Clever Geek Handbook
14 September 2025

The Facebook Effect

Recommendation

Statistically speaking – if Facebook and the internet keep growing at a steady rate – by 2013, every internet user will have a Facebook page, a remarkable achievement for an organization in operation only since 2004. In fact, Facebook is the best networking platform ever. Writer, editor and technology expert David Kirkpatrick examines its amazing start-up and covers “the Facebook effect,” the singular phenomenon that enables people globally to connect in new ways. Facebook is ubiquitous, with far greater penetration than any other mass medium. Most intriguing, information can bubble up from Facebook users and quickly spread from one online “friend” to another across an immense social network of nearly 500 million users worldwide. Kirkpatrick nails Facebook’s complex corporate biography and, even more tellingly, captures the personalities of the innovators involved, particularly genius CEO Mark Zuckerberg. BooksInShort recommends this book to all Facebook members, which if current trends continue, soon will be everyone online.

Take-Aways

  • Harvard student Mark Zuckerberg and three friends began “Thefacebook” in 2004.
  • It started as a social networking website for Harvard students, then Ivy League students, then U.S. college students, then everyone.
  • In its first few months, Zuckerberg moved the operation to Silicon Valley.
  • That September, three Harvard students sued Zuckerberg for intellectual property theft. He settled with them.
  • Facebook’s expansion has been astounding, with nearly 500 million users worldwide.
  • Its popular networking service operates in 75 languages and 180 countries.
  • Because of its tremendous popularity, Facebook has never lacked investors.
  • The company has always been focused on growth, not just on making money.
  • Google and Microsoft are just two of the firms that wanted to buy Facebook.
  • Because Facebook stores comprehensive personal data on hundreds of millions of people, many worry about its impact on privacy.

Summary

Ten Million People in the Street

Facebook is an immensely powerful internet application, or in CEO Mark Zuckerberg’s term, “utility.” For example, on Jan. 4, 2008, Oscar Morales, a civil engineer in Barranquilla, Colombia, created a Facebook group opposing Colombia’s Revolutionary Armed Forces (FARC) rebels and their terrorist tactics. He named the group Un Millón de Voces Contra Las FARC (“One Million Voices Against FARC”). By the next day, 1,500 people had joined; by that evening, 4,000 had signed up. Via Facebook, Morales proposed nationwide marches against FARC. But Facebook group members worldwide told Morales they also wanted to march in their countries. On Feb. 4, a month later, some 10 million people across Colombia joined in marches against FARC, as did two million more globally, from Buenos Aires to Tokyo, because of a one-month-old Facebook group that began with one angry member.

Opening the Book

In February 2004, Harvard sophomore Mark Zuckerberg, a brilliant computer science student, and his fellow undergrads Dustin Moskovitz, Eduardo Saverin and Chris Hughes founded “Thefacebook,” a social networking site for Harvard students. “Houses,” or dorms, at Harvard maintain scrapbooks of residents’ pictures; the boys named their site after these “facebooks.” The four students set out to create “an online directory that connects people through social networks at colleges.” At first, Thefacebook was available only at Harvard. But Zuckerberg and crew quickly began offering it at other Ivy League colleges and then at other U.S. universities. They formed a company to manage the site, which was an instant hit with college students. Just four months after the launch date, a financier offered Zuckerberg, then 20, and his friends $10 million for Thefacebook. Knowing that they had struck gold with their insanely popular site, Zuckerberg “didn’t for a minute think seriously about accepting.”

“Facebook is all information all the time.”

By May 2004, Thefacebook had nearly 100,000 users at 34 different colleges. Zuckerberg and his friends contracted with an ad sales company, Y2M, to sell advertising on Thefacebook to firms such as MasterCard, which in one day garnered double the sign-up results it anticipated for its entire four-month campaign. Zuckerberg and Moskovitz moved – temporarily – to Palo Alto in Silicon Valley, the hotbed of technology development. Hughes left to study in France. Saverin, then business manager, went to New York to sell ads. Sean Parker, Plaxo co-founder and part of Napster’s launch team, joined Thefacebook and soon became president, with Zuckerberg as CEO.

