Is "10x Product" the Right Strategy?

Root Cause #3

In the previous essay, the illusion of progress, we explored the idea that, probably, we were handed the wrong ruleset.

Currently, we operate under the assumption that people will prefer a 10x product. This 10x can be “more functional value” or “same value at less price” or other functional value/price combinations. 

But, do people really choose the 10x better (value/price) product over the competitors?

The quick answer is No. People will buy first the product that aligns with their Identity, even if there are better functional alternatives.

This is why an Enterprise Manager will choose Microsoft Teams over Slack, a Startup founder will choose Slack over Microsoft Teams and a group of gamers will choose Discord over Slack.

Therefore, our goal should be to become a symbol for a given "Identity group", not to build a 10x product.

In a startup, the goal of the product team is not adding features to be more and more 10x but to build an attractive solution that connects functionally and, more importantly, emotionally with an Identity group. It's not about more Xs; it’s about just the right features built in a way that makes them feel special.

And the goal of the marketing team is not promoting the last feature but ensuring the product is perceived as entirely different from anything else out there, so an Identity group can choose it as a symbol to express their individuality. One way to achieve that is creating associations of the product with other symbols.

Convinced? No? Ok, then let’s move on to the long answer:

We can argue forever about why Microsoft Teams is better for the enterprise because it has synergies with Microsoft Office, or why Slack is better than Discord because it has more integrations with products Startups use. But what we would be doing in this debate is just using the “10x product” mental model to try to make sense of reality, and move the discussion to what is or is not “10x”…

If we want to be able to see other possible models that explain consumer preferences better, we can’t just look at the present and twist our current models until they seem to explain reality. We need a different vantage point to analyze the situation, one way to achieve that is to look at how these preferences evolved over time.

Turns out that Adam Curtis did a documentary for the BBC called “The century of the Self” to explore exactly that. But he covers not only consumer behavior change but also other social, political and economic changes. It’s a great documentary that I recommend watching in full, but its 4-hour length can be daunting, so I prepared a 30-min version that you can easily squeeze into your busy day, with the parts relevant to us. I also included below a novelized transcript, in case reading suits you better. Either way, it will be time well spent.

In the video, you will see how consumer behavior evolved from focusing on features to all ending up being about Identity. The implications of what that means for us and how we should plan based on this new model are nuanced, so I will define the tactical aspect in the next essay.

One last word of caution: this is not just a documentary. As you are about to see, the insights in this video are powerful and they were not always used for good, so please handle with care.

Enjoy.

The century of the Self - DeMark Cut:

1. Edward Bernays

This episode is about Freud's American nephew, Edward Bernays. Bernays is almost completely unknown today, but his influence on the 20th century was nearly as great as his uncles because Bernays was the first person to take Freud's ideas about human beings and use them to manipulate the masses.

He showed American corporations for the first time how they could make people want things they didn't need by linking mass-produced goods to their unconscious desires. Out of this would come a new political idea of how to control the masses by satisfying people's inner selfish desires and make them happy and thus docile; it was the start of the all consuming self which has come to dominate our world today.

Freud had devised a method he called psychoanalysis, by analyzing dreams and free association, he had unearthed powerful sexual and aggressive forces which were the remnants of our animal past feelings we repressed because they were too dangerous.

Freud's young nephew, Edward Bernays, was working as a press agent in America. His main client was the world-famous opera singer Caruso, who was touring the United States. Bernays parents had immigrated to America 20 years before, but he kept in touch with his uncle and joined him for holidays in the Alps, but Bernays was now about to return to Europe for a very different reason. On the night that Caruso opened in Toledo, Ohio, America announced it was entering the war against Germany and Austria.

As a part of the war effort, the US government set up a Committee on Public Information and Bernays was employed to promote America's War aims. In the press, the President Woodrow Wilson had announced that the United States would fight not to restore the old Empires, but to bring democracy to all of Europe.

