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Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg

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Speaker 1: Quick Takes Tim Stenovic on Bloomberg Radio. I want to

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Speaker 1: get right to our guest. He's really interesting and you

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Speaker 1: might remember um a story by Bloomberg's Missy Gafa Poulu

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Speaker 1: that began with in Silicon Valley near a All is

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Speaker 1: the habits guy. Want to understand how to get app

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Speaker 1: users to come back and again? Then A all is

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Speaker 1: your man. That's what she wrote in his story. He

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Speaker 1: is a former lecturer at Stanford's Graduate School of Business

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Speaker 1: and angel investor. He has studied our companies such as

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Speaker 1: Facebook now of course, Meta and Twitter encourage users to

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Speaker 1: spend time on their platforms. He's also author of a book,

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Speaker 1: It was out in Hooked, how to build habit forming products.

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Speaker 1: His website is Near and Far and dot com and

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Speaker 1: he joins us in our Bloomberg Interactive Broker Studio. Welcome, Thanks,

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Speaker 1: great to be here, great background. I feel like I

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Speaker 1: have a million questions, so you're just gonna have to

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Speaker 1: stay for the next sixtew minutes, Like cancel the next show. UM,

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Speaker 1: tell us a little bit about like we were talking

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Speaker 1: about the or ring, which you have on um all

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Speaker 1: of this information and all of this information gadgets are gathering,

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Speaker 1: gadgets that we're wearing. Is it a good thing for us?

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Speaker 1: And Mike talked about, you know, he's on his phone

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Speaker 1: all the time. Is this good for society? It's a

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Speaker 1: great question. Is it good? Is it bad? The answers yes,

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Speaker 1: it's both. Pauvarlio has a wonderful quote. He said, when

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Speaker 1: we invented the ship, we invented the shipwreck. So of

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Speaker 1: course every new technology, especially one on such a massive

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Speaker 1: scale as the Internet, is going to have goods and

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Speaker 1: beds about how we manage those. You know, you're I'm

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Speaker 1: wondering about sort of the chemicals that are at play,

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Speaker 1: like the brain chemicals. You know you always hear about, Well,

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Speaker 1: if you get a notifications on your is that a

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Speaker 1: real thing? You know? Do is there dopamine or whatever?

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Speaker 1: You know, happiness chemicals at work when you when you

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Speaker 1: get addicted to an app and you're and you're you know,

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Speaker 1: I love to see those notifications and stuff like that.

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Speaker 1: Yes and no, I hate to give a wishy washy answer,

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Speaker 1: but typically if you hear somebody talk about dopamine s

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Speaker 1: where it's just discount everything, they say, because it's so overused.

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Speaker 1: It's so overplayed. Everything releases dopamine. When you hug somebody,

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Speaker 1: you get dopamine. When you learn to play the piano

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Speaker 1: or play tennis, you get a squared of dopamine. Dopamine

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Speaker 1: is not cocaine in the brain. It's like a different

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Speaker 1: scale than using an app. So the whole idea of

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Speaker 1: getting addicted to an app or hijacking your brain is

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Speaker 1: so overplayed if you actually look at the research and

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Speaker 1: you talk to the people who study this stuff. Some

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Speaker 1: people get addicted, of course, just like some people get

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Speaker 1: addicted to alcohol. Right, alcohol is highly addictive, but not

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Speaker 1: everybody who has a glass of wine with dinner is

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Speaker 1: an alcoholic. Right, About three to five of population is addicted,

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Speaker 1: but it's not. It's certainly not everyone. Addiction is a pathology,

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Speaker 1: and just because some people get addicted doesn't mean everyone will.

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Speaker 1: So these little dopamine hits that we get aren't. It's

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Speaker 1: something pretty natural that we'd probably be getting something. And

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Speaker 1: we remember, we want products to get better products. Being

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Speaker 1: engaging is not a problem, it's progress. We're gonna say, hey, Apple,

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Speaker 1: your phones are really easy to use. Stop that Netflix

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Speaker 1: your shows. I want to watch them all the time.