“Really great leadership...especially in a start-up, is about knowing when to say no – evoking a vision very clearly, getting everybody excited...but knowing when to draw the line...you can’t do everything. That’s a lesson Mark didn’t know yet. That’s a lesson Mark learned.” (Sean Parker)

Living in a leased house, Zuckerberg, Moskovitz and Parker worked mightily to improve the site. Moskovitz handled details, including organizing databases for more universities. Front man Parker networked with financiers. Zuckerberg was the strategist, planning how Thefacebook would grow and evolve. The bottom of each online page carried the message: “A Mark Zuckerberg production.” He created “most of the software and...design.” When the company incorporated, Zuckerberg had 51% ownership. He and his colleagues removed Saverin from management (though he received an ownership stake) because he “had not done work he’d said he’d do.” Angry, upset and still in control of the firm’s finances, Saverin froze Thefacebook’s bank account. To keep operating, Zuckerberg and his family spent $85,000 on servers and other expenses. Zuckerberg and Moskovitz dropped out of Harvard to stay in Palo Alto and continue to build their company.

“There was a sense among many at the company that they were participating in something historic.”

In September, Harvard students Divya Narendra and twins Cameron and Tyler Winklevoss filed suit against Zuckerberg and Thefacebook for intellectual property theft. Narendra and the two brothers had once hired Zuckerberg to help them develop a “Harvard-specific social network.” Zuckerberg dismissed their claim but settled with them for an undisclosed amount. The trio had a dissimilar site called ConnectU, but the configuration of another earlier site, Friendster, clearly influenced development of Thefacebook, ConnectU and other networking websites.

Money to Grow

By fall 2004 membership hit 200,000. Students across the U.S. clamored for Thefacebook to include their colleges, particularly after it added the instantly popular “wall” feature, which lets people leave comments on individual members’ pages. With its widespread acceptance, the company did not need investor funding until it had to buy many more servers to grow. That opened the door for investors. PayPal co-founder Peter Thiel invested $500,000. Washington Post CEO Donald Graham, who also wanted to invest, made an extremely favorable impression on Zuckerberg. However, to secure the capital the site needed, Zuckerberg went with Accel Partners, a well-connected Palo Alto venture capital firm. Accel put in $12.7 million, but Zuckerberg and Parker maintained control with “three out of the five board seats.”

“I need servers just as much as I need food. I could probably go a while without eating, but if we don’t have enough servers then the site is screwed.” (Mark Zuckerberg)

With this hefty investment, Thefacebook now had money to expand, but it needed more people. Matt Cohler of LinkedIn joined the management team. His first hire was Steve Chen, who soon left to lead another start-up, even though Cohler told him he was turning his back on millions. However, Chen was committed to his new website: YouTube. At the time, Zuckerberg and Moskovitz were 21. Parker was 25. Cohler, 28, was the oldest member of the executive group until Robin Reed, who was in her 50s, signed on to handle recruiting. Then Marc Andreessen, co-founder of Netscape, joined the staff as an adviser to Zuckerberg. Although each person was impressive, the overall crew’s relative youth was not inspiring. Further, many experts thought social networks were fads.

“Facebook’s ultimate success owes a lot to the fact that it began at college. That’s where people’s social networks are densest and they generally socialize more vigorously than at any other time in their lives.”

In August 2005, Parker was arrested for cocaine possession (he maintains his innocence and was never officially charged). Still, he resigned as company president. Distrustful of venture capitalists who might eventually try to take over, Parker gave his board seat to Zuckerberg – a move, Parker says, that “solidified Mark’s position as the sort of hereditary king of Facebook.” In September 2005, the website formally became Facebook; by October 2005, it had five million members.

“Facebook still seemed to nonusers to be mostly about dating and doing pointless, possibly suspicious things like poking people.”

As it grew, Facebook added high school students as members and began offering photo hosting. Facebook photos swiftly became users’ favorite feature (now, three billion photos are posted monthly). To meet increasing expenses, Facebook’s leaders raised $27.5 million in additional venture capital from an assortment of new and old investors, following various courtships, particularly with Viacom. In May 2006, Facebook added “work networks” for use inside companies, but the feature did not catch on except in the military. Still, advertisers loved Facebook. The Interpublic Group made a $10 million one-year advertising commitment. Microsoft, the source of more than 50% of the firm’s 2006 revenue, continued as a huge advertiser, guaranteeing Facebook “$100 million in revenue” for 2007.

“If you are friends with someone on Facebook, you may learn more about them than you learned in 10 years of offline friendship.”

To fuel continued growth in 2007, Facebook needed more money. Zuckerberg thought the proper valuation was $20 billion, but he sought investment support at $15 billion. Google invested and offered to buy the company. Microsoft also wanted to buy Facebook. Zuckerberg wouldn’t sell, but he negotiated a new, advantageous ad deal with Microsoft, which also made a $240 million investment in Facebook. With other investors, the total infusion was $375 million.

