19 February 2020

Today, Robert Leonard speaks with Nir Eyal to discuss his experience as an entrepreneur and his two best-selling books. Nir is an expert on behavioral psychology and he has been able to use that to create many successful businesses and products. Nir is a strong believer in controlling your mind and attention to achieve superior results throughout life.



  • Nir Eyal’s experience as an entrepreneur through multiple successful ventures.
  • What angel investors are looking for and how projects become successful.
  • Why you need to be “indistractable.”
  • Why behavior psychology is so important in business.
  • And much, much more!


Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it!

Download this episode and subscribe using your favorite podcast app! Join the conversation with the rest of the Millennial Investing community by joining the Facebook group or tweeting directly to Robert





Disclaimer: The transcript that follows has been generated using Artificial Intelligence. We strive to be as accurate as possible, but minor errors may occur.

Robert Leonard  00:02

Today, I speak with Nir Eyal to discuss his experience as an entrepreneur and his two best-selling books. Nir is an expert on behavioral psychology, and he has been able to use that to create many successful businesses and products. Nir is a strong believer in controlling your mind and attention to achieve superior results throughout life. I’m excited to have Nir on the show today because the topics we talked about in this episode help in so many different aspects of life. The topics will help with your general productivity in life. But if you’re able to master them, they can also help with a lot of your stock investing, your career, side hustles, business or even your personal finances.

Robert Leonard  01:56

Thank you so much to everyone who has left reviews for the show already. And if you haven’t already, but you’d like to help the show grow, or possibly even hear your review read on an episode, you can take just 30 seconds and leave a five-star rating and review in Apple podcasts. As you heard from the two I just read, they can be long or short, they both helped the same. So it doesn’t have to take a lot of your time. You can also help with word of mouth by sharing the show with your friends and asking them to subscribe. Both of these really help the show grow, and I truly appreciate it. Now without further delay, let’s get into this episode with Nir.

Intro  02:31

You’re listening to Millennial Investing by The Investor’s Podcast Network, where your host Robert Leonard interviews successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

Robert Leonard  02:53

Hey, everyone, welcome to the show. I’m your host, Robert Leonard, and with me today, I’m very excited to have Nir Eyal. Welcome to the show, Nir.

Nir Eyal  03:01

Thanks. Great to be here.

Robert Leonard  03:03

You’ve had a lot of experiences and success as an entrepreneur, investor, and author that I’m looking forward to talking about throughout this interview, as well as the specific topics you cover in your two best-selling books. But let’s start with your background and who you are.

Nir Eyal  03:18

Sure, so I’m what you would call it behavioral designer. And that means that my job is about helping companies design healthy habits in their users through the use of technology. So my first book was really about how to build habit-forming products. The book is called “Hooked.” And the idea behind the book was to steal the secrets from companies like Facebook, Google, and Slack and all of these products that are so engaging, right, the best in the business products when it comes to creating very sticky and engaging products, so that the rest of us can build the kind of products and services that improve people’s lives by building healthy habits.

And that’s exactly what’s happened. So companies like Fitbod uses the “hook” model to get people hooked to exercising in the gym. Companies like Kahoot! is a company I like so much actually invested in them. They use the “hook” model to get kids hooked onto in-classroom learning. My clients have included companies like the New York Times that I’ve helped people hook to reading the newspaper every day. And so, the idea is that we can use this stuff for good.

Nir Eyal  04:12

Of course, in the course of my study, a question that always came up and a problem that I had in my own life was what happens when products are designed to be so good that sometimes they’re hard to stop using? That sometimes that can lead towards distraction? And so that’s the topic of my second book, “Indistractable,” which is all about how to control your attention and choose your life. And it was because I had this vantage point of understanding the root cause of distraction and how these products are designed to capture so much of your attention. I know also the Achilles heel. And I think I now have a framework that took me over five years to develop to help people get the best out of technology without letting it get the best of us. So it’s a very tech positive approach to using technology, in such a way that it doesn’t distract us but in fact empowers us to do more.

Robert Leonard  04:14

Has social media platforms done such a good job that it’s *inaudible users too hooked?

Nir Eyal  05:05

I don’t think so. I think that today we hear a lot of blame at these companies. And that’s, interestingly enough propagated by their competitors. So where you hear that narrative is, you know, in, in the New York Times and in the traditional media, the companies that are threatened by the business models of companies like Facebook, Google, because look, they all monetize the same way, right? The New York Times, The Wall Street Journal monetize the same way Facebook does, and that’s by selling your attention to advertisers. Big surprise.

Read More

And so it’s not surprising that you know, that the traditional business model of advertising in the newspapers is threatened by this and you hear a lot of negativity. What you don’t hear is an empowering message. You hear about how technology is hijacking your brain and how it’s addicting everyone. And there’s no doubt it does addict some people just like alcohol addicts, some people, but that doesn’t mean everyone who has a glass of beer with dinner is an alcoholic. Clearly and so why do we have this ridiculous notion when it comes to technology? We call everything addictive these days. And I think the reason people do that, is that because it frees you of responsibility that if you call something addictive, which is a pathology, right? We never talked about other diseases this way. We never talked about cancer or Alzheimer’s this way.