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Speaker 1: Can you please make boring shows? It's ridiculous. It's a

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Speaker 1: wonderful thing that the world is becoming more engaging, but

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Speaker 1: the cost of this is that we have to learn

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Speaker 1: some new manner, some new norms and new ways of

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Speaker 1: being in the world so that we can get the

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Speaker 1: best of these products without letting them Because I can't imagine.

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Speaker 1: You know how many times you walk into like a

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Speaker 1: subway train and like just people are just involved, you know,

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Speaker 1: so engaged either in their phone or something, and you

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Speaker 1: feel kind of rude, kind of moving around. And I

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Speaker 1: do feel like we need to kind of rethink how

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Speaker 1: we interact and engage in society as a whole. Um.

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Speaker 1: So I think about things like healthcare. Uh. And it's funny.

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Speaker 1: I had a t MJ or do you have a

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Speaker 1: t MJ issue? Um? And I actually have an app

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Speaker 1: that reminds me to relax my jaw. And it sounds

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Speaker 1: so stupid and silly, and I kind of laughed when

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Speaker 1: my doctor said, I want you to download this app.

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Speaker 1: It's a very simple app, but it works. How do

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Speaker 1: you think about how we could get so much more

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Speaker 1: in the healthcare and wellness space. When it comes to

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Speaker 1: apps and you know whether it's workable technology, how do

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Speaker 1: you see it? How do you see that it should

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Speaker 1: play at is playing? So we were talking about before

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Speaker 1: we went on air, about how I get a gadget.

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Speaker 1: Almost every week somebody sends me something to try out.

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Speaker 1: Because I'm in this health change space. Healthcare is specifically

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Speaker 1: taking off. I mean, I think one thing I'm super

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Speaker 1: excited about our continuous glucost monitors. Have you seen those

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Speaker 1: around for? It used to be something that only diabetics

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Speaker 1: war and it's it's a game change, my mother in law,

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Speaker 1: and you start seeing them on people's arms. What you

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Speaker 1: start seeing now is that people who don't have diabetes

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Speaker 1: are now tracking their gluecost because it's so easy to

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Speaker 1: do that. Now you can track it throughout the day.

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Speaker 1: And and there's several companies I work with a few

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Speaker 1: that will tell you before you eat, right before you

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Speaker 1: get a snack, check your glucose. Why because it will

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Speaker 1: tell you whether you are psychologically hungry or physically hungry.

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Speaker 1: And sometimes it's hard for us to tell the difference.

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Speaker 1: So by looking at this, happen saying, actually, my blood

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Speaker 1: glucose is fine, I really don't need a snack. Let

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Speaker 1: me wait fifteen minutes that can delay snacking. So that's

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Speaker 1: just one small example. But I think we're gonna see

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Speaker 1: an explosion of these new behavior change apps. All right,

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Speaker 1: So what are some of your favorite you know, either

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Speaker 1: apps are products that are out there, let's say for

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Speaker 1: working out, because there's so many. Yeah, So one of

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Speaker 1: the apps I talked about in my book Hooked is

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Speaker 1: uh an app called fit bod f I T B

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Speaker 1: O D. And I love this app because I actually

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Speaker 1: put out a blog post. I was so frustrated with

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Speaker 1: how bad most fitness apps were. I put out a

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Speaker 1: blog post that the title was why your fitness app

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Speaker 1: is making you fat? Because they were so bad. All

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Speaker 1: of them were so terrible. And then somebody told me

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Speaker 1: about fit bod so bad? Was it just because they

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Speaker 1: didn't form a habit? Okay, got it? And so I

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Speaker 1: I downloaded fit bond and I started using it, and

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Speaker 1: I said, oh my goodness, this is actually really great

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Speaker 1: and it looks like it's following the hook model. Hook

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Speaker 1: models what I based my book on my class at

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Speaker 1: Stanford on and so I just went to the customer

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Speaker 1: support email thing and I sent them to you have

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Speaker 1: you by chance read my book? Within thirty seconds? The

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Speaker 1: founder wrote me back and said, yes, we actually built

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Speaker 1: the hook model into the app. And it's I use

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Speaker 1: fit bod every time I work out. I mean, I'm

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Speaker 1: forty four years old, best shape of my life because

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Speaker 1: of this app. It's fantastic. Well, near cuts to the

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Speaker 1: chase here, How can Carol and I make this show

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Speaker 1: more habit forming? That's what we need? What we need huge?

