Evil Moats: Tech-Created Habits and the Hijacking of Consumer Minds (Tech Strategy – Podcast 80)

Competitive advantages can be build on the demand and the supply side. And advantages on the demand (i.e., revenue) side are usually about customer capture in some form. One general category for this is when a company captures a “share of the consumer mind.”

In this talk, I go into how some companies do this for their own benefit. And against the interests of the consumer. I call these types of competitive advantages “evil moats”.

You can listen to this podcast here or at iTunesGoogle Podcasts and Himalaya.

Here are the books and articles I mentioned:

Related podcasts and articles are:

From the Concept Library, concepts for this article are:

  • Share of the Consumer Mind

From the Company Library, companies for this article are:

  • n/a

Photo by Sammy Williams on Unsplash

———–Transcription Below

Welcome welcome everybody. My name is Jeff Towson and this is Tech Strategy and the topic for today is evil motes How tech can create habits and hijack consumer minds? So this is in my sort of strike zone, which is competitive advantage meets digital But it’s kind of on the edge a bit because it I’m gonna cite some books and papers that all sort of deal with this idea of how software and digital tools can be used to create addiction, sometimes very seriously, sometimes how software is systematically used to target vulnerabilities of human psychology. So I would all kind of, you know, now you could put that all under the idea of, oh, this is just product development, this is growth hacking, this is product… design, blah blah blah, getting attention, getting engagement, all of that. I think there’s a subset of that whole category that yes these are competitive advantages, they’re motes, but I would put them in the evil category. In the same way I would put heroin in the evil category. Heroin is a consumer product. It has an incredibly powerful competitive advantage based on addiction. cigarette companies are sort of a lesser degree of that same strategy, but I mean these are addiction companies from top to bottom That’s what they are So I think in software we’re seeing different versions of that and that’s kind of what I wanted to talk about today It’s just sort of a couple examples of that. It’s an interesting subject I don’t I’m not a expert on it, but I want to kind of point to some people that are I’m reading about this Really in the last six months or a year Now the key concept for today is share of the consumer mind, which is a type of, it’s kind of a general bucket. It’s a type of demand side competitive advantage. That term is a Warren Buffett term, share of the consumer mind. And if you go to the concept library, you’ll see that listed there. And I mean, I’ve written quite a lot about this, you know, big pens and… monster energy drinks and kind of a lot of companies could fit within that but there’s a lot of different ways of doing that one of which is sort of just basic chemical addiction whether it’s sugar or caffeine or nicotine or heroin others are sort of habit formation it can be aspirational it can be emotional it’s a lot of within that but I’ll talk about what that means so that’s kind of the key concept for today and a podcast where I talked about this before if you’re curious was podcast 36 I’ll put the link in the show notes. And that was WeChat, TikTok, and how you capture the consumer mind in a digital age. So sort of the same general idea, and I’m gonna repeat some of that, but this is sort of the dark evil version or subset of that. That’s the point for today. Now, for those of you who are subscribers, I sent you out kind of a bit on Hello Bike, which is now called Hello Inc. And they filed to go public. And this is the first real Chinese bike sharing company that we’ve seen go public. So we can see their numbers and we can see their financials. And I’ve been writing about bike sharing out of China for four years. And that was interesting. I didn’t think it was gonna be as interesting as it was because it turns out this is a bike sharing company and there’s no sharing going on. And this is, it’s not a platform business model. It’s a clever service business for renting bikes, but it’s not a platform. but they are trying to become one. They’re trying to leverage their very large user base, 90, 100 million quarterly transacting users. They’re trying to leverage that into a platform business model and maybe become a mini DD or a mini Maituan. And that’s a really interesting strategy. So as I wrote about that, you got that the other day. And I’m sort of out of IPOs to look at. The big ones on the horizon are ByteDance and DD, but they haven’t filed yet. So if you have any companies that you think are worth looking at from a strategy dimension, please give me a heads up, I appreciate that. And for those of you who aren’t subscribers, you can go over to jefftausen.com, sign up there, free 30 day trial, see what you think. And my standard disclaimer, nothing in this podcast or in my writing or on the website is investment advice. The numbers and information from me and any guests may be incorrect. The views and opinions may be incorrect or no longer relevant or accurate. Overall, investing is risky. This is not investment advice. Do your own research. And with that, let’s get into the subject. Now I’m gonna start with just a bit of a summary of what I talked about in podcast 36, which was, geez, 44 podcasts ago. That’s crazy. But basically I was talking about competitive advantages. And… they are generally, but not always, they