a16z Podcast - a16z Podcast: Trigger, Action, Reward, Investment -- Four Steps for Habit-Forming Products

Episode Date: September 15, 2014

Nir Eyal and Product Hunt's Ryan Hoover, the authors of "Hooked, How to Build Habit-Forming Products," discuss the theory and practice of the book as the publish date of a new edition approaches. Nir lays out the four steps integral to any habit-forming product -- trigger, action, reward, investment -- and Ryan describes how those same steps apply to the fast-growing Product Hunt. The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business tax or investment advice or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Hey, this is Michael Copeland. This is the A16Z podcast. We have two special guests here today, near Ayal and Ryan Hoover, who they're clutching the galleys of their new book, hooked how to build habit forming products. And Ryan had actually never seen it. And so he was just complimenting the nice color of yellow on the cover. Yeah, we have a new cover. Great job. This is,

it's very bold. I like it. So for those of you who don't know, Neer, it seems like he does everything. You lecture at the Stanford Graduate School of Business, at the D school. You've started video game companies. You've written this book now with Ryan. Not all at the same time. Just to be clear. I'm glad to hear that. And Ryan, you are the founder of Product Hunt. Yes, that's great. Which we are all very wild about these days, or everybody is very wild about these days.

So thanks for coming in, you guys. Thanks for having us. This is great. Great setup, much better than my own. So we want to get into Hooked. And before we sort of dig into the book and what you guys, you know, uncovered, how is it that you two even met and embarked on this project? project together. Yeah, it's kind of a funny one. Yeah, so I've been doing a lot of blogging or I used to do a lot more when I had more time. And one post I wrote towards the end of 2012 was 13 people I want to meet in 2013, naturally. And so NIR was on that list. And I'd been following his blog for a long time and reading his writing. And I think I just sent you an email and said, hey, do you want to meet up sometime? And you said, no, actually, I read your post. Oh, did you? Yeah. And I think I emailed you and I was like, dude, I'm right here.

Maybe that was it, okay. It had like famous people on your list and I was like, I live in Palo Alto. We could just have lunch sometime. Yeah. Okay, so that's how it went. So you agreed and we just grabbed dinner at the counter, your favorite place. It seems like. And so that's how we first met in person, but, you know, I'd been following you for such a long time before that.

Yeah. And then from there, Ryan had been reading my blog post and kind of said, hey, how can I help? And I said, you know, I've been thinking about putting together like a little PDF. I was thinking about giving out to my blog subscribers. I had a few thousand at the time. And I thought, you know, people have been asking for some kind of papered document. So I thought I'll print a PDF, maybe 10, 15 pages. Well, that 1015 pages turned into this now 200-something page book that will be released on November 4th.

So let's talk about Hooked in kind of the genesis of the idea. And, you know, certainly we live in a world where we are glued to our phones and glued to our sort of social. apps and networks, et cetera. Why hooked now and what were you seeing that made you think like, oh, we have something else to say? Right, right. So I didn't set out to write this book. That wasn't the initial intention.

I started researching this entire field after my last company was acquired and I kind of had some extra time on my hands. And I wanted to figure out what I would do next as an entrepreneur, right? What was the next company? Tell us what that company was. The last company was called AdNector. We put ads inside social games. At the time, 2008, Facebook had just opened up the platform.

Everybody was building an app, and we thought there should be an ad network for advertising inside these games. And so from that vantage point, I saw a ton of experiments, right? I saw games come and go. I saw ad campaigns come and go. And so I learned a lot of what works, but I found that there wasn't actually a vocabulary around why these things worked. What was the deeper psychology? Right. And so after that company kind of wrapped up, I decided to dive deeper into,

the psychology of why people do what they do, and I became fixated on habits, that I believe that as the interface shrinks, right, as we go from desktop to laptop to mobile and now to wearable, habits become more important. Why? Because there's less room, there's less real estate to trigger people. So it has to be a habitual behavior because there's just less real estate to send people messages. So habits matter in that new interface. So Ryan, I want to know before we get into those habits and kind of break it down even further, you bought into this, I guess, or you believed it and saw sort of a similar way of explaining things? Yeah.

