Yu Kai Chou is one of the world’s foremost experts on motivation and game design for real world outcomes. He has advised and consulted to organisations like Uber, Tesla, Oxford, Yale and Stanford universities among many others. In this conersation he shares his Octalysis framework for gaming motivation and gearing it toward your goals.
What you'll learn:
Terry: How can you get addicted to doing things that actually improve your life, like personal finance? That is what you’re about to discover in this episode. But before I review our guest of honor and what we cover, let me quickly give this some context within the broader theme of this.
So far, we’ve laid out a framework for personal change. We’ve had John d Martini talk about the role your values play in your achievement, and then BJ Fogg showed us how to build habits that stick by maximizing personal ability with behavior design. And as part of that episode, we learn more about his behavior model, and that describes how motivation and ability intersect with a prompt to catalyze action.
Now, BJ’s take is that improving ability is more impactful than trying to increase motivation. He sees motivation as fickle. He thinks it comes and goes in waves. In this episode, we’re gonna explore the other side of that. Why understanding motivation is key in how to tune your motivation for any change effort.
And to guide us, we have Yukai Chow. Ukai is one of the world’s preeminent applied experts on motivation and game design. He has consulted and advised organizations like Uber, Tesla, Oxford, Gale, and Stanford Universities, along with countless others. And he codified his deep understanding of motivation by creating a framework called Octas.
His book actionable gamification, lays it all out in great detail. And like our other experts, his work has played a really important role in how we’ve structured our program.
In fact, after reading his book, we mapped the entire player journey to assess and optimize for motivation at each point in our process. And doing this actually inspired the development of Compass, our grading system for gauging progress towards personal finance Nirvana.
So in this episode, expect to learn the unorthodox source of you guys’s expertise. Why making things more interesting and enjoyable works better than rewards. The eight universal core drives that motivate us to. And how to mix what he calls black hats and white hat drives to start and sustain our efforts. Bottom line is if you wanna know how to make anything more interesting and enjoyable to make change stick, then you’re gonna find this episode as insightful as it is actionable.
Terry: Welcome to the show.
Yu Kai Chou: Thanks for having.
Terry: Thank you for the book as well, and the Octa model, mate. No, I learned so much from the model, and as I said to you before we spoke, having spent a lot of time in sport coaching and understanding people and their motivations and things like that, it definitely did teach me some stuff and made me go back and mind my past and really understand motivation on a much deeper level where actually we’ve been talking a lot more about habits.
I think those two things are inextricably linked.
Yu Kai Chou: Yeah, discipline is what people try to focus on. But if you have motivation, you don’t need discipline to play your favorite game, right? You need discipline to stop playing your favorite game. But of course, once you have motivation, then you build into a habit. Then you no longer need the motivation. You don’t need motivation to do a habit.
You need motivation to stop doing a habit. So those are just, uh, steps into changing your lifestyle.
Terry: Yeah, it’s definitely the on-ramp mate. I would love to go and just understand, I guess, your early influences, because the model for me, which I really wanna get to the model for me, is so much more sophisticated than anything that’s out there, and specifically how you talk about the white hat, the black hat, which we’ll discuss later on.
But I’m just keen to understand whether there’s any early influences that might have played a part in, I guess the genesis.
Yu Kai Chou: We were talking about some of my early childhood where I moved to a variety of countries, including Taiwan, South Africa, us, and Kansas, you know, which is kinda different to California and Vancouver. So I just had to constantly adapt to new environments and adapt to new cultures. What’s polite and correct in one place is offensive in other place, and I’m just trying to fit.
So, um, I just spent a lot of time trying to figure out what people in the new place they, what they believe, how they feel, what they want, and slowly move from someone that’s like very awkward to, and getting picked on to someone who’s gaining respect and understand how things work in that area, and then get thrown into a new environment where I completely suck again.
So I think that gave me the sensitivity of how people feel almost of our survival sense. You know, I didn’t get that to survive. So it became a very interesting subject. And of course I played a lot of games and I was very curious about why there are important things in the real world where we want to spend more time doing it.
If we did, we actually felt great about it, but we spend very little time on that, and at least for me, I spent a lot of time in these games that have no real. Outside benefits and you know, I could spend thousands of hours making in-game characters amazing. But then once I stopped playing the game, you know, I’m still the same loser in real life.
So why is that? And how can we learn from games and apply those same techniques, the games you use into important things in the real world? So that’s kind of what was let down the path into a game. Cation and behavioral design.
Terry: was that before you going and studying at ucla? The psychology. Or psychology was kind of on the journey.
Yu Kai Chou: The beginning of my game came, journey started in 2003. I was 10th, 11th grade in high school. And then, um, my first year in college, I actually started my first business because I felt it was much more like a game than school and other things you can do, right? Because a game is you have an objective. You have obstacles and then you have your current resources, and your goal is to figure out how to use your current resources, overcome the obstacles, and get to the objective.
And that’s actually more like, to be honest, most people’s work as opposed to memorizing a lot of things and regurgitating on a piece of paper. Right. And so that was fun, exciting. So I started my first business and as a game and just kind of grew from there. I’ve never had an employer in my life because it just, the game just kept going.
Terry: So it was studying psych, learning all this stuff along the way. Straight out of school, you’re obviously just going into your own business from there.
Yu Kai Chou: Yeah. Yeah, so starting my first year in college, I started my first small business and then obviously extended for 17 years now when I created the dialysis framework. I just thought it was an interesting tool. But now if you go to Google Scholar and you search for the Rock, you’ll see it close to 2000 academic journals, PhD thesis, applying the OC in different fields.
