Keep Them Coming Back: 23 Habit-Making Insights for Product-Minded Founders

Written by The NFX Team
NFX is a seed-stage venture firm headquartered in San Francisco.

23 Habit Making Insights

Too often in startups, Founders track products and their impact by the numbers. But building engaging products is about focusing on how your users think and feel, which can be orders of magnitude more difficult to measure.

As we’ve seen time and again, behind every great product is an insight about human psychology. Does your product motivate and reward people to keep coming back? Users want to experience connection, they want to be entertained, they want to feel like they belong somewhere.

These are the deceptively simple key drivers behind the twin superpowers of startups: growth & user retention.

Today, we’re publishing 23 insights about user psychology for Founders, from many of the world’s best product minds:

  • Tony Fadell (inventor of the iPod, iPhone & Nest)
  • Rahul Vohra (Founder & CEO, Superhuman)
  • Josh Elman (Former VC and Product Leader at Robinhood, Twitter, Facebook, LinkedIn, & Apple)
  • Eugene Wei (Product Leader at Oculus, Hulu, & Amazon)
    & more

Within these frameworks, we hope you will uncover ideas for hooks, habits and happiness that you can build into your products. These are the insights for building products that keep your users coming back. Once you do that, the numbers will follow.

I. User Psychology

Technology Needs To Be Felt

Noam Bardin, Former CEO of Waze.

I was showing my wife the Waze app. The very first version of Waze that had come out on a Nokia phone. You could see other Wazers. They were only blue. We didn’t have our moods feature yet, and I remember my wife saying, “Wow, that’s so cute. There are other people using this. I don’t feel alone.” And my wife is not very technical or into technologies or apps, but that feeling she got was something that was very important and stayed with me.

When you think about the technology, there’s the functional side of what it does, and there’s how it makes you feel. Often startups focus too much on what it does and the hard aspects of the feature, the functionality, the performance. You forget that, if the user doesn’t feel that, it doesn’t really matter. What matters is what the user feels when using it.

There are a few different frameworks that I apply when I talk to businesses in the consumer space, but it’s probably the same for SaaS businesses and for other enterprises. I try to ask them when a user five years from now describes your company, what are the words they’re going to use?

This seems silly, but that is what the output of strategy, mission, and vision is. What will the actual user, when they describe you, think about it?

If you ask a Google user, what’s Google? They’ll say, “It’s a search company.” If I ask you, what is Facebook? You’ll say, “It’s a social media company.” Users have that clarity.

If you have a strong vision of how you want them to describe you, then you can begin talking in consumer terms. What are the emotions they’re going to express? What do you do for them that changes their life or that makes their life better, or that helps them in something? If you can answer those types of questions from the consumer perspective, it brings clarity to your whole business.

When startups are not doing well, it’s very often because nobody cares about you. You can do whatever you want, but nobody cares. However, when you begin doing something that matters, you’re going to get bombarded by opportunities.

 

If you don’t have clarity on your “Wow” moment, then it’s all luck.

Noam Bardin, Former CEO of Waze.

When we were building Waze, one of the most important things we wanted to convey to users was that this was a network. There are other people, you’re not alone, and that we’re building towards something. At the same time, it was very important for us to manage their expectations. Because, in the beginning, we couldn’t track where you were going and we’d get you lost.

When we started out, there was no one. So, if you were driving in the bay, in real-time at that moment, there’d be three other people driving. Once you were driving and you saw another person, you felt so excited about this “Wow” moment that people were connected too.

A lot of what we’d try to show you was this great experience we had for you, to make you feel empowered. In effect, this still exists. If you’re standing in traffic with Waze and the road is painted dark red, that’s all traffic. There are 50 different people that have reported traffic, but people will still report that they’re in traffic. That makes no sense, there’s no logical reason. But you feel that you’re in control. You feel that you’ve done something even though you’re helplessly sitting in traffic. Those emotional experiences are super important.

If you have clarity on them as a Founder in terms of what they are, what is that emotional experience that makes someone say, “Wow,” and tell their friends about what they’re doing, then you can engineer for it, you can build for it, and you can plan for it. If you don’t have that clarity, then it’s all luck.

The question is then whether you can deliver on your product promise or not. The users understand it, and they understand the mechanics, that you need lots of people using the app for it to get better. Once we understood that, we could focus all our energy on the core of the map, the navigation, text to speech, and basic functionality. Obviously, that’s much easier to improve than the experience or emotional connection.

As we improved the core functionality, we saw the numbers go through the roof. Literally, every release we did something, the usage grew, churn went down, and the network got bigger.

 

Waze's Data Nfx

 

What emotional payoff does your product have?

Eugene Wei, Product Leader at Oculus, Hulu, and Amazon.

