SaaStr Podcast #407 with The Creative Curve Author Allen Gannett: “The Secrets of Market Timing and How to Develop the Right Idea, at the Right Time”

 

Ep. #407: Trends are fleeting and hard to pin down. Or are they? Learn how you can leverage the science of trends and better understand market behavior.

This episode is an excerpt of Allen’s session at SaaStr @ Home 2020. You can view the full video here.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Allen Gannett

Transcript:

Announcer:

This is SaaStr’s founder’s favorite series, where you can hear some of the best of the best from SaaStr speakers. This is where the cloud meets.

Announcer:

Up today, the secrets of market timing, how to develop the right idea at the right time with Allen Gannett, author of The Creative Curve.

Allen Gannett:

What I want to do, is I want to talk about timing because timing is one of the aspects around creativity that I think feels the most nebulous to people, but there’s actually a lot of science behind it. So there’s actually really great definition of creativity from academia and it’s from sociology, and the definition there is that creativity is the ability to create things that are both new and valuable and the ‘and’ is super important, because not good enough to just create something new. Right? I went to Microsoft Paint and I created this and it is certainly novel, but it’s definitely not valuable. It’s definitely not creative. Now on the other hand, if you just create something valuable, it’s not creative. So last year, for example, this is true, by the way, I learned how to do conditional color formatting in Excel. You look so smart.

Allen Gannett:

It’s so easy. It’s definitely valuable. It’s certainly not novel and is certainly not creative. So we talk about creativity, what we’re really talking about is that creating something new and valuable, and that’s where it gets really interesting because value is a social phenomenon. For something to be valuable, we all have to agree that it’s valuable. It’s like money. Think about startups, right? There were companies in the late nineties doing what Uber and Instacart did. At the time, it was novel, but we didn’t deem it, as a group, to be valuable. So if we want to understand and what creativity really is, we have to understand why certain things are deemed valuable. To do this, there’s actually a lot of really interesting research in sociology that’s focused around the study of trends and hits, and this isn’t just hits in the sort of pop music, sort of mainstream way, but hits are when a group of people big or small, say that something’s both novel and valuable.

Allen Gannett:

It could be a hit at an academic conference, right? It could be a paper. It could be a hit among a small group of startup CEOs. It could be a hit marketing tactic among SaaS marketers, right? Whatever group of people, big or small, say that something’s both novel and valuable, we call it a hit and so as a result, researchers spend a lot of time studying what causes things to become hits. So I want to give you an example of this and to do this, we’re going to participate in a little experiment. I want you all to think to yourself and try and come up with as many as possible. I want you all to think of some famous people named Lisa. Some famous people named Lisa and Lisa Simpson doesn’t count and Mona Lisa doesn’t count. Those are bad answers, and while you do that, I’m going to have a sip of water.

Allen Gannett:

Okay. So hopefully you have some good answers. These are the four most common answers I get. Lisa Marie Presley, Lisa Kudrow, Lisa Lampanelli, Lisa Bonet. Now the next question is, what do all of these women have in common? It’s not that their name is Lisa, it’s not their women, it’s not that they’re famous. But what do all of these women have in common? So the answer is that they were all born in the 1960s. Lisa was the number one name of every single year of the 1960s, except for two. It was a hit name of the entire decade. Everyone was naming their daughter, Lisa. But what’s fascinating is it just as it came into favor, it also fell out of favor. By 2018, Lisa had fallen to the 809th most popular name and there were only 302 baby girls in the entire United States named Lisa. The New York Times literally published an article, where have all the Lisas gone.

Allen Gannett:

This is a chart of the popularity of Lisa over time from the social security administration. It’s not good, and so the thing that’s important is that when we think about hits, we have to think about the fact that they have a rise and they have a fall and so I want to start by talking about the rise and to do this, we’re going to take part in a famous psychology experiment. This is a real psychology experiment, and if any of you speak Mandarin or can read Mandarin, I don’t want you to, don’t help anyone. Don’t put the answer in the chat. But what we’re going to do, is we’re going to look at this Chinese character and I want you all to decide whether or not you think it has a positive meaning or a negative meaning.