can generally be on the sort of supply side or the demand side. So you’ll see that in these charts I send out with blue diamonds. I’ll always sort of say look this is demand side or supply side. But generally it’s a strength, it’s a defensibility that either lets you be cheaper or have some aspect on the creation of your product or service, the supply side that others can’t match, or you have some strength on the demand side, on the customer side, on the consumer side. Or maybe you’re even selling a very similar product to someone else, but the customers keep coming to you. Generally you have strength on the supply side or the demand side or often both. But within, so I would call those either demand side or revenue side competitive advantages. And you can always, you know, kind of check if a company has this. You can just look at, okay, look at soda A, Jeff soda, and then look at soda B, Coca-Cola. very similar products, very similar placement, yet Coca-Cola can charge 20% more. That’s it. It’s power on the demand side. And in theory, if you have power on the demand side, you’ll see it in one, two, or three places, maybe all three. You might see a pricing premium. You might say, okay, it’s a soda, it’s a soda, but they can charge 10% more. That directly usually translates into a than expected return on invested capital relative to competitors. So all the soda companies make 20% return on equity but this company makes 28. That might be evidence of some power on the demand side. You might see it in market share stability. Okay you know markets go up and down but Coca-Cola seems to keep 20% of the market no matter what. You know that could be another one or you might just say okay you’re not seeing price premium but maybe you’re just seeing frequent repurchases. That would be a degree of strength. People just keep going in and they always pick up the coke even though there’s five others. Maybe the coke isn’t getting a big premium out of that but they’re definitely getting some sort of repeat business and generally your revenue because this is a demand side revenue side advantage that has to come from price times volume equals revenue. So either your price is higher relative to a competitor or your volume is higher. relative, but you got to, it’s got to play out in the revenue line eventually or who cares. So you can look at return on invested capital, you could look at market share stability, you could look at repeat purchasing type behavior, and out of that you can generally get a sense of whether this company over, you know, a significant period of time has some degree of power on that side. And we could describe all of that power as customer captivity. That’s not a bad way to think about it. My favorite type of customer captivity is restaurants at the airport terminal. Once you go in past security, all the prices go up. You buy a cup of coffee, it’s more expensive. You buy anything, it’s more expensive. Because you’re captive. You can’t go anywhere. And so everyone can boost their prices 20% or 30%. And what are you going to do about it? Nothing. If you have a… That would be type of customer captivity that’s physical. But there’s other types that can be sort of psychological. You get a good feeling from it. You have a habit. It’s just kind of something you do without thinking. It makes you happy. It’s so it could be emotional, aspirational. Worry, worry’s a good one. You can charge more for contraceptives as a name brand than a brand name because people get worried about that. It’s a critical decision. which is a French company, they can charge a lot for milk powder in China because Chinese mothers are deeply worried about the safety of milk powder. And so foreign brands do quite well. So there’s different ways of all of that would be under the category of sort of captive customer. But it’s a pretty big bucket. And within that, I would say share of the consumer mind is the most interesting one. But the other one that I talk about a lot is switching costs. You know, that’s a type of customer captivity, if you think about it. Searching costs used to be, it’s kind of fading, but generally I sort of look at three or four types of captive customers, switching costs, searching costs. You can put network effects here and then share of the consumer mind. That’s generally my list. There’s others in there that are shorter term, but yeah, that’s kind of my list. And in podcast 36, I talked about share of the consumer mind and I talked about. TikTok and WeChat who have both basically achieved this, but kind of through different mechanisms. Anyways, that’s kind of the background. That’s a quick summary of that podcast. So there is a subset here that I would consider on the evil side of how do you achieve this sort of customer captivity share of the consumer mind that will play out in your ROI, C, market share and other metrics. How do you achieve that, you know, sort of by going over to the dark side? Well, the most obvious example, and I don’t think anyone’s going to argue with me on this, is chemical addiction. Chemical addiction, which is, you know, heroin. Okay, that’s a type of chemical addiction. Apparently, you know, it’s super addictive. I mean, a lot of things are addictive and a lot of illegal drugs are addictive, but apparently heroin is super addictive. I totally want to try it one day. It’s on… It’s on my bucket list of life. If I ever get like a terminal illness, which would probably happen at some point, I’m hoping I get like a good six months worth of notice because I’m gonna totally try certain illegal drugs. And as far as I