate the extent of our hedonic adaptation, as consumers we routinely escalate our purchases, hoping that new stuff will make us happier. Indeed, a new car feels wonderful, but sadly, the feeling lasts for only a few months. We get used to driving the car, and the buzz wears off. So we look for something else to make us happy: maybe new sunglasses, a computer, or another new car. This cycle…is what drives us to keep up with the Joneses…We look forward to the things that will make us happy, but we don’t realize how short-lived this happiness will be, and when adaptation hits we look for the next new thing. “This time,” we tell ourselves, ‘this thing will really make me happy for a long time.’”

In making predictions on hedonic adaptation to change, we usually forget to consider how life goes on, and that both positive and negative events will influence our future self state-assessment. Regardless of our degree of emotional attachment and groundedness in realism, there is a process to minimizing pain

Lesson: Better to get big pain over with fast, and low intermittent pain slow.

Experiences are More Powerful than Physical Objects

Indeed they are! This is also a premise of people who say they’ve had exciting and fun lives throughout history. In recent times in response to excess consumerism and the high long-term cost of debt, many folks are advocating further development of the experience economy. Lisa Gansky in her book “The Mesh“, which I’ve summarized in this blog post along with her video presentation, describes enabling access to experiences as opposed to ownership of assets, which may carry high costs and extra burdens for disposal (not to mention environmental impact for something that’s seldom utilized anyway, loses value, then gets thrown away).

But obviously, emotional reactions to experiences (positive/negative) will be fleeting too. Dan gives us the following lessons:

Pleasurable experiences – Insert interruptions to maximize enjoyment
Irritating experiences – Complete immediately to minimize pain

Assortative Mating and Beauty

This was a funny chapter on dating websites and tests. Obviously, there’s some basic screening criteria which people would like to use to determine who they’d like to potentially long-term date including age, sex, sexual preference, marital status, geography, income, race, religion, ethnic background, drug use (alcohol, tobacco, illicit), and perhaps eating and exercise habits.

There are practically two classes of dating sites based on the amount of data is required by users to provide, the ranking of attributes behind the scenes, and the capabilities of users.

From sites that used analytics to match people based on a large variety of criteria, people ended up spending much, much more time filling out profiles and searching during the week than actually going out with someone new. Sometimes these sites didn’t offer users the ability to simply browse and contact other individuals on their own. eHarmony is the most prominent of this type of dating site. However, it should be noted that that site is intended for meeting lifelong partners, not for casual dating. Yet, I believe that this type of user experience is extremely frustrating to people who just want to go hang out with someone new, let conversation take its course, and go from there.

And that’s what experiments Dan had noted in the book showed. Users of that type of site tended to be less happy and feel lonelier in such a strict dating system. People were also tested using another site that required much less user data upfront, assumed people were more open about who’d they might actually enjoy (not necessarily perceive) going out with, then gave them matches based on a more subjective ranking methodology.

The result was that people using the second site went out on more dates, with a less serious potential matchmaking mindset, spent considerably fewer hours per week on the website, and claimed higher satisfaction levels.

Lesson: Accuracy isn’t everything, and too many data factors and how they’re ranked may adversely affect conducting analyses and generating results/matches. Overestimating the importance of additional small factors, can diminish our factoring of the few, most important ones in making an appraisal.

Empathy and Emotions

Outside the context of therapy, the extent to which we can feel empathy is correlated to our relatedness to the object, how concretely it’s understood, and its personability. Makes sense.

In philanthropy and advocacy, an emotional connection is VERY important. Use photos, videos, and stories as much as possible. Use some facts, but don’t rely on them excessively. Reframe systemic/big problems into an opportunity to benefit a small sample/lot size.

Future suffering is intangible and a hard sell. Don’t rely on it. Know that impersonal problems don’t relate to people. For that reason, paint pictures of real life people in your marketing communications.

“In many ways, it is very sad that the only effective way to get people to respond to suffering is through an emotional appeal, rather than through an objective reading of massive need. The upside is that when our emotions are awakened, we can be tremendously caring. Once we attach an individual face to suffering, we’re much more willing to help, and we go far beyond what economists would expect from rational, selfish, maximizing agents. Given this mixed blessing, we should realize that we are simply not designed to care about events that are large in magnitude, take place far away, or involve many people we don’t know. By understanding that our emotions are fickle and how our compassion biases work, perhaps we can start making more reasonable decisions and help not only those who are trapped in a well.”