Bernays proved extremely skillful in promoting this idea both at home and abroad. And at the end of the war he was asked to accompany the president to the Paris peace conference. Wilson's reception in Paris astounded Bernays and the other American propagandists. Their propaganda had portrayed Wilson as a liberator of the people, a man who would create a new world in which the individual would be free. They had made him a hero of the masses and as he watched the crowd surge around Wilson, Bernays began to wonder whether it would be possible to do the same type of mass persuasion but in peace time.

— Bernays tells the story,
“When I came back to the United States I decided that if you could use propaganda for war you could certainly use it for peace, and propaganda got to be a bad word because of the Germans using it so what I did was to try to find some other words, so we found the word Council on Public Relations.”

Bernays returned to New York and set up as a public relations Council in a small office off Broadway. It was the first time the term had ever been used since the end of the 19th century. America had become a mass industrial society, with millions clustered together in the cities. Bernays was determined to find a way to manage and alter the way these new crowds thought and felt, to do this, he turned to the writings of his uncle Sigmund. 

While in Paris, Bernays had sent his uncle a gift of some Havana cigars, in return, Freud had sent him a copy of his “General introduction to psychoanalysis.” Bernays read it and the picture of hidden irrational forces inside human beings fascinated him. He wondered whether he might make money by manipulating the unconscious:

— Pat Jackson, Public Relations adviser and colleague of Bernays, recalls,
“What Eddie got from Freud was indeed this idea that there is a lot more going on in human decision-making not only among individuals but even more importantly among groups than this idea that information drives behavior and so Eddie began to formulate this idea that you had to look at the things that would play to people's irrational emotions, and you see that moved Eddie immediately into a different category from other people in his field and most government officials and managers of the day who thought if you just hit people with all this factual information they would look at that and say “oh of course!” and Eddie knew that was not the way the world worked.”

Bernays set out to experiment with the minds of the popular classes. His most dramatic experiment was to persuade women to smoke. At that time, there was a taboo against women smoking, and one of his early clients, George Hill, the president of the American Tobacco Corporation, asked Bernays to find a way of breaking it. 

— Bernays relates,
“He said we're losing half of our Market because men have invoked a taboo against women smoking in public, can you do anything about that? (…) I called up Dr. Brill, who was the leading psychoanalyst in New York at that time.”

Dr. Brill was one of the first psychoanalysts in America, and for a large fee, he told Bernays that cigarettes were a symbol of the penis and of male sexual power. He told Bernays that if he could find a way to connect cigarettes with the idea of challenging male power, then women would smoke because then they would have their own penises.

Every year New York held an Easter Day Parade to which thousands came, and Bernays decided to stage an event there. He persuaded a group of debutants to hide cigarettes under their clothes. Then they should join the parade and at a given signal from him, they were to light up the cigarettes dramatically. Bernays then informed the press that he had heard that a group of suffragettes were preparing to protest by lighting up what they called “Torches of Freedom”.

— Pat Jackson, Bernays’ colleague, explains the situation,
“He knew this would be an outcry, and he knew that all the photographers would be there to capture this moment, and so he was ready with a phrase which was “torches of freedom”. So here you have a symbol: Women, young women, debutants, smoking a cigarette in public with a phrase that anybody who believes in this kind of equality, pretty much has to support them in the ensuing debate about this because “torches of freedom”.

I mean, what's on All American coins? It's liberty, she's holding up the torch, and so all of this is there together. There's emotion, there's memory, there's a rational phrase, even though it's using a lot of emotional elements, it's a phrase that works in a rational sense, all of these are together. And so the next day, this was not just in all of the New York papers, it was across the United States and around the world, and from that point forward, the sale of cigarettes to women began to rise. He had made them socially acceptable with a single symbolic act.”

What Bernays had created was the idea that if a woman smoked, it made her more powerful and independent. It made him realize that it was possible to persuade people to behave irrationally if you link products to their emotional desires and feelings. The idea that smoking actually made women freer was completely irrational, but it made them feel more independent; It meant that irrelevant objects could become powerful emotional symbols of how you wanted to be seen by others.

