by Oren Klaff
“I told you, Logan, when it comes to big deals, you have to be cautious. Until I talk to actual buyers, I believe none of what I hear and half of what I see,” I said over drinks a short while later. “Turns out there’s no way we’d have been able to sell that thing for fifty million. Every investor I talked to said they wouldn’t go near it.” I pointed a finger at Logan. “This is why we do things my way: careful, scientific, and logical. Measure twice, cut once.”
Logan listened intently. He hadn’t touched his spicy tuna roll or said a single word for about two minutes. I understood how he felt. Giving up on a deal you’ve spent time on is one of the most difficult things about this business. Logan had worked with this seller for months and this would be a tough one to get over. I knew he was feeling let down.
“Hey, it’s OK,” I said reassuringly. “I know you worked hard to line this up. Every deal can’t be a winner. We’ll find another one.”
Logan shook his head. “You’re such a hypochondriac,” he said in an excited voice, using the term incorrectly. “I already bought the property. I signed the purchase agreement this afternoon.”
“You—you . . . What?”
Logan had specifically promised not to do this, and promised it over Long Life Noodles!
“Well, that pre-research stuff is always just a formality! You always do it and it’s always a green light. Maybe you did it wrong this time.” His voice trailed off and we sat there in silence. We both knew what the research meant.
We were now locked up and on the hook for exactly $42 million.
I thought about the house I was having built on the other side of the ocean in California and how it would be repossessed before the dream kitchen was even finished.
SQUIRREL THEORY AND THE SCIENCE OF NOVELTY
Have you ever watched a squirrel explore a piece of litter, a picnic basket, or something left on the ground with food in it? The squirrel has a very specific method to handle this situation. He gets about five feet away, which is as close as he can get to the thing without having a total panic attack. Then he pauses on hind legs for a moment to think and compose himself. Now back on all fours, he advances farther, ever so cautiously getting just . . . a little . . . closer, but then panic!—he scurries away to hide in a bush. After a brief time-out, he gets the nerve to approach again and gets a little closer this time until, once again—pitter patter—he scurries away. This process is repeated many times until finally the squirrel is close enough to stick his head into the bag of chips or whatever it is and discover what is inside. At last, his curiosity is satisfied.
This pattern of behavior is remarkably consistent, whether it’s a rabbit, rat, squirrel, or raccoon. And whenever we explore something new, it turns out, it’s the same for humans.
After receiving his PhD from Yale in 1951, a young English psychologist named Daniel Berlyne became fascinated with this type of exploratory behavior and dedicated his career to studying it. By subjecting rats to a variety of experiments, he discovered that exploratory behavior changes dramatically depending on the type of object the animal is pursuing. The more radically new and exciting something is, the more likely it is that the animal will decide to explore it . . . but only to a certain extent. Berlyne’s research shows that exploratory behavior reaches a peak at a moderate level of novelty and then starts to decline. In other words, mammal brains seem to like things that are a little new and unusual, but not so new and unusual that we don’t know how to process it.
Why, exactly, does exploratory behavior always seem to follow this predictable trend of seeking less novelty? The answer involves two conflicting drives: curiosity and anxiety.
You’ve probably noticed people seem fascinated by things that are new and novel. We have a natural drive toward curiosity. This is no accident. The preference for novelty is wired deep into our brains and can be triggered in an instant. If a squirrel stumbles upon a picnic basket full of sandwiches and potato chips, he has potentially discovered enough food to last him for months if he stores it properly. That is a huge benefit to his survival. But can the squirrel be sure about it? When something is totally new and novel, we don’t have much information about it. This means there is a chance the thing could deliver a big reward. So we’re programmed to be curious about novel things. The more novel something is, the more curiosity it triggers in us. Curiosity motivates us to approach things and check them out.
This is why people are motivated to hear about your idea (at first) if you introduce it as new and novel and never been done before.
Of course, besides the potential reward, there is also potential risk inherent in novel situations. The picnic basket might not be a basket at all, but a trap that slams shut, capturing the squirrel inside. Novel situations can be dangerous. Because of this danger, we feel anxiety when we encounter novelty. This anxiety makes us more cautious. The more novel the situation is, the more anxiety we feel, and the more cautiously we act.
So how is it that novelty motivates both approach and avoidance at the same time?
Berlyne discovered that the two conflicting drives of curiosity and anxiety are always in operation simultaneously. But at different times and in different situations, one or the other of these drives wins out. Under very novel circumstances (like a strange noise in the middle of the night) anxiety typically prevails and we experience an avoidance tendency. We stay hidden or move away. In more boring or mundane situations (like a mysterious cardboard box) curiosity more often prevails and we experience an approach tendency. We investigate.
You can see these two conflicting drives in action with the squirrel exploring a nearby empty picnic basket. The closer the squirrel gets to the mysterious basket, the more novel the situation becomes for him. At first, when he’s far away, anxiety is low and he scurries forward. But as the basket get closer and closer, the novelty level goes up and the squirrel reaches a point where anxiety and curiosity are perfectly balanced. Neither an approach nor an avoidance tendency is experienced. This is where he pauses.
