Motley Fool Hidden Gems Investing - Interview with MichaelAaron Flicker: Hacking the Human Mind

Episode Date: December 21, 2025

MIchaelAaron Flicker is the co-author of Hacking The Human Mind: The Behavioral Science Secrets Behind 17 of the World’s Best Brands.  Motley Fool contributor Rich Lumelleau and Motley Fool Head of Strategic Operations Shannon Jones recently talked with Flicker about his new book, including loss aversion, sunk costs, and the power of pratfalls.  Host: Rich Lumulleau, Shannon Jones  Guest: MichaelAaron Flicker  Producer: Bart Shannon, Mac Greer  Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, "TMF") do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement.  We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode  Learn more about your ad choices. Visit megaphone.fm/adchoices

one thing that all the listeners can think about is humans are much more emotionally driven than rationally driven nobel prize winner daniel kahneman said thinking is to humans like swimming is to cats that was michael aaron flicker co-author of hacking the human mind the behavioral science secrets behind 17 of the world's best brands. I'm Motley Fool producer Matt Greer. Now, we recently talked with Flickr about his new book. We talked loss aversion, the power of pratfalls, the rational, and the not-so-rational. Welcome to Motley Fool Conversations. I'm your host, Motley Fool contributor Rich Lamello,

along with Motley Fool head of strategic operations Shannon Jones. Today's guest is someone who sits at the crossroads of business consulting, advertising, and technology. and has spent his career helping some of the world's most influential brands understand how people really think and make decisions. Michael Aaron Flicker is the author of the compelling new book, Hacking the Human Mind. He's worked with companies ranging from Nike and Chubb to Evan Williams, JP Morgan, and AstraZeneca. His work zeroes in on the psychological forces that shape markets, shape brands, and ultimately shape investor behavior. Michael, it's a pleasure to have you here. Welcome to The Motley Fool.

Hi, Rich. Thanks for having me. Excited to be with you all today. Excellent. Well, Michael, for listeners who may not, you know, kind of know you or be familiar with your work yet, what's kind of the short version of your professional journey? A little bit of background. I started my company when I was 14 years old in my parents' basement, and it was a time in 1997 when the world believed that the internet was a great equalizing force, and maybe high school kids knew more about the internet than anybody else. And in that moment of opportunity, the kid I grew up with across the street and I formed our company and we said, we're going to do internet programming. We're going to do computer programming on the internet. And that was really innovative at the time, almost silly, real computer programming, which belonged in the domain of mainframes and big corporations. And the idea that anybody could do meaningful computer programming online was just unusual at the time and just crazy enough that they let a bunch of high school kids work for these big companies.

And the story of the last 28 years for me has always been at the intersection of thinking about how can we come up with smart ideas to solve problems? How can we solve things that others haven't been able to solve before? It's led me now to I own nine companies. We have a number of them in our professional services, a number of them of our own brands. But what connects them all and what's been so interesting is that behavioral science has been a key to understanding why people do what they do and to really understand how they act in the real world. So much of what we learned in our years was you would run these studies and ask consumers, would you be open to buying this brand? Or would you be open to taking this medication? And when you ask them that, they give you an answer.

Then you go into market and they do the exact opposite. How could that be that people don't follow what it is they say they're going to do? And so academia has built this body of research and academics that helps explain how consumers actually behave rather than how they claim they will behave. And this was a fascinating field for me. I got involved in it about 12, 13 years ago, and it's been a passion of mine ever since. Yeah, I would love to hop in because in my role in strategic operations, I'm really at the intersection of our product teams and also work really closely with our CEO, who is a wonderful visionary, lots of ideas. But he's super passionate for our members, especially as they go through market cycles, market downturns and everything, to really realize this is a long term investing journey and to really ride the waves of those journeys, knowing that the market cycles come and go.

You'll have good days, you'll have bad days. And it really is about staying the course. I'd love to get your take. How does I think the emotional reframing in your mind empower people to take like braver actions to stay the course, especially when it comes to finances or really in anything as it relates to investing? Like, how do you connect the dots there? When I was growing up and learning my first economics classes, my first business classes, we learn these models that humans are rational actors. And given the choice of one good option and one bad option, they're going to choose the good option.