can tell everyone, you know, before heroin destroys your life, there’s a good three months where it’s like the greatest thing ever. You know, it’s basically just a natural substance in your body that’s juiced up to the limits. But anyways. That’s a good bit of my personal life sharing. It’s on my to-do list for the last three months of life. But clearly it’s incredibly addictive and when you taper that down, it starts to become a little bit more societally accepted. Coca-Cola is selling caffeine and sugar. That’s what it’s doing. It’s in the chemistry business, the chemical addiction business. But it’s fairly low grade. It’s not a big deal and it tastes pretty good. And everyone’s fine with that. You know, Starbucks and Red Bull, they just sort of took it to the next level. They said, let’s do the same strategy. Let’s just put a lot more sugar and caffeine in there. And they did. Although black coffee is actually kind of got the most. Monster Energy Drink, which I think is a really interesting company. You know, they’ve really kind of boosted the levels even higher. Five hour energy. So you can see this strategy all over the place. And definitely. Tobacco companies, I mean, that’s what they were in. Nicotine is really addictive. And I don’t think most people ever had a problem with the addictive aspects of tobacco. Tobacco has like, you want to see like the most powerful business model ever. Look at tobacco companies. Even today with the massive taxes that are put on them, it is just an unbelievable business model in terms of its competitive, you know, in its strength and the cash flow. It’s crazy. But it’s not actually the nicotine that kills you, it’s the tar and the other things. So the harmful side effects, which is what everyone has a problem with, that wasn’t the addictive part. I mean, it was the nicotine. If you could create a tar-free, nicotine-rich cigarette, that might be a problem. Anyways, I think everyone kind of agrees. Look, we understand when a chemistry, chemical addiction-typed moat goes over to the dark side. I think people know that when they see it. Okay, what if we dial it back a little bit and what if we say gambling? Now gambling is not a direct chemical addiction. You’re not injecting anything or drinking something. It’s not that direct, but people who gamble, they become very, very addicted to it. It’s a small percentage. It’s a massive problem for a small percentage. As I mentioned before, there was a book that I think is worth reading. I’ll put the link in the show notes, which was Addiction by Design. And it was basically a summary of how, you know, the casino businesses, when they went from regular slot machines to digital, saw basically screens, when they went to the screen-based and the software-based slot machines, you know, the usage just went off the charts. Because it turns out software is much more subtle. in the ways it can sort of create these effects in people’s brains. And people have started to refer to companies like Facebook as basically being in the dopamine business. That they’re stimulating dopamine release which kind of makes you more focused. I mean dopamine is a little bit complicated. I don’t really understand it. It’s not just that it feels good. It’s that it’s kind of a degree, my understanding of it, is it’s kind of, it brings on… One, it does feel a little bit good, but it brings on a state of focus that is more emotional, and it sort of overrides your rational brain for a little bit. So the more emotional, feel-good parts of your brain ramp up, and the calm, rational side of your brain gets a little bit shut down for a moment. And we like this feeling, which is why we always want dopamine hits, which is why we always want to check our notifications and check our inboxes and things like that. Okay, that’s not a direct chemical addiction, but there’s, you can see within there’s a chemical aspect and then there’s also software that is directly trying to elicitate this. And that gets us sort of to the point today of, you know, how you can use software and technology to create habits and to basically hijack people’s brains. Now habit formation is something that, you know, we’ve known about for a long, long time. companies have focused on this forever, that you know your brain works in different ways and one sort of more let’s say apparently I’m summarizing this badly primitive part is you know the limbic system where you’re it’s sort of a conservation of energy approach when you think about doing something I’m going to walk down the road it takes a lot of energy because you have to focus your brain you’re thinking about there’s a sign there’s a sign step off the curb your brain is engaged. And it requires a lot of energy, mental energy, not just mental energy, but actually in the chemistry of it. But if you do something multiple times, the same thing, your brain starts to sort of take that repeating pattern and shift it into your habit system, where it can almost basically operate on autopilot, and you don’t have to use so much concentration. So if you’re doing something every day like walking home or cooking dinner or, you know. You can do that with almost no thought whatsoever. And that’s all about just saving energy and being more efficient. It’s like the image I use in my head is like, it’s the difference between walking and running. Your body’s doing the same thing. But when you run, it takes a lot of energy and effort and it’s tiring. But when you shift to walking, you can do it without thought and it requires almost no energy whatsoever. You can walk forever. Like… You ever thought