One of the challenges of running a business is seeing a business from the customer’s perspective. Internally your worldview is all website updates and payment processing, employees and benefits, and hiring and HR. Externally the customer wonders: does this do what I want?
Job-father Bob Moesta joined Customer Camp to conduct a mock-interview with Amanda about her Peloton purchase. It’s really good. You don’t even need to conduct ‘JOBS’ interviews to get something good from watching. For instance, framing.
Amanda wanted a Peloton. After getting and liking an Oura ring, and hearing her friends talk about Peloton she wanted one. It was better than a treadmill—if she wanted to run she could just run outside. So, Amanda and her husband watched for a Black Friday deal. None came.
A holiday deal? Nope. Is there any discount? No. There’s not really a Peloton discount, and Amanda was hearing about shipping delays (thanks Covid). So Amanda and her husband ordered one, financed with Affirm.
“Finance a stationary bike?!?!?” – Boomer
Well not really, it’s a 0% loan. It’s basically a payment plan. Actually Amanda notes, it’s like a gym membership.
Now here’s the magic trick business model: Peloton pays Affirm a commission for each bike sold and financed. 50M$ in Q3 2020. Peloton doesn’t offer discounts but it does offer 0% financing. And that’s the magic.
This, as regular readers know, is Alchemy. The financial picture is the same for Peloton: they have a retail cost and accept less than that to sell more units. The question is how much less and to who? Having Affirm be the who and the amount be vague creates value. Buyers hold Peloton in higher esteem and it just feels good to finance something at 0%. As one friend told me “it’s free money.”
To the accounting office it’s the same. To the market it’s different.
“At Twitter we had all the sales people in a different building and so we organized a margarita and taco event in the sales building. Of course all the engineers wanted margaritas and tacos so they had to go and spend time with the sales people and ask them around their roles.”
Cordle goes on to tell Shane Parrish that once a sense of community forms it’s easier for the sales people to go to the engineers, “rather than filling out a form that goes to the engineer who goes, ‘what is this person talking about?’.”
Jobs-to-be-done is like an elegant meal—but in the kitchen the cooks are hot and the chef is scratching her head wondering what will make it into tomorrow’s soup.
JTBD-ing is messy because we don’t have the language for it. The axiom to don’t ask the customer what he wants exists not because the customer doesn’t know but because the customer doesn’t know how to express it.
Here’s a question transcription of a sample interview Moesta conducted:
Look at the ground Moesta covers! For a mattress! Look at the language. “You moved?” “Who suggested sand bags?”
JTBD is elegant because of the hard work behind it and the hard work is the translation. Often this comes down to: what does the person need to feel.
Now we can circle back to Cordle and see how, like a game of telephone, the message ‘needs to feel this’ gets garbled going from one person to another. What makes the message clearer is good communication which exists in a good culture.
Margaritas and tacos seems unnecessary to the bottom-line but becomes axiomatic once we trace the process back. Like looking at the flurry of activity in a kitchen can give a sense how such a polished meal emerges.
Instead, Meyer argued that it was. It went back and forth and the banker brought in the table, each member of which nodded in agreement that it was indeed not a chardonnay.
It was probably less than a minute. Meyer retreated and returned with a cheaper wine from California and that’s the story behind his most important lesson, the irrelevancy of being right.
Wine is odd. People buy wine for all kinds of reasons. The Barefoot founders figured out one way. But there always is a reason. That’s the lesson Danny learned. It’s their reason.
Part of the wine boom from 1980 onward was because wine was presented as doing one job: conveyed in an inaccessible language. Robert Modavi first communicated differently. The Barefoot founders did too. They found out there were other ‘jobs’ of wine.
When I delivered newspapers as a kid I loved the Best Buy ads where I could compare MB and GB and RAM on every new Dell, Compaq, and Gateway computer. But what really mattered was the job: will this play Warcraft II?
Apple figured this out.
Meyer figured this out.
This trips up operators all the time because it’s economic to use shorthand. But shorthand cuts out the magic, the feeling, the job—which is the soul of what a customer hires a product. Don’t be right, do your job.