Allen Gannett:

So here’s the correct answer. The answer is nothing. It means nothing. It’s a completely made up character. I tricked you. So this is from a famous psychology experiment, done by a guy named Robert Zajonc who’s a very famous professor and if you’ve ever taken a psych 101 course, you’ve read lots of the stuff that he’s done and he had this theory, this hypothesis really, that how much people liked certain things and how positive or negative they thought things were, were related to how familiar people were with things. His idea was that maybe showing things to people more, would make them like it more. So to test this, he took a bunch of made up shapes, a bunch of made up Egypt hieroglyphics, and a bunch of made up Chinese characters and he showed those made up objects to different groups of people, different amounts of time.

Allen Gannett:

And then he asked two questions. One, how much do you like or dislike it? And do you think it has a positive meaning or negative meaning? What he found was crazy, what he found was that merely being exposed to something, made people like it more and he called this, not surprisingly, the mere-exposure effect, it’s the idea, the more you’re exposed to something, the more you like it and this is why, as marketers, we have brand colors, logos, why we talk about consistency in messaging. Because it turns out that as humans, we crave the familiar, but why? It goes back to evolutionary biology. Think about one of your brain’s core tasks. One of your brain’s cortex task is to keep you safe, and it’s learned over time, that things that are unfamiliar represent risk. So think about this.

Allen Gannett:

Imagine you broke into your neighbor’s house. I don’t know why, you’re really mad, and you went to the basement. I grew up in New Jersey. We had basements. They don’t have basements everywhere. You enter the basement and you saw this like super creepy door. You’d be like, I’m not going to that door. I don’t know what’s in that door. That’s scary. I could die. I don’t have life insurance. I don’t want to go in that door. Now, imagine that same exact door, with the same exact characteristics, was in your grandmother’s house and it’s where she stored the wine. You’d be like, I love that door. Let’s go in that door. Let’s get some Merlot. So even though it’s the same exact thing, merely manipulating how familiar we are with things, dramatically changes our perception of it because we realize that things that are familiar are safe, they’re not going to harm us.

Allen Gannett:

Okay. Interesting. But there’s a but. If the more we see something, the more we like it, then why wouldn’t the name Lisa, just rise in popularity forever. Right? Why isn’t everyone named Lisa? Why am I not named Lisa? Why aren’t we living in Lisa Land? So the question then for us, is why do things fall from favor? And to answer this, we’re going to do another study from our friendly trickster, Robert Zajonc. He became pretty famous and he had a sort of nagging concern. He thought, the more you see something, the more you like it. Okay. But, how does that explain boredom? Or like certain points, I just get bored with things. I want something new, and he thought, maybe it’s because flashing objects at people isn’t really real life. Right? In real life, things are more complicated. We study them, we spend time with them.

Allen Gannett:

So he redid his study. But this time, instead of using objects, he took something more complicated, sort of abstract art. And what he did, is he told people, don’t just look at it, but actually study it and then he did the same manipulation. He showed certain groups of people the art once, some people three times, some people six times, some people twenty-five times. What he found, was that the more people saw it at first, the more they liked it. But then at a certain point, they started to like it less and less and less. At a certain point, they said they would actually want to see something new and he realized that humans have this other core behavior. They also have this pursuit of the novel. They like things that are new. Why? Again, it goes back to evolution. Think about prehistoric hunter gatherer days.

Allen Gannett:

When you were in a field, you were kind of hungry and you saw this weird mini strawberry thing. You’d be like, Oh, I’m going to eat this. This could be breakfast. This could be delicious, and so things that are new, represent what’s called a novelty bonus, where they have potential value and that motivates us to go explore it. That’s why things like new restaurants, new experiences, new travel locations can be so exciting. But this also means there’s a contradiction, right? Because on one hand, we seek out the familiar for safety. On the other hand, we seek out the novel for potential reward. Those are the literally direct opposites. So how do we explain this contradiction? It turns out that this contradiction is actually our brains’ really elegant way of balancing risk and reward. We like things that are familiar enough to be safe, but yet in other ways, novel enough to be interesting, to have a novelty bonus. See, when things are too new, they’re actually scary.