And yet, the pathology of addiction, we throw on everything that people seem to like a lot. And that’s not how addiction works, that addiction is a pathology. Not only is that disrespectful to people who actually struggle with this disease, but it’s also by medicalizing something that is a normal behavior, what we’re doing is essentially sloughing off responsibility, because it’s much easier to say, “Oh, you know, Facebook, it’s addicting me and Instagram iss addicting me and YouTube is addicting me.” Because then there’s a pusher, there’s a dealer, there’s someone you can blame, but what it really is a distraction. “Oh, well, now I gotta do something about the problem.” And that’s a lot less fun. But of course that is that is the truth. That is the reality, is that of course these products are designed to be engaging.

I mean, what’s the alternative? Should we tell Netflix, “Hey, Netflix, your shows are too good. I want to watch them all the time. Please make them boring. Hey, iPhone, it’s way too user-friendly Apple, can you please make your iPhone less user friendly because I want to use it?” I mean, that’s, that’s ridiculous. It’s not going to happen. And so it’s a much healthier approach to understand that look, this stuff isn’t your fault. You didn’t invent the iPhone, you didn’t invent Facebook, you didn’t invent email, but it is your responsibility. And in fact, there’s so much we can do to put these technologies in their place so that we can get the best of them without letting them get the best of us.

Robert Leonard  07:29

We certainly will dive into the details of what makes something hook users and how someone can be indistractable. But before we do, I want to talk a little bit more about your investing and your background a little bit. In your bio on your website you wrote, “Although I received most of my education, earning an advanced degree from the school of hard knocks, I also received an MBA from the Stanford Graduate School of Business.” Which do you think has been more valuable? And is an MBA really a prerequisite for success in business?

Nir Eyal  08:02

Oh my gosh, not even close. It’s definitely the school of hard knocks. By far, the more valuable degree, right? But life experience is way, way more valuable, in my case, least than an MBA. And I went to Stanford, it was the only school I applied to. And, you know, look, most MBA programs, train business administrators, right? People forget what MBA stands for. It’s Masters of Business Administration. Most MBAs… There are a couple exceptions out there that do not train entrepreneurs, they train middle managers and consultants and investment bankers. If your goal is to be an entrepreneur, then you certainly don’t have to have an MBA by any stretch of the imagination. And success in business?

Business is a big word. And it has many applications. So it depends if your success… if you desire to have success at a consulting firm or as an investment banker, then yeah, probably an MBA is a requirement. But if it’s to be an entrepreneur, then in some ways, I think actually an MBA can hold you back because, you know, in many ways, the people who go get MBAs, and I’m speaking as a graduate of the Stanford Graduate School of Business. So I’ve been through it. It is still about a lot of box checking, right? It’s about the person who can take the test and get the score on his GMAT or her GMAT, and show a record of kind of following the rules.

Nir Eyal  09:18

But of course, entrepreneurship is about believing that you can break the mold and do something a little different. Because if you’re going to follow a conventional path, you know, that’s not the path to success in entrepreneurship. You have to believe that you can do something different, that you can offer a service that hasn’t been offered before, that you can offer a customer experience that hasn’t been offered before, you can do something that other people haven’t done. You kind of have to believe that there’s a $100 bill on the sidewalk and nobody’s picked it up that most people walk by that hundred dollar bill and say, “Oh, it must be fake and they don’t even bend over to pick it up.” An entrepreneur says, “Wait a minute. Maybe there really is a $100 bill there in the street because once in a while that happens.” And that’s what entrepreneurs have to see when you start a business. It’s about envisioning that there is a potential future that other people just don’t see. And that takes a lot of what we call in Yiddish, chutzpah, you have to really believe that you can see the future and other people don’t.

Robert Leonard  10:14

Yeah, entrepreneurship is almost the exact opposite, where rather than fitting into the boxes, you’re trying to stand out from the boxes and do something different.

Nir Eyal  10:22

Yeah, and I will qualify it, though. I mean, you know, I’m talking in broad generalizations. There’s a lot of entrepreneurs who, you know, open a franchise, and a franchise tells you exactly what to do. So that doesn’t require… I don’t think a lot of breaking any mold, but quite the opposite. I’m talking about the kind of entrepreneurship where you have real outsized returns, where you’re, you have what’s called an unfair business advantage that you have a competitive mode because other people don’t see the opportunity. So then we’re talking about venture scale type returns, startup styles, where you know, startup is by definition, a business that starts small and grows up, start up and gets really, really big. As opposed to you know, you can be an entrepreneur and start a restaurant. Not that there’s anything wrong with those businesses. But that’s not kind of business, you know, starting a restaurant or a dry cleaner that, you know, perfectly respectable profession, but that’s not… I don’t think that’s the kind of entrepreneurship per se we’re talking about right now. I don’t think.

Robert Leonard  11:12

Now, a lot of people listening to the show are interested in investing. So let’s talk a bit about your angel investing. First, what is angel investing?