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Speaker 1: We have a huge Do we need a bitually listening?

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Speaker 1: What do we what do we do? Well? You're you're

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Speaker 1: you're doing great so far that's fantastic. So the ho

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Speaker 1: model has has another segment. Let's say, okay, how do

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Speaker 1: we analyze twenty seconds? That's the most important part. The

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Speaker 1: fuel that we see is the backbone of every habit

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Speaker 1: forming product is a variable reward, right, some kind of

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Speaker 1: intermittent reinforcement. Of course you have it in that you product.

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Speaker 1: By the news, the first three letters of news. Any

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Speaker 1: w new It's all about variability. So that's what makes

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Speaker 1: sports engaging, what makes slot machines so so intoxicating, what

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Speaker 1: makes social media fun, It's all about the new, new new,

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Speaker 1: The variability so you've got that as your backbones, not personality.

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Speaker 1: Of course, I'm crushed. Maybe you won't come back now,

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Speaker 1: I'm just kidding. Good look, we're going to come back,

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Speaker 1: and you're in just a moment, So I want to

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Speaker 1: get back to a guest. We're still talking with Near

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Speaker 1: I l he is the habit sky as our Bloomberg's

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Speaker 1: Missy Gafa Poolo had written about. But he was a

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Speaker 1: former lecturer at Stanford's Graduate School of Business. He has

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Speaker 1: studied how companies, as we mentioned like Meta and Twitter

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Speaker 1: encourage users to spend time on the platforms. Check out

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Speaker 1: his book Hooked, How to Build Habit Forming Products. And

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Speaker 1: he's also got a blog website near and Ford dot

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Speaker 1: com and he's still with us in our studio. So

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Speaker 1: we were talking about wellness and health apps in particular

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Speaker 1: for some of our audience. UM Peloton right somewhere addicted.

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Speaker 1: There's something that really rode a high no pun intended,

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Speaker 1: and then obviously has has come undone a bunch. What

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Speaker 1: do you think about that? Yeah, it's it's a super

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Speaker 1: interesting story because I think it's a great example of

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Speaker 1: why variability is so important for habit formation, that if

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Speaker 1: something is not variable. If it's predictable, it's boring, right.

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Speaker 1: I think about game games, right, everybody wants to gamify everything,

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Speaker 1: put points, advatagine and leaders, but most games people burn

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Speaker 1: out on. Right, think about member Farmville. Farmville was like

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Speaker 1: the biggest thing ever back in what two thousand and twelve.

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Speaker 1: Who's playing Farmville anymore? Nobody? Why? Because after Farmville it

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Speaker 1: was Chefville and uh whatever, frontier Ville was like the same. Yeah,

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Speaker 1: you're telling nobody's gonna be playing Wortle in a few years.

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Speaker 1: You may be surprised, Okay, as long as that. You know,

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Speaker 1: what's great about word is that it's social, Yeah, as

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Speaker 1: opposed to solitary expanses like Peloton. So Peloton during the pandemic,

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Speaker 1: when you couldn't go to the gym, you couldn't do

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Speaker 1: the things that used to do. It was very novel.