And some psychology PhDs have told me that it answered a lot of things that wasn’t addressed and couldn’t be explained in the psychology world. And so I was thinking about why this became legit, right? Why studying games became legit and you went down to the idea. For most psychological studies, it’s like a classroom, a professor with 200 students and devised the room in half, and then for half of the group, he has a different delta, like this little special difference.
And then if one half has a different behavior than the other half, it doesn’t have to complete, right? It’s like, oh, 65% of this half does it right? And so it’s a little bit more. Then they say, okay, yeah, this delta changes behavior. And if this is replicated in many, many different other classrooms, then it’s scientifically proven.
Now, if you look at a. Each game is like a Petri dish of hundred millions of test subjects all voluntarily changing their behavior based on the game rules or psychological triggers. Like you add a little scarcity here, everyone changes their behavior. You add a bit more unpredictably there, people change their behavior.
And some games people will play for 11 months and they love it. And then a month I’m 12. They just like hate it. They stopped doing it. So it became a really nice test bet to understand human behavior.
Terry: Yeah, and that was the thing that struck me too, was when it comes to behavior and human behavior, I’ve read as much as I possibly can read and nothing struck me as truth as quickly. As when I was reading your thing, and I think it was because your laboratory was observing lots and lots of games and the depths you go into with a book where you’re analyzing different games, having played them yourself and understanding the other players, it’s very hard to disprove on that actually does make sense and you can see it all bear out in real life.So mate, tell me about the first steps out and into the first business and what were you doing there?
Yu Kai Chou: My first business was kind of simple. My first very weird business was like a eBay business, and basically I noticed. I was selling T 83 calculators and I noticed that the last five minutes of when a bidding ends, that’s when the price goes up. The most last moment. Do you wanna bid for this? So I decided to buy t i 83 calculators at $40 when their auction ends at, you know, two and three m when no one’s bidding against me. And I sold them for $60 during the day when a lot more people are bi the last five minutes.
So, you know, I just did that for fun and then I went into more drop shipping. But then soon after I got into this thing called the F Network, which is a service that allows professionals to network with each other, connect to the right people you need, and then eventually got into like a.
This is still in college, but a virtual world that’s supposed to help people build their careers. So again, it’s still that theme of using a game-like design to enhance your real life and one led to another loyalty program and off to whatever I did later on.
Terry: That’s interesting, isn’t it? Because you were kind of exploiting one of these principles that you talk about, that whole scarcity and avoidance thing to kind of create a big arbitrage with the calculators, , it’s pretty cool. When did this model start to crystallize for you? When did it start to kind of come to the surface?
Yu Kai Chou: I think it most likely would be 2012. And that’s when I had a few life change. I stepped down as c e O of my previous company called Reward Me, raised a seven digit amount and there was some, I think, investor issues. So I stepped down as C E O I was the same year I got married, and so I just thought, Hey, you know what I’m gonna do now.
And I noticed there’s the starting to have this booming industry called gamification. A lot of companies getting VC funding to market gamification. and I look at it and it’s like, Hey, you know, this is pretty much what I’ve been doing for the past seven years, uh, or nine years. But I think what they’re saying doesn’t make any sense, you know, this whole field is they don’t really understand why games are engaging.
So I thought maybe I should contribute and share some of my thoughts. So I started blogging on UK child.com. Sharing some insights, some my past experiences and that’s when published the OC framework and I think got picked up quite quickly. Within a year, that blog post was organically translated into 16 different languages.
And I’ll see it on Twitter, people talking about it in conference in Russia and you know, in Sweden and Australia and all those places. So that’s how I got picked up.
Terry: and did that propel you into the consulting side of things and going and helping other companies do this?
Yu Kai Chou: Yeah. So based on that, a lot of people reached out to me for consulting advisory. That’s how I got opportunities to, uh, teachs at, you know, Stanford, Oxford, Yale, Uber, Tesla, a variety of places. People keep asking me why did I write a book? And it was during this time, people kept asking me, when is my book coming out?
When is my book coming out? And then I’m like, maybe I should start writing a book, because people, people kept asking what it’s coming out. So yeah, that’s the story.
Terry: Yeah. And mate, it’s a fantastic book. As I said, it feels like something between like a kind of scientific reference guide and a bit. Self-help book. It’s kind of a cool little combination. Has anyone ever said that to you before
Yu Kai Chou: When I was writing the book, I did have a choice to make because I could make it purely just. Technical, these are those principles and have the book be probably a little thinner. But you know, at the time I was really into Malcolm Gladwell books too, and I noticed there’s a lot of storytelling and so I decided to have more storytelling, personal stories in it, make, make it more relatable. So I ended up being, uh, the length it is, but I think most people like it for that.
Terry: and how long did it take you, man, cuz it’s.
Yu Kai Chou: Well, the funny thing is that when I initially planned it, I planned for it to be 27 chapters, but then when I got to chapter 15, it was already Brownfield 500 pages. So I’m like, I, yeah, probably not gonna be 27 chapters. Yeah. So there’s a lot more to include, but you know, it is already pretty, a thick book. But it took me about a year to write most of the words. It took another year to make an actual. Book and one of the most time consuming things is finding all the cited sources in documenting it correctly. There’s a pretty funny story, so when I was blogging about different things, I had a stat, right?
I just like, oh, got got it from somewhere. So I wrote the stat down and when you’re blogging, you’re not as disciplined on the site sources, all that stuff. And then a couple years later, I was writing my book and I wanna include the step. And I’m like, all right, well it can’t reference my own blog, so I need to find the actual credible source.