So Much for Privacy

As Facebook grew, amassing personal data about millions of users, privacy became a more pressing issue. Zuckerberg and his team believe in “radical transparency”; their philosophy says that openness is everything. Many older users find this attitude about personal information and privacy troubling. Some people think they should be able to present different aspects of themselves online, with varying degrees of authenticity, but Zuckerberg believes in a unified, “holistic version.” Facebook operates accordingly and that seems to work. A 2009 survey named it the “10th-most-trusted company” in the U.S.

“You can make a dollar off a user today, but if you can get them to invite 10 friends, then you’ll make $11.” (Dustin Moskovitz)

As envisioned by Zuckerberg, Facebook has become an essential platform for other internet applications. Within six months after it began hosting other applications, 25,000 came on board. Now Facebook hosts 350,000 applications; games are the most popular. For gamers, Facebook is “the nexus of an ecosystem,” a vast space where they operate. Facebook lets web partners make money from their applications. They can even sell ads in competition with Facebook on its own turf, because Zuckerberg thinks the result is more page views and more growth, his main goal.

“Zuckerberg had a knack for making software people couldn’t stop using.” “Facebook is the most targetable medium in history.”

Amid its investment and ad triumphs, Facebook made one huge mistake: Its “Beacon” alert service trod on too many toes. Users who bought something on Facebook could tell friends about it on Beacon, but people resented the service’s semiautomatic, hard-to-bypass nature. People who were angry about having their purchases divulged without their permission formed Facebook protest groups; within three weeks, the company made Beacon optional.

“You’d better take CEO lessons, or this isn’t going to work out for you.” – Facebook recruiter Robin Reed to Mark Zuckerberg “Facebook’s software makes information viral.”

Visionary as always, Zuckerberg permitted other firms to create free Facebook pages. The idea: get corporations to operate in the Facebook universe and make money from them later. Zuckerberg recruited Google executive Sheryl Sandberg to become COO and make Facebook profitable. Her strategy was to turn its enormous people power into a force that “would generate demand” – beyond just selling products. Facebook now runs “engagement ad[s],” small messages that spur users to act, for example, by taking a coupon for free Starbucks coffee. Advertisers like Facebook because members provide so much personal data.

Worldwide Facebook

In 2008, Facebook invited people around the planet to translate pages into their own languages. This initiative worked so well that by year’s end Facebook was operating in 180 countries, in 75 languages. Facebook’s global penetration is amazing. “Well over 20% of the 1.7 billion people on the internet worldwide now use Facebook regularly.” In Norway, 46% of the population is on Facebook; in Canada, 42% and in the U.K., 40%. By focusing on openness and transparency, Facebook is shaking up closed societies. “A more transparent world creates a better-governed world and a fairer world,” Zuckerberg says.

“Ironically, Zuckerberg was not a heavy user of Thefacebook . Nor in fact were any of its founders and early employees.”

As Colombian Oscar Morales learned, Facebook is the ideal medium for protest groups. However, protesting requires far more commitment than holding a sign in a parade. On Facebook, your name accompanies your protest, unlike the anonymous situation on much of the internet. Globally, politicians have turned to Facebook. U.S. President Barack Obama used the site so masterfully in his 2008 campaign that the result is sometimes called “the Facebook election.”

Whither Facebook?

The site now offers Facebook Connect, which lets users log in to 80,000 websites (the number is growing) through their Facebook accounts and export their Facebook identities wherever they travel on the web. Facebook Connect may become a “universal Internet log-in.” The groundbreaking Facebook Open Stream application programming interface (API) enables outside companies to publish their Facebook feed on their sites. In response to Twitter, Facebook is shifting to include a form of micromessaging in its service.

“At Harvard, Dartmouth, Colombia, Stanford, Yale and other schools, Thefacebook quickly became an essential social tool.”

Facebook now has 1,400 employees and “revenues could reach $1 billion in 2010.” Eventually, it will be so ubiquitous that, as Matt Cohler (now a former Facebook employee) puts it, “There won’t be a distinction between being on and off Facebook. It will be something that goes with you wherever you are communicating with people.” For many, that is energizing. For others, it’s Orwellian. Zuckerberg himself “sees Facebook as a work in progress” and “an exercise in crowd psychology.” For him, its technological improvements are not as challenging as its unfolding social role. He wants it always to be a force for good. But what happens if control of the company ever shifts into other hands? Could Facebook, with its massive data on millions – and perhaps, one day, billions – of people “become a giant surveillance system”? After all, Facebook’s visionaries already see its potential to become a “directory of the entire human race,” or at least the portion of humanity that’s hooked to the internet.

About the Author

David Kirkpatrick is a Fortune magazine editor and author of its Fast Forward column. A leading authority on technology, he developed Fortune’s Brainstorm conference.