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Speaker 1: It's this this screen on your on your bike. It

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Speaker 1: is so interesting, so in with people. But then you

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Speaker 1: do it three or four times and you kind of

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Speaker 1: got the idea. Right, It's say, it's the same routines,

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Speaker 1: it's not variable enough. Let alone the fact that it's

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Speaker 1: hard work, right, You're you're really pushing yourself. So it's

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Speaker 1: Uh that I think was what what what went wrong

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Speaker 1: was that they didn't maintain the sense of variability. Yeah,

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Speaker 1: you know, you're talk to us a little bit about

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Speaker 1: some of the companies you've invested in over the year

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Speaker 1: and how this notion of habit forming it had sort

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Speaker 1: of played into your thesis of whether or not a

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Speaker 1: company's worth investing in. And if you give us some

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Speaker 1: examples of where where it worked, well, yeah, it's it's

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Speaker 1: been amazing. So the book came out in Hooked How

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Speaker 1: to Build Habitforming Products, and uh, it's been used in

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Speaker 1: every conceivable industry. Education is one I'm super proud of

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Speaker 1: whenever I see a company using the hook model. A

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Speaker 1: few years ago, I got a call from these young

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Speaker 1: entrepreneurs uh in Norway building this little app. They showed

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Speaker 1: me the Hook model. I was so impressed. I immediately said,

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Speaker 1: please take my money. I want to, I want to,

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Speaker 1: I want in because they showed me how they really

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Speaker 1: applied the book. And today that company's cahoot, it's the

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Speaker 1: most widely used educational software in the world. Uh. And uh,

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Speaker 1: I've got the last time I checked that a multibillion

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Speaker 1: dollar valuation. And what are they doing. They're getting kids

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Speaker 1: hooked onto online learning. So how are they doing that?

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Speaker 1: What are some of the techniques? Yeah, so they have

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Speaker 1: this really innovative it's like a it's uh, you you

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Speaker 1: get the so the hook model. I'm trying to summarize, uh,

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Speaker 1: three page book and and don't do any seconds. But

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Speaker 1: essentially what they're doing is, uh, they're getting kids to

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Speaker 1: invest in making these quizzes on their own to share

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Speaker 1: with their peers. And so that investment phase this is

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Speaker 1: really special. That that's great. Yeah, the investment phase where

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Speaker 1: you put effort into something to make it better. So

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Speaker 1: when you are the person making the quiz, right, as

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Speaker 1: opposed to saying that when we were in school was

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Speaker 1: a pop quiz Today that sucks right, horrible. Here the

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Speaker 1: kids are making it for their peers and then in

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Speaker 1: the class they're playing these quizzes. So anybody body with kids,

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Speaker 1: you know, under probably fourteen, I bet you your kids

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Speaker 1: have know all about cahoot. And that's a wonderful example.

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Speaker 1: You only we only hear about the bad cases. We

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Speaker 1: only hear about Facebook and Snapchat melting kids brains. I

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Speaker 1: think that story is overblown. But we also need to

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Speaker 1: talk about the good examples of how we can actually

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Speaker 1: use habit for me, technology for good. Well, you know,

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Speaker 1: and here we are. You know, we're not out of

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Speaker 1: the pandemic, because we often say, you know, on the

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Speaker 1: other side of the pandemic, we're not quite there. But

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Speaker 1: it's certainly very different than it was in the you know,

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Speaker 1: height of it. But we're trying to figure out, you

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Speaker 1: know what, what trends, what habits that we formed during

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Speaker 1: the pandemic stay with us or do you think they

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Speaker 1: just all go away? Because that was just such a

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Speaker 1: different world. It's hard to say what it's better or worse.

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Speaker 1: It's definitely different, right, So the things that changed that

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Speaker 1: we talk a lot of in the habit formation about

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Speaker 1: internal triggers. Internal triggers are uncomfortable emotional states that we

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Speaker 1: seek to escape. So every product you use, every product

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Speaker 1: you use for one reason, and that is to feel

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Speaker 1: something different, to modulate your mood. Because all human behavior

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Speaker 1: is motivated by a desire to escape discomfort. All human behavior,

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Speaker 1: even the desire to feel good, is psychologically destabilizing. So

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Speaker 1: when we went into the pandemic and now we have

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Speaker 1: all these internal triggers of fear, uncertainty, doubt all of

