A new wave of disruption is coming. This time not brought about by advances in technology or new business models but instead by a new understanding of how the human brain functions and how we make decisions and choices. The changes it will bring will likely dwarf those that have come before.
Over the last decade, a combination of real-world events and new research have overturned dozens of foundation theories underpinning entire disciplines from economics to consumer psychology. Accepted truths relied upon by every business executive, banker and policy maker the world over can no longer be relied on. The very foundations of economics including Rational Choice Theory, the law of supply and demand, and the Efficient Market Hypothesis, Everett’s theory of Innovation Diffusion (which coined the terms “early adopters” and “laggards”), and even Clayton Christensen’s theory of Disruptive Innovation have now been shown to be at best only accurate in certain contexts and, at worst, flat wrong. (references for research showing these ideas being overturned appear at the end of this article.)
The replacement of old theories with new is normal in all scientific and research-based disciplines. Advances are made when an established theory is replaced by a new one that explains more, one that covers both what the old one did and also the anomalies, exceptions, and conditions that the old one could not. What is rare, however, is a wholesale change to the very foundations of multiple disciplines all driven by a single new understanding that not only explains more within an individual discipline but offers consilience across them. That is to say, it provides a shared explanation supported by evidence from a diversity of arenas, while also explaining the various anomalies and those troubling and previously inexplicable real-world observations.
What the evidence now makes clear is that the human brain is comprised of discrete, but highly interconnected, physical structures. These evolved modules function and interact in ways very different than previously thought and in ways that directly, consistently, and predictably influence our decision making processes and choices.
Rather than being biased away from rational self-interest, we are genetically compelled to independently value a variety of specific things. We pursue and resist the loss of relative status, novelty, belonging, gossip, and more (gossip in this context specifically refers to information on the actual or potential sexual partners of others or regarding events or actions that have impacted the relative status of others). Critically these forms of value are unlike money or “utility” as traditionally conceived by economists. These discrete forms of value are not universally interchangeable or independently quantifiable. Most are strictly relative and many are strictly contextual. They only exist in terms of one person being compared to another and often only in specific contexts. One can not be used to obtain the other. No amount of money can make something novel that is not or buy the status of an MMA (mixed martial arts) fighting champion in a group of serious gym junkies. A person can only have status relative to others. Status in the operating theatre or cockpit does not equate to status on the basketball court. Yet in all cases, relative status is valued, we would happily pay for it if we could. People of high status are universally considered more desirable as mates. No one wants to be the last one picked and most will accept a more senior title over more money. In fact, where money appears to be the driver, it is more often than not simply a proxy for status.
Critically, each form of value exists and is perceived because of discrete independently operating neural modules. Our brains don’t operate like a single decision-making system or even a simple pairing of a fast and slow system. Rather, these modules are independently activated by specific patterns of stimuli and they battle each other for control or influence alongside our conscious system while being either emboldened or suppressed by various emotional states. While interconnected with the physical structures enabling our conscious and “rational” abilities, the perception and judgment of ‘value’ of each form generally occur subconsciously and always within its associated distinct physical neural structure. As such, each cannot be compared or equated to the other forms of uniquely perceived value.
In addition to the need to pursue relative status, novelty, mastery, and other genetically dictated, unique, relative, contextual, and often non-quantifiable or interchangeable forms of value, the research shows:
- While universal, these value traits appear in all populations in proportions corresponding to a normal bell curve distribution for polygenic traits. This means that some small percentage of people will not value status or novelty at all, some small percentage will be obsessed with it, and the vast majority of us will pursue or value it in a roughly average way.
- “Psychological safety” is the key to all adoption decisions. Self-reported personal preferences, economic self-interest, and even physical safety are secondary for most of us. Psychological safety in this context refers to a decision not having a negative impact on a person’s status, belonging, or definition of self.
- Information, opinions, and even new products that conflict with our stored definition of self will trigger the same “posture, submit, flight, or fight” circuit as physical threats. We will resist and rationalize why anything that will diminish our status, role, or belonging within or to a group that forms part of our self-identity should be resisted irrespective of any objective assessment or the rational benefits of adoption.
- People’s willingness to challenge others also appears in a standard bell curve distribution. As a rule, most people are reluctant to challenge others. Given the adoption of a new idea or product will trigger the “fight, flight, or submit” circuit in others, any adoption decision for a new product or new idea will be based on a subconscious assessment by the decision maker of if their choice will be perceived as a challenge to others and how the decision will impact on their status and belonging or the perception by others of their status and belonging. This means that rather than our choices being the product of personal preference and made solely within our individual heads, our decision processes are almost universally social or group in nature.
- Belonging, or fear of ostracism, is the most powerful need or form of value. Relative status within groups that form part of our self-identity is the second most influential form of value.
- The persistent, consistent, and social nature of these influences results in our behavior in groups and between groups being highly predictable irrespective of the size of the group.