And the challenge in my career and in my life has been that's not always proven to be the case. They don't always choose the thing that's in their best interest. They don't always choose the thing that seems like the best option for them. And I think one thing that all the listeners can think about is humans are much more emotionally driven than rationally driven. Nobel Prize winner Daniel Kahneman said, thinking is to humans like swimming is to cats. They can do it. They just prefer not to. And so there's something about the human experience that if we can take a mental shortcut, if we can not have to work as hard to get to that outcome, we're not going to. fascinating fact, the human brain is only 2% weight of your whole body, but consumes 20%

of all your calories. So literally over hundreds of thousands of years, the development of humans has been a survival of the fittest to use as few calories as possible. And we're going to use these mental powers we have to make these shortcuts. So your question, Shannon, is how do we teach people to stay the course? How do we teach them to invest in the long game rather than the short game? The first thing is to understand that the rational, logical argument may not be the most compelling one. It may be the one that the data shows you to take, but there might be a lot more going on behind the scenes. So when you think about investing, we want to reveal these behavioral science insights, these psychological tricks to help people analyze brands, businesses that they

might invest in but also analyze their own motivations and their own actions to better understand what might be at play because the more that you understand how the human mind works the more you can work with it rather than against it the more you work with it the more effective you're going to be your summer travels deserve an upgrade with select chevrolet buick gmc and cadillac vehicles connected by onstar you can stream game and more on the go whether you're headed to a music festival or a cottage getaway. You can access hundreds of apps on Google Play right from your center display. Explore OnStar tech today at OnStar.ca and discover how to take your summer to the next level. OnStar, better never stops. I love that. I would love to keep

going along those same lines. You explain in your book, Hacking the Human Mind, which I love that title, by the way. Got a lot of looks at Thanksgiving for my in-laws walking around with that book, by the way. But you explain in the book that loss aversion is really one of the strongest forces in human behavior. You use the Got Milk campaign just to show how powerful that is. The ad didn't sell milk's benefits. It was really the fear of running out. And at the Motley Fool, obviously, we see loss aversion every time members will panic sell or freeze during those downturns. So my question is, why is loss aversion so dominant and how can companies like ours really help people make better long-term decisions without really exploiting that

fear at the same time? Absolutely. So first of all, the definition by the social scientists would say loss aversion is the tendency to feel the pain of losses more intensely than the pleasure of equivalent gains. And that can lead, as you're saying, to holding losing investments for too long or being too risk averse on new opportunities because of that fear of loss. So the academic study that backs this up is actually fascinating. So let's start there and then we can talk a little bit about the impacts. Israeli psychologist Amos Tversky and Daniel Kahneman, it's 1979, and they think up this experiment. What if we offer people a bet on a coin flip? Tails, they lose and they have to give us $10. Heads, they win and they win $10. The researchers wanted

to know the amount people would need to be offered before that win was worth the loss bet. How much would they have to get paid in order to be worth a $10 loss? And the key finding was that most people wouldn't gamble unless they were set to win at least $20, meaning they'd rather not risk losing 10 unless the potential reward was double that, $20. And other studies have shown similar real world situations and outcomes. So what we learned from that is it's human nature to want to hold on to things more than they want to gain new things. And that psychological barrier of being afraid of losing something really has an outsized impact on our actions. So Shannon, you mentioned the Got Milk example. The book goes through great brands and

how they've taken advantage of psychological insights into how we act and how that's led to good business outcomes for them. So Got Milk could have very easily said, think about how amazing Oreos would be and Chips Ahoy's would be with milk. But they don't say that. What they say is how bad would those Chips Ahoy's and Oreos be without a delicious glass of milk with it? And that fear of not having it is a much stronger sensation. And that's what drives people to act because of loss aversion. If I can follow up. So from kind of a psychological standpoint, do you think that that is the bias that investors underestimate the most, that fear of loss? I think there's probably two major psychological impacts that are driving

investor decisions as a marketer. One, I would say, is loss aversion, without doubt, Rich. The second is this concept called the sunk cost fallacy. It's really an interesting insight. So let's pair it with loss aversion. So loss aversion says the pain of losing is more intense than the pleasure of an equivalent gain. In fact, I need to have twice as much gain to be worth the risk of that loss. So that's loss aversion. Sunk cost fallacy is this idea

that humans have a tendency to continue investing simply because they've already done that before. And we call it the sunk cost fallacy because it's not necessarily rational. It's not necessarily logical. And so because I have an inclination to match my past behavior. If I've already started investing

in one type of investment, I want to continue to see that through. I've already started down that path. I want to see how it does. I've already made a $100 investment. Even if it loses a little, I've already got my $100 in. I want to see what it does.