Allen Gannett:

So, imagine you were back in that field and you saw this like weird red pitted olive thing. You’d be like, I’m not eating that. I don’t know what that is, and that’s good because this is a yew seed. It will kill you. And so the result is this phenomenon, that academics call… This is the academic name, bear with me, the inverted U shaped phenomenon between familiarity and preference. I thought that was a bad book title, so I rebranded it The Creative Curve, and it’s this finding that when you map out how familiar something is, with how much people like it, you see that at first people don’t like it. Then they like it more and more. Then they start to get bored. Now this might look similar to you to things like crossing the chasm type demographics. But this is actually different and I’m going to explain how it’s different.

Allen Gannett:

So this comes from psychology and it represents an individual-level phenomenon, a group-level phenomenon, and a population-level phenomenon. The things that are subject to this are really things that come from consumer behavior because consumers have these contradictory urges. They like things that are old, but they also like things that are new, and so the result, is that you see that trends go through these distinct phases. I like to break them down like this. The first phase, what I call fringe interest. This is when just the people who are the deepest in a field, just when they like something. So think about fashionistas. If you watch men’s fashion week this year, the big trend among men’s coats was these big unstructured coats. Now you’re probably like, it’s kind of weird. I’m not going to do that. That’s not really me, but in a few years you will because that’s how trends work.

Allen Gannett:

Now, the next stage is actually the most important stage. It’s kind of sad that it comes second. But the next stage is what I call the sweet spot. And this is when ideas are familiar enough, they’re safe and with a little bit additional exposure, they go from low preference to high preference very quickly. When we talk about creative genius, what we’re really talking about is some people, some creative greats, have this ability to consistently create ideas that are in the sweet spot of The Creative Curve, where they continually move what they’re doing to constantly be in this spot and not become too new or too familiar. So, let me give you an example of something that’s in the sweet spot right now. There’s been this big explosion, in the past 18 months, of interest in non-alcoholic spirits. So it’s been this combination of the sort of health and wellness trend, with the sort of craft cocktail trend, where people are like, okay, I like cocktails, but I don’t want the hangover, and so you’ve seen this huge development of non-alcoholic spirits and this is something that’s familiar, but it’s novel, right?

Allen Gannett:

It takes something you’ve seen before, but presents it in a new and novel way. Now, ultimately though, ideas eventually reach what I call the point of cliche. This is when things are overexposed. So I’ll give you an example that’s a late 2000s, reality TV show reference. This might get lost on some people, but I don’t know if any of you watched the show Jon & Kate Plus 8, it was on TLC. The whole idea was they have eight children, crazy stuff happens. For a while, they were on the cover of every magazine and Jon Gosselin, the father character in this reality show, he started wearing the clothing brand, Ed Hardy and according to Don Ed Hardy, the original tattoo artist, this guy, John Gosselin was responsible for Ed Hardy becoming overexposed and cliche because Ed Hardy was doing $900 million a year in sales.

Allen Gannett:

Today, it only does to $20 million. So eventually ideas become overexposed. Now the next stage, what I call a follow on failure, and this is really important if you work in a big organization. You’ll see is that a lot of times startups, new competitors will come in, they’ll create something in the sweet spot, they’ll grow as it becomes popular and then bigger organizations see it and they go and create their own version. But by the time they actually create it, it’s too late, where it might be popular for a little bit, but then they’ll quickly fall from favor and they’ll lose that credibility. So this is actually really important. Think about like a great example of this, is almond milk. Almond milk is super popular right now, but it’s starting to decline. You’re seeing people talk about the environmental impacts, oat milk is a better option and the result is if you’re in a big CPG company, from the data, you could be tempted to say, we should create something using almond milk. But in reality, by the time you create it, it’s probably going to fallen out of fashion.