You know, honestly, this is a field kind of user behavior that doesn't get written about nearly as much as other fields like growth hacking and marketing and engineering and everything else in the startup world. There's a lot of material out there. So NIR is one of the few people that is writing about user psychology. And what's fascinating about user psychology is that it's, it's permanent, like the way people think and act doesn't really change, whereas marketing tactics and things like that that you might learn about on another blog, that will change in two months.

So, you know, this is a fascinating field for me. And then when you read his writing, he's able to kind of concisely describe how you feel. And then after you read it, you're like, aha, of course, that makes sense. Thanks. And so, you know, that's where it really attracted me. And then thinking more about as you're building a product, it's harder and harder to build something that people want. And that's ultimately what you're trying to do and keep them engaged. So, so, so, you're you say it's something interesting, Ryan, and you talk about user psychology, how that doesn't really change. And so I'm wondering if, you know, in the past and sort of in the industrial revolution or in products of the past where we've seen this same behavior and there's lessons

that you drew forward. And then maybe why today it's even more pronounced this kind of hooked addictive way of being. Right. Well, it's funny you start with, you know, you mentioned the industrial revolution. If you think about kind of the history of how products evolved. Products would get made by somebody on high would decide to make a certain product. It would take years in development and engineering and tooling and retooling to get the product made. And then the next iteration would take another five, ten years to be made. But today, all of this happens in real time, right? Facebook is engineered just for you to be the product you want it to be based on the data you give that company. And so this is just happening so

much faster today that the products that we're using are being tailored for us in real time. There's also the fact that the lean startup movement has increased awareness around these iterative cycles of build, measure, learn. So the way products get built today fundamentally is just much, much faster. So break it down, you have sort of four tenets or four kind of steps that you see these products moving down and explain or describe for those steps. And then Ryan, I want you to talk about a little bit how maybe you've applied those or how you think about those steps when it comes to product hunt. Right.

So the pattern that I saw emerge time and time again in all sorts of habit-forming technologies came down to these four basic steps. And the reason I wrote the book, I'm not an academic. Now I'm kind of do more research and writing, but my background is a startup entrepreneur. And so I was looking for the book I couldn't find, a practical guy to tell me how to leverage user psychology. And so I've kind of uncovered this habit, this, I'm sorry, this pattern that I saw repeated time and time again, which has these four basic steps, these four basic elements that we see in all sorts of habit-forming technologies.

It starts with a trigger through an action, then a reward. That reward is typically a variable reward, and finally an investment. And the whole book is really outlining and detailing these four steps so that the entrepreneur can look at these four steps and either understand, hey, here's where my product. is deficient. Here's where I should really focus my efforts because the hook isn't, you know, isn't sound. I haven't, I don't have a good trigger. I don't have a good action, reward or investment so that they can focus on those problems. Or, and what I see very frequently is an entrepreneur will come to me or a company with a product will call me up and say, we don't understand why people aren't coming back. Well, by looking at this lens, they can

figure out, they can diagnose where their problem is. So for those things that you can talk about, Give us a real-world example of those four steps in action, like, you know, from the start to the end. Yeah, so there are many different, I guess, loops or hooks within Product Hunt. One of them is right now in Product Hunt, when you subscribe to the daily email, you get a list of new products, new products every single day. And so to apply the hook model to that user flow, it's in the morning, I get an email, and I see that email in my inbox. So the trigger is the actual email itself. the action is opening up that email, which is relatively simple. It's within your workflow.

You're not doing a lot of work to get to that content. And so now you're consuming. The reward is consuming that content, reading these new products. And for people that subscribe to Product Hunt, it's usually new, interesting products upvoted by the community. So these are new innovative products you might find just interesting or maybe useful for your life. And then the investment stage is when you go to the site, you upvote these products.

And by doing so, you are essentially bookmarked. marking them. You're kind of assigning them to your profile. And so you have this repository of products that you've uploaded in the past that build value over time within the site itself. And if any of those three things are missing or deficient, four things, sorry, I was thinking that you already lost one, but if any of those four things, if they're deficient or missing, does it fall down? Or is that why people come to you nearer and say, like, wait, why aren't people coming back? Right, right. In a habit-forming product, you have to have these four fundamental elements, this trigger, action, reward, investment, they have to be there. It's kind of the

prerequisite for a product that builds what I call unprompted user engagement. But let me just say kind of a qualifier here. Not every product needs to be habit forming, right? This isn't magic pixie dust that as long as you can make your product habit forming, it's going to be successful. Plenty of companies don't need to form habits. They can bring customers back with ads. They can have a physical storefront. They can use search engine optimization. Lots of ways to get customers to come back. So is like most of retail or at least brick and mortar retail of clothing? Is the clothing industry not habit forming?