Over the years as a product person, I’ve become more cognizant of how important it is to have awareness of how your product makes people feel. What’s often overlooked is that a lot of people use products to just make themselves feel good.

“Feeling” is an understudied aspect of product design and product development. We’re used to a very clinical economics analysis that’s cost-benefit driven. Every user is a rational economic actor trying to maximize some amount of benefits.

I think that people in the gaming world have more of an intuitive understanding of how important it is, moment to moment, to track your user’s emotional valence. That’s partially because games are continuous interactive experiences. If the user isn’t feeling the right balance of challenge, motivation, and reward in a game, they’ll churn out.

That same principle can be applied to a lot of other products. A lot of how products take off is in how they make you feel. If you watch any Apple keynote, going back to the Steve Jobs days, I think he is underrated for having this very intuitive understanding.

He understood why people should buy Apple products and that part of why they buy Apple products is that it makes them feel cool or it makes them feel hip, or it makes them feel creative. That applies to social networks just as much.

It is harder to measure that emotional quality. What emotional payoff does your product have? You may have to actually sit in a focus group and watch the body language of someone to really understand this. But it’s often just in their minds, in their heads. So, the downstream metrics that capture that are a little too late in the game, or we don’t connect them back upstream to a user’s state of mind. I think Jobs had an intuitive sense for this. It helps if you’re a Founder to try and be that user yourself, to be able to feel, moment to moment, how your own product is making you react.

 

Is your product utilitarian or entertainment-based?

Eugene Wei, Product Leader at Oculus, Hulu, and Amazon.

Many people think their products are utilitarian, but I’d argue a lot of products that people build are entertainment-based products. The reason this is important is that I think in the modern world, our smartphones are always connected to the internet, holding a whole bunch of different apps. We are seeing a collapse of barriers that used to separate different forms of entertainment into their own vertical.

I like to talk about when I was a child, when we had geographic separation to different forms of entertainment. I’d only watch TV in our family room because that’s where the TV was. I’d only play video games in my bedroom because that’s where I had the little Apple computer that I would load games on. I would only listen to music really in the car because that’s where we had a cassette tape player and radio. And I’d only really watch movies at a movie theater with friends because that’s where movies were played.

Over the years, those entertainment options started to blend. We got a VCR and could start watching movies at home. We started to get computers that were more portable. Music over time became available in more places. And the smartphone ultimately collapses all those things into one device. Every time I unlock my phone now I’m given a choice of anything.

I can choose what my diet of entertainment is. That actually makes all these forms of entertainment absolutely competitive with each other. In economics, we have this concept of substitutes. A product can substitute for another product. But I think in entertainment, what you have is actually a lot of forms of entertainment, while they might not be perfect substitutes for each other, they’re close enough.

Let’s look at sports as an example. The major sports leagues have an aging viewership. A lot of this is because kids today often choose to play video games instead of watching sports on TV. You might say, “Well, those are two different things. Watching sports is a totally different thing than playing a game with your friends.” But in that child’s mind, it doesn’t really matter.

They’re just choosing how to maximize their entertainment value at that moment in time and they’re making that choice to play the video game. So, I think a lot of companies that formerly looked at their competitive set as being companies that were directly in their vertical are missing out on the fact that they now compete with companies in a variety of verticals.

What I often tell companies now is, “Let’s say your product doesn’t really have much of a social layer.” And you might say, “Hey, nobody in our industry has a social layer. That’s not what movies are about. Movies are a passive form of entertainment.”

The problem is if all forms of entertainment are now effectively substitutes for each other, you don’t compete with other movie studios. You actually compete with a game company that has built a really fun party game, a social layer. In the end user’s mind, there’s no distinction. I think you now need to compete with the best aspect of every substitute, regardless of what industry they come from.

It’s very critical if you’re doing a startup to understand if you are going to be offering a product that is an entertainment-based product, because that really changes your competitive set. I’d argue a lot of things like, if you’re going to go argue politics with people on Twitter, people think of that as something heavy and serious, but I think that’s just another form of entertainment.

Social media, ultimately, is a lot about entertainment, not utility. That’s more precarious ground to be on than say, if you were truly a utility-based network. Like if you have a network like Uber or Lyft, you’re ultimately about getting someone from point A to point B. That’s not really an entertainment-based product. So, your competitive set may be more limited.

 

Don’t focus on what users want or need, instead obsess over how they feel.

Rahul Vohra, Founder & CEO of Superhuman.

I think that this generation of product builders are very talented, probably the most talented that has ever existed, and that they should always lean into their own strengths, whatever those may be.

But there is one systemic weakness I have noticed across Silicon Valley and more broadly technology: product builders have been trained to think about what users want or need. On the face of it, that sounds very reasonable, but there is another way to build software – instead obsess over how users feel.