Nir Eyal  11:22

Yes. So angel investing is when you as an individual, invest your money into companies without any kind of what’s called institutional backing. So typically, this will be in the form of a venture capital fund or some kind of private equity firm, where the what’s called the LPs, limited partners, is a large endowment or a retirement, like a pension fund, for example, might put in money into a venture capital fund or private equity firm. And then the venture capitalists are the individuals who deploy that money as opposed to an angel investor. An angel investor, it’s their money right? And so they are acting on their own with their funds to back specific companies. And so that’s what I do. I just invest with my own cash.

Robert Leonard  12:09

What type of companies are you looking to invest in? And why have you chosen the specific companies that you have so far?

Nir Eyal  12:16

So every investor I think needs when it comes to angel investing… And by the way, angel investing is something that you can only legally do as an accredited investor, which means you need a certain liquid assets, or certain type of net worth or a certain income threshold. And that’s something that I do before I tell you how to do it, or what I do as an angel investor.

To me, it’s the funny money portion of my portfolio. So I want to make sure people realize like, this is not how I plan to, you know, make it to retirement. Most of my savings is not in startups, most of my savings is in a well-diversified mutual fund. That’s the vast majority of my holdings. But there is some proportion of my portfolio that I say this is the high risk capital and so it’s what you know, when I write a check as an angel investor to a startup, in my mind that money is a zero, right? As soon as I write that check, in my mind, it’s gone. Thankfully, I’ve made about 25 investments to date. And I’ve made a great return. But many of you know, some companies have returned 20x, some have returned zero. And I did lose my money. But thankfully, you know, the way that this type of investments work is you’re looking for some of those 10x, 20x returns to pay back some of the losers. That’s kind of the game you play. But again, this is like a small part of… should be a small part of one’s portfolio because it’s a very high-risk investment.

Nir Eyal  13:36

And so what I try and do is to invest in companies that meet my special area of expertise. So my competitive advantage as an angel investor is that I have deep expertise into how to build engaging products and services. So there are many industries I just won’t invest in because I’m no smarter than anybody else. So I don’t know much about crypto so I don’t invest in it because I don’t have any special expertise. I don’t invest in pharmaceuticals. I don’t have any special expertise in that. But I do have special expertise in is how to build habit forming products. And so I look for companies with business models that depend upon repeat user engagement that depend upon forming habits. That’s where I think I have a special area of expertise and where I can be helpful to the entrepreneurs, as well as being able to spot opportunities where others may not.

Robert Leonard  14:23

What have been some of those opportunities that you’ve spotted so far that have gone on to be a great success?

Nir Eyal  14:28

Yeah, so there’s been thankfully, several now, companies like Eventbrite. Most folks have heard of Eventbrite, by now. It’s publicly traded. So I invested in that company. I invested in a company Kahoot!, which is the world’s largest educational software. If you have school-aged kids, chances are your kids use Kahoot!. They went public recently. I’m an investor in the company that makes Marco Polo, which is an alternative social network which I really love because it’s providing you know, we talked about some of the negative aspects of social media and so I think the solution is a better social networking. So Marco Polo happens to be a product that actually third party studies have found increases people’s sense of well-being and connection when they use it and so I’m really proud to be an investor. They’re consistently in the top 20 apps on the Apple App Store. Thankfully, there’s been many in the past several years.

Robert Leonard  15:18

I know you were also a successful entrepreneur yourself, having sold to tech companies. How has what you learned being a successful entrepreneur yourself helped you be an angel investor?

Nir Eyal  15:31

I definitely cut my teeth on what’s really required to run a business. In fact, many times when I look at who I’m going to invest with in terms of the entrepreneur, I’m looking for the traits I know will be valuable. So you know, open mindedness and yet *inaudible*. Entrepreneurship is about a lot of paradoxes, right? We’re told to never quit, but also know when to cut your losses. We’re told to be open-minded, and yet stick to our guns. We’re constantly told these paradoxes and I think it’s a delicate balance. And so one of the things that I think I always look for is a person with a growth mindset. And I’m sure some folks have read this book by Carol Dweck, which is all about this idea of growth mindset that there’s this, there’s what’s called a fixed mindset and a growth mindset. And fixed mindset people, they say, “I am what I am,” right?

Like, “Don’t try and change me, I can’t change, this is who I am.” And that, to me is kryptonite. I don’t want to touch people like that. I don’t want to be friends with people like that. I don’t want to associate with people like that. And that’s really the kind of person I look to invest in, the kind of person I want to be friends with, is the kind of person who believes that it’s not my innate traits that define who I am and what I do, it’s my ability to learn. And so, I think an entrepreneur needs to be a voracious learner. And so I gleaned that insight from being an entrepreneur. And so many times when I thought I was absolutely right, that this is the way things were going to be, you know, sometimes it panned out, but many times it didn’t pan out. And so, you need to be the kind of a person who get what’s that saying that Marc Andreessen says, “Strong convictions loosely held.” I think that’s the kind of person I like to invest in. I know that that is so valuable in the marketplace.

Robert Leonard  17:07

So why do some products really capture a widespread attention while really just some others flop? Can you walk us through your four-step process in your hook model?

Nir Eyal  17:18

Sure. So the “hook model” is an experience designed to connect the users problem with a company’s product with enough frequency to form a habit. And so the reason habits really matter for businesses that it’s a competitive moat. Many of your listeners are looking to find great investments. And so one of the things that Warren Buffett always talks about is a competitive moat. Is there a way that you can build a defensible moat around your business so that the competition doesn’t come in and steal your margins? And so that moat can take a lot of different forms. It can take intellectual property, it can take brand, it can take economies of scale.