“I thought hard about what other people are trying to accomplish and I tried to shape my language in a way they could hear it. That’s half of what I talk to founders about. It’s just that, how to build the API to the other person’s brain. It doesn’t matter what you say. It matters what they hear, and it matters how they feel.”
That expression has a real JTBD-ness to it. It’s not the how something is done but the what, and if it’s the right what.
Tracking Tom. After a monster of a game, Tom Brady is 162 yards ahead of pace, his largest difference of the year. If Brady plays the rest of the games he’ll likely hit the over and our speculation will be wrong but our reasoning continues to hold, though maybe less than we should have suspected. One question comes to mind:
Did we think about base rates wrong? The key to base rates is to choose the right reference class. Brady seems fanatical about his health, and maybe we should have taken a page from Morey and made a cross-class comparison to Lebron James.
There’s still more ‘zero’ outcomes than not. Tampa could clinch a playoff spot, or be eliminated. Brady could be injured or rest before the playoffs.
We speculated at the start of the season there were a lot more zero to 200-yard games (injury, rest, offense, etc.) than 400+-yard games. That’s held in the data, Brady’s median yards per game is 11 yards less than his average. It feels incredibly odds, but we’ll be wrong for the right reasons.
“Battery life is a bit hard to quantify, and in my opinion difficult to peg to a single number. Milliamp-hours or watt-hours don’t tell you the story. What you want to know is, in practical real-world use, how long the device lasts on a charge. An ideal test would involve, say, an iPhone 12 Mini and iPhone 12 used side-by-side, doing the same things in the same apps at the same time in the same places.”
This is not the first time Gruber has faced this conundrum, here talking with Ben Thompson about temperature.
Gruber) “I staunchly believe that Fahrenheit is the better scale for weather because it’s based on the human condition. Who gives a crap about what the boiling point of water is, it’s the most ridiculous thing I’ve ever heard in my life.”
(Thompson) “The other thing is that Celsius is not precise enough. In the car it adjusts it by point-five because a single degree of celsius is too much for the car. Fahrenheit is more finely grained in a positive way.”
Insiders suffer the most because it’s efficient to use shorthand, yet it abstracts what the customers want. To serve customers, forget the numbers and get to the really why. For instance, it’s often not about the acidity of the grapes but the story of the label.
Equilibriums and incentives exist everywhere but not always in the same forms because conditions matter. “The key question is no longer: What’s the incentive?” Cowen said, “But to understand the incentive, you have to ask: What do people believe is the case? Subjective perceptions of the objective incentives out there become the new starting point for economics.”
The 2019 college admissions scandal is a situation where incentives and equilibriums existed and produced odd behavior which became criminal. Why would wealthy parents pay tens of thousands of dollars for their children to be admitted to schools, where in some cases, the kids didn’t even want to go?
Let’s pause our pursuit of Cowen’s ideas and introduce a set of cousins: the paradox of skill and the paradox of signalling.
The paradox of skill is the idea that if skills between people are relatively similar, then luck matters more. If Serena Williams shows up at a local racket club, she’ll win (in straight sets) against the local pro. However, at Wimbledon she needs every bit of skill and a little bit of luck to claim the championship.
That same idea exists in the world of signalling status. Ask the same question, and we get different results. If the incentive is to stand out from your peers, but your peers are already famous, already rich, and already take vacations to French Polynesia then what do you do?
You stand out through your kids.
The ring leader was Rick Singer, a once legitimate college counselor who found a side door for clients. Kids were flagged as recruits even though they sometimes never had or wanted to play the sport, but the coach was compensated by the kid’s parents through Singer. It worked because collegiate athletic departments didn’t actually check if the kids were on the team.
The thinking at the time was that coaches were incentivized to win because that’s how they kept their jobs and paychecks. But the violators followed the JTBD theory to include non-recruits in return for, what they claimed, were non-quid-pro-quo donations.
Ryan Singer solved for the equilibrium.