The last lesson of the book Dan gives is this: Don’t act on negative emotions, for we may regret the consequences later.

I first read about the stories of Sameer and Vinay in Jennifer Aaker and her husband’s book, “The Dragonfly Effect“. It’s a powerful narrative that goes to show what constraints, a concrete goal, storytelling, marketing, and simple metrics can do. A highly recommended book which I hope to share lessons from in a future post, and which provided lots of insights into how a tightly integrated campaign can effect lots of change in a relatively short period of time.

[Slideshow Link for Email/Other Subscribers]

Awesome book I read early last year on behavioral economics, which according to Wikipedia

“…use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market prices, returns and the resource allocation. The fields are primarily concerned with the bounds of rationality (selfishness, self-control) of economic agents. Behavioral models typically integrate insights from psychology with neo-classical economic theory.”

Here are the chapter notes, as written by Chris Yeh with some editing and additions of my own:

Influencing Decisions by Adding Inferior Choices

In considering options before deciding, we always seek to draw comparisons, and we are often unaware as to how seemingly irrelevant factors such as the simple presentation of options (like timing), actually influence what we select.

Given three choices:

• A
• B (very distinct, but equally as attractive as A)
• A- (similar to A, but inferior)

We will almost always choose A, because it is clearly superior to A-.

Say we are trying to decide on a vacation between two choices:

• Paris trip with free breakfast
• Rome trip with free breakfast

We cannot decide between the two because maybe we love Paris and Rome equally.

But adding the option of a slightly lower priced Paris trip but without the free breakfast, the better Paris option now looks a lot better, and marketers have artificially created a premium offering, and distracted us from the Rome option.
So by adding a third option (an “A minus” version of one of the options), we’ll pick the A version, over the equally attractive B version.

Example: When Williams-Sonoma introduced bread machines, sales were slow. When they added a deluxe version that was 50% more expensive, they started flying off the shelves. The first bread machine now appeared to be a bargain.

Fallacy of Supply and Demand

Anchoring, the act of creating or adopting an attachment, has a major long-term effect on our willingness to pay.

Herding: Assuming that something is good (or bad) on the basis of other people’s previous behavior.

Example: Starbucks itself is a case of producing a new anchor.  Howard Schultz made Starbucks as different as possible from the traditional coffee shop to convince shoppers to establish a new anchor, rather than saying, “This is a fancy, expensive Dunkin Donuts.”

Knowing the impact of anchoring, you should train yourself to question your repeated behaviors.  You should also pay particular attention to the first decision in a long stream of decisions.  It may seem like it is just one decision, but that first decision may have impact on future decisions for years to come.

The bigger picture is that supply and demand are not independent; supply-side variables like MSRP can impact willingness to pay.  Price “memory” can also have a major impact. Doubling the price of milk and halving the price of wine would have a major short-term impact, but it’s unlikely to have a long-term impact on consumption patterns. And if you induced amnesia about the previous prices, it might have nearly no impact at all.

“Free” Drives a Lot More Demand than a Penny

Why we often pay too much (in opportunity cost or time spent) when we pay nothing.

Zero/free is a source of irrational excitement.  This is called the “zero price effect.”

Ariely, Shampanier, and Mazar conducted an experiment using Lindt truffles and Hershey’s Kisses.

• When a truffle was $0.15 and a Kiss was $0.01, 73% of subjects chose the truffle and 27% the Kiss.
• When a truffle was $0.14 and a Kiss was free, 69% chose the kiss and 31% the truffle.

According to standard economic theory, the price reduction shouldn’t lead to any behavior change (relative price and expected pleasure should be equal between the two experiments).

The same experiments were conducted with Kisses going for $0.02, $0.01, and free…and free again made a huge difference.
Ariely’s theory is that for normal transactions, we consider both upside and downside. But when something is free, we forget about the downside.

“Free” makes us perceive what is being offered as immensely more valuable than it really is.

• Humans are loss-averse; when considering a normal purchase, loss-aversion comes into play.
• But when an item is free, there is no visible possibility of loss.

Example: Amazon’s free shipping

• After Super Saver shipping was introduced, Amazon saw sales increases everywhere except for France.
• It turned out that the French division offered 1 franc ($0.20) pricing instead of free pricing.
• When this was changed to free, France saw the same sales increases as elsewhere.