And one of the ways you can build a competitive moat is habit. So Warren Buffett talks about how he invested in Coca Cola because he found that he was in the habit of drinking Coca Cola every day. And you know, if you think about companies like Google, for example, you know, Google owns about 80-90% of the search engine traffic. Why? Is it because there’s so much better than the number two search engine Bing? And Bing, just a laggard, they can’t make a better product? Why aren’t people using Bing? Well, it’s not because the product is not as good. In fact, third party studies have shown that when you show the search results of Google versus Bing, side by side, and you strip out the branding, so people don’t know which is which, it’s a 505-0 preference split. People literally can’t tell the difference.

Nir Eyal  18:36

When was the last time you said to yourself, “Hmm, I wonder who makes a better search engine? Maybe I shouldn’t Google this. Maybe I should try Bing.” Probably never. Because once a habit is formed, and this is why habits are so incredibly important for business, is that once a habit is formed, you don’t even give the competition a chance, right? Think about that. Like you know every other product out there if there isn’t some kind of competitive advantage or habit formed, then what people typically do is they shop based on price and features and price and features. And so that of course degrades margins. But a business that forms a habit can have incredible margins, because people don’t even give the competition a chance. They just do it, they Google it. And so that’s why habits are so important for certain businesses.

Nir Eyal  19:18

And the way you form a habit is these four basic steps is what’s called a trigger. You have an external trigger, an internal trigger. So an external trigger is a ping, a ding, a ring, something in your environment that prompts you to action, like a notification on your phone, for example. Then you have what’s called the action phase. And the action phase is defined as the simplest behavior done in anticipation of reward. So it’s something as simple as opening an app and scrolling a feed. And then you have what’s called a variable reward.

This is where there’s some kind of element of surprise, uncertainty, some kind of mystery into what you might find when you use the product. So scrolling a feed or pushing the play button on a video or looking at a dashboard, anything that provides intrigue and mystery, this would be variable reward. And then finally the investment phase, which is where the user puts something into the product and make it better and better with use. And this actually, this last phase is really unprecedented. Because if you look at the history of manufacturing, it was always really hard to customize and retool products for customers, right?

Henry Ford is quoted as saying, “You can have any color of Model T as long as it’s black.” And the reason he said that is because at the time, it was really hard to give you one car that’s purple, and one car that’s blue, and one car that’s yellow. That was really hard to do. Well, today, because of interactive technologies, we are able to custom make a product of one for every single user. So when you use Pinterest, or Instagram or Facebook or any number of Google, you are customizing the service based on your investment of data. And that data improves the service with use and that’s a really big deal because if you think about every other product out there as things that are made of atoms, as opposed to things that are made of bits, everything in the physical world depreciates with wear and tear, right? Your furniture, your clothing, your car, it all loses value and depreciates with wear and tear.

Nir Eyal  21:10

But habit-forming products do not depreciate, they appreciate, they get better and better the more they’re used because of this concept I call stored value. So the more we use the products, the better they become. And so what this does is that it makes the product more and more valuable to the user. Also, the investment also loads the next trigger. So that when you invest in the product, for example, let’s say you like something on Facebook, or comment or share or you know, anything that you put into the product, what you’re also doing is you’re loading the next trigger.

Every time you do that you’re giving the company a reason to reach out to you and say, “Hey, here’s a reason to come back. Somebody commented on your photo, somebody likes something, somebody did something with your content. Come back, check it out.” And so what’s happened, they’ve reloaded the external trigger prompting you through these four steps of the hook cycle, trigger, action, reward, investment once again.

So that’s how the hook model basically works until through successive cycles through these hooks, you no longer even require these external triggers. Eventually, you don’t use a product because of the external trigger. It’s not because of the ping or ding, you’re using it because of an association with what’s called an internal trigger. So now you’re using it because of an emotion. When you’re feeling lonely, maybe you check Instagram. When you’re uncertain, you Google. When you’re bored, you check Reddit, Pinterest, stock prices, ESPN, right? All of these products and services you’re looking at, you’re going to because of these uncomfortable emotional sensations.

Nir Eyal  22:38

So imagine what happens to a business model when customers come back on their own, right? You don’t spend money on advertising. You don’t have to annoy them with spammy messages. They start using the product because they trigger themselves. And that’s when a habit is formed.

Robert Leonard  22:53

Yeah, I mean, all of that is so great. I think Google is probably in my opinion, one of the best ones because like you said with the example of Bing, you don’t even give it any consideration. You just always go directly to Google. And it’s a verb now, you know, “I’m going to go Google something. I’m going to go…” Google has done such a good job with this that it is the only thing that has eliminated all of its competition.

Robert Leonard  23:16

So if you are an entrepreneur building a brand new platform from scratch today, what would be the most important features you’d include to really hook a user?

Nir Eyal  23:27

So it’d be these four basic steps. And that’s something you can do in the very early stages. So where the hook model is most useful is in two stages, either very early days, if you have a product that has a business model that requires a habit. By the way, not every business needs a habit. For example, if you sell car insurance, people will never use car insurance habitually. It’s just not a product that is used with sufficient frequency to ever form a habit.