Today, our business software feels like work. We have to check our emails, submit expense reports, enter data in our CRM. But what if we could make software feel less like work and more like play with game design?

At Superhuman, we build software like it is a game. And that has been core to why people fall in love with it. But most software companies don’t do this. Most software companies worry about what users want or need, but nobody needs a game to exist.

When you make a game, you obsess over how they feel. And when your product is a game, people don’t just use it. They play it. Game design turns out to be a different kind of product development – an altogether different framework.

 

Rahul Vohra's Product Frameworks

 

II. Product Principles

5 Game Design Principles

Rahul Vohra, Founder & CEO of Superhuman.

As a Founder, I’ve gone deep into game design principles. As it turns out, there is no unifying theory of game design. To create games, we have to draw upon the art and science of things like psychology. We’ve identified five key factors to consider:

  1. Goals
  2. Emotions
  3. Toys
  4. Control
  5. Flow

One example principle would be to make fun toys and then combine them into games. As it turns out, the best games are built with toys. They are fun on multiple levels, the level of the toy and also of the game itself.

To make this real in Superhuman, a favorite toy is our autocomplete. You can type whatever you want. It can be gibberish. And it does its best to understand you. For example, 2D becomes two days, 3H becomes three hours, 1MO becomes one month and the time to complete it is fun because it indulges playful exploration. What can it do? When does it break? How does it work?

It’s not long in on-boarding before people start asking themselves questions like, “HM, I wonder what happens if I keep typing 10?” Well, it turns out that it’s October the 10th at 10:10 PM. Or how about a sequence of twos? Well, that’s February the 2nd, 2022 at 2:00 PM.”

I then see people start trying more complex inputs and it’s not long before our users find pleasant surprises. For example, timezone math happens without you ever thinking about it. You can type in 8:00 AM in Tokyo, and that turns out to be 8:00 PM Eastern time. Most people are delighted to find out that if you really want, you can snooze emails until never. You can literally type in the word never and that email will never come back.

Consider all the features of your own product. Do they indulge in playful exploration? Are they fun even without a goal? Do they create moments of pleasant surprise? If so, congratulations, because you have a toy and you’re on your way to building a great game.

 

Looking Behind the KPIs

Dan Ariely, Israeli-American Author and Professor of Psychology & Behavioral Economics at Duke University.

Contrary to standard operating procedure, people measuring daily active or weekly active users, to determine the use pattern and how to reinforce habits, is misleading. The real question is: Are people using the product at the frequency and timing that we want them? And what is the model for repeated use that we have and how do we create that? They are looking at the dry KPIs and not thinking about what’s really happening behind them.

For example, a product that would be very useful to try and get people into a habit of checking every Monday morning or Sunday or Friday. What is the right cadence and what do we create in the environment to become a trigger for that?

People have busy complex lives and therefore we need to realize that the time that they’re giving us is very, very limited. People have very limited attention and time. If we design with that in mind, I think we’ll make much more progress.

 

50% of the design is the design. 50% of the design is the story behind the design.

Tony Fadell, iPod inventor, iPhone co-inventor, and the Founder of Nest.

First and foremost, when we’re telling stories, they have to be true. Too many startups want to believe their own BS. They start telling stories that aren’t true. You have to first have a true story. Even better, underpromise in the story and overdeliver in the experience.

Here are three tips:

  1. Give your customer a new superpower. Really understand your customer and speak their language. What is their pain? Understand their pain. Remind them of their pain. And then show them the way forward that takes away the pain — and gives them a superpower they’ve never had before. A superpower that is so magical that they want to show all their friends: “Look at this. Check this out. Look what I’m doing.” They feel like a different person because of it.
  2. Good stories are 50% emotional, 50% rational. You can be rational all day long: “This will save you money. Here are the features.” But you also need to make people feel, “Oh, this is important. It’s important in my life.”
  3. What’s in one person’s heart could be in another person’s head. You have to remember that what is in somebody’s heart could be in another person’s head. Look at a husband and wife. It’s like the stereotype, where the man says, “Look at these cool features,” and the wife says, “I don’t care. It looks like crap. I don’t want that in my house.” Whether it’s B2C or B2B, you always have multiple parties making decisions. You have to remember that not everybody around the table is going to think the same way. What’s rational to one person is emotional to another.

 

III. Creating Habits

Monopoly of the Mind

Nir Eyal, Angel Investor and Author of two bestselling books: “Hooked: How To Build Habit Forming Products” and “Indistractable: How To Control Your Attention And Choose Your Life.