Example: People will wait in line for absurdly long times to get something for free.

Free is one of the most powerful ways to trigger behavior.

The Cost of Social Norms

Why we are Happy to do things, but Not when we are Paid to do them.

Clark, Mills, and Fiske theorize that we live in two worlds; one where social norms prevail, and another where market norms make the rules.

• Social norms such as reciprocity are warm and fuzzy, with no explicit quid pro quo.
• Market norms are explicit and hard–you get what you pay for.

Example: The AARP asked lawyers to participate in a program where they would offer their services to needy employees for a discounted price of $30/hour. No dice. When the program manager instead asked if they’d offer their services for free, the lawyers overwhelmingly said they would participate.

• Conclusion: Market norms drive out social norms.

“People are willing to work free, and they are willing to work for a reasonable wage, but offer them just a small payment and they will walk away.”

Companies that try to market based on social norms (“like a good neighbor…”) but fail to follow through (e.g. like imposing nuisance fees), end up in a worse position. Consumers take personal offense when a relationship framed as a social exchange turns out to be a market one. This is one of the risks and consequences to be wary of when employing social marketing.

“If you’re a company, you can’t have it both ways. You can’t treat your customers like family one moment and then treat them impersonally (or worse, as a nuisance or competitor) a moment later when this becomes more convenient or profitable. This is not how social relationships work. If you want a social relationship, go for it, but remember that you have to maintain it under all circumstances.”

If you think you need to play rough, don’t waste money making your company the fuzzy feel-good choice. State what you give and what you expect in return–it’s just business.

“If companies want to benefit from the advantages of social norms, they need to do a better job of cultivating those norms….It’s remarkable how much work companies (particularly start-ups) can get out of people when social norms (such as the excitement of building something together) are stronger than market norms (such as salaries stepping up with each promotion). If corporations started thinking in terms of social norms, they would realize that these norms build loyalty and–more important–make people want to extend themselves to the degree that corporations need today: to be flexible, concerned, and willing to pitch in.  That’s what a social relationship delivers.”

“A salary alone will not motivate people to risk their lives. Police officers, firefighters, soldiers–they don’t die for their weekly pay. It’s the social norms–pride in their profession and a sense of duty–that will motivate them to give up their lives and health.”

“Money, as it turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well.”

Influence of Arousal

Why Hot Is Much Hotter Than We Realize

Ariely and Loewenstein conducted an experiment on Berkeley undergrads (Ariely tried to do this at MIT, but couldn’t get the necessary permissions).  They asked them a series of questions, then had the undergraduates stimulate themselves to a state of sexual arousal, and asked them to answer the same set of questions. The results show that people simply don’t realize how different their decision-making is during a state of arousal.

Implication: Someone may promise to just say NO, but that promise is less likely to hold up during a state of emotional excitement.

Procrastination and Self-Control

“We have problems with self-control, related to immediate and delayed gratification. But each of these problems has potential self-control mechanisms. If we can’t save from our paycheck, we can take advantage of our employer’s automatic deduction option; if we don’t have the will to exercise regularly alone, we can make an appointment to exercise in the company of our friends. These are tools that we can commit to in advance, and they may help us be the kind of people we want to be.”

How can these principles be used to improve health care?
Charge a $100 deposit, refundable when the patient shows up on time rather than procrastinating.

Repackage procedures so that they are predictable and easily done.

Example:

• Ford had issues getting customers to come in for regular maintenance. Many of the parts needed servicing at different times, and the intervals differed by vehicle.
• Then Ford noticed that Honda had lumped all service needs into one of three intervals: 6 months/5,000 miles, 1 year/10,000 miles, and 2 years/25,000 miles. It was suboptimal from an engineering standpoint, but it made it easy to tell customers when to come in.
• Ford imitated Honda, and within 3 years, was achieving the same results.
• Why not make comprehensive physicals simple?  Then layer in a financial penalty for missing them.

What about a self-control credit card that let you decide in advance on certain restrictions on your spending? (Only $60/month on entertainment; no candy between 2 and 5 PM)

Why We Overvalue What We Have

The “endowment effect” means that when we own something, we begin to value it more than other people do.

There are three fundamental quirks of human nature:

• We fall in love with what we already have.
• We focus on what we might lose, rather than what we might gain.
  • When thinking about selling something, you think about all the things you’ll miss, rather than the hassles of ownership.
• We assume that other people will see the transaction from the same perspective as we do.