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The Facebook Effect

Book The Facebook Effect

The Inside Story of the Company That Is Connecting the World

Simon & Schuster,
 


14 September 2025

Communication Catalyst

Recommendation

Like the sadistic prison guard in the movie Cool Hand Luke who told his prisoners, “What we’ve got here is failure to communicate,” managers often attribute unrealized plans, missed goals and unsuccessful projects to a lack of good communication. Most don’t recognize that even casual conversations around the water cooler have the power to affect results far down the road. Communications consultants Mickey Connolly and Richard Rianoshek advise you to use conversations to add value to all your interactions. Their points are useful, if fairly general and well known. The authors use extended quotes, examples and even a fictional running story to crystallize their book’s messages. BooksInShort sees their guide as a good refresher course about the power of the spoken word and recommends it to recent graduates, business-world newcomers, and those who want to boost their conversational skills and draw more out of every chat.

Take-Aways

  • Investing in conversation can save you money and make your business more profitable.
  • Managers can use conversation to tap into “high-velocity value” business demands.
  • Adjust your communication style to fit “static” or “dynamic” situations.
  • “Intersection conversations” allow divergent views to unite to achieve a business goal.
  • To create value and reduce waste, “align, act and adjust” your communications. Align everyone’s interests, act on an agreed plan and then adjust the results.
  • Moving from alignment to action transforms “maybe” into “make it happen.”
  • Moving from action to adjustment involves learning from mistakes and bouncing back.
  • Moving from action to adjustment involves learning from mistakes and bouncing back.
  • To learn valuable lessons, respond to mistakes by looking ahead and being resilient.
  • To create a “culture of accountability,” review and debrief after a project; you may find an unexpected insight that can save time in the future.

Summary

Talk Is Cheap, but Consider the Alternatives

If you believe time is money, then you may think that taking time to talk, converse, explain, chat or discuss is too expensive. The reality is far different: Investing in the social aspects of conversation to advance your business agenda may save you money and make your business more profitable. The trick is to craft “high-performance conversation,” which is “well-designed listening and speaking that creates high-velocity value.”

“We misunderstand a source of value that is as common, crucial and taken for granted as the air we breathe: how we converse with one another.”

Value is anything “customers or investors are willing to pay for, that employees are willing and able to provide”; but business doesn’t demand only value, it demands speed, so you need high-torque value – and conversation is the best managerial tool for finding it. Well-structured, purposeful talk is not just a “soft” skill; it’s as critical as your company’s technology and know-how. For example, one firm struggled with its products’ lagging time to market. Analysis revealed that more than 80% of the blockages it faced resulted from social issues needing better communication. By implementing high-performance conversation techniques, the firm cut its product development time in half; managers estimated it might have saved $50 million if it had implemented these methods sooner.

“Conversations are not neutral; they always affect the quality and pace of the outcome.”

Examples abound of instances where failed or inadequate communication led to spectacular disasters, like the space shuttle Challenger explosion or the Chernobyl catastrophe. In business, General Motors’ reluctance to meet Toyota’s challenge is just one instance where better conversations might have turned the tide. Research shows that continually, over time, “most mergers and acquisitions fail,” not for lack of knowledge or technical expertise, but due to poor verbal interactions. Conversation lets leaders organize their firms’ different value-producing segments more effectively. If your efforts to coordinate your marketing, operations and research arms aren’t yielding results, or if your firm’s relationships with big clients, industry allies or government officials could be better, the culprit might be “unintended conversational effect.” To improve the impact of your discussions, “converse by design and accelerate achievement.”

Fast Talkers

Business demands a rapid pace, but if you’re moving at blinding speed, it’s easy to go wrong. As one executive fretted, “We make fast decisions, but we don’t make smart decisions.” Whether you communicate by phone or email, in casual chat or at meetings, every interaction is an opportunity to advance high-velocity value above the immediate bonus of getting things done.

“Instead of ‘What proves me right?’...ask, ‘What value will I create?’”

Start by evaluating which parts of your business are “static” or “dynamic.” Situations never are purely one or the other. In a static situation, the parameters of your work are fairly predictable. If your manufacturing firm has a signed contract from a large client, the company can move ahead confidently, investing in the materials and tools it needs to fulfill that contract. Observe your interactions and capabilities in such a static, known situation, with defined roles and communication pipelines. Then, consider situations that are dynamic or uncertain, with “permanent whitewater everywhere.” You have to react in real time in order to gather information and not just bark orders, and to open lines of communication that may not exist in static conditions.