Then he takes one more tiny step forward. And now he has crossed the line and the situation is too novel. The scale tips and anxiety wins out over curiosity. In a rush, the squirrel experiences an avoidance tendency and scurries away to hide in the bushes.
As soon as he reaches the safety of the bushes (a lower level of novelty), the squirrel begins to feel more curiosity than anxiety, so he experiences an approach tendency and scampers toward the basket again, and the process repeats itself.
On each approach the squirrel is able to get a little closer before the urge to retreat overpowers his curiosity. This is because he is gradually getting more and more exposed to the picnic basket, so his novelty sweet spot is slowly shifting closer and closer to the basket. This process might take a while, with many back-and-forth attempts, if the squirrel has never been exposed to a picnic basket before. Eventually, the novelty will wear off to the point where he can stick his head in the basket and see what’s inside.
We’re not that different from our squirrel friend. Over millions of years these strategies have been imprinted on our DNA. We are preprogrammed to move toward things when we get bored, to increase our novelty level. Similarly, we move away from things when we get too excited, to find a lower level of novelty.
At the end of the day, we’re most comfortable with things that are about average.
Ever notice how websites always seem to give you three different price levels? Companies today know that when presented with three ascending options, the vast majority of people will instinctively choose the middle one. So we strategically engineer web pages to present three options: one that is too expensive, one that is too basic or limited, and one that is “just right.”
And time and time again customers go with the Plain Vanilla option, the most middle-of-the-road out of the three choices. My problem in Hawaii was that Mahalo Marketplace was 100 percent different from anything inves
tors had seen before. It was in Hawaii and super profitable, which created attraction and the initial urge to approach. But it was also extremely novel, which created anxiety and the avoidance tendency—when they got a little closer, my deal scared them off.
THE ONLY WAY OUT OF A KOBAYASHI MARU
How did I let Logan get me into these kinds of situations? He needed to understand that things were different for me. There was a time when I would have jumped at any deal, no matter how outlandish, if I thought it had a chance of working, but I had my family to think about now. Life had gotten a whole lot more real for me. Logan hadn’t even asked about my life. We were always too busy talking about big deals, new airplanes, and empire building.
Logan had signed the contract for this deal and shaken hands with the seller. We were all in. But our research said we were about to be all out. This was the definition of an impossible situation—and exactly how I found myself drinking a beer at the KuaKua, in downtown Honolulu.
Logan had just signed me up for a suicide mission, and the reality of the situation was beginning to sink in. A pint of beer sounded just about right. Unfortunately, this was Logan at the table, so instead of a pint we ordered twelve bottles of Sierra Nevada Torpedo and got down to business. This meant we needed to face some difficult facts about Mahalo Marketplace.
First, my test marketing, which was typically reliable, revealed lukewarm interest from the type of investors we usually worked with. Second, we had already committed to show up in thirty days with $42 million in cash. To admit a mistake now would broadcast to everyone in our industry that we were unreliable and couldn’t be trusted to hold up our end of a deal.
“Logan, what we’ve got here before us is a classic Kobayashi Maru,” I said between gulps of Torpedo.
“That test on Star Trek that nobody could pass?” he asked, looking morose.
“Yeah, exactly. It’s a no-win situation; even Kirk failed the test twice,” I said. “Yup, this is a Kobayashi Maru all right.”
The Kobayashi Maru was originally designed to test how Starfleet Academy cadets responded to a no-win scenario. It had suddenly occurred to me that Logan and I were living that fictional test, and we had to do something about it, fast. But what?
“So what did Captain Kirk do?” asked Logan.
“He cheated,” I said. “He snuck into Starfleet and reprogrammed the computer.”
“So let’s do that,” said Logan, tossing a piece of a rainbow roll into his mouth. “How can we flip the script and reprogram the game?” Over a batch of calamari and seaweed, we struggled to answer that question. What does it mean to reprogram the game when you’ve got to offload a $40 million marketplace in Hawaii?
Just then, my phone rang. It was the appliance guy for the house I was building two thousand miles away, calling to go over the specs on a bunch of different kitchen appliances, starting with the refrigerator. I sighed, not yet ready to tell him it looked like we were going to have to put the whole project on hold.
“Hey, Vince,” I said, trying to cut him off, “I’m kind of in the middle of something right now, can’t pick out a fridge.”
But Vince ignored me, and kept talking through my attempted interruption. “Here’s a quick rundown of what will work for you,” he continued with excitement. “We should do the in-fridge fifteen-lens cameras so you can check what’s inside remotely from your phone and drag virtual countdown timers over the top of your food to track expiration dates. We’ll also do smart grid syncing to schedule defrost cycles. And because you travel quite a bit I’d do a twenty-five temperature zone system with speed chilling. I can get it ordered tomorrow morning and installed by end of week.”