— Peter Strauss, employee of Edward Bernays in the 50s, comments,
“Eddie Bernays saw the way to sell a product was not to sell it to your intellect, that you ought to buy an automobile but that you will feel better about it if you have “this” automobile. I think he originated that idea, that they weren't just purchasing something, but that they were engaging themselves emotionally or personally in the product or service. There's not “you think you need a new piece of clothing” but “you will feel better with the piece of clothing.” That was his contribution in a very real sense, we see it all over the place today, but I think he originated the idea of the emotional connect to a product or service.”

2. From Functional Needs to Unconscious Desires

What Bernays was doing fascinated America's corporations. They had come out of the war rich and powerful, but they had a growing worry: The system of mass production had flourished during the war, and now millions of goods were pouring off production lines. What they were frightened of was the danger of overproduction, that there would come a point when people had enough goods and would simply stop buying up. 

Until that point, the majority of products were still sold to the masses on the basis of need, while the rich had long been used to luxury goods. For the millions of working-class Americans, most products were still advertised as necessities; Goods like shoes, stockings, even cars were promoted in functional terms for their durability. The aim of the advertisements was simply to show people the product's practical virtues, nothing more.

What the corporations realized they had to do was transform the way the majority of Americans thought about products.

— Paul Macer, leading Wall Street Banker of layman Brothers, was clear about what was necessary,
“We must shift America, from a needs to a desires culture. People must be trained to desire to want new things even before the old have been entirely consumed. We must shape a new mentality in America, man's desires must overshadow his needs.”

Beginning in the early 20s, the New York Banks funded the creation of chains of department stores. Across America, they were to be the outlets for the mass-produced goods, and Bernays job was to produce the new type of customer. Bernays began to create many of the techniques of mass consumer persuasion that we now live with.

He was employed by William Randolph Hurst to promote his new women's magazines, and Bernays glamorized them by placing articles and advertisements that link products made by others of his clients to famous film stars like Clara Bo, who was also his client. Bernays has also begun the practice of product placement in the movies, and he dressed the Stars at the film's premieres with clothes and jewelry from other firms he represented. 

He was, he claimed, the first person to tell car companies they could sell cars as symbols of male sexuality. He employed psychologists to issue reports that said products were good for you, and then pretended they were independent studies. He organized fashion shows in the department stores and paid celebrities to repeat the new and essential message: “You bought things, not just for need, but to express your inner sense of yourself to others”.

The growing wave of consumerism, helped in turn to create a stock market boom, and yet again, Edward Bernays became involved. Promoting the novel idea that ordinary people should buy shares by borrowing money from Banks, he also represented, and yet again, millions followed his advice.

— Peter Strauss, Bernays employee, continues
“He was uniquely knowledgeable about how people in large numbers of going to react to products and ideas and so on. But in political terms, if he were to go out, I can't imagine that he get three people to stand and listen. He wasn't particularly articulate, was kind of funny looking and didn't have any sense of reaching out to people one-on-one, none at all. He didn't talk about, didn't think about people, in groups of one. Thought about people in groups of thousands.”

In the 1920s he began to write a series of books which argued that he had developed the very techniques Lippmann was calling for. By stimulating people's inner desires and then sating them with consumer products, he was creating a new way to manage the irrational force of the masses. He called it the engineering of consent.

But Bernays power was about to be destroyed dramatically, and by a type of human irrationality he could do nothing to control. On the 29th of October 1929, the market collapsed. The effect of the crash on the American economy was disastrous, faced with recession and unemployment, millions of American workers stopped buying goods they didn't need. The consumer boom that Bernays had done so much to engineer, disappeared. And he and the profession of public relations fell from favor.

There was growing violence, as an angry population took out their frustration on the corporations who were seen to have caused this disaster. Then in 1932, a new president was elected who was also going to use the power of the state to control the free market. It was the start of what would become known as the New Deal. Roosevelt assembled a group of young technocrats and planners in Washington, he told them that their job was to plan and run giant new industrial projects for the good of the nation. Roosevelt was convinced that the stock market crash had shown that laissez-faire capitalism could no longer run modern industrial economies, it’s to become the job of the government.