“Intersection Conversations”

Whether your business is mostly static or largely dynamic, consider where your customers’, employees’ and investors’ standpoints might converge. Create conversations at these intersections by “researching the point of view of anyone whose support you desire or require” and “discovering where your view overlaps or intersects with theirs.” Such congruent views include:

  • “Purposes,” which are necessary, vital goals or aspirations.
  • “Concerns,” which may influence or interfere with achieving those goals.
  • “Circumstances,” which are the factors that shape purposes and concerns.
“People are magnetically attracted to improving the value of their contribution.”

Intersecting interactions, the basis for creating high-velocity value, have three ruling axioms:

  1. Respect other people’s purposes, concerns and circumstances.
  2. If you disregard or discount other parties’ issues, you risk their resistance.
  3. If you account for others’ issues, you will get their cooperation and achieve value.
“In the context of a purpose, failure is information, not an end.”

Most conversations uncover differences among people; focusing on those differences first and fighting to get others to hear you is natural, but probably not effective. The next time a conflict arises in a discussion, ask yourself three questions before you argue: What major purpose lies in the balance for the other person? What concerns does he or she have about attaining that purpose? What are the individual circumstances affecting that purpose and those concerns? Be aware that your brain’s amygdala, which governs instinctive reactions, may lead you to jump to conclusions as you process other people’s words. For instance, if you hear someone say something that strikes you as impolite, stop to assess your gut response. Instead of “That was rude!” perhaps, with thought, you could conclude, “That seemed rude. I wonder if I misinterpreted him.”

“The Architecture of Conversation”

To create a “cycle of value” that furthers your business aims, structure your next project around three elements that lead to worthwhile conversation and profitable results: “align, act and adjust.” Achieve agreement that aligns all the players and resources; execute the agreed plan and adjust the results in a virtuous circle of improvement. Do not let the opposing “disagree, defend and destroy” patterns take over your projects or waste your time. Unresolved differences – whether overt or subtle – lead to defensive reactions that undermine and ruin your results. Work with three types of talks: “align conversations,” “act conversations” and “adjust conversations.”

Align Conversations Build Unity and Innovation

These conversations bring together the essential elements of any business goal, “people, time and money,” to arrange all the relevant factors in agreement before taking any further action. Conversations designed to create alignment have three aspects:

  1. “Intersect” – Finding the intersection of people and purposes creates synergies, which make the whole greater than the sum of its parts. Remain open to all viewpoints, and adopt an “authentic” posture that will enable you to reach an agreement. For example, look at the creative intersection that blossomed when famous composer Aaron Copland met with choreographer Martha Graham to create music for a commissioned ballet. Working with Graham’s idea of celebrating rural America, Copland composed within the constraint of a performance area that could hold only 13 musicians. Out of that collaboration and its stringencies came the Pulitzer Prize-winning musical composition, Appalachian Spring.
  2. “Invent” – Once you find the common intersection of talent and intention, the next logical step is invention, which explores the innovative possibilities that participants’ “connections, faith and focus” bring to the discussion of an issue. To foster an inventive environment, work on strengthening relationships, gathering resources and assessing the “facts, constraints, purposes and assumptions” around the project. Avoid becoming drawn into a time-wasting spiral that starts when you presume everyone’s allegiance to a cause just because you value it, and that ends in an atmosphere of distrust and skepticism.
  3. “Invest” – Once you’ve delineated the intersection of all the participants’ interests and outlined everyone’s innovative ideas, invest in the elements of the discourse that will lead to realizing your goals. In this phase, the participants’ focus shifts from ideation to implementation. Investigate and answer questions about resources, planning, feasibility and efficiency. Create real time lines by working backward. Begin at your project’s end date or milestone, then work toward the present, asking and answering questions about the necessary expenditure of time, money and personnel for each point in time.

Act Conversations Build Commitment

Conversations based on action generate the commitment necessary to execute the plans you made during conversations focused on alignment. Moving from alignment to action transforms the words people use from “maybe” and “what if” to “I promise” and “make it happen.” Time perceptions change as well. During alignment, participants gather around a “prognosis,” like the company “could probably get that done.” In the action phase, that plan becomes a “promise,” such as, “The first shipment from the company will be on store shelves by October 1st.” To ensure action, “engage, clarify and close.” Persuade the people who promise action to connect with their tasks by appealing to their human longing for relationships, learning, understanding and appreciation. Be precise about your expectations and the way you will measure success. Obtain everyone’s sincere agreement on what they will deliver.

