selected: 9 startups
from: 4 countries
meet them: right now!

David Papa – How humans really make decisions and what it means for business

The way humans make decisions is almost the complete opposite of what we’ve been taught. For the last 3 decades, most economic theories and our educations have gotten it wrong. It’s not logical, but emotional, and it’s not based on the outside world, but on our internal identities. We’ll look at the science & stories that reveal how the present working world really functions, and figure out how each of us can use this to create our best work and business.

David Papa (MBA in Social [email protected] University, [email protected] Earth Network, [email protected] World Books, [email protected]) helps organizations and entrepreneurs escalate their impact and value for people, inside their companies and out. Over the last 11 years he’s been a marketing producer, brand strategist, e-commerce team leader, full-time meditator, innovation consultant, and founder of Love & Profit. He believes in people and the power of commerce to liberate our greatest work and best lives.

Screen Shot 2014-12-04 at 20.54.43.png

I hope you are like me – a terrible decision maker. Friends wouldn’t go shopping with me because I would have wait to compare all the clothes I saw in the shop later at home. Once I was in a relationship and for many years we were thinking about marriage. And she really wanted to marry me and I didn’t know what to do. I was thinking about this for four years, I made every argument possible why the wedding made sense but there was something going on in my body and I didn’t know what. Eventually, she called it off. And something happened that I will never forget – I felt this amazing sense of awesomeness inside. It was the best idea ever to call it off. And it really got me interested how people make decisions because at that time my decision process was broken and it didn’t serve me.

It is about scaling your personal impact and the way we make decisions is the key.

Two systems:

  1. logic

  2. limbic

The pros and cons list – it is helpful but there is a problem – nobody ever wrote a pros and cons list he would be excited about. Nevertheless, people still use it on a daily basis or sometimes even hire a consultant to help them with their choices.

Rational choice theory – underpinned 30 years of economics. It is a belief that humans are rational actors deciding things in their best interest. There is only one problem with it, it is completely false and it doesn’t help people to make decisions. It has more to do with biology than it has to do with our brains.

Why rational theory doesn’t work?

There is a state called Kansas just right in the middle of the US. It is more than twice geographic area as the Czech republic and it has about 3 million people. There is a couple of cities with low population. Kansas actually has a policy – there is so few college graduates in Kansas – so if you have a college degree and move to Kansas they will lower your taxes. They almost pay you to live there. A lot of people have minimum wage jobs and in US – the minimum wage is not a living wage for US prices. There is one interesting thing about Kansas – it is only ever voted in one particular direction in the election cycles. There are basically two parties and one party is always trying to raise the minimum wage. The single political agenda that would change majority of lives in Kansas materially – and they everytime vote for the second party. Why are these people voting in this way? It doesn’t make any sense. Rational choice theory doesn’t explain this. There is something going on in the decision making.

People actually tattoo themselves of brands and there is nothing rational about this. What is going on here? What makes people do this has nothing to do with rational choice but rather a particular type of emotional choice.

“All the best things I’ve learnt about business was after school in case somebody is thinking about getting MBA.”

BRAIN

The limbic system versus everything else

Limbic system is the place where logic, rational thoughts and languages happen. One of the reasons why rational choice theory seems to make a lot of sense is because rational part of our brain and language part of our brain are at the same place. So whenever we are trying to explain our decision, we have to use language to do that and we come with irrational explanation. But that’s not how decision making works. In fact, this limbic system which control memory processing or emotion, it turns out it has more to do with decision making.

Processing ability:

  • 40 pieces of information per second (cerebral cortex)

  • 20 million pieces of information (limbic system)

This is all happening below your brain you are consciously aware of.

How experience gets into brain – The Three Brains

We are sitting in a room right now. The first piece of experience goes through the base of our brain, the survival part of our brain, and it gets filtered there. Because firstly, you are looking for a threat. You don’t have to do this consciously. If you were doing it consciously, you would be dead. It is automatic. Once you feel like you don’t have to fight, emotional part of our brain starts to process it. We actually share this part of brain with memos. This is happening at 20 million pieces per second. Behaviour comes next and happens at the same time that the information gets filtered to the rational part of our brain. By the time we’re doing something and we can explain what are we doing, we’ve already decided what we should do. This is how all our experiences happen.