And I’m like, luckily the stat is very specific, so I just have to google the STA and I should be able to find, you know, credible sources. So I Google and yeah, sure enough there are like hundreds of websites talking about, I’m like, okay, let’s see if they can al either that site is credible or it takes me to a more credible site.
And what happens is all those hundreds of sites link back to my blog post. So I’m like, where’s the original? Where does it come from? You know, and ultimately I found out that the stat came from a Coursera video course, and so it was very, very hard to obtain it through Google. So just finding that one piece of like cited source is, as you can imagine, very time consuming.
Terry: Well, it does come through in the book. It comes through as very thorough. It comes through as very, very methodical and thoughtful. So it was probably worth it, let me tell you that.
Yu Kai Chou: The book is doing, you know, well, uh, I think we sold little over a hundred thousand copies and without me really promoting it. And I didn’t even do a book tour because I was running a business on at the same time. So once I finished the book, I was behind in work, had to go back to to work. And I also know like at least a handful of.
Billionaires have been fans of my book. Uh, maybe some of ’em are a hundred millionaires now because of the crypto market, but, but yeah, it’s been a blessing that this book kind of resonated with people.
Terry: Yeah, well actually it was Jeff Booth who was the person who I picked up on. I think he was talking about your framework, and I’m somebody whose ears prick up whenever somebody says something like, look at this framework. It’s all about human behavior. It’s all about what people do. And so that was all I needed and I searched for it and I looked at the reviews and I thought, I’m gonna. I’m definitely gonna have a go at this, mate. It’s indicative that it has sold that many copies, I think, because it’s very distinct. There’s a lot of those thinner books that have just the one idea that’s just like played through on and on and on, but there’s not much with the depth and the breadth that you’ve gone to.
But what was it like when you were going into the consulting side of things? Was it easy for you to get this across to people? Do they take it on board or did it take some time for you to get people really understanding what this is all about?
Yu Kai Chou: So interesting enough, I’m actually not a good salesperson. I think it’s the empathy thing. I’m just here scared of bothering people and pushing people, things that they don’t actually want. But what I’m good at is when I know people actually want to talk to me, then I can gauge them really, really well.
So my advantage is I have a lot of inbounds, so people reach out to me, they already sell, they already love the work, and then it’s easy for me to go and have. Now, sometimes there would be like, Director in a company who’s all in on this game cation thing, but they need to convince their boss, you know, the VP or the C levels that this is legit.
Now, of course, that sometimes is a journey about how do you persuade them? How do you use val case studies or examples, whatnot, to and the the behavioral science behind things to convince them. In the early two thousands, I guess you call that, it was completely crazy, right? It’s a crazy concept. And then later, People accept a bit more, especially this, this boom with the gaming industry too.
You know, games became more and more reaching in terms of demographics. They became more successful in all sorts of metrics. eSports became big. So I think that, uh, make people accept that too. Last year, one of the largest banks in Asia reached out to me and their chief of innovation told me that, Hey, there’s all these Neo.
Appearing that’s eating their lunch. And according to him, I can’t attest to this, but he says, and it’s obvious that all of ’em are reading your book, so we would like to hire you to teach us how to beat all of them. You know? So that’s just a funny thing that at least the perception of everyone is doing it or everyone’s learning it, is good for me.
Terry: I think that’s spot on. I see the same thing here in Australia. Absolutely. The little players, and they’re being very smart with the way they have their interfaces, way more engaging. And then the big guys are just a bit too slow at the moment, but. Hopefully they’ll get there. So obviously you’ve done some work in private, you have done work with games themselves as well, advising games.
Yu Kai Chou: I don’t do games as much. Typically work with games if, uh, You know, I’m friends with a co-founder or there’s some special connection. Typically, I tell people, right, my passion is not to make better fantasy worlds people can escape to. My passion is to make this world so much more interesting that you don’t even go there.
So I know games are already fun, exciting. They don’t even necessarily need to become more exciting. It’s the important things in, you know, education, healthcare. When I host public workshops, which I don’t do very much these days, we’ve had people from, uh, blizzard, from King, from um, Scopely send just their people to, to learn about my, I know my framework is also well used in the game design industry, but I just haven’t done a lot of projects in that space.
Terry: Yeah. And you have moved towards even more of an individual sort of side of, I’m a subscriber on the side of yours and, and I see there’s a lot of people in your community using the framework to make big changes in their lives. Could you share any really cool stories from people that have been able to take this, implemented it and make big shifts?
Yu Kai Chou: Yeah, so one that came to mind is one of our OP members we call Palace’s Prime. So they’re OP members. He was a music teacher, right? And he was passionate about teaching music and games. And then he was in my Casa Prime program, and he learned about. Eight core drives and how to motivate his life to, you know, not be in the comfort zone, take more steps forward, innovate his life, and also, you know, have more sellable skills.
So there was a two-step process. I think one of the step was became a instructor in like a music company. In his mind he was like, there was like upgrade, but then he became a game designer. For a musical learning game company, which is really like combining all this passion to like this perfect spot about, you know, you love these three, the game is using music to educate people. So it’s, it’s a pretty phenomenal thing. So he’s his life to have big shifts because of having this framework.
Terry: Yeah. That’s interesting. It’s a good demonstration, I guess, of having like a couple of really valuable skills, putting them together and then becoming very distinct because of that. Like it’d be hard to find another one of him, right in that whole arena. Someone who understands music and also somebody who understands this game side of things.
Yu Kai Chou: Yeah. And this is interesting because I have another framework called the 10,000 hours of play framework, 10 k hp. It might become a second book of mine, very slow progress because other stuff, but it’s about, you know, choosing the game you’re playing, identifying your initial stats, and then your role in the game, and then your allies, all those things.