Adjust Conversations Build Future Improvements

Learning from mistakes and bouncing back are hallmarks of great companies and great leaders. Resilience and agility in adapting to unforeseen situations can make all the difference in rescuing a failing project. Consider the example of soul songstress Aretha Franklin: She took over a Grammy Award show segment at the last minute for ailing opera star Luciano Pavarotti. With only eight minutes of rehearsal, she belted out a formidable rendition of his signature aria, Nessun dorma, a challenging piece of music even for accomplished opera singers.

“Flops are part of life’s menu, and I’ve never been a girl to miss out on any of the courses.” (actress Rosalind Russell)

To get the best results from adjustment conversations, concentrate the discussion on “review and renew” topics. Don’t let the dialogue degrade into faultfinding or blame assigning. You want participants’ experiences, good and bad, to furnish useful, beneficial lessons. Utilize these conversations to illuminate and explain opportunities for future change. People welcome change that serves them, but not change that threatens them. Focus on appreciating staffers’ efforts, but don’t use false appreciation to manipulate them. Pick the right times – such as scheduled meetings or during appropriate, if unexpected, circumstances – to debrief so you can obtain information you can use to make later adjustments. Don’t neglect this review if people claim they are too busy. You may find an unexpected insight that can save everyone time in the future.

“When common stakes are clearly revealed, even enemies become allies.”

“Build a culture of accountability” through regularly scheduled, frequent debriefings. Split the debriefing session into two parts. First, review the project: Reaffirm what everyone set out to achieve; recap actual outcomes; outline positive aspects and ideas they provoked; state any negative results, missed opportunities and errors; and determine who earned appreciation. Second, delineate specific “insights, methods and mindsets” arising from the review that will alter how you operate in the future. Decide how to include these concepts in your processes.

“Failure Is the Back Road to Brilliance Instead of an Unfortunate Dead End.”

Just as a river diverts from its course when it encounters obstacles, failure can lead to valuable opportunities for resilience and growth. As a self-assessment exercise, list your failures and the lessons they’ve taught you. Analyze these insights for patterns and themes. Choose the most resonant as your focal point for learning over the next few months. Remember these six points:

  1. “It’s the conversation, stupid” – Words help you relate to the world. Select valuable conversations over wasteful ones.
  2. “It’s achievable from here” – Look for knowledge and resources that will help you advance toward your goals.
  3. The quicker people “admit error, the sooner [they] make good” – Don’t hang on to mistakes to save face. When you admit your faults, you inspire others to do the same.
  4. “Success is the redemption of small and large failures, so forgive already” – Absolve yourself first so you can pardon others.
  5. “Appreciation is a purpose, not a reaction” – Build your team’s sense of purpose by acknowledging the value that the members bring to their work.
  6. “Being valuable is more satisfying...than being popular” – Seeking others’ approval may be easy, but it sells you and your abilities short. Contribute to creating value for your company and yourself.

About the Authors

Mickey Connolly and Richard Rianoshek co-founded Conversant, a consulting firm specializing in communications.

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Communication Catalyst

Book Communication Catalyst

The Fast (But Not Stupid) Track to Value for Customers, Investors, and Employees

Kaplan Publishing,
 


14 September 2025

Consumer.ology

Recommendation

If you let market research dictate your business decisions, consumer behavior expert Philip Graves thinks you’re making a big mistake. Market research, he says, can’t predict customers’ buying decisions because it focuses on the wrong criteria – a conscious-mind, logical thinking process. But consumers almost never make buying decisions like that, although they’ll insist they do. Instead, they make choices, quickly and efficiently, with their unconscious minds. Business owners who understand this and who apply Graves’s criteria to their research will gain valuable insights into what their customers really think and want. While just about anyone who shops can enjoy this entertaining, informative book, BooksInShort believes it will help business owners and marketers – if not to read their customers’ minds, then at least to understand them better.

Take-Aways

  • Market research has always driven business decisions inappropriately.
  • Market research often is cited as the reason for product failure or success.
  • New Coke is a prime example of of market research failure.
  • Market research focuses ineffectively on consumers’ conscious minds rather than on their unconscious drives, which motivate their behavior.
  • Asking consumers their opinions is useless; they make choices “outside of conscious awareness,” in favor of the familiar and against risk.
  • Conventional studies can skew results by leading, persuading or influencing participants, even unintentionally.
  • Traditional research methods do not adequately replicate the consumer’s decision-making environment.
  • To determine what your customers think, observe them and read their body language.
  • Analyze their actual behaviors in “natural habitats”.
  • Covert studies work best: Let customers think you are exploring something else.