Allen Gannett:

So this is one of the reasons why, oftentimes, best practices or trends are not things you should do, but rather telling you what has already been done and you should avoid because they’re eventually going to fall from favor. Now the last stage is sort of like the most obvious, which is that, eventually things fall out of favor. They become out of date, right? Don’t open a disco record shop, don’t start collecting beanie babies. These are bad ideas. So the question then for all of us is how do you create things that are in the sweet spot of The Creative Curve?

Allen Gannett:

The answer is to get the right amount of familiarity and novelty, where it’s familiar enough for your audience to be safe, but novel enough to just push them slightly and be interesting and new. When you think about products, when you think about trends you’ve interacted with, you start to see this pattern quite a bit. I actually think Apple’s a great example of this. So we think about Apple as like radical novelty, right? They’re new and they’re innovative, but we all remember Apple in the early nineties created the Apple Newton, which was their tablet device, their first attempt at a tablet device and it was a failure. It was a flop, it was too new. People were like, ah, what is that? Fast forward to today, and the iPad is a huge, widely successful business. A lot of you probably built apps for it, right?

Allen Gannett:

But if you think about the development of the iPad, the iPad was an iPhone without a phone, iPhone was an iPod with a phone, the iPod was a better MP3 player. One of the biggest mistakes we have when it comes to understanding trends, when it comes to understanding creativity, when it comes to understanding timing, is that often we confuse the right idea for the best idea. Consumers don’t want the most features, the most advanced thing. The thing that has all the bells and whistles that are technically possible. They want the thing that for them, in that moment, is the right balance of the old and the new. I want to give you an example of this and to do that, I’m going to tell you a story and it’s a story that maybe you’ve heard before. It has to do with a startup. A startup that started at an Ivy League campus in a dorm room.

Allen Gannett:

It was started, that a few friends started, that was a social media startup, and it allowed people to connect with each other and all these things and now of course, you’ve probably not figured out what startup this is, startup called Campus Network. Haven’t heard of it? Campus Network actually launched a month before Facebook, at Columbia University, started by the class president at Columbia. It went super viral. The founders of it left school, like the Facebook team did, to work full-time on it. For a while, it was actually the biggest competitor to Facebook. The Stanford Daily, the campus newspaper at Stanford actually wrote an article sort of comparing the two of them, and one of the things that was so interesting about Campus Network was that it actually had way more features than Facebook did and this quote, for example, Carrington Lee talks about how Campus Network had a blog, a photo album, messenger, a bulletin board.

Allen Gannett:

Those things are all in Facebook now. But when Facebook launched originally, it was so bare bones, right? There was poking. There was directories, there was photos. If you think about things like the newsfeed or groups, these are things that came much later, but Campus Network actually had these features, features that would later become essential to Facebook success. It had them from the beginning, but it failed. Adam Goldberg is a sort of Mark Zuckerberg of the Campus Network story. He was the founder and CEO. He was one of the two founders, and what he said that I thought was really interesting was that what Facebook did so well, is that they didn’t overwhelm their users with features. They added them slowly, without being overwhelming, which is really this idea of the familiar and the novel. If you think about, go back to 2004, 2005. People at the time would still use pseudonyms online, or I remember my AIM username, which is too embarrassing to say, but the idea of using your real name on the internet, that was a big enough jump. That was Facebook’s jump.

Allen Gannett:

Campus Network was also broadcast everything you’re doing, post all the photos of your life, do all these things. Mark Zuckerberg once said, when he comes to building products, the trick isn’t adding stuff, it’s taking things away. The important thing for all of us, when it comes to creating the right idea at the right time, is not to look at it as this magical thing, there’s rather to think about it critically, because really when we talk about creating the right thing at the right time, what we’re saying is, is it the right thing for my audience? Are they prepared for it? Not is it the most technical or the most advanced or all these things, but is it the right thing? Is it at the right point of The Creative Curve where it’s familiar enough to be safe, but novel enough to be interesting and new?

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Published on December 10, 2020

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