These realities have both mundane and profound ramifications. Money is not the sole driver of choice, actions, or exchange. In many cases, money is simply a proxy for status. For marketers and product managers, a product that confers status will be valued and adopted more broadly than even a superior product that does not or worse is associated with negative status. Premium brands have capitalized on this for years. Apple’s iPod did so without knowing it. But every Apple release since has tried to emulate or confer multiple forms of value from traditional functional utility to status, novelty and more. Tesla has incorporated status value into its strategy with tremendous effect, succeeding in selling green electric cars where others mostly failed because they focussed solely on environmental benefits. Tesla succeeded by selling a super cool premium sports car that happened to be electric. Early MP3 players, Google glasses, and 3D televisions fell prey to the negative status associated with their ‘geeky’ early adopters. 3D televisions suffered from the socially awkward need to wear unflattering glasses. Google glasses also made people feel that others would see their choice to adopt as a challenge. In each case, success or failure was the result not of a traditional economic analysis or utility but the product of these alternate forms of value.
Moving forward, the most effective organizations will fundamentally alter how they think about what incentivizes a customer to buy as well as how to incentivize their employees. Programs based specifically on these realities will allow powerful incentive programs that dramatically impact employee and team behaviors and performance without also incentivizing abhorrent behaviors such as inappropriately selling products just to get a commission.
Recruitment processes, performance reviews, and team structuring will also change to reduce or eliminate bias and to optimize team and organization performance. Those companies that embrace and apply these new realities will quickly achieve a substantial strategic advantage over those that do not.
Awareness of the role of status, belonging, people’s innate lack of willingness to challenge others, the social nature of decision making, and critically our “fight or flight” response to ideas and proposals that aren’t aligned with our self-image will allow for a whole new era of more objective decision making and project selection.
“Group-think” is not just a condition of unique environments but the norm virtually everywhere. These influences impact equally internal decision processes within an organization and external decision processes of individuals and groups comprising a market. 90% of innovation, new product, start-up, and organizational change initiatives fail to fulfill their business case. While these failures are contributed to by a diversity of issues, it is these previously misunderstood ramifications of our nature, the way our brains physically function, the lack of objectivity during selection processes, the role of status, the common failure to acknowledge and address assumptions, and the collective impact of these flawed theories now overturned, that represent the single most significant cause.
Disruption lead by those who apply knowledge of this new understanding of human nature and choice, both internally within their organization and in developing new products, marketing campaigns, and all interactions with external stakeholders, will literally change the way we perceive business success. Asset market bubbles, the existence of which so conflicts with traditional economic theory that some economists still deny them, can now be explained and predicted. The behavior of mass shooters, suicide bombers, world leaders, in fact, the emergence, adoption, and behavior of whole political movements can now be explained and predicted. From teen depression and bullying to successful international relations, previously intractable problems may now have solutions. Change is coming. To lead it simply requires embracing the modern science of human nature.
Neuroscience and social nature of behavior, choice, and forms of value:
- A Deeper Truth: The New Science of Innovation, Human Choice and Societal Scale Behavior by Tim Stroh Amazon
Flaws in Traditional Economics:
- A Deeper Truth: The New Science of Innovation, Human Choice and Societal Scale Behavior by Tim Stroh Amazon
- Thinking, Fast and Slow by Nobel Laureate Daniel Kahneman Amazon
- Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions by Dr. Dan Ariely
- “Epigenetic Behavior: The Cause of Irrational Group and Societal Scale Behavior, Including Asset-market Bubbles.” https://www.researchgate.net/profile/Tim_Stroh/publication/264159515_Epigenetic_Behavior_The_Cause_of_Irrational_Group_and_Societal-scale_Behavior_Including_Asset-market_Bubbles/links/53d05d4c0cf2f7e53cfb7736/Epigenetic-Behavior-The-Cause-of-Irrational-Group-and-Societal-scale-Behavior-Including-Asset-market-Bubbles.pdf
Clayton Christensen & Disruption Theory are only narrowly applicable:
- “Is the Theory of Disruption Dead Wrong?” By Natalie Kitroeff in Bloomberg 2015-10-05 (did-clay-christensen-get-disruption-wrong)
- “How Useful Is the Theory of Disruptive Innovation?” By Andrew A. King and Baljir Baatartogtokh, MIT Sloan Management Review Magazine: Fall / September 15, 2015
- “The Disruption Machine” by Jill Lepore in The New Yorker (2014-06-23)
New Theories Regularly Replace the Old
- The Structure of Scientific Revolutions by Thomas S. Kuhn Amazon
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Tim Stroh is a successful innovator, author and speaker. He has taken software-as-a-service (SaaS) startups from idea through to multimillion-dollar trade sale, lead the R&D efforts of market-leading consumer product manufacturers, and is the award-winning author of A Deeper Truth: The new science of innovation, human choice and societal scale behavior. Tenaciously curious, he is known for his engaging speaking, his ability to bring together and make relevant radically diverse topics, and as a catalyst for objectivity.