Wednesday, March 31, 2010

March 2010 Early Indications: Behaviorism, Online

One of the consequences of the ubiquity of our communications tools is a shift away from fascination with and the need for expertise in the tools themselves; PC Magazine, for example, ceased physical publication last year. Instead, relatively transparent use of the tools supports our need to do a job: schedule a plane trip, send relatives some photos, or coordinate a social engagement. As we perform more of our social interactions online, our behavior will adjust to the tool's constraints and capabilities. Those behavioral adjustments are starting to accumulate, and the patterns are fascinating indeed.

In her book Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages, Carlota Perez studied five technology breakthroughs in western history. In every case, a financial bubble burst after early enthusiasm, but then the technology became embedded in multiple processes and relationships, transforming the host society. (Think of the impact of automobiles after the crash of 1929 and the economic recovery driven by World War II: interstate highways, suburbs, Holiday Inns, drive-in and drive-through fast food chains, the rise of manufacturing labor unions as core elements of the middle class, and on and on.)

The trends in financial markets suggest that we might be moving into what Perez calls "synergy" after the bursting of the Internet bubble in 2001 as computing and communications technologies become deeply embedded in everyday life. Apple, Google, Nokia, and Samsung are key players in any list of global companies to watch. Facebook's population is bigger than the third-largest nation on earth. Video traffic on the Internet is projected to double every eight months or so for the foreseeable future.

The rapid growth of online social networks, across many cultures, is one major development, but there are many others. Spurred in part by Jesse Schell's highly compelling talk at DICE earlier this year, I am seeing important behavioral changes in many domains.

-One reason for Apple's success with the iPhone relates to the powerful attractor the App Store provides for independent software developers. Changing the traditional compensation model offloads risk from Apple (which could never have imagined, much less built, 100,000 applications in less than two years) while attracting innovation. First-mover advantage is proving to be substantial as other software companies try to catch up.

-When DARPA wanted to celebrate the Internet's 40th birthday last fall, they conducted a fascinating experiment. 10 red weather balloons were tethered in plain view and the first team to submit the correct coordinates of all 10 won $40,000. MIT's team won, in large measure because they devised a clever incentive model to grow the network of observers. The $4,000 per balloon was divided between referring parties and the observer him or herself, leading to increased participation. Other fascinating developments included the spoofing of competing teams with Photoshopped fake balloons.

-Online dating is clearly a huge business, but the rules of engagement are still being sorted out. The desire to attract appealing candidates with one's description leads to the temptation to lie. Researchers at Cornell and Michigan State looked at daters' actual height, weight, and age, then compared those to online representations. Unlike purely virtual environments, online dating ideally leads to face-to-face meeting, so the ability to lie is tempered by the possibility of real-world confirmation. Men lied about height and, infrequently, about age more than women did, while both sexes lied almost equally, and in the majority of cases, about weight. As the researchers concluded, "the pattern of the deceptions, frequent but slight, suggests that deception on online dating profiles is strategic. Participants balanced the tension between appearing as attractive as possible while also being perceived as honest."

-Behavioral economics has many insights to contribute to this domain. was founded by three Yale professors who saw the application of behavioral economics to personal aspiration. The model is simple: people select a goal, set the stakes, get a referee, and build a network of friends for moral support. Whether for weight loss, smoking cessation, or dissertation writing, there is evidence to suggest small, symbolically powerful incentives matter much more than substantial financial rewards.

-Symbolic rewards, paradoxically, can get people to spend real money. Many online games' business models feature large inflows of revenue for upgraded game elements (swords, shields, real estate). Disney's Club Penguin gives away game points, but charges $6 per month for players to redeem the points.

-Foursquare was one of the hot companies at SXSW this year, following Twitter's breakout there a few years ago. In Foursquare, people "check in" to the real-world places they visit via mobile phone, announcing their presence to friends and proprietor alike. It turns out you can check in to a place you are not visiting: to make a point, one guy became mayor (one of Foursquare's honorary titles) of the North Pole. Foursquare's founder replied to that effort in a blog comment by asking "We often wonder why people 'cheat' when there’s really nothing to win – it’s not like we’re giving away trips to Hawaii or Ford Fiestas over here. But I guess the combo of mayorships, local recognition and, hey, maybe a free slice of pizza is a little too much for some people to live without :)"

-Facebook games like Farmville, with extremely limited graphics and plotlines, contrast vividly with Playstation 3 titles with massive visual horsepower but high barriers to entry. Females especially appear to be gravitating to Facebook games, and helped drive the Wii to the top of console market share, so Microsoft and Sony are responding by mimicking Nintendo's simple but gesture-driven platform. The shift hit home hard at Electronic Arts, which bought a social network game company the same day that the firm laid off 1500 console-supporting employees.

Several tendencies appear to be emerging here. First, the barrier between real life and play life can get fuzzy. In 2008 two Dutch youths were convicted of stealing virtual goods from an online gamer by beating him up at school and coercing him into transferring the goods. A Chinese gamer was murdered over the sale of an online sword artifact. The Wii bowler uses a real arm motion to hurl a virtual ball toward virtual pins. People's Farmville opponents are their real-world friends. In addition, people are powerfully motivated by symbols, just as they are elsewhere, whether those artifacts are military service ribbons, flags, or luxury cars. Finally, as always, people work assiduously to game every system, whether of grades or Facebook friend counts or Stickk weight loss programs.

What's new here is both the degree of portability and the global scale: ten years ago, nobody could play Scrabble with hundreds of people while sitting on a bus. Now that we can, what comes next? With so many games now resident in the computational cloud, how will people remember or recreate them in the future? How will human relationships, whether intense or trivial, scale in these virtually physical or physically virtual settings particularly? Finally, how will other systems, currently driven by other incentive programs, be transformed by the permeation of game and other group dynamics? Schell points to education as an obvious target, but corporate HR, aging, personal fitness, and retirement savings are just as likely. As a result, nearly every field of endeavor could be affected by the clever application of behavioral carrots and sticks via new electronic media. Social engineering, in short, appears to be supplanting technical engineering in the vanguard of innovation.