“One of the key resources of procrastination is fear of failure. You don’t know what to do and how should you do that.”

Threat – rationalization > behaviour

How we can change the way we do business? Emotions are 84% of all buying decisions. Emotional experience of clients is really important.

Puls Biznesu is a Polish newsletter that hired a designer to increase their circulation. He asked for a purpose and they said they wanted to engage people around news and interest them. He looked at the newsletter and he saw the traditional logical arrangements: big headlines, easy access to articles…. So he totally changed the design of the newspaper to be about engagement. He didn’t change anything about market, marketing, the type of offer or content. And they increased circulation just through the design. Design presents emotional reaction, there is nothing logical about it.

Mailchimp owns the email provider servicing Space (B2B). They hired designer Aarron Walter (Designing for emotion) to redesign their website and everything they do to be more fun and easy. It took only one small change – designing the monkey with this ““Hey, do you want to try my monkey stuff?” face to overcome their competitors. They focused on emotion.

Why you never see stickers on Mac? Apple understands that clean design is creating an emotional experience you want to interact with. It doesn’t have to prove to you. It’s like here we are and you like us – or you don’t. The emotions are what drives the experience.

Paradox of choice

It is about how we think what we want. How much choice we want? We always think more choice is better. At least in US. Most often it is incorrect.

Fruit x jelly: They organized tasting with two tables. At the first one – there were 24 flavors. At the second one – only 8 flavors. The table with 24 flavors had twice as many people but the one with 8 flavors had 60% more purchases.

For your business, only offering the simple amount of choices is more important.

Most of the people are happy with their first decision.

The way we process emotions is not just inside our bodies but also other people’s bodies. You have this full body experience in your limbic system. And that’s from where ‘the gut feeling’ comes from. Limbic system is more powerful than your rational brain.

Open-loop system

  • it requires external stimulus (threat, other people)

  • if you put someone in an intensive care room and you put another person with them – in a few minutes the sick person’s blood pressure will drop

There is so many health consequences not to pay attention to your stress response.

Mirror neurons

  • all they do is looking at what other people are doing and sending signals to your brain

    • After 15 minutes being around somebody else, your heart rates will be the same.

    • If you put 3 strangers together and let them talk, in a few minutes the two will have the same expression.

Emotions are contagious. We are not using them only for making decisions but they pass from one person to another. It is really important for business, meetings or phone calls. In many countries they sue doctors when things goes wrong. The more caring doctors were sued less.

What kind of emotions are you putting up there?
How do you talk about your business or interacting with people?

Survival

In the past, not fitting in a tribe would cost you your life. This whole emotional interaction was about survival, that’s why we have it. And it is still going on today. We are all cavemen in business suits dealing with technology.

Fabio Sala and 3x laughter

This Italian guy found out why certain emotions spread more. Positive emotions spread more. He found that top performing leaders made the people around them laught at least three times more than mediocre leaders. Happier employees were able to sell 37% more than employees that weren’t positive about their work. It turns out that chasing success doesn’t actually make you a lot happier.  But if you are happy first, you are more able to achieve your goals because it influences how you work or create new ideas.

Screen Shot 2014-12-04 at 19.25.43.png

Daniel Goldman: “Leader’s moods and behavior drive everyone else.” The most important thing in a workplace for the outcome was the leader’s mood. For a leader of an organization, the mood and behaviour they have sets an emotional tone for the entire company. And the outcome are results.

A study with over 1 million top performers from different business and there was one factor that 90% of the top performers had: their ability to notice and control their emotions during the time of stress. Being able to manage this system turns out to be the key to performance at work.

TIP: Meditation helps your limbic system.

The 2 most important questions in business:

  1. How do I feel?

  2. How do you feel?

SCARCITY

What is the main emotion of the business world? It’s fear.
Example: 50% off today!
Scarcity plays a huge role in how we make decisions in our lives.

Survey by Daniel Kahneman: The number one least happy moment in his survey was people talking to their boss because it leads people to fear.

Problem with fear: if you have extrinsic goals (outside of yourself), you are more likely to experience stress. You are activating fear inside your body.

What is the most important fear?