And what I like to say is that it’s hard to be number one, the world on one single trade like math. But if you have a unique blend of different skills together, you could be number one in the world with that blend. Like for instance, I would say maybe I’m not the best in the world for game design. I’m also not the best with the for business, but I could potentially be the best in the world in combine those two you in applying business games to business.
So, so I think it’s, it’s good to find that unique plans that synergizes together and then just own that space.
Terry: Yeah, definitely. So given all your experience and everything you’ve learned along the way, and obviously you’re at the place now where, as you said, inbound opportunities to you, it’s more of a sought after place where people are coming to you and asking for help. What’s the most important truth about motivation that most people you think would disagree with you on?
Yu Kai Chou: Most people show up already read my book, so I don’t know how much they disagree, but I’d say the biggest thing is about a heavily reliance on extrinsic motivation. So they think, oh, if we wanna behave, we just reward them. We give them some money, we give some discounts, we, you know, give them a sticker.
And we know that’s limited, right? Due to the over justification principle. If someone already enjoys doing something and you start paying them to do it, at the beginning, they’re pretty happy. But once you pay them less and less and less, or stop paying, they just completely burn out. They don’t wanna do it.
It’s not worth their time, even though before they met you, they did it for free because they genuinely enjoyed it. So a lot of companies, they come in and says, oh, well we want to increase behavior, so let’s give them rewards. But I in fact say, let’s make it more interesting to do the activities. And this is important for the callous framework.
We have the eight core drives and it’s octagon, right? So the left side on left brain four drive. So that’s more of a logical brain, uh, stuff, and it’s. Necessarily geographically left versus righteous, symbolically left or reverse. Uh, rightward logical emotional. But the left rank core drives are about extrinsic motivation.
Things you do for reward or purpose or a goal, but you don’t necessarily enjoy the activity itself. So once you obtain the reward, it hits your goals or get used to reward becomes still stop doing it. Whereas the right brain core drives you. Intrinsic motivation, things you just enjoy doing to the point that you just want to experience and you’re.
Pay money to experience it. And even if we lost all our progress the next day, we would still wanna do that activity today because that’s how we measure quality of lives. How much time we spend on things we just enjoy doing. So if you look at social influence, right? Some, a lot of people since they were in middle school, they hang with the same, you know, two or three friends for three or four hours every day and there’s no reward, right?
No badges, no achievement, no progress, Barb, but it’s evergreen. People just like that. It just keeps going. In fact mo, a lot of working professionals look back to those times and think, oh, I wish I could go back to the time where we just hang out for three hours a day and do nothing. Right? That’s intrinsically enjoyable.
There no needs to be no incentive. So the question is, how can you make your environment like that? You know, just intrinsically making you wanna do things because you want it to last as long as possible, as opposed to, yeah, I got the reward, I’m gone. Bye.
Terry: Yeah, if I can validate that, and I mentioned before that my previous career was coaching and coaching athletes in support and this is pro sport. And so what I did notice was a good percentage of athletes would come in kind of loving the game and then money became a bigger and bigger part of it and status became a bigger and bigger part of it.
And that crowded out some of that intrinsic motivation and a lot of people burnt out because of that. Cuz it changed that motivation and it was the guys that could somehow figure out how to get back to that more intrinsic. Kind of level of motivation that we’re able to sort of push through that challenging period.
Cuz it is a challenging period. You were doing something for the love of it. Now you’re getting paid a shit ton of money to do it. . It does mess with the motivation a lot, doesn’t it?
Yu Kai Chou: Yeah. And on a simpler example, I used to be a competitive swimmer, but swimming practice is really. I mean, most actual foundational practice is a little ous and boring, right? So swimming back and back and forth, back and forth. But then when I play water polo, I swim harder than I ever do. and I, and I’m not even thinking about the benefits.
I’m not thinking about, oh, I’ll get healthier, I’ll swim faster. Uh, training, I’m just trying to get the ball. I’m just trying to not lose the other team and be a burden to my, to my teammates, and I’m just like out of breath already. I want to give up, but I see the ball and I just keep going forward. It actually made the activity more enjoyable, but I was not thinking about the extrinsic benefits of it.
Terry: and that was because of the social element of the game. There’s people around you, you are working together.
Yu Kai Chou: The social, the strategy, the wanting to, uh, play the game, the right.
Terry: Yeah. Awesome. All right. I would love to just walk through at a higher level, just each one of these principles of the SIS model, just to give guys a bit of a overview of that, and then just talk quickly about, you know, the black hat and the white hat stuff a little bit later on too.
Yu Kai Chou: It’s called the Octas framework because it’s a combination between the word octagon and analysis. So makes it slightly easier if you know the root cause of it. And then I think you’re going into Core J one Epic. And.
Terry: That’s right. Can you tell us a bit more about Epic meaning and calling.
Yu Kai Chou: So Epic Manian Cull is basically the drive that says, we are motivated because we feel like we’re part of something bigger than ourselves versus why people contribute Wikipedia. We know they don’t do it for money, but they don’t even do it to advance their careers, update their resumes. Some people put one to three hours every day after school and to Wikipedia because they believe they’re protecting humanities knowledge, something bigger than themselves.
And so you see that in games a lot, right? It’s like, oh, the world’s about to end, but somehow you’re the only. Qualified to save the world and it’s mo very motivating. So this is the theme about like freedom, justice, patriotism, any type, religion, faith, all kind of higher theme, saving the world sustainability.
Poor drive two is development accomplishment. It’s the idea that because we feel like we’re improving ourselves, we are leveling up, we’re achieving mastery, we feel engaged with that. So most of the points and badges fall into that. Four drive points are mathematical counters. It shows a sense of progress.