Habit is one competitive moat. It is one form of competitive advantage. You don’t need any more evidence than Google. When I present in front of an audience and I ask people, how many of you have searched with Google in the past 24 hours? Out of 100 people, 99 hands will go up. And then when you say, how many of you have searched with the number two search engine? How many of you searched with Bing in the past 24 hours? Maybe the hand of one or two people, typically former Microsoft employees, go up. Why is that? Is Google just so much better? No.

In third party studies, when we compare the Google search results to Bing search results and you strip out the branding, so people don’t know which is which, it’s a 50, 50 preference split. People can’t tell the difference. And yet we Google it.

We even made it into a verb without even considering whether the competition’s product is any better. And so this is why habits are such a huge competitive advantage because when you form a habit in a consumer’s mind, I call this the monopoly of the mind, they don’t even consider whether the competition is making a better product.

In this battle of attention between the user and the company, the users always win. Creating the best product is table stakes. It’s really about capturing the monopoly of the mind. That’s what a product needs to have to keep users coming back.

You can buy growth for a company. Buy ads on Google or Facebook or television spots or radio spots. What you can’t buy is engagement, that has to be designed into the product.

 

Every Habit Needs a Hook

Nir Eyal, Angel Investor and Author of two bestselling books: “Hooked: How To Build Habit Forming Products” and “Indistractable: How To Control Your Attention And Choose Your Life.

I’m wary of making business processes that require thought, that require deliberation into habits. Because, by definition, they can’t become habits unless they’re done with little or no conscious thought – what they can become is a routine.

Not every product has to be habit forming, but every product that needs a habit needs a hook and hooks start with two features. As an Angel investor, I disqualify many companies that will never form a habit.

The criteria for a product that will form a habit are:

  1. One, it has to actually satisfy a user need. This is not mind control. You can’t get people to do something that they themselves don’t want to do. It doesn’t work that way. It has to provide real lasting value because people aren’t dumb. If your product is not serving them, they’ll look for alternatives or they’ll stop using your product altogether.
  2. The second criteria is sufficient frequency, and this is a big one. This is probably the number one reason that I will not invest in a company: Their product doesn’t have a hope of forming a habit if the behavior does not occur with sufficient frequency.

If your product is not used again within a week’s time or less, it’s very difficult to change a consumer habit. There are exceptions, but by and large, it’s a week’s time or less. If you’re selling, let’s say car insurance, you don’t use car insurance once a week. You only use car insurance if you get in an accident.

 

The Hook Model: 4 Steps

Nir Eyal, Angel Investor and Author of two bestselling books: “Hooked: How To Build Habit Forming Products” and “Indistractable: How To Control Your Attention And Choose Your Life.

The hook model is useful in two places. One in the very, very early stages, when it’s still a napkin sketch idea – before you spend a lot of money on the design of the product and coding the product.

The other place where it’s really helpful is in the latter stages. I get a lot of calls from people who are at a company that have poor customer retention. People aren’t using the product like they expected, and they don’t know why. So, in that case, you can use the hook model as a diagnostic tool to figure out what’s deficient. What experiments can run to see how we can fix the product to make it more sticky, more habit forming?

There are four steps in the hook model:

