Why Business Isn't About Formulas - It's About Understanding Human Nature
Roman Rackwitz
We help organizations make informed decisions about when and how to use behavioral psychology & gamification. We help practitioners learn behavioral economics design. Ask me how to master it.
This is why Engagement equals EBITDA
In today's corporate world, we've become obsessed with deterministic thinking. The idea that every business decision can be reduced to a formula or algorithm. However, business is fundamentally probabilistic. It's more like a casino where we're placing bets on different visions of the future.
Take Apple's Vision Pro, for instance. Even with billions in development and some of the brightest minds in tech, there's no certainty whether it represents the future of computing or will join the graveyard of failed innovations. This uncertainty isn't a bug - it's a feature of how business actually works.
The Paradox We All Miss
One of the most mind-blowing insights is how we've completely misunderstood the relationship between great ideas and marketing. Conventional wisdom suggests that truly revolutionary products sell themselves. The reality? The bigger the idea, the more marketing it needs.
Consider the smallpox vaccine - arguably one of humanity's greatest innovations. It took 50 years to achieve widespread acceptance. Even the automobile faced significant resistance, with former US President Woodrow Wilson claiming it would foster socialism due to its "naked display of conspicuous wealth."
Understanding Human Behavior vs. Mathematical Models
As someone passionate about behavioral economics, my main criticism is aimed at our current business education system. We're training people to be deterministic thinkers in a probabilistic world. This creates a dangerous disconnect between how we think people should behave and how they actually behave.
The Problem with Current Approaches
Companies generally rely too much on quantitative metrics.
They assume rational decision-making and therefore prefer formula-based solutions to understanding behavioral patterns and ignore psychological considerations.
What We Should Be Doing
Instead We need to:
The Detective Mindset in Business
Perhaps the most valuable lesson for organizations is the "detective mindset."
Instead of looking for definitive answers, we should be searching for clues and patterns in human behavior. Just as detectives ask open-ended questions like "Did anyone notice anything unusual?", businesses need to maintain curiosity about their customers' behaviors and motivations.
Moving Forward: A New Framework for Business Thinking
To build better products and services, organizations need to:
1. Embrace Uncertainty: Accept that not everything can be quantified or predicted
2. Start with Psychology: Consider behavioral factors before technical specifications
3. Think Probabilistically: Make peace with multiple possible outcomes
4. Value Observation: Pay attention to small behavioral details that might signal larger patterns
5. Challenge Assumptions: Question whether "rational" solutions actually align with human nature
What now?
The future of successful business isn't in more sophisticated algorithms or better spreadsheets - it's in better understanding human nature. As we build products and services, we need to move away from treating people as rational economic actors and instead embrace the beautiful irrationality that makes us human.
Organizations that succeed will be those that can balance the science of business with the art of understanding human behavior. It's time to stop forcing human behavior into mathematical models and start building our models around actual human behavior.
Remember: Business isn't a math problem to be solved - it's a human puzzle to be understood.
FYI: I run workshops and consulting services that help companies a cutting-edge framework for designing sustainable motivation and engagement strategies.
?? My upcoming book dives deep into how to make informed design decisions that foster real, lasting engagement.
?? Want to learn how? Click below to explore workshops, consulting, or pre-order the book: https://engaginglab.com
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