That fallacy that just because I've put something in, I have a first on cost, drives a lot of future actions. And there's actually some fascinating academic studies on this. There's a lot to choose from. I'll just pick one that's really interesting. This is a study from 1985. It's Arx and Blummer, and they give a thought experiment to a group of people. Let's say on one hand, you're looking for a ski trip for your family, and you go and you buy a

$100 ticket to a Wisconsin ski weekend, and you're set, you're excited, and that's going to be a very good ski weekend and then you a few weeks later buy a 50 ticket to michigan to a great ski weekend that's going to be an even more enjoyable ski weekend and then oh no you realize that they're both on the same weekend and you have to make a choice should you go with the average $100 ski weekend or the much better $50 ski weekend. 54% of people choose the less enjoyable trip just because they had spent more on it. So because you want to be consistent with your past behavior, even though you know you're going to like it less, you choose the more expensive option. And that's just not logical. It's just not rational. And so it really

challenges us to think, are we being more emotionally driven in our actions? Are we truly being more academically, logically focused? And being able to spot those things when they're happening can make us smarter investors. They can make us smarter humans. Just to pick up on that, I think in the book, you actually use Amazon as a great example with sunk cost fallacy in their prime subscription model. And obviously they've done quite well with that model. I'm a huge Prime subscriber myself, Amazon shareholder, like many of our members are. But, you know, taking that hat off and putting on my strategic operations hat and working across product and working with our marketing team here, I'm often thinking about,

we're always talking about with our subscriptions, with our products, how we price them and how do we make sure we, our members feel like they get value out of that. I think you also bring out in the book. Amazon even has, I think it's called charm pricing where it's like $9.99. What do those examples teach us or what can they teach us here at The Motley Fool about how people perceive value and how can companies like ours use pricing psychology ethically? So picking up on that thread, Shannon, of the idea that you're going to want to be consistent with your past behavior. Once you become an Amazon Prime member, once you join any of these membership services, you're more likely to want to invest and use those services rather than be

a switcher. One study shows that Prime members spend $110 a month on their Prime buying versus just $38 a month of non-Prime members on their shopping on Amazon. So there's a lot more bulk buying when you already have invested in the service or in the membership. And it's beyond Amazon. You see Uber has their Uber One product, $9.99 for $0 delivery freeze, or famously Pret, which is a chain of sandwich and coffee shops in London and New York. They offer a plan $5 a month to get up to five half-priced coffees. Now, if you're already a Pret member and you've given them that $5 each month, and then you're walking down the road, you're much more likely to skip the Starbucks, skip the Costa Coffee, and walk the extra 100 feet to go to Pret, which isn't

necessarily logical, but it's because you want to be consistent with that membership that you've already gotten. So lots of brands have now tapped into this. It's why subscription pricing is so prevalent. But what's really an interesting factor of subscription pricing that a lot of people don't talk about is, would it be better to charge them once a year for $139? That's the going rate of Amazon Prime. Or is it better to charge them $9.99 every month? And fascinating number of studies reveal that the pain of payment every month helps reinforce that consistent behavior and improves your chance of using the product because you're reminding yourself through your credit card statement that this is the type of buyer I am. I'm an Amazon Prime member. I'm a

gym subscription member. And if my gym bills me every month, I'd better get back to the gym this month. So sometimes you want to reduce the pain of payment. You do not want people to feel the size of that spend. And other times, like in this bias, a little bit of reminding them the pain of payment may help them use your product more frequently and more often. So that's some of the big insights around how we use the sunk cost fallacy to get people to come back. Probably one of the most interesting studies that double underscores this point is another study from Arx and Blummer, but this time they're studying theater goers. And so they line up, I think it's the University of Ohio, and they go to the campus theater

and they have people lining up to buy their season tickets for all the shows that the university is going to show. And so they randomly divide up people that are coming up to the window. Some people are charged $15, full price for the tickets to the university shows. Some are charged $13, slight discount. And some are charged only $8 a ticket, a deep discount.

What's fascinating, they track the attendance at all the shows, those who pay full price attended 25% more shows than those that got the discounted, the deep discounted price. So those that were invested, who paid the full amount of money, were more motivated to get their money's worth out of their subscription. So fascinating to think about how when we sell things at discount, when brands go on sale, they might be driving up revenue in the moment, but they actually might be devaluing the experience with customers

and they may have less coming back. So it's always a balancing act. How do we position our brand and our products to really improve people's perception? And then in some places, how do we not send the wrong signal and get less usage

and less repeat buyers? So sunk cost fallacy works in a number of different ways. In Toronto, every arrival is a statement and nothing says it better than this. Cadillac Optic was the number one selling luxury EV in Canada for 2025. Find your rhythm across a seamless 33-inch display and an immersive 19-speaker AKG surround audio system.