  1. There are two types of triggers. We have external triggers and we have internal triggers. The internal triggers are uncomfortable emotional states that we seek to escape from. The only reason we use any product, online and offline, in fact, the only reason we do anything in life, the seat of motivation, is about the desire to escape discomfort. This is called the homeostatic response. The external triggers every designer is familiar with. These are the pings, the dings, the rings, anything in your outside environment that prompts you to action. On Facebook or LinkedIn or TikTok, it’s a notification, it’s an email. It’s something that tells you, “Hey, do this action.”
  2. Next is the action phase, which is defined as the simplest behavior done in anticipation of a reward. One of the backbone tenets of consumer psychology is called Lewin’s equation, the easier something is to do, the more likely people are to do it. So, if we can make that key behavior, the key habit as easy as possible to do, users will more likely do that intended behavior.
  3. The third step is really the engine of the hook model. It’s called the variable reward. The variable reward comes out of the work of B.F. Skinner, the father of operant conditioning. He did these experiments back in the 1950s and 60s, where he took a pigeon, put the pigeon in a box and gave the pigeon a reward, a little food pellet every time it pecked at the disk. So, very quickly Skinner could train the pigeon to peck at the disk if and only if the pigeon was hungry. There has to be an inherent need.
    Now, one day Skinner ran out of these pellets and couldn’t give the pigeon a food pellet every time – he could only give it to them once in a while. And to Skinner’s amazement, what he found was that the rate of response increased when there was what we call an intermittent reinforcement. Such that, sometimes when the pigeon pecked at the disk, there would be no food pellet, no reward. The next time the pigeon would peck at the disk, they would receive a reward.
    What Skinner observed was that the pigeon pecked more often when there was some type of variability around that reward, the schedule of reinforcement, and we see the same phenomenon in all sorts of products and services online, the best example is the feed. Have you noticed how everything today has a feed, why is that? Well, on LinkedIn or Instagram or Facebook, that feed mechanic is a variable reward structure. It’s using that same psychology of searching and searching for that next variable reward.
  4. The fourth and final step, and probably the most overlooked, is what we call the investment phase. The investment phase is where the user puts something into the product to increase the likelihood of the next pass through the hook. Now, the way this works is in two ways:
    Users can load the next trigger. Loading the next trigger is when the user does something to bring themselves back. For example, when I send someone a message on WhatsApp, there’s no immediate reward, there are no points, there are no badges. Nothing really happens when I send someone a message. What I’m doing is I am loading the next trigger because I am likely to get a reply. And that reply comes coupled in the form of an external trigger, which prompts me through the hook once again. It’s not from some piece of spammy marketing or expensive ad, but rather something the user did to bring themselves back. That’s called loading the next trigger.
    The second way is what I call stored value. Stored value was a revolutionary concept in the history of manufacturing, because it used to be very expensive to change a product. Henry Ford is quoted as saying, “You can have any color Model T as long as it’s black.” Why? Because it was really difficult for him to retool his shop and make different color cars back then. Well, today, when it comes to these interactive products, we are changing them on the fly for each and every user. It’s a product of one because of this concept of stored value. The more data, the more content, the more followers, the more reputation you accrue on a platform, the stickier it becomes. The more you invest in it, the more value is stored in that product. Unlike things made out of atoms in the real world that depreciate with use, that lose value with wear and tear, habit-forming products appreciate with use. They get better and better the more we use them because of the investment that the user is putting into the products.

After many successive cycles through the hook, the product does not require that external trigger anymore. Eventually, we start to rely on the internal trigger, or the uncomfortable emotional states that we seek to escape from.

Products are successful when they can attach to these uncomfortable sensations, whatever they might be. You’re feeling lonely, check Instagram or Facebook. You’re feeling uncertain, Google it. You’re bored, there are lots of solutions for boredom. Check the news, stock prices, sports scores, Pinterest, Reddit. When a product attaches to that feeling, that’s where the habit is cemented because now you don’t even need that ping or ding anymore.

People are increasingly realizing that understanding consumer psychology and behavioral design is an essential skill these days.

 

B=MAP

BJ Fogg, Founding Director of the Stanford Behavior Design Lab and best-selling author of “Tiny Habits.”

I created a human behavior model, it’s written like an equation B=MAP. The equation explains that a behavior (B) happens when motivation (M) to do the behavior, ability (A) to do the behavior, and a prompt (P) to trigger the behavior come together. The prompt is the cue, the reminder, the call to action. If any one of those things is missing, the behavior will not happen.

You might think it can’t be this simple. This age-old puzzle of what causes human behavior, does it really come down to only these three things? The answer is, yes, it’s three components that characterize every behavior.

Note that the harder the behavior somebody does, the more motivated they are. One really safe guide is to always look at it in a primitive, fundamental way. We ultimately want to look good to others, we want to be financially secure, we want to feel love. Things like that are very deeply wired into us as human beings and animals.

The more people (1) stretch their finances, (2) put in physical effort, (3) put in mental effort, (4) make time, and (5) adjust their routine to do something, the more motivated they’re to do it. These five components are a model I call the ability chain.

Look at habit formation not as drudgery, not as something you have to endure for 66 days, not something that you use willpower for, rather as something fun. Pick habits that you like and be playful in your approach and revise as you go along.

I think for a startup mentality, Founders need to understand that they have to revise, shift, and pivot what you do with your product’s habits. You start out with something, you design it into your user’s life, and if it doesn’t work, you adjust it until you find out how it fits.

Habit formation is a design challenge. It’s the design process. It should feel pretty familiar to Founders and people in startups. There are definitely parallels with the ways you make your venture work and the ways you figure out habits and make those work.

 

IV. Productizing Status

Status Games

Eugene Wei, Product Leader at Oculus, Hulu, and Amazon.

When I think about status, there’s intra-product status, how status works within your product, and external status, or culture. The networks that have struck me as achieving super scale had some sort of status incentives or status games built in very early on. These status games helped them achieve that kinetic energy you need to achieve scale that then increases the utility of your app/product.

You can think of all of these products as a game. There is some hurdle that you have to do, some proof of work, to capture status. If you can define some unique form of proof of work, then you may have something that jumpstarts a new game.

It’s an art form to design this because the risk is always that you put in some restriction and people respond, “Oh, it’s not even worth going through that. I actually don’t care.” And you just end up killing off usage of your product.