about how long would I have to walk before I’m so tired that I can’t walk anymore? Now you might get sore, that’s different, but just in terms of exhaustion, have you ever walked so far that you feel sort of bent over, heaving and, you know, clutching your side? That never happens. You know, we walk incredibly efficiently from an energy perspective. Well, that’s kind of like habits. It’s an incredibly efficient way of coding something into your brain so you don’t have to think about it. And we can see this all the time and we do it all the time. And you know, there’s books written about this. I’m gonna cite two here that I suggest you read. One is called Hooked by Nir Eyal. I’ll put the link in there, that’s a pretty good one. And there’s another one called The Power of Habit, which I will also put in there. But they both basically describe a process which has three steps, which is there is some sort of trigger. Usually it’s an external trigger, something from outside of you. Seeing a sign, feeling hot, you wake up in the morning and you feel the film on your teeth, you feel the stubble of your beard growing in some sort of external trigger that happens naturally in the world. That’s step one, trigger. And then step two is you take an action. You brush your teeth, you open a can of Coke, you take a puff of a cigarette, you shave your beard. That’s the action, step two. And then step three, there’s a reward. And the reward can be, oh, I just brushed my teeth, now I get, usually it’s a feeling. And you brush your teeth and you get that sort of burning sensation that feels like cleanliness, but it’s actually an oil they add, it’s not part of the toothpaste. You put on aftershave, you get a little burning sensation, you take that first swig of a Coke, went on a hot day and it tastes real good. You take a… puff of your, that first puff of the cigarette, you get a nicotine rush that calms you. But it’s that cycle, it’s trigger, action, reward. And what people always talk about, especially like software people and people in gaming and casinos, is they always talk about variable intermittent rewards. That a reward is good. When you get this process, trigger, action, reward, it will start to encode that as a habit in your brain. if you do it with enough frequency. Infrequent things don’t work. It has to be like daily or even better than that. Like that’s why cigarettes are so powerful because your average smoker, you know, smokes 20 of them a day. So you’re running this cycle 20 times every single day. And that sort of encodes it. But if the reward you get is intermittent, where sometimes you get a big price by pulling the slot machine wheel and sometimes you get nothing, That makes it even more stimulating for people and it really makes it a lot more powerful. So you’ll hear people in gaming talk about intermittent variable rewards. I talked to you recently about a company called Pop Mart, which is this company that puts toys in little boxes but you don’t know what you get. And then you go to the vending machine and you buy one and you see which one you get. That’s the same idea. It’s intermittent rewards. Variable intermittent rewards. Maybe I got this one, maybe I got the big one, maybe I got nothing. that tends to make it a lot more powerful. That’s the process you create the habit over time. And if you’re in the software business, what they want to do, and this happens in others, but it happens more there, is they want you to switch from external triggers that start this process to internal triggers. An external trigger is, I’m walking down the street, I feel anxious. Okay, I’ll smoke a cigarette. That’s my action, what’s my reward, I get the nicotine rush. As you do it more and more, you start to anticipate the reward and you start to create your own triggers in your head because you’re looking forward to it. So, you know, suddenly you find yourself, you know, it used to be you checked your email or your notifications on WeChat or WhatsApp or Facebook, every now and then and you start checking them more and more and every time you’re lonely or bored, you start checking. You start to trigger yourself, then you take the action, then you get the reward. And that’s the real payoff, is like when people are, without any external prompting or triggering, they are routinely doing these actions. They’re checking their emails all the time. You know, they’re checking their notifications all the time. They’re on Instagram all day long. That’s what these software companies always talk about going for. Anyways, and all this fits under the category of habit formation. It just turns out if you’re good at software, technology can not just find habits that are already there. They can create them. And that’s really what these companies, a lot of them are overtly doing. They’re trying to use tech to create powerful habits in people’s brains. And I put that in the evil category. I really do. I think it’s you’re not helping them at that point. You’re helping yourself. Coca-Cola is not doing anything bad to you. They’re really not. They’re giving you a nice soda, it costs a dollar, it’s pretty good, yeah, it’s a little addictive, but they’re giving you something for it. What is the benefit for anyone to check your Facebook notifications 20 times a day? That’s not making their lives better. That’s good for the company. It’s not good for the consumer at all. So I think they’re sort of operating, you know, they’re doing tech created habits out of almost entirely their own self-interest. that don’t help you at all. And often it’s much worse for you. People sit