— Stuart Ewen, Historian of Public Relations, details,
“Following that election, business people start to get together and start to carry on discussions, primarily in private, about the need to sort of carry on ideological warfare against the New Deal, to sort of reassert the sort of connectedness between the idea of democracy on the one hand and the idea of privately owned business on the other. And so, under the umbrella of an organization, which still exists, which is called the National Association of Manufacturers and whose membership included all of the major corporation operations of the United States, a campaign is launched explicitly designed to create emotional attachments between the public and big business. It's Bernays’ techniques being used on a grand scale.”

The campaign set out to show dramatically that it was business, not politicians, who had created modern America. Bernays was an adviser to General Motors, but he was no longer alone, the industry he had founded now flourished as hundreds of public relations advisers organized a vast campaign. They not only used advertisements and billboards but managed to insinuate their message into the editorial pages of the newspapers. 

It became a bitter fight. In response to the campaign, the government made films that warned of the unscrupulous manipulation of the press by big business, and the central villain was the new figure of the public relations man.

But now, a group of psychoanalysts were going to take what Bernays had begun, and invent a whole range of techniques to get inside, and manage, the unconscious mind of the consumer. They were led by Ernest Dichter. Dichter had practiced next door to Freud in Vienna, but he had come to America and set up “The institute for motivational research” in an old mansion north of New York.

— A promotional film detailed the purpose of the institute,
“This is the institute for motivational research, a place devoted to the Intriguing business of finding out why people behave as they do, why they buy as they do, why they respond to advertising as they do.”

— Ernest Dichter himself explains,
“We don't go out and ask directly why do you buy? Why don't you? What we try to do instead, is to understand the total personality, the self-image of the customer. We use all the resources of modern social sciences. It opens up some stimulating psychological techniques for selling any new product.”

— Fritz Gehagen, Psychologist and employee of Dichter, explains,
“And so he said, why can't we have a group therapy session about products? So Dichter built this room, up above his garage, and he said we can have psychoanalysis of products they can actually act out and verbalize their wants and needs.

And they could be observed and watched, and other people could comment, and they could talk about it, and everybody could join in. He was the first to do this, this was absolutely the first thing that was ever done. And he had a movie projector up there where you could show advertisements and things like that and people could react to them, and he invented the whole technique for mining the unconscious about the hidden psychological wants that people had about products. This became the focus group.”

Dichter's breakthrough came with a focus group study he did for Betty Crocker foods. Like many food manufacturers in the early 50s, they had invented a new range of instant convenience foods. But although consumers had told Market researchers they would welcome the idea, in fact, they were refusing to buy them. The worst problem was the Betty Crocker cake mix.

Dichter did a series of focus groups where housewives free-associated about the cake mix. He concluded that they felt unconscious guilt at the new image being promoted of ease and convenience.

— Bill Schlackman, another psychologist and employee of Dichter comments,
“In other words, he understood that the barrier to the consumption of the product was the housewife's feeling of guilt about using it. They basically, on one hand, wanted to make it easy for themselves, but they felt guilty about it. So what you've got to do in those circumstances is remove the barrier, the barrier being guilt. The way you do that, is to give the housewife a greater sense of participation. And how did you do that? By adding an egg.”

Dichter told Betty Crocker to put an instruction on the packet that the housewife should add an egg. It would be an unconscious symbol, he said, of the housewife mixing in her own eggs as a gift to her husband, and so would lessen the guilt. Betty Crocker did it and the sales soared.

— Schlackman continues,
“The consumer may have basic needs that the consumer himself or herself doesn't fully understand, you have to know what those needs are in order to fully explore the consumer. So, Is it wrong to give people what they want by taking away their defenses?”

Dichter success led to a rush by corporations and advertising agencies to employ psychoanalysts. They became known as “the depth boys”, and they promised to show companies how to make millions by connecting their products with people's hidden desires. 