Badges of achievement symbols. Its symbolized sense of accomplishment and so, but it can be many forms, right? Trophies, uniform changes, black belt, white belt, which is used in martial arts and of course later on, adapted to a Six Sigma quality management core drive. Three is empowerment of creative and feedback.
So that one is about meaningful choices. It’s about autonomy, it’s about self-expression. It’s on the right top of the octagon, which means it’s a white hat. Intrinsic motivation, cord drive. . Usually the longest lasting type of motivation to evergreen type of stuff happens there because it’s just like infinite creative output that can come from this process, like being an inventor, you know, lifelong experimentation.
Cord drive. Four is ownership possession. So this is say because you feel like you own something, you wanna improve it, you wanna protect it, and you wanna get more of it. So that’s a bit like own virtual goods, virtual currencies. It’s also the why we like to collect stamps or baseball cards. Also has a bit of more abstract stuff.
Invest a lot of our time customizing our Facebook profile. Dropbox folder, LinkedIn profile. We feel more attachment, hence ownership to that experience. And even if a new technology that comes out that’s supposed to be better, we don’t wanna switch because we already have built up so much ownership into this one.
It feels like this one understands and that one does not. Core drive five is social influence relatedness. So this is basically everything you do based on what other people do think or say. So things like collaboration, competition, group quest, social appreciation, gifting, things like that. Core drive six is scarcity and impatience, which is the interesting one.
Something that says we want something simply because we can’t have it or because it’s very difficult to obtain. Like if you say, Hey, you can do this activity a million times, people don’t. But if you say, Hey, you’re only allowed to do it three times, they get pissed and they do it three times. Yeah.
Literally, if you look at some apps that say, Hey, invite your friends. Refer your friends who’s like, ah, I’m not gonna do it. It’s good for you, but how is it good for me are gonna pay me to do it. Right. But when they say, oh, you have three exclusive invites, then people are going up and say, Hey, who’s a buddy of mine who wants my three exclusive clubhouse invites?
Or Gmail invites, right?
Terry: Yeah, clubhouse did a great job of that. Yeah.
Yu Kai Chou: Yeah. The only thing that is limit how many times they can do it is suddenly there’s. Core drive. Seven is unpredictability and curiosity. So it’s because you dunno what’s gonna happen next, you’re always thinking about it. So it’s heavily utilized in the gambling industry, but whenever you have like a sweepstake system of lottery, a raffle ticket system, you have to core drive.
It’s also what motivates us to wanna finish a movie or a book. You know that curiosity?
Terry: that’s that variable reward sort of Skinner box type of motivation, isn’t it?
Yu Kai Chou: Yes, Skinner box. The interesting thing about the Skinner box is early does a game cation If people did say that. Uh, critics said that giving people points and badges is like putting them in a Skinner box, and that’s actually imprecise because if you know, the Octa frame or points and badges, if done well is about core drive two development accomplishment.
But the unique insight about the Skinner box is not that points badges or rewards motivate obsessive behavior. It’s the variable rewards and unpredictable. Create obsessive behavior and of course that’s used a lot in some gaming, especially some monetization themes these days, but with least can see the actual cause and effects and be more precise on the the techniques, whether you identify them or apply them to your projects.
Terry: Game of Thrones did a great job of variable reward at the end of every episode, didn’t they?
Yu Kai Chou: Yeah, so what’s interesting is Core Drive seven, unpredictable in curiosity, is on the right bottom of the outcome, which means a right brain blackhead motivation program, which means it’s right brain, it’s intrinsic. Our brains enjoy it. But as black hat, we feel out of control. So it’s like, you wanna go to bed at 10:00 PM but then you binge watch Netflix till four in the morning.
Right. It’s our, your brain enjoyed it, so it’s right brain, but you feel out of control. It’s black hat. Yeah. So it’s oftentimes you can see, like, even if the cord drives in the corner of the han, it will at the same time embody like both traits, the right left brain and the, and the white black hat traits of that motivat.
Terry: Yeah. Let’s do the last one’s. Loss and avoidance.
Yu Kai Chou: Yep. Loss of avoidance is pretty straightforward. You’re doing something to avoid a loss. You’re doing it because you don’t want something bad to happen. It’s the fear core drive. Sometime it’s like just avoiding change your behavior, like some kind of behavioral inertia thing. Dictators love it because creates immediate results, but most people aren’t happy being in that environment.
Terry: Yeah, I would love to just explore for a second that white hat, black hat concepts we covered already. Left brain, right brain. Extrinsic, intrinsic, but white hat, black hat. For me, when I start to look at how these things interact, as you just pointed out there with unpredictably in curiosity, you said this is right brain, but it’s black hat.
Talk to us about black hat versus white hat.
Yu Kai Chou: Okay, so white hat motivations on the top of the octagon. So it’s , 1, 2, 3. Epic meaning accomplishment and empowerment. And so white hat motivation makes us feel powerful in control. We feel good, but there’s no sense of urgency because we feel fully in control. So we procrastinate. So if we’re doing something because we feel like we’re doing something bigger than ourselves, we’re pursuing our faith and changing our world and we’re improving ourselves and we’re using our creativity feels great.
Black hat motivation makes people feel urgent, obsessed, even addicted. But in the long run, if that’s the only motivator, it leaves a bad taste in the mouths. Cause we feel like we’re not in control of our own behavior. So if you’re only doing something to avoid a loss because you can’t have something, or dunno what’s gonna happen next, it’s very strong and.
