Hindsight bias

Hindsight bias reflects your tendency to view the outcome of an event as inevitable. It’s your belief you could have accurately predicted an outcome after knowing what the outcome is. A few years ago I had the worst night of camping of my life. We arrived at Lopez Island, off the coast of Washington state, … Continue reading Hindsight bias

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6 psychological tactics behind the Starbucks menu

Starbucks menu design

The menu at Starbucks is designed with one thing in mind: to make you feel better about buying coffee at Starbucks. And it doesn’t hurt if it gets you to spend a little more—while making you feel like you spend less. There are lots of ways Starbucks gets you to do this. Among the more … Continue reading 6 psychological tactics behind the Starbucks menu

The center stage effect: this is why you choose the product in the middle (even if it’s bad)

center-stage-effect

The center stage effect describes your tendency to choose options in the middle of a choice set. In some cases, these choices are low-risk: which route you drive to work, which pen you pull from the drawer. The center stage effect also influences which products you buy, which students you call on in class, or … Continue reading The center stage effect: this is why you choose the product in the middle (even if it’s bad)

The decoy effect: Why you make irrational choices every day (without even knowing it)

Decoy effect - Apple iphone

The decoy effect describes what happens when, while choosing between two items, a third item is introduced that causes you to switch your preference between the first two items. A few weeks ago, I was at a clothing store trying to decide between two shirts. I liked the way one shirt fit, but I liked … Continue reading The decoy effect: Why you make irrational choices every day (without even knowing it)

Why you spend more when prices end in .99

99-ending prices

I once worked at a company that priced everything with a .95 ending. The bestselling software package was $999.95. Add-on products were $9.95, or $19.95, or $49.95. Everything ended with a .95. It had been this way for more than twenty years. One day, one of the VPs suggested we change all prices to end … Continue reading Why you spend more when prices end in .99

Jeff Bezos on the 4 differences between “Day 1” companies and “Day 2” companies

In his recent letter to shareholders, Jeff Bezos explains how he plans to keep Amazon a “Day 1” company. A “Day 1” company is defined by vitality. But a “Day 2” company is defined by “statis… irrelevance… excruciating, painful decline… death.” 1. Focus on customers first. Bezos writes, “You can be competitor focused, you can … Continue reading Jeff Bezos on the 4 differences between “Day 1” companies and “Day 2” companies

A well-managed organization is boring

Sometimes, excitement means something exciting is going on. But other times, excitement only masks confusion, disorder, and decline. If your organization places value on a strong work ethic and your people put in long hours, that's exciting. If there are couches and soda and stock options, but all that effort is wasted only on fixing mistakes … Continue reading A well-managed organization is boring

You are 34 times more likely to get a response if you ask in person instead of via email

If you want a response, ask in person. It’s tempting to send an email. It’s easier. The cost for you to send an email is virtually zero. But the cost of receiving one is higher than sending one. That’s why many of your emails are ignored. (And it's why you get spam: a conversion rate of … Continue reading You are 34 times more likely to get a response if you ask in person instead of via email

Nobody buys copy machines, but everyone buys copies.

Peter Drucker, on Xerox: One reason why the patents on a copying machine ended up at a small, obscure company in Rochester, New York, then known as the Haloid Company, rather than at one of the big printing-machine manufacturers, was that none of the large established manufacturers saw any possibility of selling a copying machine. … Continue reading Nobody buys copy machines, but everyone buys copies.

You are in business because of your customers

There are lots of reasons business exist. Sometimes they exist for profit. Other times, they exist for their employees. Many businesses exist for stockholders. But you are not in business to create jobs for your employees or dividends for your stockholders. You are not even in business to earn a profit. The reason you are … Continue reading You are in business because of your customers