Dichter himself became a millionaire famous for inventing slogans like “a tiger in your tank”, even the marketing of the Barbie Doll came from a children's focus group.

At the same time, an onslaught was launched on the way psychoanalysis was being used by business to control people. The first blow came with the bestseller “The Hidden Persuaders” written by Vance Packard. It accused psychoanalysts of reducing the American people to emotional puppets whose only function was to keep the mass production lines running. The second blow came from an influential philosopher and social critic, Herbert Marcuse, he had been trained in psychoanalysis.

— Herbert Marcuse explains his critique,
“This is a childish application of psychoanalysis which does not take at all to consideration the very real political systematic waste of resources, of technology, and of the productive process. For example, planned obsolescence, for example the production of innumerable brands and gadgets who are in the last analysis, always the same, the production of innumerable different marks of automobiles… and this prosperity at the same time, consciously or unconsciously leads to a kind of schizophrenic existence. I believe that, in this society, an incredible quantum of aggressiveness and destructiveness is accumulated precisely because of the empty prosperity which then, simply erupts.”

3. From Unconscious Desires to enabling Self-expression

By the late 60s, the idea of self-exploration was spreading rapidly in America. Encounter groups became the center of what was seen as a radical alternative culture, based on the development of the self, free of a corrupt capitalist culture, and it was beginning to have a serious effect on Corporate America because these new selves were not behaving as predictable consumers.

The life insurance industry in particular was concerned that fewer and fewer college students were buying life insurance when they left University. They asked Daniel Yankelovich, America's leading Market researcher, to investigate. He had studied psychoanalysis.

— Daniel Yankelovich explains,
“The life insurance business, more than any other business at the time, was built on the Protestant ethic; You only bought life insurance if you were a person who sacrificed for the future, if you lived in the present you had no need for life insurance. So they had some sense that may be the sort of core values of the Protestant ethic were being challenged by some of these new values that were beginning to appear.

And I was really astonished at what I found, the conventional interpretation, the dominant interpretation, was that it had to do with political radicalism. But you know, it was clear to us that that was a mask, a cover, the core of it had to do with self-expressiveness. That this preoccupation with the self and the inner self that was what was so important to people the ability to be self-expressive.”

Yankelovich began to track the growth and behavior of these new expressive selves. What he told the corporations was that these new beings were consumers, but they no longer wanted anything that would place them within the narrow strata of American society. Instead, what they wanted, were products that would express their individuality, their difference in a conformist world. The very things that US corporations did not make.

— Yankelovich continues,
“Products have always had an emotional meaning. What was new was individuality, the idea that this product expresses me, and whether it was a small European car, the particular music system, your presentation of self, your clothing. These become ways in which people can expend their money in order to say to the world who they are. But the manufacturers had no idea of what was going on really with consumers and in the Market at large.”

Major advertising companies set up what they called “operating groups” to try to work out how to appeal to these new individuals. The head of one agency sent a memo to all staff. We must conform, told them, to the new non-conformists we must listen to the music of Bobby Dylan and go to the theater more. But the problem was few of the self-expressive individuals would take part in focus groups; the advertisers were left to their own devices.

And there was an even more serious problem, making products for people who wanted to express themselves, would mean creating variety. But the systems of mass production that had been developed in America were only profitable if they made large numbers of the same objects. This had fitted perfectly with the limited range of desires of a conformist society. The expressive self, threatened this whole system of manufacture.

4. From Self-expression to defined Identity groups

And it was at this point that American capitalism decided it was going to step in and help these new individuals to express themselves, and in the process make a lot of money. 

The first thing they were going to do, was to find a way of getting inside their heads to discover what these new beings wanted in order to be themselves. To do this, SRI turned for help to those who had begun the liberation of the self, in particular one of the leaders of the human potential movement, a psychologist called Abraham Maslow.