You have to define the restriction so enough people feel a sense of progression. So, you need a challenge, but you also need to give people hope that they can overcome that challenge with enough time or enough improvement in their skill level. Otherwise, they just churn out. That’s why they talk about games with a heavy skill cap having a limited TAM or ultimate user base.

We’ve all probably heard by now about a whole bunch of new influencers created essentially by TikTok’s algorithm. I think that’s one of these new status games.

 

Engineering Status

 

Scarcity Breeds Status

Eugene Wei, Product Leader at Oculus, Hulu, and Amazon.

I think a younger generation in the U.S. is actually very attuned to the emotional value and the status that comes from ownership of virtual goods, whether it’s in video games or elsewhere. I think that’s a very big societal shift because if a centralized provider can guarantee the scarcity of a virtual good, then it actually does have emotional value. For example, people who play League of Legends all know how hard it is to acquire certain types of equipment in that game. And there’s a flourishing aftermarket for it.

I think China leapfrogged ahead of the West a little bit on this, but virtually-defined scarcity is going to come to the West. (Eugene originally said this on the NFX podcast on November 10, 2020. We’re seeing this now with NFTs.)

I think every product person or entrepreneur moving forward needs to just have familiarity with this tactic and strategy. Structurally, part of how you build your product will be about defining what scarcity means.

 

V. Consumer Social

The Best Consumer Founders Are Psychologists

Josh Elman, early investor in Musical.ly (rebranded as TikTok), Nextdoor, and Houseparty, and product leader at Robinhood, Twitter, LinkedIn, Facebook, and Apple.

I think the best Founders, especially in the consumer space, are great studies of humanity. They are great studies of people and they are really great psychologists. I used to say this maybe 10 or 12 years ago, Facebook is a psychology company. If you think of the early Facebook, it was a bunch of forms that people could fill in and it communicated the forms to other people. But they understood how to do that in a way that made humans feel better. That’s really the secret of almost everything that’s been built since then.

Evan Spiegel when he was talking about the early days of Snapchat, he very much sounded like a psychologist too. He talked about why deletion by default changes the entire way that you perceive the person on the other side and how you experience that human connection.

Ben Rubin, who’s the Founder of Houseparty and Meerkat, also talked so much about the power of live video and how being live and trying to create togetherness when we’re not together has been so powerful.

That’s what makes these products so special. Some people who come to technology are architects. They think about building cities, they think about planning. Some people are psychologists, and they think about people. I think these insights about humanity need to be applied, technology is just the enabler.

 

Writing a New Trend

Josh Elman, product leader at Robinhood, Twitter, LinkedIn, Facebook, and now Apple, and early investor in Musical.ly (rebranded as TikTok), Nextdoor, and Houseparty.

I probably looked at 600-700 new companies in the consumer and media worlds every year from 2012 through 2017 when I was in Venture Capital.

One thing I always looked for was somebody writing a new trend where if they got it right, they could actually own a new habit formation in the future. A habit that starts small but can snowball to become a new center of gravity for that new habit or behavior.

It really needs to be something new. “I have a better way to share photos,” just wasn’t nearly as interesting. That is derivative.

“Hey, I think people are actually going to start recording a lot more videos, and I think we have a way to become the hub of short form videos.” This insight actually led me to invest in Musical.ly (rebranded as TikTok) when it was starting to work in 2015.

Right now, for the first time in four years, I’ve been thinking about remote work, remote connection, and staying at home. Being just as happy to get on a video call with friends might be enough to set new habits, and new things can form that could not have before.

Who swears by your product?

Josh Elman, early investor in Musical.ly (rebranded as TikTok), Nextdoor, and Houseparty, and product leader at Robinhood, Twitter, LinkedIn, Facebook, and now Apple.

I think a lot about stickiness, or how a habit becomes central to somebody’s life. I look for products with habits that users have top of mind and want to do often. If you think, “I’m bored,” what do you do? You might go to Facebook, you might go to other things. If you can, try to be the thing people do when they’re bored.

Or if I want to connect better with my friends, where could I find more meaningful time with my friends? What are some of these needs that can be central and met in people’s lives that other products don’t provide today?

When I’m looking at a company, I usually look for a little bit of traction where there’s a small group of people who you’re completely solving something for already, who swear by your product. Your early users will hopefully say, “Every day I check into this product because it does this thing for me.”

When I look for traction, I don’t care about the big numbers per se. I care about the depth of the numbers for the people who’ve already converted to your product. Because, if you have that, then you have a chance to take that deep meaningful connection with some people and expand that to a lot more.

 

What’s your growth hook?