The problem is you have to have some other competitive advantage, right? If you don’t, then you will always compete on price and features. So Geico says 15 minutes will save 15% on car insurance. And then the next year, somebody else comes out and says, “Oh, yeah, well, 12 minutes will save you 20% on car insurance.” There’s this constant battle of tooth and nail based on prices and features. And that’s a battle that leads to very low margins. Whereas if you have a product that has this competitive advantage of a habit, then as you said, people don’t even consider the competition, they turn straight to it. So what I would recommend is either, you know, the two phases where using the hook model is very useful is the very, very early days, that if your business model needs a habit, then you have to have a hook.

Nir Eyal  24:32

But not every business model needs to have it. But every business model that does need to have it has to have a hook. So in the very early days, that’s a really good place to take out the hook model and say, “Hey, does our idea does you know, even if it’s a napkin sketch idea, does it have the four phases of the hook model built in?” The other phase that where using the hooks model is very valuable is if your business model requires habit and it’s already up and running and has established products as an established company, but people aren’t sticking around? Why aren’t they sticking around? You know, so many companies throw so much money at customer acquisition. And it pains me how few companies spend on customer retention, that it’s so much… this has been known for ever that how that it’s way more advantageous to keep a customer than to acquire a new customer. You’ve already spent all that money acquiring the customer.

So it behooves us as business owners, if your product requires a habit, but people aren’t coming back. That’s a really good place to take the hook model and see, “Hey, does our user experience conform to these four critical steps? And if not, where is it deficient?” So it becomes a diagnostic tool for you to figure out and diagnose you know, what’s missing in our hook model.

Robert Leonard  25:39

That dynamic about keeping current customers versus bringing in new customers is so intriguing to me right now, because I was actually going through that recently in my personal life where I was with a phone carrier for a long time and I was looking to upgrade my phone, but they wouldn’t do anything for me. They had no offers for current customers. If you were a new customer, they’d give you all kinds of great deals. So what did we do? We ended up switching carriers to a different one. And wwe took advantage of all those great deals.

Nir Eyal  26:06

Yeah, screw them. Right? They lost it because of price and features, what they should have done is figured out a way to keep you engaged by creating a habit that you wouldn’t want to switch away from, right?

Robert Leonard  26:18

Right and I was more than happy to say I was, you know, I was happy with their service, it was just, you know, kind of blew my mind that they weren’t willing to do that for a customer that they’ve already spent all that money to acquire.

Nir Eyal  26:27

Yep. Now they’re going to spend 10 times more trying to get you back.

Robert Leonard  26:30

Yep, exactly. Exactly. Now, so are there specific features, you know, of course, it’s going to depend on the platform, and you know, really what the goal of the business is, but are there certain generic features that really make a platform be hooked? Like I remember hearing an interesting story about the invention of the like button, or even the comment button on Facebook, and I know how a lot of that drives, you know, not addiction, but just people wanting to come back to the platform. Are there any features similar to that at a business that’s building an online platform should implement?

Nir Eyal  27:03

But it’s never so simple. You know, I think in the media and in the business press, people look for the magic bullet. And they like saying, “Ah, it was this.” And it’s never this, it’s always a little bit more complicated than that. But there is this basic four-part model that’s about as simple as I can make it without making it simplistic, is that you have to have all four of these steps. You have to have the trigger, the action, the reward, and the investment. You need all four. If one of those things is deficient, you’re not going to create a habit-forming product. I think one of the things that gets some attention is this idea of what’s called a variable reward. This comes out of the work of BF Skinner, the famous psychologist to father of what we call operant conditioning. He is famous for these experiments where he took a pigeon and put them in what we now call a Skinner box with a little disc in the box. And every time the pigeon pecked at the disc, they would receive a little reward, a little food pellet, and at first he could train the pigeon to peck at the disc whenever the pigeon was hungry. By the way, this experiment didn’t work if the pigeon wasn’t hungry. As long as the pigeon had what’s called an internal trigger, as long as there was this hunger, then the pigeon would peck at the disc and and get a reward.

Nir Eyal  28:06

But then one day, Skinner actually ran out of these food pellets, he literally didn’t have enough of them one day, so he couldn’t afford to give a pellet to the pigeon every single time. So he only could give the pellet to the pigeon, every once in a while. So sometimes the pigeon would peck at the disc, and nothing would happen. The next time the pigeon would peck at the disc, they would receive a reward. And what Skinner observed was when there was this variability as intermittent reward, that’s when the rate of response increased. So the pigeon would peck more often when there was variability to the reward schedule. And so we see this phenomenon in all sorts of things that come in the classic case is gambling, right? What makes a slot machine so engaging is that it’s a game of chance, there’s uncertainty around what you might win.