Through observing the work at places like Excelon, Maslow had invented a new system of psychological types, he called it: “The hierarchy of Needs” and it described the different emotional stages that people went through as they liberated their feelings. At the top was self-actualization; this was the point at which individuals became completely self-directed and free of society.

— Amina Marie Spengler, the director of the Research Programme, remarks about the process,
“We were trying to find out what people really felt like. So we asked these really penetrating questions, and we hired a company that administers surveys; they said they've never seen anything like it.

Usually, you have to send out a postcard, 6 weeks and then another postcard, and then you got to call the people… to get the return rates up. We had an 86% return, and they only sent out one postcard. People loved filling out this questionnaire. We got several questionnaires back with a note attached saying: do you have any other questionnaires I could fill out? Because we were asking people to think about things that they had never thought about before, and they liked thinking about them. Question like what they felt inside, what motivated them, what was their life about, what was important to them.”

SRI created a simplified questionnaire with just 30 key questions, anyone who answered them could be immediately fitted into a dozen or so of these new groups. It allowed businesses to identify which groups were buying their products, and from that, how the goods could be marketed so they became powerful emblems of those group's inner values and Lifestyles. It was the beginning of Lifestyle Marketing.

In the wake of the invention of values in Lifestyles, a vast industry of psychological market research grew up, and the old technique of the focus group invented by the Freudian psychoanalysts in the 50s was used in a new and powerful way.

The original aim of the focus group had been to find ways to entice people to buy a limited range of mass-produced goods, but now focus groups were used in a different way: To explore the inner feelings of life lifestyle groups, and out of that, invent whole new ranges of products which would allow those groups to express what they felt was their individuality, and the generation who had once rebelled against the conformity imposed by Consumerism, now embraced it because it helped them to be themselves.

— Stew Albert, a founding member of Yippie Party, comments,
“What capitalism managed to do that was brilliant, was to actually create products that people like me would be interested in. Capitalism developed a whole industry at developing products that evoke a larger sense of self, that seemed to agree with us that the self was infinite, that you could be anything you wanted to be. The product sells you a way of life, a way of being, the product sells you values; hipness, coolness, … So the notion that you could buy an identity, replaced the original (Yippie) movement notion that you were perfectly free to create an identity.” 

5. The never-ending consumer boom

This vast range of new desires, fitted perfectly with changes in industrial production. Computers now allowed manufacturers to economically produce short runs of consumer goods; the old restrictions of mass production disappeared, as did the worry that had bedeviled corporate America ever since mass production had been invented; That they would produce too many goods. With the new self, consumer desire seemed to have no limit.

— Yankelovich explains,
“In the United States, the concern of companies was always that supply would outstrip demand, that we would, we were producing too much, and that there was not a market for it. You don't hear that kind of talk anymore because you've gone from a conception of a market of limited needs, and if you fill them, they're filled, to a market of unlimited, ever-changing needs, dominated by self-expressiveness, that products and services can satisfy in an endless variety of ways, ways that change all the time. And consequently, economies have unlimited Horizons.”

Out of this explosion of Desire came what seemed a never-ending consumer boom that regenerated the American economy. The original idea had been that the liberation of the self would create new kinds of people, free of social constraint. That radical change had happened, but while the new beings felt liberated, they had become increasingly dependent for their identity on business.

The corporations had realized that it was in their interests to encourage people to feel that they were unique Individuals, and then offer them ways to express that individuality. A world in which people felt they were rebelling against conformity was not a threat to business but its greatest opportunity.

— Robert Reich, economist and member of the Clinton Cabinet from 1993-1997, summarizes the situation up to the 2000s,
“It was, in a sense, the triumph of the self. It was the triumph of a certain self-indulgence, a view that everything in the world and all moral judgment was appropriately viewed through the lens of personal satisfaction. 

Indeed, the ultimate ending point of that logic is that there is no Society. There is only a bunch of individual people making individual choices to promote their own individual well-being.”

The Century of the Self by Adam Curtis.
Full documentary: https://www.youtube.com/@justadamcurtis9178