They don't have to be necessarily habit forming, right? But the products that we profile in the book are these technology companies that many of us kind of scratch our heads to figure out, man, why do I use these so much, right? Why am I always checking email? Why am I always on Facebook or WhatsApp or Twitter or Pinterest or Instagram? What is it about these products that makes us use them without being prompted? If Facebook's business model couldn't survive if they had to pay for an ad every time someone checked their newsfeed, right?

They couldn't afford it. It has to be unprompted. It has to be a habit. And it's kind of, I'm going to interrupt real quick, but it's kind of crazy how addictive or how habit forming some technology is like right now in my pocket is my phone. And I know I'm getting emails. And I'm not sure what those emails are, but there might be something important there. And email is one of the most powerful and habit forming products, I think, that we've seen

in the past, like, two decades. and everyone has that kind of itch and some people just don't recognize it but after you read Hook you start understanding how are these products informing and changing my behavior I still I think it's interesting

then when you say that not every product has to be habit forming I would think that every person who designs and builds and develops a product would like it to be so but you know does the auto industry need to be habit forming I guess for some people it is

but so I one I wonder the word addictive, you guys have used it several times, by and large, we tend to think of that as, you know, and maybe at least in our kind of puritanical society as a, I mean U.S. society, as a negative. Where does addictive kind of, how do you view it as a positive or negative and kind of how do you advise companies and really individuals, you know, as they go through these addictive products? Right. Now, this is a very important topic that I, we give a whole chapter to in this chapter called the morality of manipulation, there is a very

specific definition to addiction, which is different from a habit. An addiction is a compulsive dependency on a behavior or substance, and it's always bad. So addictions by definition hurt the user, and that's why the book is not called how to build addictive products. It's called how to build habit-forming products, because we have good habits and we have bad habits. And so the purpose of this book, the reason we worked on this, was because we wanted to help technology companies, we wanted to help entrepreneurs build better behaviors because we believe that there's this coming age,

that we're on the precipice of this age, where we can use technology to help people live better, to help form these habits that help them live happier, healthier, more productive lives through these habit-forming technologies. And so what kind of habits are we talking about, sort of writ large, in the long run? I know that we talk about health care

and we've actually invested in a company companies around here that that are attempting to do just that but when you look at these habits and ryan you too what what are we talking about i mean the most obvious is the wearable movement right now i bought a fitbit a while ago and although it's very nascent and very early in that stage when i bought the fitbit i started walking more because it started measuring and the the wristband itself was the trigger to remind me that i should walk more and then it started measuring give me some feedback on how healthy i'm being you know relative to walking and that's again very new but over time we're going to see more and more quantified healthful products come out so that we can

start measuring how well are we eating and how well are we actually exercising and that will allow us to one control and give us some feedback on how well we're actually doing but i think there's also the application of products that not only help us with our physical health but our psychological health i mean you know i get a lot of benefit from social media and the habits I've formed around social media have been incredibly empowering. I mean, Ryan and I wouldn't have met if it wasn't through Twitter and blogging and Facebook. A lot of these products have built what I would consider very healthy habits. Now, people can go too far, of course. And the next book is actually going to be about that. Yeah, I wanted to ask you about that. Is it, you know, in recovery or

unhooked? Yeah, exactly. There's a lot to be said around the ethics of people who go too far. And that's what I'm working on now to kind of explain. And there are many products, many of them that have been on product tent lately because I think people recognize their, whether it's an addiction or a bad habit and they want to fight. And one of them is mobile flow, where it's an app that you open up and you can basically, it removes any notifications for a certain period of time so that you can focus. And there are many other products out there just to kind of reduce distractions. Right. And it's sort of fighting. It's using technology to fight technology in some way.