Grabbing us into that experience. But the moment we can burn out, we, we do because we, we feel out of control. So, wide end motivation is good for long-term community management, loyalty programs, innovative team building or environments. Black hat motivation is good for. You know, one-time transactions, you want people to give your credit card, their credit cards, donate money or short bursts of activity.
So when it comes to one-time transactions, so like booking.com was a client of ours and they’re looking for the one-time transaction, right? So you’ll see a lot of black hat techniques such as, oh, there’s only two tickets left and there’s 10 people looking at this ticket right now, and you have five seconds, 40 seconds.
I gotta buy. Gotta buy. So you buy the ticket, right? So you did the desired behavior. They made money, but you don’t feel great about it, right? You feel like you were kind of rushed into it, and you have may have a little bit of buyers and remorse. Now, the reason why they can get away with it is because booking.com is a low frequency transaction because you don’t buy tickets every week.
So after six months, you already forgot about that feeling like, Hey, I think last time I bought for booking and I have some loyalty points. Let’s do it again. So they’re fine. Now, if you’re amazon.com, Amazon want people to buy 10 times a day, so it’d be totally different. They don’t use any of the black hat stuff, right?
So I believe that they actually use this, all the same black hat techniques, and you feel a little bit negative every time you buy every day. You would not want to go to Amazon as often, and their business metrics will suffer. In fact, they use a lot of core drive two and five strategies, so accomplishment.
You have all and you feel smart, you have all the information you need, you know you can order it, and then you’ll arrive in one or two days. You can return it quickly. My wife, sometimes when she’s thinking about like a blender, she’ll buy three different blenders and then return two of them the next day.
So you feel smart about, you feel like in control and then social influence, right? So you safety in numbers, they show you reviews and what other people think. So they’re more of a white. Now Amazon does do black hat, but only in short bursts, right? So Black Friday. Then they do this of exclusive discount.
That only happens the next few days, but not, so that’s one time transactions. But then there’s also short bursts of activities. Like if you have a one week competition between your employees for that one week, it’s very exciting. A generalist high. It’s very thrilling. Everyone wants to trash talking to each other.
So it’s kind of fun. But if it’s a year long competition, most people don’t wanna be in a constant state of competing with their colleagues, coworkers. It creates a cutthroat environment, and a lot of people just burn out and leave. Now, even most professional athletes, and correct me if I’m wrong, most of the year, they’re not competing with others and competing with themselves.
So it’s more of the core job to development accomplishment and it’s short burst of actually competing with others. And those are fun and actually,
Terry: Yeah, I think that’s about. The stuff that makes it harder is that it moves towards the extrinsic. It’s not so much the black hat, it’s just that everything moves to the left and it becomes more about what’s outside of you that was inside you. When you’re explaining black hat, the thing I think about right now is like Instagram reels, TikTok, where it’s like pure black hat unpredictability, the curiosity, and it’s just a very quick flick and it’s just click flick. And just sit there and you’ll be like half an hour’s gone and you don’t feel good about it. You feel like what a waste of time. Nothing productive happened without time and you begin to resent the technology, don’t you?
Yu Kai Chou: Yeah. So that’s the, uh, slot machine mechanic. You pull and say, Hey, is there something interesting? Oh, nothing. How about now? Oh, something cool and it, it trains that whenever you feel boredom, you do that. So we’re standing in line, you’re doing anything. You just wanna pull that slot machine bar. I had a really interesting story back in the day when Facebook was the big thing.
I had a friend who was on Facebook and he was browsing around and he suddenly, his brain felt, So he instinctually opened a new tab in type new facebook.com, and he land on the homepage. He’s like, whoa, what am I doing? What? I was already on Facebook, right? And so his brain is trained that the moment he feels bored, he should go to Facebook.
It doesn’t matter if it’s already on Facebook. So that’s a trigger design. And I’d like to add, because you talk about the athlete thing. So black hat motivation by itself is not a negative type of motivation. It merely means if you feel out of control, and a lot of people use black hat to motivate themselves to do things they already want to do, eat healthily, exercise more.
This is why you. Pay your gym trainer to call you a loser when you’re trying to do pushups. Right. But feels bad when he is doing it. But then after you say, Hey, thanks for pushing me harder than I ever could myself and, and so if it’s a goal people already want to do, then they’re actually happy with Black hat.
And what people don’t like is when marketers, employers, governments, educators, parents use a lot of black hat to. Get us to buy things we don’t need work overtime without proper compensation, get manipulated. And so a lot of people do the activity because it’s obsessive, but the moment they can burn out, they run away.
So employees leave, customers buy from others. Sometimes, uh, children run away from home if the parenting strategy is all black hat. But the key is, hey, if I can use black motivation to add this urgency, right, to make me uncontrollably finish my book, then I actually feel really happy about it. So there’s.
Intent of the motivation. What are you’re trying to get people to do and that could be good or evil. And then there’s the nature of the motivation, which is Whitehead blackhead. And that just means what part of the brain is appealing to you? Is it in control, out of control?
Terry: Yeah. And a couple of years ago, I actually built a game for myself on my phone and it was tracking. I was tracking myself. I’d basically given myself certain points for different activities I was doing every day. I wanted to get really, really fit. And so I’d said, you know, if you go for a run, you get 15 points.
If you go for a 10 minute walks, you get this many points. If you do fire pushups, you give this many points. And I created this whole kind of bank, and every one of those points correlated to. And it’s money I earned back. So what I did was I pledged $300 and every time I trained, I earned the money back.
And let me tell you, it was actually super effective. But as soon as the game was over, I didn’t wanna do it anymore. And I think it was because of it was too extrinsic and it was probably too black hat. Would that be a fair analysis?