Parents wanted kids admitted. Coaches wanted compensated, and recognized. Singer wanted paid. Students wanted help. Like ingredients in a recipe, combining these things and it almost seems inevitable.
To solve-for-the-equilibirum means to also think about incentives, which we look at in the short piece from Cowen. It’s written as an alternative to Netflix or for the dentist who chronically runs late.
According to Julie Zhuo (YouTube), there are three design rules at Facebook.
What problem do people really have?
Is this problem real?
How will we know if we solve it?
These three questions have a very JTBD essence to them. Serving customers is not just about giving them what they ask for but giving them what they really need.
For example, Zhou said, many people over many years have asked Facebook for a dislike button. If there’s a thumbs-up for things we like, why can’t there be a thumbs-down for things we don’t?
But this isn’t really what people want. If the Facebook feed was too much thumbs-down material and not enough friend’s photos, easy recipes (Tasty anyone?), and photos from the past no one would log on. What people want, said Zhuo, is that “not everything in the feed is likable and I want to express other things.”
It’s odd to think that what people say they want may not be what they really want, but we can trust this idea because conditions matter. For example, when parents were collected and questioned in focus groups about what kind of medical information they wanted for a vaccine, they said they wanted more information. The thinking was something along the lines of: ‘this is science, let me weigh the facts.’
But when researchers created 84 Facebook posts that went on to reach three-and-a-half million users, the results were different. The most resonate posts were those with personal stories.
In another example, people were asked if they would wear masks during the coronavirus pandemic. The yes/no split was largely along party lines. However, when people were observed out-and-about, political preference yielded to prudence.
In finance, Nassim Taleb rails, ‘don’t tell me how to invest, show me what’s in your portfolio.’ Tyler Cowen says to look at your actions, and then tell me what you think.
Zhou’s other good point to add to our JTBD quiver is to think not in terms of supplier language but demander. It’s not about the click-through-rate as much as it’s about engaging content. Financial advisors should never bring up words like theta, Sharpe ratio, or quarter-Kelly. None of those are about the JTBD.
One way to wrangle a creative idea is to find areas where something is already being done but not done in your particular industry. There’s only so many things consumers need; ease, trust, consistency, etc. It’s likely that a creative solution for you is old hat to someone else.
Scott Alexander brought this up writing about the Amish health system. There are multiple reasons the Amish system is more cost effective than the English (non-Amish-but-American) system, but one is how they’ve dealt with the costs.
“Much of the increase in health care costs is “administrative expenses”, and much of these administrative expenses is hiring an army of lawyers, clerks, and billing professionals to thwart insurance companies’ attempts to cheat their way out of paying. If you are an honorable Amish person and the hospital knows you will pay your bill on time with zero fuss, they can waive all this.”
“Doctors around Amish country know this, and give them the medically indicated level of care instead of practicing “defensive medicine”. If Amish people ask their doctors to be financially considerate – for example, let them leave the hospital a little early – their doctors will usually say yes, whereas your doctor would say no because you could sue them if anything went wrong.”
Amish medicine costs less because it’s less costly to provide.
But this obviousness was SoFi’s insight.
When SoFi started, the company looked at the loan default rates across a variety of metrics. Where did someone go to college? How much money do they earn? What degree does this person have? Which default more, art or vocational degrees? (Art). SoFi realized that some people defaulted less and paid promptly more. With lower costs for collections, SoFi could offer these customers a better rate.
This can be any insurance that’s sliced and diced. And it’s been happening all along.
What’s common between the Amish, the SoFi Henrys, and homes in floodplains since 1968? Legibility.
We don’t know a solution exists until we see it.
Tony Hsieh succeeded enormously in the early days of the internet. Before joining Zappos, Hsieh sold an advertising network to Microsoft for hundreds of millions. Like anyone else who’s young, wealthy, and (maybe) smart, Hsieh started angel investing. Which is where he met Nick Swinmurn.
It’s 1999. Everything internet was hot. It’s the year Webvan started taking orders for groceries in San Francisco. We can imagine Swinmurn meeting Hsieh.