This city demands agility, and Optic delivers with precision to make every drive extraordinary. Let's take the Cadillac. Find out more at cadillaccanada.ca. Luxury sales claim based on S&P Global Mobility Canadian New Vehicle Total Registrations for calendar year 2025 for the Cadillac definition of luxury. In your experience, are there signs that a particular company has a strong grasp of customer psychology? When you go into work with somebody, do you kind of sit there and go, okay, these guys get it or no? I think it's so right the way you phrased the question, Rich, because a lot of times in business, you will find a rare individual in the organization that just seems to get human psychology more than others. They just have a sense of what's going to activate the customer or what's going to activate the buyer. But a lot of times they're either a great strategist or they're a great creative person, and they use that to make a promotion work or make a sale work or make a product work, but they don't know why.

They have the insight, they have the reason to believe in this, but they're not really sure what's driving it. So the practice of behavioral science, the reason I wrote the book, was so that we can reveal these and understand the underlying reasons why this exists. So this is a fascinating, one of my favorite stories in all of behavioral science, and it's called the Pratt-Fall effect. And so this is a study in the 1960s. They record someone answering a live quiz. And so he gets asked a question and he responds, asks a question, he responds. He scores 93% correct. and then right before the recording ends he spills his coffee on himself okay so now they have this recording and they show it to two separate groups one group of people are asked to watch the recording with the spill included and rate how likable the contestant was in answering the question and then the second group is shown the same exact video except they clip off the end where he has a small blunder, what we call a small pratfall, where he spills on himself.

How likable is the contestant in both scenarios? People rated the contestant 55% more likable when he has a small blunder, when he spills the coffee on himself. Now, that's not logical. Why? The same questions, the same answers, 55% more likable. And so it drives home this point that brands who can think about how to use these human insights can really make a difference. Who's taking great advantage of that pratfall insight? Think about a great line by Guinness Beer, good things come to those who wait. That's a nod to when you order a Guinness at the bar, you have to wait longer than everybody else to get your beer because the head of the stout is coming down and the bartender has to refill it. Or famously in the 1960s, Avis said, we're number

two. We have to try harder when they were competing against Hertz. They admit their flaw. And because of that, they become more likable, more believable. Listerine has a great one. The taste you hate twice a day, meaning it's so astringent, it must be working. They're accepting the flaw that Listerine is hard to gargle for 30 seconds. And in doing that, they're proving a mirror strength, which is that it must be very effective. So did Listerine, Avis, Guinness beer know the pratfall effect? Probably not. In fact, the Avis ads came out seven years before the study that I'm talking about was ever run. But the people who made the Avis had had that insight into humanity that they took advantage of.

So as investors, we can be looking at where brands do this, where they either through their product or their service meet a psychological need of consumers. That's a great one to look for. Nir Eyal in his book, Hooked, talks about any brand that meets a psychological need is going to be more successful than others. Or in these examples,

where a brand is using a communication and marketing advertising that seems to get the human instinct in a way that others may not realize. And that's a really great thing to look for as investors to think about what brands may be ahead of the curve. I don't think it's a leading indicator, but I think it's a pretty good bet that if they're doing that and doing it well, they can be really successful. So I have to ask the million dollar question then, Michael Aaron, in the age of AI, when it comes to human flaws, likability, humanity i mean who wins in this case is it the brands that are out there showing their humanity or is it really ai is just going to level the playing field where does this all shake out you

know we're talking at such an interesting time we're recording the show right after black friday cyber monday i saw a reuters report this morning that said three billion dollars of black friday spending was influenced by AI assistants or AI agents, meaning you go to Amazon, you ask Rufus what's the best deodorant, and now comes out a lot of options. AI is guiding you to your choice. The game is changing quick. And those brands that have a strategy to be optimized for AI search, We used to call it Shannon and Rich SEO, Search Engine Optimized. We now have a whole field called AIO, Artificial Intelligence Optimized, so that your brands and products are recommended by AI agents when it comes time for that.

But let's say that's on the bleeding edge. Let's say that that's the very small percent, but a good leading indicator where we're going. Today, most buying decisions are still made by humans. And insofar as the buying decisions are being made by humans, we are susceptible to our natural human instincts. So brands and businesses that understand those human insights, those psychological biases are going to be more likely to get people to buy their products and buy them more often. So insofar as we are listening to this podcast in 2026, I feel real good that we are having people make their buying decisions for the most part, and these human biases are at play. Once we have AI agents and others really giving us a wildly curated down set of options, or maybe saying, this is the best compression sock money can buy, how much decision making

are we doing as buyers? And that's a very exciting and interesting place for brands to grow into. Well, Michael Aaron Flicker, thank you so much for the time. Thank you for coming on Motley Fool Conversations. The book is Hacking the Human Mind by Michael Aaron Flicker and Richard Schotten. Thank you so much for your time. On behalf of Shannon Jones, I'm Rich Lamello. Thank you for listening to Motley Fool Conversations.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Fool Money team, I'm Matt Greer. Thanks for listening, and we will see you tomorrow.