The same goes for why do we like watching spectator sports? Why are people obsessed with fantasy football or the World Cup or you name the sport, you’ll find people who are what we call fanatics because they are entranced by a ball or puck bouncing around a pitch or a court. I mean, it’s ridiculous when you zoom out, but it’s very enjoyable, right? People love it. And I would argue, there’s nothing wrong with that. It’s a perfectly fine pastime. You know, the same goes for why do we like reading books? We like fiction because of the uncertainty, right? How is the story going to end? How is the trouble going to resolve? Why do we like going to movie theaters? It’s about the ending. What’s going to happen? We don’t know. It’s no fun when someone tells you how a movie ends. You want the surprise, you want the uncertainty, all the way to one of our core drivers around the sex drive. It’s about romance, it is about variability. It’s about uncertainty. That’s what gives us those butterflies in our stomach. It’s all about uncertainty.

Nir Eyal  29:48

The news. Oh my God. You know the media is in the business of keeping you hooked to watching the news and reading the news because of the uncertainty of the first three letters of news is N E W. What’s new? That’s what keeps us engaged. It’s all about variability, this mystery.

Robert Leonard  30:05

So let’s talk about maintaining that hook. Because I’m thinking specifically of two examples of companies that I think built platforms that really hooked to users, or at least I thought they did. But they still failed. Those platforms that I’m thinking of are pretty recent. They are Vine and Yik Yak. And they were both social media platforms that were very addictive and had user bases that would use it, you know, multiple times a day, every single day, day after day, but they still failed. So once a business has built the product or service that really hooks its users, how can it really sustain that?

Nir Eyal  30:39

Well, it’s about maintaining the hook model. It’s about making sure that these parts stay intact. Look, just because you have a habit doesn’t mean somebody can’t come along and steal that habit away if you don’t protect it. I mean, we see this today happening with Facebook, the $300 billion behemoth. We see that Facebook proper is deteriorating. It’s not giving people what they want, it’s not scratching their itch. And so the first place to start when forming a habit is with that internal triggers. What’s the uncomfortable emotional state that we turn to out of habit, that we get relief from the use of the product? And for Facebook, the best investment they ever made was an Instagram, because we see that Instagram is giving many people a better alternative to the dumpster fire that is the Facebook newsfeed. It doesn’t work for a lot of people anymore. It’s filled with political nonsense and stupid videos and memes and things that don’t make it pleasurable for people. And if it doesn’t scratch their itch, they look elsewhere.

So they go to TikTok, they go to Instagram, and they go to Snapchat, they go somewhere else. And that’s exactly what’s happening. So, you know, it’s a potential competitive advantage. But over time, if you’re not careful, somebody else can steal those customers away. Now, that’s hard to do, right? Many times, that’s very difficult to actually accomplish because of this habit. And so you know, companies will spend a lot of money defending that habit. This is exactly why Facebook spent a billion bucks on Instagram, which at the time seemed like a fortune. I remember when he bought Instagram, and then later WhatsApp, everybody laughed at Zuckerberg. We thought, “Oh my god, did that guy get creamed? What a rip off.” And of course, you know, today Instagram isn’t worth a billion, it’s worth 40 billion. So it was it was the acquisition of the century for sure.

Nir Eyal  32:19

We oftentimes see that, you know, I had a professor at Stanford by the name of Andy Rachleff, who used to say early is the same as wrong. You know, many times this happens, right? How many social media… Facebook was not the first social network. There are many social networks. Google was not the first search engine. You know, Apple has made nothing really new, right? There were mp3 players before the iPod. There were certainly laptop computers before the iMac, there were smartphones before the iPhone. What they did you know, it’s not about being the first mover. It’s oftentimes about being the last mover when you can create those customer habits and that creates consumer loyalty. And so many times what we see is you have a product like Vine that was good, but not good enough. It wasn’t sticky enough. And I would say that, you know, the massive success of TikTok is kind of an iteration on Vine. They did some key things that make it a much better product.

Nir Eyal  33:09

For example, I think the big innovation with TikTok versus Vine, even though there’s a lot of similarities in terms of the content format, is the investment phase. TikTok’s big innovation is that every time you watch anything on TikTok they’re collecting data on you, how long you watch what you watch? Did you react to it? Did you do anything? Did you comment? Did you do anything? And that will feed the algorithm to feed you more interesting content, as opposed to Vine that didn’t have that capability. They just show you whatever was popular. Well, TikTok makes a product of one for every single user based on what you like. And that’s an incredibly powerful way to form a consumer habit is that whole idea of stored value?

Robert Leonard  33:48

Yeah, I absolutely love that dynamic that you mentioned about Facebook, not being the first social media because I talked about that all the time. There are times where I talk about different business ideas with other people. And they might be like, “Well, some else is already doing that.” And I tell them, “That’s okay. How many other companies… Or look at MySpace before Facebook, right?” They were out there, they were dominating the market. And then Facebook came in and look at what they’ve done, you know, they built it way bigger than MySpace ever could have been.

Nir Eyal  34:13

So and that’s where the hook model is actually super helpful in that is that you can look at a reason or rationale why the existing incumbent isn’t doing something to optimize their hook model. So I would argue that the big innovation that Facebook had over MySpace was that it was just so much easier to get going, right? Remember, on MySpace, you had to customize your page. And Facebook made it just super simple, right? Like everybody gets the same blue and white profile. All you can put on in your is your picture, everything else is text. That is part of the action phase of the hook that if you can make something easier to do, people could become more likely to do it. And so it becomes a way for you to analyze a product and say, “Okay, I know there are incumbents in the market. How is this new market entrant improving the hook model? And how will that ultimately lead to them capturing a greater share?”