‘Footwear is a forty-billion-dollar a year market and there’s no good way to buy shoes online.’
‘Of course, why would someone buy shoes online?’
‘Because of the selection!’
‘I just don’t see it.’
‘It’s already happening!’
‘People are buying shoes without trying them on first?’
‘Have you ever opened a catalog?’
‘Weren’t shoes in there?’
‘There you go.’
‘Sure, but how many?’
‘Right now, five percent.’
Hsieh’s problem had already been solved. Now he just had to solve it better—and he did, selling Zappos to Amazon a decade later.
During the coronavirus quarantine (or whatever we’re calling this) there’s been a lot of trouble with the data. Part of the problem is a collection issue. But part of the problem is a heterogeneity issue. The data is fine it’s just that the conditions are different. There’s culture, ethnicity, practice, government and so on. It’s hard to compare one place to another.
But what makes the pandemic devilishly confusing makes business slightly easier. Your answers are out there.
Note, in a related post we addressed this idea through sports. Our Jenn Hyman post addressed this too. Thank you for reading.
Netflix added fifteen-million subscribers in March, double their expectations. This makes sense. Most people watch Netflix on a television. Most people search for Netflix around November and December of each year.
In 2018, the Netflix annual report noted, “We compete with (and lose to) Fortnite more than HBO.” Director of content, Ted Sarandos told Variety their biggest competitor was sleep.
Does Netflix really compete with Fortnite and sleep?
Well, kinda, but probably not as much as we think. There’s a human tendency psychologists call opportunity cost neglect. It’s our inability to compare across categories. For example, when researchers went to a Toyota dealership and asked the ‘just looking’ customers what they might buy if they didn’t buy a new car, almost everyone said they might buy a Honda.
But they also might buy a vacation, a remodeled kitchen, or two-semesters of college for their oldest daughter. A dollar is a dollar but that’s not how people think.
In another study, researchers asked people if they would buy an iPod with 40gb for $399 or an iPod with 20gb for $299. Most college students chose the larger size for more money.
However, when researchers added ‘and with your $100 in savings you can buy better headphones or download more music’ the students flipped their answer. Now it made sense to buy the smaller and cheaper option but have money for music.
Asking people, If you don’t watch Netflix, what might you do? is a murky question. If people don’t compare across categories, then they’ll probably bring up what comes to mind: Amazon, Hulu, HBO, or play Fortnite.
To untangle this web of apps and find which activities compete with Netflix we need to ask what job do people hire Netflix to do?
Bob Moesta has pioneered the JTBD research (I’ve added my own thoughts) and he says that company growth will come from “horizontal integration, not vertical integration.”
This observation came after an interviewee told Moesta what she did after work. Some nights she ran, some nights she ate ice-cream, some nights she played video games. Superficially we don’t think that Nike, Ben and Jerry’s, and Microsoft’s Xbox compete. But for this woman, they do. For this woman the JTBD is ‘unwind after work’.
If that’s true does Netflix compete with Nike, Ben and Jerry’s, and Microsoft’s Xbox too? Let’s take some guesses.
Netflix competes with babysitters. Parents use Netflix to keep their kids out of the way. During the quarantine of 2020, it’s very likely that many WFH parents use the service for spot supervision. When my daughters were younger, my wife and I certainly did.
Netflix competes with comedy clubs. Yes, going-out and staying-in are two very different jobs. The former is a date single people have, the latter is a date married people have. But for a good laugh, Netflix stand-up specials are tops.
Netflix competes with serialized television. Many of the top shows on Netflix are the same characters is the same situations with the same friends. Customers who watch these shows hire Netflix for the familiar.
Netflix competes to be in the Zeitgeist. I tried to watch Tiger King. I wanted to join the conversation, to mosey over to the digital water cooler. I couldn’t. Every Fantasy Football League has someone who did not want to play but they did not want to be left out more.
Netflix competes with boredom/family time. Why do Netflix searches peak around Thanksgiving and Christmas? Is it a coincidence that these are the two times of the year many are too lonely or too together?