on Instagram all day long and the more they use it, the unhappier they are. Like Twitter’s like that. Twitter is in the habit formation business and the more you use Twitter, the unhappier and angrier you are. So how is that at all good? That’s clearly evil moat in my book. So that’s kind of the first topic for today. Just think about habit formation. It’s… It’s a lot about human psychology, but there’s also some chemistry involved in there as well. It’s easier to create a habit if there’s a, you know, a chemical addiction at the same time. So it’s a bit of a mix, but it just turns out software is really good for this. And gamers are amazing. Have you ever wondered like the freemium business model? Like why when you play a video game it’s always free to begin with? Because they want to give it to you for free so you start playing and you start developing a habit. And then when you’ve got the habit, then they’re gonna start charging you. Either they’ll max out the time you can use, or they’ll do it a little bit better. They’ll try and sell you gifts and virtual items and things like that. But that’s a lot of, well one, free is powerful in its own right. Like I’ve talked about this quite a lot. The power of free is a big deal. You get a lot more adoption when something goes from one cent to zero. So it’s free, that’s good. But it’s also a habit formation technique. Let them use it for a while. They’ll build up the habit, then we’ll make money on them. Yeah, that’s a little dicey in my book. Okay, let me move on to the second one, and we’re just gonna do two of these for today. Now for this one, there was an article written, very good article, by Tristan Harris, who was written in the Atlantic. I’m gonna put the link down below. I’m just summarizing this article. This is not my thinking at all. And as a former product manager at Google, and basically studied, you know, The article is called How Software Hijacks Your Mind. And it’s just how software companies are focusing on psychological vulnerabilities and weaknesses that we all have. It’s just in the hard wiring. And they’re targeting it the same way magicians target it. And there’s a lot of parallels between what they’re doing as software and how magicians trick you. And make you see things that aren’t there or not see things that are there or all of that. It’s… kind of the same idea. They’re focused on sort of your blind spots within your processing, the limits of your perception, the edges. And then they use it to basically get you to do what they want you to do. And companies are doing this. I mean, it turns out software is really effective at this. So I’m going to summarize the list from the book. And it has how many? 10 hijacking techniques that software are using. I’m just gonna list them for you. I think it’s really interesting and I’ll put the link down below and you should absolutely read this one. I think it’s pretty awesome. Number one, hijack number one, control the menu, control the choices. You know, you see this all the time. I mean, you see it all the time. Like, I get this pop-up from McAfee, which I really dislike. I get these pop-ups on my PC all the time your subscription for antivirus is expiring, would you like to renew? And then it gives you two options. Option one, renew my subscription. Option two, accept the risk. And I’m like what kind of nonsense language is that? I mean could you be more blatant? You see them always trying to constrain your choices and force you to take one or the other, maybe because they’re tilting you with the language, which this group clearly was. Or maybe they’re just giving you five choices. But, well, how did you choose the five? What about the other 10 you didn’t show me? By limiting the choices, they can make the button that says renew is like bright red, and the button that says accept the risk, or it said like no, I’ll take the risk. It’s like black, it’s hard to see. I mean, they can change the perception, they can change the choices. They don’t even tell you the choices you’re not seeing. So, way this is just described in the article is that they’re giving you the illusion of choice. But they have already seriously directed your activity just in their control of the menu and what’s presented and what’s not. What did they leave off? Who determines what’s on the list of choices? Who determines what’s let off? What are the goals of those people? Are their interests the same as your interests? I’ve already said, look, a lot of the evil moats, it’s because what they want to achieve is very different than what is good for you. Cigarette companies want you to smoke as much as possible. That’s bad for you. So your interests are not the same. There is this assumption, let’s call it psychology, that the place you get information in this world is now your smartphone. You don’t go to the library. You’re probably not even asking a friend. You know, the smartphone itself has sort of become the default place to go to get information and get your answers. And so once you’re in that, you’re in their world. You’re in a world they’ve created. You know, what is Facebook really, really good at? Newsfeed. That was their core product was the Newsfeed. And people don’t give the Newsfeed enough credit. The Newsfeed is an unbelievable product design. One, it gets you to watch forever. But two, they choose what you’re gonna see next. I mean, they really do. And they, you know, you’re not gonna see all your friends if you’re on Facebook. You’re not gonna see what all your friends are doing in posting. You’re gonna see 10%. Maybe. And they’re gonna choose