Summary

Market Research Just Doesn’t Work

Most companies that conduct and rely on market research think they are gaining a better understanding of their customers’ motivations and behaviors, but they are not. For example, the launch of New Coke resulted from a notable research debacle. When Coca-Cola’s market studies indicated that people preferred the taste of Pepsi, Coke rushed out a new product. New Coke failed for many reasons, but primarily because research participants were answering questions in artificial environments using their conscious minds. This generated misleading results because “the unconscious mind is the real driver of consumer behavior.” A real-life interviewing or observational environment – which would reveal or engage the “unconscious mind” – would likely have produced quite different and more illuminating responses.

“We want our lives to have meaning and are unable to understand how they can do so.”

The unconscious mind makes decisions throughout the day. It filters information and enables you to zero in on particulars in an efficient way. It becomes increasingly efficient as the tasks and information it encounters become more familiar. Therefore, a brand gains an advantage if consumers buy it without conscious thought.

“It is unrealistic to expect customers to know what they think.”

Market research offers no way to ask questions of a consumer’s unconscious mind. A gap separates “what people would like to believe they will do as consumers and what actually happens.” If a retailer tries to gauge consumer interest by presenting a test group with a range of washing machines, for example, the array of choices can overwhelm the group’s members. Perplexed by all the information they must absorb to make a conscious, rational decision, they fall back on unconscious drivers, such as childhood familiarity with a brand. Therefore, “more choice isn’t necessarily beneficial.” The conscious mind and its unconscious counterpart can, unknowingly, be at war. The unconscious mind usually drives buying decisions, so asking customers their product preferences proves fruitless because they must respond to your questions in a conscious-mind way.

”Consumer research has been allowed to creep in as a substitute for entrepreneurial judgment.”

Other “triggers” that can affect customers’ decisions appeal to their unconscious minds: pleasant smells, the faces of friendly women, price, even light and temperature. “What people see, hear and feel influences their behavior, but they can’t account for what has happened or how it has influenced them.” All this almost guarantees that introducing a successful product is more a matter of chance than a scientific process. Most new products – 80%, in fact – fail.

“Emotions represent the best link between the unconscious and conscious minds.”

“Whenever it becomes helpful or necessary to question consumers, it is essential that what they say is treated with enormous skepticism.” So should merchandisers abandon market research? No, but they should conduct it differently.

Consumers Are Hard to Read

The best way to research a product before launching probably is “live testing: trialing a concept in real-life situations and observing what happens...as a consequence.” But even live testing carries risks: Customers can become aware of what’s going on and respond with “artificial reactions.” Still, this is the closest read available of customers’ responses without just releasing your product in the dark. Several psychological factors affect what people buy:

  • People claim they like new products, but they gravitate to the familiar.
  • Market research participants will say that they’re willing to try something new because, under interview circumstances, no risk is involved.
  • If customers know a product, their unconscious minds believe they like it more.
  • The unconscious mind prefers ease. New information adds difficulty.
  • Consumers may deny that other people’s decisions affect them – but they do.
  • Previous encounters and experiences “prime” consumers, and they judge subsequent information accordingly.

The Environment Provides Context for Buying Decisions

A store’s lighting, its background music and even its size can affect consumer choices. Other people can influence a decision, too – including the salesperson, although customers don’t like to admit it. The right environment can cause consumers to associate pleasant feelings with a product, an occurrence known as “unconscious misattribution.” Several factors render traditional market research inaccurate, whether conducted in focus groups or online. Focus groups don’t accurately replicate the consumer environment; online there is no similarity at all. Marketers also should be aware of “confirmation bias,” which unconsciously can lead consumers to make contradictory choices. The best way to research customers’ selections is by observing them in their “natural habitat.”

Watching What People Do

Observing customers’ behavior is far more effective than asking them about it. Watching allows you to see the unconscious and the conscious minds at work together. This requires undercover observation. People behave differently if they know they’re being watched. Questions to ask as you study your customers’ behaviors include:

  • How much time do they spend with your product?
  • Do they touch your product?
  • Do they “reach for a product without significant conscious attention”?
  • Do they look carefully at a product, or glance at it quickly and then look away?
  • What is your customer’s emotional state? That’s your best clue to what’s going on in his or her unconscious mind.