Netflix doesn’t compete with Fortnite. Netflix is lean-back, Fortnite is lean-in. Netflix is consume, then converse. Fortnite is consume and converse. Netflix is same-level. Fortnite is level-up. Though both digital apps with millions of users, the Netflix and Fornite overlap is small. We think these two companies compete because they are easy to compare.
Netflix doesn’t compete with sleep. Are there any shared benefits between sleep and Netflix?
The JTBD research is a very helpful tool figuring out what people want, not what they say they want. Moesta has written a few books but he’s a great speaker so start your intro to JTBD on YouTube.
When Rory Sutherland recommends a book I do my best to find it. Even if it’s from 2006 and uses British English. Henceforth, I’ll be interchanging behavior and behaviour.
The Naked Jape was good for exactly the reason Sutherland said it would be: comedy reframes things.
Alchemy recasts one thing as another. Diets, wrote Penn Jillette are hard, but challenges are exciting. When he reframed his diet as something difficult but not-fun as something difficult and challenging it changed his attitude. Jillette had already learned challenging things – like juggling – so this was just another one of those.
Comedians are great at this.
“My father hugged me only once, on my twenty-first birthday. It was very awkward. I know now what it was that made me feel so uncomfortable: the nudity.”
That joke works well in a comedy set, less-well on a first-date, and terribly while talking to a psychiatrist. Change the context, change the meaning. Or, change the words and you change the meaning in the context.
Carr’s book offers lots of little jokes that prove this point. The ideas, these jokes are “anarchic, a little scrap of chaos from beyond the boundaries of the rational, a toe dipped in the shallow end of anti-social behaviour.”
Take the idea of jokes along with the JTBD theory and we get the start of the solution to a puzzle.
When Instagram was building out features an engineer told co-founder Kevin Systrom that he was building a polling tool. ‘That doesn’t sound like something I would use’ Systrom recalled. ‘Oh no, it’s going to be great,’ the engineer explained, ‘teens will love this!’
What was happening at the time was that teens were uploading solid-color backgrounds with a prompt on it. Their followers voted as comments. The users created a work-around, customizing the platform for their needs. Workarounds are also common in comedy. I saw a sign at an audiologist’s office that (loosely) demonstrates both JTBD and jokes; We don’t sell hearing aids, we fix hearing.
In the JTBD work, Bob Moesta changes his perspective. He enters customer interviews as an empty vesicle and lets them tell him about the product. He avoids jargon. He doesn’t lead them. Moesta is similar to Jerry Seinfeld who described comedians as people with a third eye. Here’s Seinfeld with the check after the meal.
“Went out to dinner the other night. Check came at the end of the meal, as it always does. Never liked the check at the end of the meal system, because money’s a very different thing before and after you eat. Before you eat money has no value. And you don’t care about money when you’re hungry, you sit down at a restaurant. You’re like the ruler of an empire. “More drinks, appetizers, quickly, quickly! It will be the greatest meal of our lives.” Then after the meal, you know, you’ve got the pants open, you’ve got the napkins destroyed, cigarette butt in the mashed potatoes – then the check comes at that moment. People are always upset, you know. They’re mystified by the check. “What is this? How could this be?” They start passing it around the table, “Does this look right to you? We’re not hungry now. Why are we buying all this food?!””
Let’s try this comedy idea with this reframing.
Instead of paying last, people pay first. A restaurant places a $50/100/200 charge just for stepping in. Customers get a menu without prices and order without influence. At the end of the meal, a waiter brings back their balance, if there is any.
There’s all kinds of consumer psychology at play here from menu design to mental accounting to the idea Seinfeld jokes about it. This may not even be a good idea but it’s a new idea and that’s what matters.
If something could be the premise to a joke, it’s on the right path.
Another Rory’s read is Schtick to Business by Peter McGraw. If you like this blog’s stories, you’ll probably like that book (a few overlap). McGraw’s big idea is that business people should think more like comedians and find the interesting weirdness around life. There’s areas where we’ve always done it this way has wallpapered over interestingness.