“Vince, please. I can’t deal with this right now. Just get me the normal regular everyday refrigerator that everyone in my neighborhood gets. Whatever is standard, I’ll take it. I really don’t need a hologram countdown timer for milk.”
There was a chuckle on the other end of the line. “You haven’t bought a fridge in quite a while, have you, Oren?” he said, and didn’t wait for an answer because the answer was obvious. “Well, these days for a house like yours the standard refrigerators all have speed chillers, smart sync, and reorder apps on the front digital panel. In fact, most of them have laser temperature sensors. So if you want the standard, I guess I’ll get you a totally plain-vanilla no-frills Viking. It’ll just have the linear compressors and multi-zone monitors with a backup mini-compressor. That’s it, nothing fancy. Plain vanilla. It’s $19,980,” he said quickly and hung up the phone.
And then a lightbulb went on.
“Virtual smart app countdown timers projected over the top of your food to track expiration dates?” I thought to myself. “Didn’t expect that.” Now I knew how each of the sixteen investors felt when I had tried to sell them a property that was completely different from the types of properties they were used to purchasing. No wonder they all turned me down.
I had just bought a nineteen-thousand-dollar fridge I hadn’t planned to buy. What had this man said to get me to do this? I thought about it for a moment.
“Normal,” Vince had said. “Standard . . . plain vanilla.” To which I had said: “OK.”
Immediately I started replaying the conversation over and over in my mind. What was it, exactly, that had made me buy a fridge with features I hadn’t even heard of before? The answer was almost too obvious.
He made the novel (and expensive) features seem normal.
When I slid back into our booth after the phone call, Logan had a faraway look in his eyes, like he was in a trance. And he still hadn’t touched his spicy tuna roll. I grabbed a piece and popped it into my mouth as I tapped him on the shoulder.
“OK,” I said, “let’s do it.”
“What?” Logan asked, perking up.
“The marketplace,” I said. “I can sell it. I have an idea.”
FROM NOVEL TO THE NEW NORMAL
Imagine you just created a new cold medicine, and you find it’s 35 percent more effective than other popular cold meds on the market. Users administer it by vaping rather than taking a pill, so it doesn’t have to be swallowed. And it’s completely safe to use. Great! You’re obviously excited and your mind is going a mile a minute thinking about how popular this new product will be (and how much money you’re going to make). Some wealthy friends think it sounds like a slam dunk, so they give you a cash investment and you spend two years working out the details, and when you finally put it on store shelves . . . nobody buys it.
Cold medicine that requires a vaporizer? No thanks. It’s just too novel.
For the most part, customers and consumers rely on their tried-and-true suppliers or on their network of friends to suggest new products, rather than trying every new solution that hits the market. Certainly there is a small set of adopters who will try unproven products and take the risk on new ideas and technologies—but this is not true of the mainstream, middle-of-the-road consumer. In practice, too much novelty produces avoidance and not the hoped-for attraction effect.
The grocery store shelves are already lined with a dozen different kinds of cold medication. Your customers have all been seeing the common brands on the shelf for years and years. They already have a medication they use, which their doctor recommended and all their friends use too. These people aren’t out looking for a new cold medication that might be one-third better. And they definitely don’t want to switch from taking pills to vaping, because they’ve never heard of anyone taking cold medicine like that before; it’s too unfamiliar.
To influence people to try a new kind of anything, you first need to find somebody who is willing to listen to you talk about your new thing, whatever it is. At this stage, positioning a project or idea as completely new and original can cause a deceptive amount of interest. These people will listen to the idea. And yes, they’ll be intrigued, maybe even engaged and excited. But when it comes to making a decision
, they’re likely to return to the products and ideas that are already in place and known to work—even if those products and ideas are just average.
This counterintuitive consumer behavior has frustrated thousands of entrepreneurs, who often get fired after telling their board of directors, “It’s a great product, so much better than anything else on the market . . . but we are just not selling, and are not going to hit our revenue goals this year.”
For more than a decade my colleagues and I have watched countless companies attempt to sell their products, services, and ideas to all types of buyers. Through interviews, working sessions, and consulting directly with hundreds of executives, I’ve seen the way most sales presentations go:
Salesperson creates excitement by pointing out new features, ideas, or technology
Introduces the offering as new and “totally different” from the competition
Explains that “this is a new kind of company—we do things differently”
Points to industry innovation awards
Typically quotes Steve Jobs’s commercials or keynote speech: “Here’s to the crazy ones . . . The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently.”
Moves to the next cliché, comparing their company to disruptive tech giants, Google, Airbnb, Etsy, or Uber (“We’re the Uber of toothpaste, really.”)
Tries to overcome objections and ask for the sale
This rarely works.
So why would sellers consistently choose this particular way to highlight their products? In other words, why are people seemingly preprogrammed to present their ideas as new and different? Because new and different things attract immediate attention.