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Speaker 1: these things that are causing us more internal triggers. What

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Speaker 1: changed While people were glued to the news, they were

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Speaker 1: scrolling their devices all day long. They were constantly looking

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Speaker 1: for an escape from this crazy world that we had

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Speaker 1: back then. And so as the world calms down, now

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Speaker 1: we're we're or at least in the world never is

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Speaker 1: not crazy, but at least this phase is over. Uh,

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Speaker 1: we're we're looking for other ways to deal with that discomfort,

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Speaker 1: to deal with whatever we're we're handling. Like the same

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Speaker 1: goes with workplace distractions, right, So people are not getting

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Speaker 1: distracted at home from their from their kids, or from

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Speaker 1: their pets. Now that they're going back into the office.

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Speaker 1: What we're hearing from employees that they're getting distracted by

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Speaker 1: their colleagues, by their bosses. So the distractions didn't go away,

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Speaker 1: they just changed. They just shifted around. But you know,

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Speaker 1: near you did sort of flick at the idea of

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Speaker 1: there can be a backlash to two products that are

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Speaker 1: too habit forming, whether it be a parent saying as

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Speaker 1: you said, the social media is melting my kid brain.

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Speaker 1: So how do you sort of assess that risk when

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Speaker 1: you're trying to decide in a company to invest. You know,

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Speaker 1: is that risk still there for say the big social

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Speaker 1: media for the robin Hoods? You know, how how important

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Speaker 1: is that risk do you think to these companies going forward?

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Speaker 1: It's a great question. I spent a lot of time

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Speaker 1: working on ethics. There's actually a chapter in my book

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Speaker 1: called the Morality of Manipulation where I talk about all this,

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Speaker 1: but I propose what I call the regret tests. And

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Speaker 1: the regret test comes out of my search for how

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Speaker 1: do you make sure that you're ethical when you use

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Speaker 1: these behavioral design techniques? Because as we talked about, they

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Speaker 1: can be used for good. You can help people exercise

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Speaker 1: more and uh, save money and form all these great habits.

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Speaker 1: But how do you make sure you do it ethically?

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Speaker 1: So the regret test sets you don't do it with

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Speaker 1: draft Kings or or one of the gambling apps. That's

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Speaker 1: that's a that's a great example. Robin hood also potentially

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Speaker 1: a great example. So the regret test says that the

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Speaker 1: he asks would the user do what we have designed

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Speaker 1: for them to do, knowing everything we know summarized as

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Speaker 1: would they regret using our product? Because people aren't dumb, right,

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Speaker 1: people aren't dumb? That if they regret doing business with you,

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Speaker 1: guess what, not only are they not going to do

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Speaker 1: business with you, they're going to tell all their friends

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Speaker 1: on social media not to do business with you, right,

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Speaker 1: And so that's why it's so important when we use

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Speaker 1: these behavioral design tactics to do what I insist we do,

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Speaker 1: which is usability testing, which we've been doing for decades,

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Speaker 1: to bring people in and see if they regret that experience.

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Speaker 1: Do we wish we had like an hour here, um

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Speaker 1: thirty seconds left tears? There's some thoughts on the metaverse

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Speaker 1: from your perspective, like does that become part of our

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Speaker 1: habits or something that we're going to enjoy going forward.

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Speaker 1: I think it's way too early to tell. We don't

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Speaker 1: even know what the metaverse is. We don't have it

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Speaker 1: even a deaf finition of whatever. I think it's kind

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Speaker 1: of like AI. It's like one of these things that

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Speaker 1: captures the imagination we've been thinking about for so long.

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Speaker 1: Way too early to to really start putting down roots.

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Speaker 1: I think, all right, can I leave it there? Come

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Speaker 1: back absolutely within your travels, we would love to have you.

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Speaker 1: Have you back neary' all. He's author and investor check

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Speaker 1: out his blog Near and Far dot com. Joining us

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Speaker 1: here in our interactive Booker Studio