Peculiarities of ownership:

• The more work you put into something, the more ownership you begin to feel for it (The “IKEA effect”)
• We can begin to feel ownership even before we own something (The “eBay effect”).
  • This is why trials and money-back guarantees work so well! People hate to downgrade.
• These ownership quirks apply to ideas as well as things…which is why we end up with ideologies that no longer seem rational.

To counteract the endowment effect, try to view all transactions as a non-owner. This explains the efficacy of the question: “Assuming you hadn’t done X, would you still do it now?”

Why Options Distract Us from Our Main Objective

We feel compelled to preserve options, even at great expense, even when it doesn’t make sense.

“What we need to do is to consciously start closing some of our doors….We ought to shut them because they draw energy and commitment from the doors that should be left open–and because they drive us crazy.”

Even when you get down to two doors, choosing is still difficult.

“Choosing between two things that are similarly attractive is one of the most difficult decisions we can make.”

When we focus on the similarities and minor differences between two things, we fail to take into account the consequences of not deciding. Flip a coin and move on.

Why The Mind Gets What It Expects

Previously held expectations can cloud our point of view.

When we believe something will be good, it generally will be good, and when we think it will be bad, it will be bad.  But does finding out the truth after the experience change one’s mind?

Stereotypes: Not only do we react differently based on stereotypes of others, we react differently based on stereotypes about ourselves.

Shin, Pittinsky, and Ambady conducted an experiment on Asian-American women.

• A first group was asked questions related to their gender, then given a math test.
• A second group was asked questions related to their race, then given a math test.
• The second group did better on the math test than the first.

The Power of Price

Why a 50-Cent Aspirin Can Do What A Penny Aspirin Can’t.

The placebo effect is well-known and real.  It’s not just a matter of fooling oneself; placebos can actually trigger endorphins and opiates and other biological reactions that actually change body and experience. What is interesting, however, is that price has an impact on perceived efficacy. Extremely low-priced (but quality) items will be seen as possibly untrustworthy.

Given the Opportunity, Many Honest People will Cheat

Experiments were conducted at MIT, Princeton, UCLA, and Yale with similar results, so it’s not just that Harvard students are crooks.

Once tempted to cheat, students didn’t seem to be influenced by the risk of getting caught; even when we have no chance of getting caught, we still don’t become wildly dishonest.

“We care about honesty and want to be honest. The problem is that our internal honesty monitor is active only when we contemplate big transgressions, like grabbing an entire box of pens. For little transgressions like taking a single pen, we don’t even consider how these actions would reflect on our honesty.”

Ariely conducted an experiment on MIT’s communal refrigerators:

• When he slipped in a 6-pack of Coke, all the Cokes had vanished within 72 hours
• When he left a plate containing 6 $1 bills, no one *ever* took any of the money
• Would you feel bad about taking a pen for you child?  How about taking $0.10 from petty cash to pay for a pen for your child?  The two are economically identical, but get very different reactions.

“Cheating is a lot easier when it’s a step removed from money.”

Overall, cheating is not limited by risk; it is limited by our ability to rationalize the cheating to ourselves.

Summary

“We are all far less rational in our decision making than standard economic theory assumes. Our irrational behaviors are neither random nor senseless–they are systematic and predictable.  So wouldn’t economics make a lot more sense if it were based on how people actually behave?  That simple idea is the basis of behavioral economics.”

[Video Link for Email/Other Subscribers - 17min]

Nick Bilton, Lead Technology Reporter for The New York Times “Bits” blog, says that digital media has resulted in a “new form of storytelling.” Bilton, who is also a designer and user interface specialist, is co-founder of NYC Resistor, a hacker collective in Brooklyn, and has written a book called, I Live in the Future: & Here’s How It Works. The video is entertaining and I do recommend watching it.