Yu Kai Chou: Yeah, so the idea is that now you put a dollar value to to the activity and when you don’t have the game anymore, it’s like, I’m wasting my hand doing this cause I’m not getting money back anymore. And so ideally the design is, use X extremes to hook people in, to get them to justify in the first place, but then make it so intrinsically more enjoyable that people just wanna do it.
So your design, you didn’t make doing the activity itself more enjoyable, you just made doing the same activity more rewarding. So when the reward’s. Then of course the activity is no longer something that’s appealing.
Terry: Yep. And now I’ve got this tracker heart rate variability tracker, and all I do is I try to, As many minutes as I can in this green zone. And as I do that my, um, development accomplishment, I see my heart rate variability improve over time and I feel like I can run a lot better. And so that’s way more white hat.
I’m really sensing like I’m getting better, I’m improving this and it’s not something I need to get motivated for because it’s kind of crushed that threshold now, which I find super interesting.
Yu Kai Chou: so what’s interesting is core drive to develop and accomplish, like you said, it’s white hat, but also extrinsic. You’re doing it for the goal, right? I’m trying to improve myself and sometimes potentially, the issue is that when people feel like they’re plateaued, they’re not improving, then they lose motivation cuz it’s results oriented, right?
The people that I feel like who are doing this consistently well, Are the people who are on Core Drive three and empowerment of creating feedback, and they’re like, like Tim Ferriss. They’re experimenting the whole time. They’re like, oh, let’s see. I do this with my lifestyle. Oh, my numbers change this way.
How about this? How about this? All right, this is the way to optimize it. This is the best optimal strategy. So it’s always fun when you’re just trying to come up with new strategies and optimize. Optimize. That’s actually pretty interesting.
Terry: That’s that sort of playful mentality, isn’t it? That Jay McGonagal approach, just being gamely, I guess. , obviously this is a money podcast and personal finance and investing is, are the things we talk about. So I would just love to know from your perspective if you were somebody who listened to this podcast.
Cast and you’re like, yeah, I’m learning all this stuff, but I haven’t been able to actually motivate myself to get going and do something. How would you advise that person to, I guess, design their motivation or, or manipulate it to improve?
Yu Kai Chou: I mean, this is a big question and yeah, I was forgot to wonder about the theme of the podcast because that all takes a lot of time to explain, but it really depends on what’s the desired action, right? So our work is always about. Okay, who’s the target audience? What’s desired action? And once we have that desired action, we can use those eight core reps to motivate that action.
So it depends on if the person’s managing money is like, Hey, I wanna encourage myself to save more, or I wanna invest more intelligent, I’d say the OC framework is very useful for me. when it comes to very volatile markets that have high speculation because, uh, then it’s all about psychology, right? So, you know, it’s people’s greed and fear.
It’s about how they manage uncertainty. And so I really enjoy and thrive in like things like Bitcoin or Tesla, like things that just go up and down based on people’s feelings. Ones that have epic meaning and calling tend to tend to survive through interest. So learning at your customer. Does help with that investment.
A lot of it is, I’d say these days, especially because so much there’s, it’s so easy to consumers to jump in and pick the market a little bit. I feel like it’s 60, 70% just human psychology and then 30, 40% fundamentals, right? You have stocks that’s like a thousand, uh, PD ratios, so it’s like, does it actually mean anything?
Right? What’s the difference between 1000 and 1500? It’s. It’s about the same psychologically, right? Yeah. So I think there’s a variety of things in terms of strategy and I think money is just a, a tool, right? To prove your life. So just like you said, use money as a way to motivate stuff to get healthier.
So I think. Advice you see less on other channels. It’s not about how to preserve the most money. It’s how to make sure you have the best conversion to something that improves your life. You need to give a, give the same thing. Tell a friend, Hey, here’s like $500 and I’ll do this by the end of the month.
If I don’t do it, keep my $500. That’s, and it’ll actually help you get to your goal, and I think that’s a great use of money, right? A lot of time your friends will actually be like, oh yeah, I’ll match like 50 bucks. If you do it, I’ll give you 50 bucks. But if you just want to. Think about not overspending.
There’s d variety of tactics out there. Some people like freeze their credit cards in a glass of water. So it’s like if you don’t do spontaneous purchase right, you have to go away for the the iced to thaw and then take out your card and then spend it. So yeah, I think generally speaking, it’s good to not make.
Especially large purchase, even even small, with these mobile apps, you say they’re just like, like chip a $2, $2 at a time by just double cooking your thumb. Right. With Apple Pay, it’s good to not make any meaningful purchase on the spot. At least give a 10, 20 minutes to cool down because they will use these black hat techniques, they’ll use scarcity.
So this is the biggest thing. You go to a gym, go to these places and they’ll say like, oh, right now we have the biggest promotion ever. Right. Once in a lifetime. Right. And you gotta buy before you leave this room or else it’s gonna be. , right? And yeah, maybe there’s like a one person street, but the chances of you just happen to.
Hit that once in a lifetime offer. The moment you walked into it that that one day you walked in your life is so low, they’re just gonna offer the same thing a week later or a month later, they wanna sell. Right? So just don’t buy into that bull crap about, oh, this is like if you walk out, sometimes I don’t wanna be rude because they spend a good time building that social relatedness, right?
That rapport. So I just, oh, I have to ask my wife about it. This as a policy I make. I don’t make decisions without talking to my wife. And I’ve seen people say, like they challenge me and said, oh, why do you need your wife to make a. Like, can’t you make decisions on your own? Right? So that’s a psychology push, right?