which 10%. And they’re making all these selections, but you think it’s your social network. It’s not your social network. You know, they’re constraining the choices. So that’s number one. Control the menu. Control the choices. You can see that everywhere. And it’s not necessarily evil because there’s so much information in the world. Someone has to narrow it down to something that’s digestible. So that’s maybe just an artifact of the world we live in. Hijack number two. Make everything a slot machine. Use intermittent variable rewards. Now this is the same idea. You can use this as part of habit formation, but you can also just use it to get people to engage. Why do people check their phones all day long? What is the first thing you see? You see the notification button that says, oh, you have six notifications. And you click. That’s basically like playing a slot machine. Ooh, how many did I get? People check all the time and maybe, so that’s your reward. You see the notification, that’s the trigger. You take an action, you click on it, and then you see how many notifications. How many people liked my photo? How many people liked my comment? How many people read my article? But it’s also variable. You know, maybe a lot, maybe a few. So you can sort of get that slot machine like effect. And the intermittent and variable part is very, very important. But this is also like a TikTok, which is a kind of a newsfeed and Facebook, which is a newsfeed. You watch a video. What do you do? You flip with your thumb. the next video comes up. That’s literally like pulling the lever on a slot machine. Ooh, what’s the next video gonna be? Is it gonna be a good one, a bad one, one I like? Ooh, let’s flip again, let’s flip again. As you’re looking at next content, what’s next in the newsfeed, you’re basically like playing a slot machine. And they may be good, they may get bad. It’s the same idea. Now that can be part of habit formation or it’s just a way to get engagement because people really like that. Hijack number three is fear of missing something important. I don’t really think this one is great. This is just sort of hey, you know, you don’t want to miss out on what your friends are doing. Kind of speaks to fear. Kind of peeps people in newsfeed. I think maybe one place I do believe this one is people won’t leave Facebook. Like when you ask people like do you use Facebook? No. Have Why not? Well, I don’t want to lose contact with people. Even if they’re not, there’s this fear of like, I don’t want to lose my connections with people, even if I’m not using it. I think that’s true. I think that’s why a lot of people stay on some of these social networks, which are based on social connections. I’m not sure about this one generally. Hijack number four, social approval. Yeah, that’s a big deal. I mean, we are social animals. There’s always this idea that human beings evolved. like on the savanna and we fought the lion and we could beat the lion so we evolved to be able to run really far, which human beings can. I mean, we can run further than, there’s only one animal on the planet, I think it’s the husky, the Alaskan husky or something. There’s only like one animal on the planet that can run further than humans. But we’ve evolved to fight and other things. No, no, no, no, totally, I don’t buy any of that. We evolved in social circles. I mean, we socially evolved within cities, within villages, to interact with each other in ways such that the group is very effective. So we’re incredibly sensitive to social signals from each other. I’m not gonna notice if a lion is walking in the grass. I am not hyper attuned and hyper evolved to be aware of a lion 200 yards away because the grass moved a little bit. That’s not how my brain works. But I sure know if someone may not like me or someone slights me a little. I mean, I can pick up social cues and I’m terrible at this stuff. Other people are amazing. And we are, you know, hyper-evolved for social interactions, for social approval. I think safe to say generally women are incredibly good at this. They can pick up on little clues. It’s, you know, it’s stunning to me when I see them do that. But yeah, so social approval. Everyone wants to belong. Everyone wants to be appreciated. Everyone wants status. This idea that we are status seeking monkeys. I totally believe that. You know, look at all, look at my life. I’ll show you my best life on Facebook even though it’s not my best life. It’s just the best photos. No one ever puts, you notice you never put a bad photo of yourself up on Facebook or anything like that. You always kind of choose the best one, right? Social approval. Anyways, that’s, that’s pretty good. Number five, social reciprocity. This is something Charlie Munger has been talking about for like 20 years. That we are, it appears, hardwired for reciprocity. And I think that’s clearly an evolutionary thing. If someone says thank you, you always say you’re welcome. You always do. And if you don’t, it feels bad. You literally feel wrong for not doing it. If I go to someone and I buy them a present, hey, it’s Thursday, I got you this book. I knew you liked this author, I bought you this book, here it is. That person automatically feels like they should get me something. It’s very powerful. And yeah, there’s a bit of social approval, but it’s really just sort of hardwired into us. If someone buys you lunch, I mean, don’t you always remember, oh, I should buy him lunch or her lunch. If someone sends you an email, don’t you feel obligated to reply? If I follow you on Facebook, don’t you feel like you should follow