Presentation Notes

• Describes some interesting projects including visualizing home v. mobile content readership across the U.S. on a map, investigating and developing content for alternative reading devices including tablets, and flexible displays.
• Everyone that gets a newspaper essentially gets “dumb content”, since it doesn’t know what you’ve read, your history, etc. Digital experiences have the opportunity to know you better, and better display relevant content across devices.
• We can effectively multitask for many, but not all things in life. The Brodmann Area 10 of the brain is said according to research that “it is involved in strategic processes in memory retrieval and executive function. During human evolution, the functions in this area resulted in its expansion relative to the rest of the brain.” And it’s believed to develop and perform faster in future human generations as our activities may require more cognitive and physical task multitasking at various times.
• “Technocondria” is a term he coined regarding fear of technology, and describes how people have feared locomotives at one time, with some amusing anecdotes.
• So why are we multitasking more? Well, there are increased number of interfaces in our lives, through which we’re choosing to do various activities that we find interesting or necessary for interacting with phases in Maslow’s hierarchy of needs.
• Secondly, there’s a lot more media around us to consume and peruse, should we so desire.
• Nick describes a slice of media usage history including pocket sized books centuries ago that allowed people to conveniently read/learn on the go. Radio’s introduction showed a very attentive human behavior at first, but over time as more broadcasts and programming came over the air, people began multitasking while listening along because they didn’t have enough time in the day to do chores in the house, read newspapers or books.
• Television then comes along and follows a similar adoption curve, although more attention time is paid because of the visual element. Radio is then made available in the car for listen to while driving. What we end up with over time is media and multitasking.
• Our brains and habits are adapting, but obviously it’s not evolution which requires much longer time lapse. Nick provides 3rd party research studies showing this.
• Video games are also responsible for multitasking capability development in terms of attention, hand & eye coordination, working and long-term memory, and visual & spatial problem solving.
• Jumping back to newspapers, the common discussion is around business models. Let’s look at how radically our interactions with news is changing, from reading on mobile devices and sharing with others (family/friends/acquaintance web).
• Changes: Relevance (ability to tune in and out of meaningful content), Location (anywhere), Trust (less trust in media, more trust in friends), Who Reports News (journalists, new contributors), Feedback and Discussion (comments, sharing).
• The new generation is learning to consume, create, and aggregate media. That’s going to have an increasing impact on how news organizations report, tell and consume stories.

Personal Notes: Although these sociological changes are afoot and do affect our relationships and interactions with media, the extent to which we participate varies just as it has throughout time. Some people love consuming and sharing media, other folks like to spend much more time on other activities meaningful or important to them (sports, family, nature, hobbies, volunteering, games…). This relates to how much free time we have, the stage of life we’re in, the amount of responsibilities we have. Nonetheless, I’d like to think that intermittently we all have an outside world situational awareness curiosity. That competes though with the awesome ability we’ll have to take photos on the go with a smartphone, do video chat with friends and family, play a game, or something else in those little break times in between train stations, on vacation, or whatever the situation allows. For the sake of mankind, I hope we choose to be more present and put the device down.

This has to be one of the most influential business books of my life (so far). Having been fascinated by design and technology since youth, there’s always appeared to be a randomness at work in what becomes successful. Yet in hindsight, everything always seems so obvious. There are patterns though. And Clayton spelled them out in the last half of the 1990s exceptionally well. As my good acquaintance Peter succinctly wrote (or did he quote?),

“…as established companies innovate with sustaining technologies to move toward higher margins and higher performance in larger, mainstream markets whose needs they eventually overshoot, they become so resource dependent on their customers and investors and so locked in their values and processes, that they are unable to develop technologies catering to emerging, lower-margin markets which don’t solve their growth needs. New companies with disruptive technologies then enter and exploit the vacuum in the lower end markets, and subsequently move toward mainstream markets as their technology develops and becomes widely adopted, disrupting the established companies’ markets. What makes successful companies succeed in their mainstream markets is precisely what makes them fail in the face of disruptive technological change  – complexity kills the cat.”

A more thorough examination of disruptive innovation can be found on the Wikipedia article, which I highly recommend as it gives plenty of examples as well for people to think about. Fact is, change happens over a long period of time. Some businesses will get stuck, others will be positioned for growth. It’s the transition that matters.

Clayton advocates for creating subsidiaries to serve new customers and market segments made possible through disruptive technology so that they’ll receive the focus they deserve. Meddling and budget constraints from a higher department, versus a parent company, is harder on the success of the “startup”.

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Technology entrepreneur Lisa Gansky believes that the growing ubiquity of networked information and relationships are leading to what she calls a “mesh” economy of shared services and products. She is the author of “The Mesh: Why the Future of Business is Sharing”, a great book I recently read. What follows is a combined summary, along with my own thoughts for meaningful synthesis. Her book is highly recommended, and provides much greater context, more topics and stories, and a landscape view that my mere notes below can’t provide.