Josh Elman, early investor in Musical.ly (rebranded as TikTok), Nextdoor, and Houseparty, and product leader at Robinhood, Twitter, LinkedIn, Facebook, and now Apple.

I always look for the growth hook in a product. It’s not that you’ve already figured out how to grow or exploit that but, “Hey, if this small group of people are using it, here’s why they want more people to join them, and here’s how this will expand, grow, and rise above the noise.” Because any company that you want to grow from something small to very big needs enough reasons for why it would rise above the noise.

Discord was one of the rare examples in my venture career that keyed on all three elements I look for: writing a new trend and owning that new habit, sticky users who swear by your product, and a real growth hook that users care about growing so they can get more value from the product.

Discord was riding the trend of gaming where people were starting to play a lot more games with each other. Gaming was becoming much more of a core behavior. We’ve obviously now seen that with Fortnite and others but even in 2015, this was already becoming much more mainstream.

Discord enabled chat via web browser where I could just send you a link and we were voice chatting within about a minute. It was pretty amazing. Back then, it was a total aha experience to have 10 people in a voice chat over just a text. So, we found that they had a couple hundred thousand daily users, but they weren’t just daily users. They were every day, hours a day, 10% of the people had the app open for over 10 hours per day.

This was a really, really committed group of people. They had a really good growth hook too, as the gaming ecosystem was blowing up. Twitch streamers were talking about using Discord. Once you get one person, they would share it with all their friends who they gamed with. All of a sudden it just kept growing virally and through the use of Twitch and other gaming influencers. This growth hook really helped Discord become such a meaningful company, but I bet on it because of all three things. It’s rare to find all three in one product.

It’s all about getting the right product at the right time with the right trend, and finding the right way for the viral growth to actually flow through current channels for something to really take off versus being stuck.

 

Bringing the user’s life energy to the product

Josh Elman, early investor in Musical.ly (rebranded as TikTok), Nextdoor, and Houseparty, and product leader at Robinhood, Twitter, LinkedIn, Facebook, and now Apple.

When we first invested in TikTok in 2015, one of my theories was similar to Instagram and Snapchat, we had made capturing a moment so effortless and so fast that you could just share it. We were tipping the balance and putting the burden on consumers as opposed to the creators to make something that’s valuable for the people they care about.

With TikTok, we flipped that again. To make a lip sync, to make a good dance video, to make a funny, humorous piece of content, people actually spend hours learning steps and going to make them. We turn the world back into creators with our phones. It’s media that we’re creating with our heart and wanting to share and wanting to get feedback on.

I’ve long dreamed that the best social network could be one that shows how long you spent making a post. If you go on a trip and you make a collage, it says, “Hey Josh, James just spent three days or six hours over three days curating these pictures to share his album from this amazing trip he had. Would you like to look at it?” If it said that you put that much time in, I would always look at it. Whereas, if I just see you slam up a hundred pictures, I’m more likely to think, “Thanks. I hope you had a great trip.”

It brings humanity, it brings the time we spend, the life’s energies that we spend into the actual media form. I think TikTok is the beginning of that.

 

VI. Other Product Frameworks

3 Maxims of Successful Products

BJ Fogg, Founding Director of the Stanford Behavior Design Lab and best-selling author of “Tiny Habits.”

I have several frameworks for what a product has to be able to do before it deserves a bunch of funding and development. At the highest level, there are three principles that I’ve found over the years that matter more than anything else. I call them Maxims.

  1. Maxim number one is to help people do what they already want to do.
    Contrary to popular belief, it’s not persuading people to do what they don’t want to do. If you want your venture to last, or if you want your product to engage people, if you want your platform to change behavior, you’ve got to help people do what they already want to do.
    Instagram didn’t go out and try to get people to share photos they didn’t want to. Facebook didn’t go out and try to get people that didn’t want to be connected to connect.
    Whether you’re pitching a VC or putting it on a website for everyday people to look at, they don’t care that you’ve solved the technical problem. They don’t wake up in the morning saying, “Oh my gosh, I wish I had a secure way of doing X, I wish I could get an API for Y working.”
  2. Number two, and this one is also important, you have to do both. You have to help people feel successful.
    That’s what wires in the habit. It’s not repetition that wires in habits. There’s no scientific evidence I can find that says repetition creates the habit.
    Instagram is a really clear example of this. When they launched Instagram, how did they help people feel successful? Yes, you could share photos and you could get likes and followers, but I don’t think that was the key. It was the filters. You could take a picture, apply a filter, and then your photo transformed from just a photo anybody could take to something with a point of view, something that might even be a work of art.
    What was Instagram tapping into? People want to feel like they are admired by their friends, because if they don’t feel like they are, it doesn’t matter.
  3. Maxim number three is that simplicity changes behavior. What is the simplest way that people can solve a problem, or do what they already want to do. Amazon did this. Twitter did this. People want to interact. People want to share. So, be the simplest, easiest, most satisfying way to do X.
    One overriding principle of human nature is that people follow the Law of Least Effort. We generally choose the easiest path to do something. It’s why all the capillaries in our bodies conform with the same ratios as capillaries of a tree. And we see that everywhere. That’s nature.