me? I mean it’s really, that’s a big deal. I mean Charlie Mugger has been talking about this forever because companies have always been doing this. Like you know you you sit down in a car dealership and the first thing they do is they say, oh you want a cup of coffee? You want a cup of tea? They’re giving you something. Even though it’s small, you will feel obligated to do something for them. You see salespeople do this all over the place. Even when they give you a discount, it feels like a gift. Hey you know this this stereo is $600 but just for you today $550. Now one that’s made up because it probably wasn’t $600 but two even within that I that was kind of like a gift. I have a sense of reciprocity now where I feel like I should do something back for them. Salespeople use reciprocity all the time. The most famous one of the most famous examples is the It used to be like if you get off a train or something like that when you come out of the train station in Paris or wherever, there would be the Arakrishnas and they would hand you a flower. A little yellow flower, a real flower. You’d walk by and they’d say welcome and they’d hand you a flower and that’s all they would say. And it was an incredibly effective technique and it really turned them from a very small religion into a much bigger one. Because even though it was a flower, everyone felt a sense of obligation to do something for them, and their donations went through the roof. And then the funny thing is you walk a block away and you’d see a garbage can absolutely full of little flowers, which I’m assuming they went and got and brought back. Clever, very, very clever. I don’t know if they did that on purpose or if it just sort of happened. But it’s the example people always point to with some reciprocity. Anyways, you can see that all over social media. Like they are literally trying to get you to do something where they’ll say, hey, it’s Bob’s birthday today. Send him a happy birthday. Like, you know, Facebook would send you a reminder. You think Facebook is being helpful. They’re not. Well, maybe they are a little bit. They’re doing that because as soon as you say, happy birthday to Bob, what’s Bob gonna do? Bob’s gonna say something back. They’re triggering reciprocity. You see it all over the place. A couple more here. Hijack number six, bottomless bowl. I always think of the soup bowl, because it was actually a psych study, where how much you eat depends on whether it runs out or not. Like if you eat a bowl of soup, you eat a bowl of soup. But some psychologist or something did, put people in a restaurant and they gave them a bowl of soup that never ended, like it kept refilling. And people just kept eating soup. They didn’t stop, they would eat a ridiculous amount of soup. That’s. That’s why when you go on Netflix and as soon as you watch one video it automatically starts playing the next one. Episode 1, Episode 2, Episode 3. When you go on Netflix they automatically tee up the next video. When you go down the news feed they automatically tee up. They’re basically giving you the bottomless bowl. And sure enough people consume a dramatic increase, a lot more. Okay, that’s pretty much the ones I want to go through. There’s a couple more here, I’ll just list them for you for your inertia, but I’m not gonna go into them because I don’t think they’re nearly as big a deal. Hijack number seven, instant interruption. If you interrupt people, it tends to be more persuasive. Hijack number eight, bundling your reasons with their reasons. That’s when you may come to a website or an app for one reason and then they will pair that with their objective. So you probably come on to Facebook to send a message. That’s very common, but you can’t see the messages without seeing the newsfeed. The newsfeed is what they want. So they put them together. Fine. Uh, hijack number nine, inconvenient choices. You make things difficult. Uh, hijack number 10, forecasting errors. Uh, you get people to sort of start using something, do an easy first click, some first activity to get people, sort of your foot in the door, then increase. Anyways, I don’t think those are as interesting though. The first ones were the interesting ones. Anyways, that’s kind of what I wanted to go through for content, but you know, it makes you start to look at your smartphone differently. Where, you know, the idea is like you’re basically becoming sort of a cyborg. We are all basically cyborgs now. We have our phones in our pockets, and then we have our own minds, and between the two we can do unbelievable things. Right? You can access all of human knowledge at any point. It’s just that we’re inefficient cyborgs that our interface with the phone is quite poor. And that was kind of my idea in terms of how I thought about this. Okay, I’m becoming super powered. I’m a regular person but now I’m a cyborg. I’m not convinced it’s not the other way around. Once you open your phone, you are not in charge anymore. Someone else is in charge. Really several companies are in charge of what you see and what you don’t see. And every moment that you engage with your phone, they are in a position to hijack your mind, to modify your behavior, and to get you to do what they want. But, you know, in terms of this cyborg relationship, I think they’re more in charge than we are. I really think they’re able to shape people and modify them and hijack their brains and create addictions and low, well, it’s not addictions. They’re able to create habits in people. as long as people turn on their phones. So I’m kind of viewing it differently, this idea