Fear of loss or rejection – rejection means death. At these moments, your limbic is about to say “Hey, I am going to die!”.

Beyonce – Put a ring on it

The business behind the engagement ring was created by fear of rejection. Fear that you will be rejected by somebody you really care about. They invented this idea that the ring was the sign of the best and deepest love. Eventually now, it is the size of the ring that shows how much you love somebody. And if you don’t have a certain size of ring, you feel this fear of rejection.

NEGATIVITY BIAS

Fear gives our brain a negativity bias. We tend to be more focus on things that were threat to us than things that were positive. If you have as many negative thoughts as positive thoughts – you are not better off than somebody who has only negative thoughts. Once you have three times positive thoughts as negative thoughts – you are much more effective.

Why does this work? Because we needed to survive for so long. But at what price? It works because it is motivating. Fear is motivating. Fear of rejection works because we want to be accepted. But at what price? We have less trust in business world now than ever before. 70% of workers are unengaged in their jobs. Most people are muted to marketing messages now. All this fear environment created a very toxic working environment where is really hard to engage people and innovate. That’s the price we are paying.

Are there other ways? What if we use the opposite of rejection to motivate people?

You can craft your messages and create a tribe:

(read Seth Godin – Tribes)

 

Screen Shot 2014-12-04 at 20.31.53.png

Examples:

New experience: the opposite of rejection. I am just like you – join me. Tribe is based on the social identity theory.

Social Identity Theory: we have to choose our tribe based on how we want to be perceived in the world. How is your business allowing somebody else to be perceived and express their identity?

  1. Apple

Ad: There is no product. No description of a product.

People buy Apple because it is an expression of how they think differently. There is something in you that believes you are kind of a rebel. It is an emotional play. It is a social identity.

  1. Nike – Just do it

They started with talking to tribe. There are emotions going on and there is a story that gets people excited. The brand created a tribe. It gets people excited about their own level.

“If you are trying to grow a startup – think about your tribe.”

  1. Harley Davidson

From the very beginning, Harley was about freedom and independence.  If you think you are a rebel, you will get yourself Harley. The only US motorcycle manufacturer that still exists despite its old technology. Early adopters were police and military who definitely needed more independence and freedom. Harley spent less money on marketing than any other from his competitor.

This is why “why” works

  • People don’t buy your product but they buy the “why” behind it

  • Stay to your purpose and your values

  • You can always attack the middle of the adaptation curve with marketing and convince the middle of the curve that someone else had success with the product but this way takes much more resources.

  • Starting with the tribe is the way how to spend less resources.

Collective Identity Strategy

TOMS

  • created amazing following

  • never had ads or marketing

  • 100 million revenue in 6 years

  • all because they cultivated their purpose and put things in their business model that activated their tribe

  • with Toms you say that you care

  • there is a flag with your shoes in the box and it says “I am a TOMS person and I care about social problems”

What is your flag?

The happiness advantage: the most important metric for happiness is social support.

Screen Shot 2014-12-04 at 20.52.28.png

Menlo innovations

  • they started because the founder hated every place he worked and he wanted to feel joy at work

  • B2B client company

  • 400 tours of their office per year

  • they have one computer for two people and they switch every five days

  • they have one company meeting

How can you make business from joy?

If you are really gonna buy a product — from who you want to buy it from?

From the person who is working with joy.

1. self-awareness

  • decide what you want to create in the world and stick to it

 

2. authenticity

  • do exactly what you say you are doing

3. empathy

  • you have to go out and ask people what they really need

4. communicate with purpose

  • and emotions

If you do these four things you can really find the support you need in your tribe. If you are going to be authentic – people will come and help you. If you try to create something new or if you make mistakes – people will care and support you no matter what. Scale your personal impact by activating your tribe and using limb system. Underneath all of these, there is something – it is love – the opposite of fear. Put more love into your business. Ask yourself what do you really love and work on that.

“The greatest influence you can have in any situation is to be the presence of love.” – Robert Holden

The most influence you can have in a situation is bringing love. Connecting with your tribe, that’s a form of love. That’s why I called my business love and profit. 

___________________________________

David was brought to Wayra CEE by the Prague Entrepreneurs Meetup.
Interested in upcoming events? Follow our 
Twitter or check our calendar.