Why Asking Is Fruitless

Studying your customers clandestinely is a lot of work, but just asking their opinions in a focus group doesn’t work. Why? Here are 13 reasons:

  1. Questions that indicate “what to think about” can unintentionally direct customers’ replies.
  2. Posing questions in different ways can change the answers, because people’s “judgment is...malleable.”
  3. The actual wording of a question can “lead the witness.”
  4. Asking questions requires researchers to present a product, which automatically “promotes” the product in the consumer’s unconscious mind, and alters his or her response.
  5. If asked what they like or dislike about a product, consumers will “unconsciously alter their position favorably.”
  6. Presenting products without their brands disables the unconscious mind’s filtering process and therefore changes people’s answers.
  7. Questions asked at the beginning of a survey can “set the tone” and skew responses.
  8. Asking people’s attitudes about a product or service proves little because “no correlation [exists] between attitudes and behavior.”
  9. A consumers’ frame of mind matters strongly and can influence his or her answers.
  10. Customers “mentally associate” prior experiences with your questions.
  11. Respondents instinctively want to please you because you ask questions in a pleasant or friendly manner.
  12. Asking indirect questions about your product in hopes that consumers will “reveal something of [their] underlying thoughts,” won’t elicit accurate responses.
  13. You can’t trust your customers’ prepurchase answers because “people who have gone to the trouble of purchasing something tend to value it more.”
“Ultimately, success will be determined not by how thoroughly organizations research their customers, but by how astutely they are able to understand the response to what they are currently doing and how quickly they can evaluate and implement alternatives.”

Market research can be effective if: 1) You question your customers as they’re engaged in the very behavior you want to learn about; 2) you “catch them in the right mindset”; 3) you use the right language and avoid communicating possible value judgments about their choices; and 4) you ask “confirmatory” questions – for example, are they buying something because they know others have bought it? Pose queries that “explore what elements of unconscious influence might have motivated the behavior.”

Following the Crowd

Although your customers probably insist that they march to the beat of different drummers, they are unconsciously influenced by the choices of other people. Consumers tend to mimic others without noticing that they’re doing it. This can be advantageous for advertising, but can work against the success of a focus group. “People will devalue their own opinion in the interest of developing an arbitrary position that is acceptable to the group.” The energy drink Red Bull is an example of a product that tested badly in research but became very popular once it was accepted and promoted by the crowd (a form of “social proof”).

“An interesting indicator of consumer thought is time....[T]he amount of time someone spends shopping in a store...is probably the most important factor in determining how much they will buy.”

Focus groups also are ineffective because group discussions or a particularly dominant voice within a group can easily sway participants, especially if they don’t have a lot of emotion invested in the subject matter. Changing their minds and agreeing with others poses no risk. The ensuing “groupthink” works against the validity of research. Other negative influences include:

  • Participants are aware they’re being observed or recorded.
  • Light levels are much brighter than in the consumers’ actual buying environments.
  • Participants generally are not stakeholders in the research topic.
“In the past 50 years market research has really become an unhelpful distraction to business.”

Despite using these imperfect methodologies, market researchers often claim that their findings predict future behavior. Researchers believe that “if you ask people what they like now, they will tell you honestly and it will remain constant,” or that they will proceed to behave the way they’ve described. In reality, consumers’ buying decisions are affected by so many uncontrollable factors that asking them to predict their behavior isn’t fair. In market research settings, buyers experience “focalism” – a narrow concentration on the subject they’re being asked about – and don’t consider all the external and unconscious factors that help determine their decision. Consumers prefer familiar, easy choices that cause less anxiety.

Better Criteria to the Rescue

Although market research methodologies are inaccurate, you can do a better job of predicting consumer behavior by taking human psychology into account more effectively than traditional research strategies allow. Judge your next market research report according to “the AFECT Criteria,” which assess these factors:

  • “Analysis of behavioral data” – Is your report an explanation of how your customers are conducting themselves? The best summaries take sales statistics and actual behaviors into account, and don’t just ask consumers for conscious-mind opinions.
  • “Frame of mind” – When consumers are out of their buying environment and know they’re being observed or solicited, they’re also in the wrong frame of mind to provide on-target answers about what they’re really feeling.
  • “Environment” – Research should be conducted in “the appropriate consumer environment,” not in a sterile focus-group room or away from the situations in which customers will be making their actual buying decisions.
  • “Covert study” – Knowing that they’re being studied influences customers’ answers in the wrong direction. If you can, let them think that your questions are exploring “something else altogether.”
  • “Timeframe” – Consumers’ unconscious minds make decisions quickly. Therefore, opt for the swift reply over probing questions that require minutes or hours to answer.
“Few could doubt Apple’s ability to cerate products that really resonate with consumers although, as Steve Jobs told Fortune, ‘We do no market research.’”

Live testing your product, using the AFECT criteria, and being aware of the relationship between consumers’ conscious and unconscious minds will help you better understand and predict buying behavior. Like Apple, you will understand “the futility of attempting to consolidate...people into representative data.”

About the Author

UK-based consumer behavior expert Philip Graves consults for a wide range of national and international businesses.

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Consumer.ology

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The Market Research Myth, the Truth About Consumers, and the Psychology of Shopping

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