of walking around with a phone in the pocket and who in that relationship is really in charge. I think the phones are in charge. And maybe the best defense you have against that is just to turn it off and say, for a couple hours a day, I am going to determine the information I consume. I am going to force myself. I’m not going to let anyone tee it up and feed it to me. I’m going to force myself to think about it myself, go and find it and make the decision. I’m going to control the information I consume. I’m going to control my experiences. I’m not just going to be sort of mostly a recipient to someone else’s decisions on what I consume and what I experience. Anyways, it’s something to think about. But that’s it for content for today and the key learning goal, the… key concept to take away here is share of the consumer mind, which is that you have to some degree captured part of people’s brains, you have a share of their mind as consumers, and that turns out to be a fairly significant competitive advantage. Now whether you get there by doing something that’s helpful to them or whether you get there by doing sort of an evil moat and taking advantage of them for your own interests. We see companies doing both and we see a lot of companies in the middle kind of doing something good but they’re more and more using these sort of tactics. Anyways, as for me I am heading to the airport in about an hour. I’m recording this on a Saturday. I finally sort of got my flights all figured out and went down this morning to get my COVID test picked up which was kind of exciting because um there’s a pretty significant outbreak in Bangkok. I mean it’s kind of all over the place right now. So I kind of packed my bag this morning and I went down to pick up my test and I figured I’d either get my test results at which point I would be heading toward the airport or I would test positive at which point I would be heading to some sort of hospital or tent because if you test positive then you know you get you end up getting sort of shunted into a hospital for I don’t know a week or two weeks or something like that. So anyways, I kind of packed my bag and headed down there. I was like, all right, well, let’s see where I’m ending up, but I’m definitely going somewhere. So I’m flying out to New Mexico to see a friend and get my vaccine, then probably bounce to New York, probably bounce to California, see my family, things like that. I haven’t seen them in a while because of, obviously the situation. And also I didn’t really, I mean, my parents are a bit elderly and I didn’t really want to show up if I wasn’t vaccinated. because you know that the people at risk are you know the older folks mostly. And you know so I was kind of worried about that. I’m like yeah I’ll go to New Mexico first and get hit the shot give it a week to kick in and then maybe it’ll be better. So that was part of it and then I’ll probably head out to Mexico for two weeks to write my book which I’m excited about. It’s um it’s gonna kind of be I mean I’ve been working on this subject the sort of digital meets competitive advantage I mean almost on a daily basis for six years and I’ve gone through you know hundreds and hundreds of companies now you know in written form and there’s just thousands and thousands of pages of notes. On all of these companies and building out the concepts and so I’ve really been working on this for a long time and now I’m going to try and boil it down to one fairly short hopefully high impact book that you know. makes it useful for people and clarifies it and maybe in the process I put my make my little mark on the world by outlining a way of thinking about things that you know sticks and we’ll see. I think I’ve got the thinking done. I’ve had that done for quite some time. The trick is communicating it in a way that that is easy and digestible and coming up with whether it’s analogies. I haven’t really figured that part out yet. I’ve been using this pyramid that I keep pointing you to. But that’s not really great for communicating anything. It’s more just a summary. I’ve sort of got to boil it down to like five simple stories. And if you hear these stories, then you’ll get it. The main concepts are embedded in the stories and usually stories are easy to remember. So that’s what I’ve kind of been thinking about, but I’m looking forward to it. I still haven’t found out where to go. I think I’m gonna head to either Mexico City or Playa del Carmen, which is sort of over on the coast near Tulum and near Cancun. Sit out there. I’m mulling it over. I am tempted to go down to Rio Generally, I try and spend a month in Rio every year And I haven’t gone for the last year or two obviously so and Rio you can get into you can get into Brazil right now So I’m tempted to maybe hop a flight to Rio and spend a couple weeks down there. I don’t know I’m thinking about that more and more anyways. That’s kind of what’s going on. I’m having an exciting week pretty excited to sort of get going again But that’s it Alright, anyways, I hope everyone is doing well. I hope this is helpful. If I can be of any help, or if you have any suggestions for cool places in the Caribbean or Central America, let me know. And apart from that, I will talk to you next week from the US. Bye bye.

I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.

This content (articles, podcasts, website info) is not investment, legal or tax advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. This is not investment advice. Investing is risky. Do your own research.

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