Without sort of revealing anything too confidential, but when you are asked, how do we get people to come back, what are the sort of essential things or typical things that you notice and that people do wrong over and over? Right. So there's always, when a company is struggling with user engagement, there's usually some part of the hook that's deficient. So what we'll do is to look at their user flow, to figure out what the central habit is that they want to create, what's the behavior that's done with little or no conscious thought and map out their flow through these four steps of a trigger, an action, a reward, and an investment. And one of the most frequently neglected line of thinking

is to understand that fundamentally we have to figure out what the user's internal trigger is. We didn't really talk about this, but there's two types of triggers. There are external triggers, the things in our environment that tell us what to do next, you know, calls to action like click here or buy now or play this. but there's also these internal triggers,

these things that cue us to take the next action, but the information for what to do next is an association in the user's mind. So it's an emotion, it's a routine, it's a situation, it's a place, it's a person even, that prompts us to do that behavior, that prompts us to do that action. And without understanding what that internal trigger is

that you're creating association with, you're never going to create that habit. But every business I work with kind of has a different part of the hook that they might be deficient in. Ryan, from kind of your vantage point, as you know, you see this flood and stream of products, are there things that you're noticing as well and things that go wildly well on those that sort of like seem like they would, but they just don't. I think people are too scared to re-engage and trigger their users in many different ways.

So with Product Hunt going back to the email, people subscribe, and we really encourage people to subscribe to get a daily email. we're also heavily reliant on Twitter and encouraging people to share on Twitter and so we've built these different triggers to remind people to come back and oftentimes people think that you can just build a good product

and a good experience but I believe product wouldn't be successful without email and without Twitter because people would come to the site and they wouldn't remember. They might enjoy it. They might like the site. They might find good content

but they still need to be reminded of it and over time they won't need to be reminded as much with those external triggers because they'll have that association. They'll remember product on, oh, that's where I find out new cool products. But on day zero, when they first visit the site, they're not going to build that association. Let's spin this forward, and maybe we can end on this note. But we've talked about software projects.

We've talked about Facebook, and, you know, it's ease with which you can iterate and respond to what people want. Do you see these four steps, the sort of hooked process applying itself to kind of the non-software world, you know, to hardware, to, you know, sort of more industrial kind of processes and products that we don't normally associate with technology, say. So the condition is that it needs to be something, it needs to be a decision or an action that's made with little or no conscious thought. And it has to occur frequently. So frequency is a kind of precondition for the ability to even form the habit in the first place.

So if your behavior is something that occurs once a year, and then you don't have to have a customer re-engage, then you don't really need to form a habit. But if your product is something that requires repeat engagement, requires unprompted engagement, then habits can be very handy. And that's something that we see in the enterprise space. It's in consumer, certainly. And even offline, I mean, there's been plenty of habit-forming technology. something I'm working on for this next book is profiling the photography habit, right? That if you think about Kodak and the Kodak moment, well, Kodak was creating an association with an internal trigger, right?

They were telling us, they were showing us images. Remember those commercials of the puppy dogs running through the grass? Or my personal favorite, I don't know if you remember this one, they used to have this commercial where they used to have grandma blowing out her last birthday candles. Do you remember? It's a real commercial. Like there's not going to be a little thing. Yeah, yeah, it might be her last.

So why were they doing that, right? Kodak was doing that because they wanted you to kind of create a bit of fear there, that if you don't capture the moment, it's gone forever. So they're creating association with these internal triggers of this fear of losing the moment. The action is to pick up the camera. The variable reward is when you develop your pictures, right? What's going to come out in those pictures? You're always unsure.

Sometimes the pictures are really crappy. Sometimes they're amazing. And the investment, of course, is buying that next role of film that can only be used inside that camera. camera. So that's, that was their hook. And, you know, this is a hook that was, you know, figured out over 100 years ago and was very successful for a long time until another disruptive technology of digital, yeah, digital photography kind of overtook that habit. With different hooks and different investments. Exactly. They're the same industry. That's interesting.

Neer and Ryan, thanks so much for coming in. The book is hooked, how to build habit forming products. And it's coming out into the world November 4th. Where else can we find it? What we'd be looking for on the publishing date or around then. Sure. So there's a big book bundle of free resources that anybody who pre-orders the book before the publication date can get. That's available at hookmodel.com. And then my blog is near and far.com, but near is spelled like my first name, N-I-R. Ryan, how do we track you down? Yeah, you can find me on Twitter. I'm R.R. Hoover. And I also blog occasionally at Ryanhoover.com. And of course, check out ProductHun at ProductHunt.com. Great. Thank you guys.

Thank you.