Robert Leonard  34:59

And to your point about TikTok, they definitely have a much superior algorithm to providing relevant content for its user than Vine did. Because I know when I go on TikTok, if I like a video or comment on it or follow somebody, that next video is almost the exact same thing but with just a different person. And then, if you like it again, it’s almost the exact same thing right after. And it’s almost to a point where it’s too good. But yeah, they’ve definitely really got that algorithm down.

Nir Eyal  35:24

And let me tell you, they’re listening to that too, right? If they say, “Oh, my gosh, now we’re feeding you too much stuff that’s the same. Right now, it’s too predictable.” They’re going to have to change that up as well. But I think the more important thing is that they have a process to do that. Almost no companies, and I think this is going to change, this is I think, something that’s going to be on the horizon for the next decade, for sure. Every company will be in the business of dynamic improvements to the user experience. So the fact that okay, maybe it’s not perfect over at TikTok, but the fact is, they have this incredible ability to customize the product, whereas most companies say, “Well, this is our product. Here’s our landing page. Here’s the user experience. It’s the same for everybody.” I think that’s going to certainly change the next decade.

Robert Leonard  36:03

Yeah, I completely agree. Now let’s shift away from businesses and products and let’s talk more about individual people. After reading about your concept of being indistractable, I set a lot of my 2020 goals around that concept. So what does it mean to be indistractable and why is it just so important in today’s world?

Nir Eyal  36:23

Yeah, I think that being indistractable is the skill of the century, that we know that to do our best work, we have to work without distraction. When it comes to our relationships, you know, psychologists tell us that loneliness is as detrimental to our health as smoking and obesity. And we are going through this loneliness crisis in this country. And then we know when it comes to our kids, what type of terrible example we’re setting for our kids when what they see of us is the top of our heads as we’re checking our devices. And so you know, if you think the world is distracting now, just wait a few years, it’s only going to become more distracting, which is why it’s so important to not only adopt these skills for ourselves, but to teach them to our children, because this is going to be an increasingly important skill, to answer your question, to be indistractable. It’s a made-up word. And the beauty of making up a word is you can define it any way you want.

Nir Eyal  37:11

And so the definition of becoming indistractable means you’re the kind of person who strives to do what they say they’re going to do. It’s about living with personal integrity, because, you know, I wrote this book first and foremost, for me, I was struggling with distraction. I was with my daughter, and I would check my phone. I would start to do some work, and you know, check email or Google something instead of actually doing what I said I was going to do. And so day after day, I would lie to myself, right, I would say I was going to go to work out. I didn’t, I would say I would eat right. I wouldn’t. I would say I was going to work on that big project and procrastinate yet another day.

And the more I dug into this problem, the more I learned that there are so many productivity techniques out there that really backfire. And so the book is full of myths that are overturned, for example, the myth of the to-do list. I think for most people to-do list is nothing but a reinforcer of what a loser you are. And that’s certainly happened to me. Like, you know, I follow this mantra that everybody has in this productivity industry that, okay that the to-do list… that’s how you get things done. The fact of the matter is when you don’t finish everything on your to do-list, what you’re doing is reinforcing an identity. And we know that long term behavior change is identity change, we have to see ourselves differently. That’s how we become different people.

Nir Eyal  38:24

What to-do list typically does for most people, because most people don’t use a to-do list correctly, is that it reinforces, “Hey, loser, you still didn’t do what you said you were going to do.” And that backfires because, you know, if you’re ending like I was, I would have you know, all these things on my to do-list. And even after I’ve had a productive day, I’d still recycle you know, half that to-do list from day to day today and I wasn’t getting what I would do done. And so at the core of becoming indistractable is living with personal integrity, just being the kind of person who does what they say they’re going to do. That’s the kind of person people we want to work with, right? People want to hire that kind of person. People want to marry that kind of person. People want to be friends with that kind of person, the kind of person who does what they say they’re going to do.

Robert Leonard  39:06

So why do our personal relationships really depend on this?

Nir Eyal  39:10

Well, so we know that relationships are incredibly important to our psychological well-being, that one of our core human needs is to understand others and to be understood ourselves. But of course, we can’t do that unless we have time to connect with people. And what we’ve seen in this country is a collapse in the amount of time that people have for these plans, shared experiences, and this is not something that Facebook did. This is not something the internet did. This is something that Robert Putnam talked about in his book “Bowling Alone” in the 90s. It’s a long-term trend. What’s happened in this country is that we used to have all of these civic groups, right? The *inaudible* Club, the bowling league, the church group, those organizations used to have time on people’s calendars. And today, you know, particularly millennials and younger, don’t do this kind of stuff. And it’s really to our detriment.

And we think we’re connected because we have these social media accounts. And I think social media is great. I mean, I love my social media account, I don’t give them up. I love these technologies, they keep me in touch with people who I would have no way of keeping in touch with. But social media is a supplement, not a replacement for real life interaction. And so what we have to do is to start bringing back some of this real world interaction. And so I show folks exactly how to do that. It is critically important, I think, you know, we are suffering in the midst of this loneliness epidemic. And I think it’s only going to get worse unless we make time to live out our values of being close with other people in the real world.