While some VCs say that all pitch decks need to include the problem that you’re solving, it would be better to articulate what you are helping people do that they already want to do and how you are helping them do it simply.

 

Cultural Diffusion Quotient

Eugene Wei, Product Leader at Oculus, Hulu, and Amazon.

Part of adoption for new products or services comes with this cultural diffusion quotient, which I think of in every society. It really matters if a culture is welcoming and accepting of it. That’s often the hardest challenge.

Say what you will about Google Glass, but our culture wasn’t ready for people wearing those types of glasses full time when it first came out, regardless of how well that product was designed. I think that cultural problem was there.

How is your product viewed by society writ large?

In the West, there are a lot of forms of technology that are regarded by the users and/or by the media as sort of dystopian in nature. I think part of why China has leapfrogged American tech in some areas is because they’re a different culture with different things that are taboo. Some things that are taboo in the West are not seen as that in the East and vice versa. So, you see certain products advance more quickly in different areas.

 

Lost Synchronicity

Eugene Wei, Product Leader at Oculus, Hulu, and Amazon.

The first decade or two of the internet and the smartphone was really focused on achieving efficiencies from going asynchronous. It’s like, “Hey, why do I have to watch Friends at 7:00 PM on a Thursday?” Netflix is like, “You can just watch things whenever it is convenient for you.”

We used to have to call people and hard interrupt them to communicate with them, but then we got email and messaging. Now, it’s like, “You know what? Most things aren’t that urgent. Let’s go asynchronously in our communications.” And most people responded, “Wow, this is a great advance for the world.”

In every field, you can see there are huge gains to going asynchronous. But I think what was lost is that social feeling of community that comes from synchronous and synchronicity. I think there’s some amount that will come back over time, where more of us will say, “It actually does matter occasionally that a society is all watching something at the same time or you and a group of people are doing something together.”

Crowds and Power by Elias Canetti is a really fascinating book that gets into crowd or mob psychology. One of the observations Canetti talks about is a paradox that if you’re in the mosh pit at a concert, there is a moment when you’re part of that group and there’s a sense of relief because you lose your sense of individuality. You actually become one with that crowd.

Again, it comes down to how products make people feel. I don’t think you can solve that problem unless you acknowledge that sometimes joining in with the mob feels good for some people.

 

People just want to play

Cyan Banister, early investor in Uber, Niantic, Postmates, DeepMind, Carta, Thumbtack, Flexport, Affirm, and SpaceX.

There’s no reason why we have to go to Santa Fe or New York. We could put on a headset or we can wander around our own town and transform our town into something really spectacular. There’s no reason why you and I should only have seven or eight options if we want to hang out. We can go to a movie, dinner, a nightclub, have a phone call, or have a cup of coffee. But why aren’t there thousands of options? There could be so many.

I think that Founders need to think bigger. You don’t need AR headsets to create this. We have a phone, and the phone is a lens to an invisible world that you can imagine.

For example, Pokemon Go. Interestingly, a lot of people said, “Oh, there are going to be all of these Pokemon Go clones. Pokemon was easy to create. Someone will just create another one.” It hasn’t happened yet, and that’s because it was not a trivial problem.

I do think that we always know it’s not real. We just want to believe it’s real and we want to play for a little while. You want to go into that childlike zone and make believe for a while and have fun with it. There’s nothing wrong with that. I don’t think you’re going to get lost in it.

I think that it’ll help solve some loneliness that people experience, which I think is a very valuable thing. Right now, people solve that through Instagram, which I don’t think is necessarily valuable. Looking like you’re on vacation, painting pictures, like you’re just crushing it doing all this stuff, that’s not real.

VR would be. You could discover something about yourself that maybe you never thought possible. If you felt safe talking to an artificial being and not a human being, you might be able to confront things that you were never able to confront before or get things done that you never thought possible without judgment, because you’re like, “That being can’t judge me, they’re not real.”

To me, life is performance art in a game. We’re all playing a game. It’s different for every single one of us. And at the end of the day, the only people who keep score are ourselves.

 

How to Become a Product-Minded Founder

A common challenge for Founders is aligning product performance metrics to the true user experience: how they think, how they feel. Time and again, we’ve seen that behind every great product is an insight about human psychology.

As Founders, you can use these insights and frameworks to bring the humanities into building products. It’s more about EQ than IQ.