And I just said, well, no, just as a policy, you know, I talked to my wife first because I respect her. I feel very good sticking to policies I make myself, right? And so it’s like, it’s like I’m in control. I’m sticking to my policy. And, and so I, I think that’s important because once you know, there’s these motivational tactics, like one.
You can think about how you apply it to yourself in your own life, but you also get really sensitive too. Other people use this on you and you can decide, and like sometimes it’s like, yeah, I want it. I want it no matter what. That’s fine, but at least you have a choice to say, no, I don’t want to fall into these tactics.
Terry: Yeah, well, something that we’ve noticed is we actually encourage people to spend more on the things they really care about, um, so that they waste. On anything else. When we do that, and particularly when we set, start to sort of get some people and sort of say, all right, that’s a good little one. Let’s go for another bigger experience now.
It actually changes the way people feel about money because I feel like it’s shifting people up to that white hat. They’re in control, and it’s more that development accomplishment. It’s more that empowerment of creativity and feedback. Now, like you said, they’re kind of playing this game where they’re like, oh man, like we just saved $6,000 and now we’re using that.
To go and have this experience that otherwise we wouldn’t have been able to have. And so it changes the nature of the feeling of delaying gratification. So now it’s like, oh, there’s actually a bigger purpose for this. It’s not just about being boring and not spending any money at all.
Yu Kai Chou: I recommend spending a lot of money on equipment and tools to help the game you’re playing, whatever it is in life. So if I’m in front of a computer the whole time, I wanna invest in a really good computer. If I make a lot of videos, I wanna invest in good camera equipment and mic equipment. So, and especially things you use every day for hours, you know, it’s good investment because there’s tons of things we buy that’s, And we’re putting 40 to $400 that we use it for like two weeks and it just sits there for for 10 years.
And so if you use it a lot, I think it’s a good investment to upgrade your gear. And in fact, there’s a psychological principle with Quadra for ownership where when you upgrade your gear, you actually feel more psychologically empowered to play that role. And actually, I’m a pro, right? I’m a serious guy doing this and actually motivates you and I’ll put better work.
Terry: Yeah, a good example of that, I. I don’t know if you use or have heard of a thermo mix. It’s just like a cooking machine. My wife convinced me that we needed to buy one and it was not cheap. I think it was like somewhere between two and a half and $3,000. But if I look at how often we use that thing versus what it cost, it’s probably the best value thing we ever bought and it makes it a lot easier for exactly what you’re saying.
You know, it helps with like changing that behavior and it also means that that frequency of use, you’re actually getting a lot of value out of it.
Yu Kai Chou: Then another thing, it’s, it’s almost always good to spend money to create more harmony in the family. So my wife and I, we have different viewpoints of what’s clean and, and so we, back in the day, we’d have some arguments, right, because I think it’s pretty neat and clean and she just disagrees and it just affects her mood.
And so we started getting some people to help clean the cloud. And to me, like spend $200 to clean a house that’s not dirty in the first place is like a waste of money. But then I thought, You know, $200 a month and I actually have less arguments with my wife and we spent more call time together. We’re happy with each other.
That’s like a no-brainer. That’s like a great deal. Obviously everyone has different financial situations. We suddenly gave you like five more ways to spend money. It’s good to save up, save up for your future. Don’t ever pay credit card interest rate. You know, I don’t know why some people still do that all the time.
They’re just like, stealing your money. Make sure you have food for your family, but given that you have some wiggle room there, money’s really just a tool. To improve your quality of life, and you wanna think about what’s the best way to convert that?
Terry: I totally agree. The reason I’m laughing so hard here is because right now as we are having this conversation, our cleaner is going through the house and it’s the exact same reason, exact same reason. We’ve got the cleaner. And um, so I can vouch for what you said. Mate, thank you so much for coming on the show.
Is there anything that you wanna sort of share with us before you leave? What are you working on now in terms of that, that next.
Yu Kai Chou: I’m running three companies, the consulting design company. So if you want consulting design help, go check the Octa Group. I have Education Platform, which is a club Octa Prime. I’ve made about 900 videos there. So the actual book is about 5% of the knowledge that you can find from Op Island. Uh, it’s like a download of my brain, and in fact, most people we recruit from the, uh, NTR Consulting.
Graduated from OC Palace’s Prime. Most recently I started an N F T platform called, uh, meta Blocks, and it’s really merging two timeless things like real estate and memories of the human race into N F T, which for most people feel like the technology is kind of timeless, but it’s usually done with like, Short term games or funny profile pictures, which is not that timeless.
So that’s another project I’m very passionate about. I’m kind of making progress on the second book, uh, 10,000 hours of play like I talked about. The first book is about how to design anything with the eight four drives and make it more engaging. Second book is how to turn your life into a game and see yourself as a R P G character, where you figure out your skillsets.
You grow and you learn what’s the subject, what quest you have to take. But it’s coming out very slow. And then maybe a little bit er, but I am discussing having a book that’s related to what’s going on in the Ukraine. I guess that’s all I can say right now. But it’s pretty exciting because I’m working with, uh, the higher ups in Ukraine on doing this.
Terry: Very good. So you mentioned a few places there, but where’s the best place for people to connect with you and start to learn more?
Yu Kai Chou: Yeah, uki chow.com is the hub by my blog. I share knowledge there, and then it’ll take you to where your heart desires.
Terry: Excellent. Highly encourage you. If you’re listening to this and this was interesting for you, go in there, dive in. He’s right. There’s so many videos on that site, but they’re all super entertaining as well and you learn a lot. So mate, thank you so much for coming on the show. Really appreciate you giving us your time.
I hope to speak to you again soon.
Yu Kai Chou: Thanks for having me.