Robert Leonard  40:36

So this is an interesting idea that I was reading and learning about from the book, and I’m curious to hear this from you. How do distractions at work proved to actually be a symptom of a dysfunctional company culture, rather than a personal issue and how can it be fixed?

Nir Eyal  40:53

So half the book is about what you as an individual can do, right? It’s about these four steps to becoming indistractable, that anyone can do it for themselves. But then of course, I’m not that naive to think that the problem is just us. If you get a phone call from your boss at 9pm on a Friday night, and your boss is calling you on the phone and saying I need you to do this or that, is the phone to blame? Is the technology that your boss used to call you to blame? No, of course not. It’s clearly that your boss and you work at a company with a kind of culture where that’s acceptable. So distraction at work is a symptom of cultural dysfunction. That what my research reveals is that distraction in the workplace, we love to blame the technologies, but in fact, the tool that is misused by a crappy company culture, and the real problem is not the problem of distraction.

The real problem is that we can’t talk about the problem. That turns out to be the real source of the problem. Because once companies have an environment where people can talk about this problem, they fix it. It’s just when companies can’t talk about it. If you work in a kind of work environment, it doesn’t happen what we call psychological safety, this is the condition where people can talk about their concerns without fear of retribution, without fear of getting fired. When companies have an open dialogue, it’s actually not that hard to fix these problems. And I tell people exactly how to do it in the book. But it requires a company culture where people can actually, you know, raise their hand and say, “Hey, this isn’t really working for me. Can we talk about this?” It’s a sort of like a dysfunctional family, right? Where everybody knows there’s a big problem, but the family can’t talk about it and so we can’t fix the actual problem.

Robert Leonard  42:27

If you had to give just one final piece of advice for someone who’s really trying to better themselves when it comes to being indistractable, what would that piece of advice be?

Nir Eyal  42:38

Yeah, so the piece of advice I would give people is to understand that you know what distraction really is, the opposite of distraction is not focused. The opposite of distraction is traction, meaning traction is anything that you plan to do with your time. So there’s nothing wrong with checking Facebook or YouTube or Google or watching sports or Netflix. There’s nothing wrong with that stuff. As long as you do it on your schedule and according to your values, not based on someone else’s. And conversely, just as anything can be traction, anything can be distraction. So even the stuff we think is productive, right? You sit down at your desk and you say, “Okay, now I’m going to work on a big project. Now I’m going to get to work. Here I go, but let me check email first.”

Well, that email is just as much of a damn distraction from what you really want to do. So anything can be a distraction, anything can be traction, the difference is intent. You see doing things that you didn’t plan to do, getting distracted is an impulse control problem, right? That’s fundamentally what all this is. The reason we get distracted by things is because of these internal triggers. If you can’t sit down at a business meeting, and check your phone every five minutes, the problem isn’t your phone. If you can’t sit down with some friends, without seeing what’s happening on Instagram., I’m telling you, the problem is inside you. It’s not your device. You’re looking for something you’re desperate for this, you know, emotional pacification, like a baby stuffing on a binky, right? That’s what we’re looking for. So if we don’t deal with that fact, if we don’t understand that we are looking for escape from our discomfort, we’re always going to be distracted by one thing or another.

Nir Eyal  44:08

And so I think where most productivity books fail, is that they don’t acknowledge why we get distracted. We all know what to do, who doesn’t know what to do. Come on. You want to lose weight, you’re telling me you don’t know how Google it. You want to get better at your job. Come on, you know how. You know how to have better relationships, how to get better at your job. The problem is not that we don’t know what to do. It’s that we don’t know how to stop getting distracted from doing the things we don’t know how to do. And so that’s really what it’s about. It’s about understanding what gets in your way. And then realizing that that is a superpower. That is the skill, that the macro skill, to help us do anything by empowering ourselves, to use these tactics to help us become indistractable so that we can do what we say we’re going to do.

Robert Leonard  44:51

Nir, thank you so much for coming on the show. I really loved our conversation. I know the audience is going to get a ton of value from it. Where can they go to connect with you further?

Nir Eyal  45:00

Yeah, thank you. So my blog is https://www.nirandfar.com/  but like my first name, N-I-R. And if you want to check out the book, you can go to indistractable.com and at indistractable.com there’s all kinds of free resources including an 80-page workbook that you can get for free. You can get that also at nirandfar.com.

Robert Leonard  45:20

I’ll be sure to put links to all the different resources we mentioned throughout the episode, as well as the resources Nir just mentioned in the show notes so you guys can go check those out. And as always, I’ll put links to different books about this topic in the show notes. So you guys can go read those if you’re interested in learning more. Nir, thanks so much. I really appreciate it.

Nir Eyal  45:40

My pleasure, Robert. Thanks for having me.

Robert Leonard  45:43

Alright, guys, that’s all I had for this week’s episode of Millennial Investing. I’ll see you again next week.

Outro  45:50

Thank you for listening to TIP. To access our show notes, courses, or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting.


Check out our latest offer for all The Investor’s Podcast Network listeners!

MI Promotions

We Study Markets