Notes

• Marketplaces like eBay and Craigslist enabled greater access for P2P sales and purchases.
• We’ve already grown used to the possibility of renting or freely streaming digital content (i.e. Netflix, Pandora, iTunes, Amazon).
• Also, we have libraries and online exchanges for low value items (i.e. Bookmooch).
• Opportunity: Sharing/leasing platforms for high value, low-utilized physical assets.

• There’s a LOT of physical assets and experiences that people would like to participate in, yet cannot for financial and practical limitations. Look around for these resources that could be more efficiently & profitably shared using social networks. Then ask how might you reduce the burdens of ownership like financing, insurance, maintenance, storage, and disposal.
• Non-ownership and commons mentality allows for greater asset utilization, financial opportunity (savings/revenue), social benefits, and less material produced, sitting idle, and in some cases sent to landfill.
• Economics after all is a dynamic interplay of resource supply and demand, where information is the marketplace enabler.
• The global economic downturn, increased resource pressures, personal re-considerations of what’s valuable in our lives (experiences, community, savings/retirement), and increasing population densities are drivers.
• The growing (and relatively new) consumer model allows for more choices, tools, info, and actionability.
• Zipcar is one example that through IT systems manages car locations, cleanliness, partner relations, and driver profiles.
• Like Amazon and eBay, more users and data make an improved service that better scales and serves customer needs.
• How do we make sharing irresistible? Trade less stuff for more experiences.
• Enabling aspects: cloud computing, 3rd party logistics, smartphones, user profiles, situational state awareness, enhanced data collection, SMS, payment services.
• With entrepreneurs that provide these valuable opportunities, we can see large numbers of new participants skip the concept of “ownership”, just like most of China went straight to digital cameras, India skipping landlines and going straight to mobile.
• A second opportunity is for using what we already have, more effectively.
• Peer to Peer carsharing is another example, that takes advantage of the fact that owned cars are used only 8% of the time in the U.S. Companies include RelayRides, Spride, and WhipCar.
• Pop-Up Stores is one retail concept that temporarily rents building space.
• Airbnb and Roomorama enable P2P renting of rooms, apartments, houses, bungalows, houseboats, estates, and castles. KeyWiFi allows people to rent out their own WiFi connection, and identify 5 hotspots they’d like to use.
• Zopa, Prosper, Lending Club, Smava loan money.
• Kickstarter funds big projects.
• From a cradle to cradle perspective, value = unused waste.
• This creates opportunities for reverse value chains and secondary markets like ThredUp (kids clothing/toys), RecycleMatch (secondary materials), RecycleBank (compensated consumer recycling system), and products from Rickshaw Bags, Advinylize, and Terracycle. The craft market is also thriving. Etsy is a popular example.
• Curator and Word of Mouth effect of social networks and peer review sites, allows for great marketing. But brand participation has to be authentic.
• The Mesh allows entrepreneurs and ventures to quickly define, refine, and scale their business. The opportunity for low investment and getting quick service feedback is phenomenal. This allows businesses to refine their offerings before they scale up their operations, thus creating less potential waste.
• Visit http://Meshing.it for a few examples of more companies. Note: I went through the site and saw a few organizations that have no innovative qualities, and just self-contributed their site to the directory.

Big thanks to Lisa for doing the research, compilation, and synthesis of this important economic, social, and environmental opportunity

In going through my books lately, I came across The Traveler’s Gift. It’s a heartwarming tale where the main character, being sad and getting in an accident, travels time to meet mostly famous world leaders who impart important life principles to live by. Summarized, here they are. I purposely leave them brief for self-reflection:

1. By accepting responsibility for my past, I free myself to move into a bigger, brighter future of my own choosing.
2. I will seek wisdom from media and friends that’ll bring positive change and healthy beliefs in myself and my future.
3. I am a person of action. Doing nothing and dwelling is not an option.
4. I have a decided heart. I am passionate about my vision for the future. My course is charted and my destiny is assured.
5. Today I will choose to be happy. I will greet each day with laughter and smile at every person met. I am the possessor of a grateful spirit.
6. I will greet this day with Forgiveness to myself for any previous pain, and to all others who unjustly criticize or don’t not ask to be forgiven.
7. I will continue despite exhaustion and focus on results. I am a person of great faith. I will persist without exception.