I heard a phrase:  People don’t buy shovels, they buy holes.

It’s taken me a very long while to respond to this because it sounds so good.  It rolls off the tongue and has an unexpected, logical quality.  It seems right, doesn’t it.

The only problem is that it is completely, utterly, 100% wrong.

People don’t buy holes.  They don’t go to stores and ask for holes.  They don’t imagine holes on the way to the store.  They buy shovels, plain and simple.  They buy the shovel to make a hole, but that is for later.  What is on people’s minds is what they know they LITERALLY need.  They need a shovel to achieve their goal.

When I was at Intuit, every marketing manager said we should put pictures of happy people on the website.  Since they test everything, I was able to learn that this strategy was always a fantasy.  The winner every time?  The box.

I started telling people, “Nothing beats the box.”  But the question is why?  The answer is deeply rooted in psychology.  But here is a simple rendition of the mental model:

The person hears/sees something about Quicken.  They understand it’s something to do with money and bills and stuff.  They have seen in the store what it looks like.  It looks like a box.

Enter the internet:  They go to quicken.com and see happy people.  They say, “hmm, this isn’t what I was looking for” and they click the back button.  They bounce. Then they go to Amazon and find the box.  They purchase it and DOWNLOAD the software.  No box needed.  They don’t care at that point.  Once they found the box, they knew they were in the right place.

I notice this struggle all of the time.  Marketers want to sell the dream and higher level goals.  However, people are just going to look and say, “Am I in the right place?  Im looking for ________”.  If they don’t see a literal interpretation of that, they will click the back button and bounce.

Think about the thing you sell.  Does your website say it clearly and obviously or does it couch the whole thing in “happy talk“?  The more literal you are, the more successful the site will be.

In short, don’t name your store “Holes”, name your store “Shovels” and you will make alot more money.

An interesting thought experiment came up today.

A company I know acquired another company for 8 figures.  The purpose was Acqui-Hire.  This is the practice of acquiring a company for the talent, not for the product.  There were not alot of people in the company and the acquiring company immediately shut down the product.  The purpose was talent acquisition, nothing else.

This is common practice all over Silicon Valley, dozens of times or more per year.  The amount of money paid out sometimes is pretty stunning.  Sometimes 7-8 figures PER PERSON ACQUIRED.  Of course, the employees usually don’t see that money, but the acquiring company writes the check nonetheless.  This post is focusing on the acquiring company point of view, not the employees.

Now imagine a slightly different scenario.  The company being acquired had a superstar who left 1 month before the acquisition.  Let’s say she was a key engineer, for example.  The acquiring company really wanted her skills/talent.  Let’s also imagine she was available to hire.

Question: How much should they be willing to pay for her?

Using logical accounting, they should be willing to pay the same premium they did for the acquired company employees.  (7+ figures per person)  However, this hardly ever happens.

I think the reason is psychological.  When acquiring a company, there is an abstraction.  It’s not one person so the psychology allows the value to be calculated without anything in the way.  How much value would the company get versus how much money would it cost? Also how much time/energy/money would it cost to hire the equivalent people without the acqui-hire?  Also, what opportunity cost would you lose spending that time?  Pretty straight-forward stuff.  It makes sense to acqui-hire if you find the right fit.

However, when it’s an individual, I think psychology jumps in full-force.  I asked a few people at work of this scenario and everyone thought the individual shouldn’t get that kind of money.  The said, “It feels wrong!”  I think an individual is too easy to personally associate with as if they are thinking “I’m a person, they are a person, I don’t get that kind of money!”

People often have difficultly measure value against cost when it comes to individuals.  Abstraction is needed.

The closest industry to do this correctly may be professional sports.  However, they have statistics that show predictions and historical reference of how much value he/she will generate.  Silicon Valley superstars are harder to evaluate. (Although accuracy of those predictions in sports is notoriously inaccurate)

Silicon Valley superstars come in many departments including sales, marketing, design, engineering, ops and support to name a few.  Superstars provide value of 10X what a normal “good” employee does.  It’s a power curve.

Psychology effects all people, no one is immune.  It’s interesting to think how this works in our everyday lives.  It’s hard to be logical all the time.  I envy Mr. Spock.

I don’t need skype at work.  So when my computer boots up, I right click on Skype and click “Quit”

I was pretty clear of what I wanted, right?  So why the heck does skype give me this window?

Honestly, screw you skype!  Stop bothering me.  No other program does this.  It’s annoying!

As a UX Designer, always listen to the intent of the user.  Only give a warning if it is possibly a mistake and they can’t recover from it. (example: Delete)  Or give a checkbox saying, “Dont bother me with this again.”