Phil Windley: When you look at the endless variety of products on the grocery store shelf, do you ever wonder where they came from? In many cases, the companies just guessed, but in other cases, they used the expertise of Howard Moskowitz, an expert in the field of psychophysics. On the next edition of Technometria, Scott lemon, Matt Asay and I talk with Howard about how he does it, what it means and how you can learn how to do it, too, on IT Conversations.


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And now, here's Technometria.

Phil: Hi and welcome to Technometria. I'm Phil Windley and today, I'm joined by the usual co-hosts, Scott Lemon and Matt Asay. Our guest today is Howard Moskowitz, CEO of Moskowitz Jacobs Incorporated and more importantly, someone who has a fascinating background in strategic brand development and the author of an upcoming book, "Selling Blue Elephants, " which I'm sure we'll get to the bottom of that interesting title as we talk.


Hi, Howard.

Howard Moskowitz: How do you do? I'm delighted to be here.

Phil: It's great to have you. It's great to have you.

Howard: Thank you.

Phil: So tell me a little bit about yourself. I know from reading your website that you do something in the field called psychophysics, which sounds cool, but I don't have any idea what it is. So tell us a little bit about what you do.

Howard: I'll give you the story. I was a graduate student in the middle of 1960s at Harvard University and I was introduced to a man named S. Smith Stevens, actually from your part of the world, from Utah. He was doing this wonderful work on relating the loudness of the tone to how loud it sounded. You know, he'd make tones of different physical levels and then ask people to give a number to show how loud it sounds. Actually, that's pretty neat. I was 21 or 22 years old and I had never seen anything like this. So I said, "Professor Stevens, since I had been assigned to you for my Ph. D., could I do something in the sense of taste or smell?" He said, "Great idea." I don't think those are the exact words, I think he grunted and I took that as a yes.


Then I began to work on taste and smell. I would vary the amount of sugar and water, which sounds kind of silly, but it actually was pretty instructive because I found that people could perceive changes in sugar and rate them as sweeter or less sweet. I started to build equations relating the amount of sugar and the water to how sweet it tasted. Well, you can imagine that you can't make a living out of sugar and water, unless of course, you are a honeybee. So, I got a job at the government and I said, "I think I can help you make better food for the soldiers by using this new method of psychophysics relating the physical stimuli that you people control to the consumer response." And that was the start of it, almost 40 years ago. From sugar-water, to creating Prego and classic pickles, and Maxwell House coffees, all the way to package design, all with the same principle - experimentation. I was the sort of...- a long winded answer to how I got started, but I think you see the connection.

Phil: Yeah. So that explains it perfectly. Psychophysics connecting the physical stimulus with what people perceived.

Howard: Yes and I thought it was a really wonderful, interesting area. You know, it's like falling in love and you never fall out of love. It's now 41, almost 42 years and I love the field with the same intensity as I loved it in the middle 60s.

Phil: So it seemed to me that that is kind of a description of what anybody who's involved with building a product, be they a software developer or marketing, product marketer person, I mean essentially, that's what they're trying to do. They're building some artifact that's going to produce some sort of stimulus and of course, we're hoping for a good reaction, right we want people that laid money down for whatever we're doing. Is that the connection?

Howard: That's pretty much it. You know, you can vary the physical stimulus, whether it's a pasta sauce, or whether it's a message, or whether it's parts of the screen for a website, and you can get that person's reaction. Then when you do this systematically, you're being a psychophysicist. You know I was surprised, of course, when you're in your mid-20s, you think that everybody is doing this. I didn't know at that time that a lot of people shoot from the hip and still continue to do so, it's sort of my bet and one of my favorite points to argue with. I thought that everybody did this systematic analysis of how changes in the product generated changes in perception. But I'm amazed when I found out, when I went into industry that almost nobody does, they all guessed. It's surprising. You know, you're laughing of course.


I'm sitting here and I could laugh, but as I was thinking about it, we're going in now to Asia, with its principles and it's so much different in Asia. They are hungry for this, they are hungry to know what the rules are of the mind, what the rules are of the tongue. They're hungry to figure out how do they know the relation between what they do to the stimulus, what are the message or the package or the food or an instrument, and how the consumers will respond. It's such a pleasure to see this and I'm so worried for America and for Europe, which seems not to be on the ball compared to Asia.

Phil: I want to get to that because I think that's really a fascinating area. Clearly, a lot of people really are interested in Asia, in China in particular. You know, as we get into this, what are the things, as I looked at your book, you're kind enough to send me the proof, and also just look at some of the websites, what are the quintessential stories that seems about your experience is the Prego story. Can you tell us that?

Howard: Yes. In 1982, I was at Campbell Soup, working with some of my clients, Kathleen McDonald and some others. Kathleen, who recently passed away, by the way and I dedicated the book to her, Kathleen said, asked me this funny question, she said, "Do you think you could use this psychophysics stuff to make better pasta sauce?" I stopped for a second, I thought about it and I said, "Why not?" And so we did this experiment. I said to her, "Why don't you have our technical development fellows sit with us in a meeting and let's figure out what we can vary to this Prego, " which was a very small brand at the time. They came up with sugar, an amount of tomato salad and some ingredients, and we made about 44 or 45 Prego products. We tested them with consumers. We took the road show across United States and tested them, and came up with a Prego equation that said there was a certain group of people that liked a specific set of ingredients. And when we made the product, or really when the Campbell's Soup Company made the product, it broke the bank. And from then on they were convinced that you could essential create products using this psychophysics method--systematically varying the products.


But the first few runs we all held our breath as we cooked the product and put it over spaghetti. But it worked very nicely. I wish I had pictures I could show the audience, pictures of these stoves with four or six burners on it, with people labeling out spaghetti sauce onto plates, and giving them to consumers who were sitting in another room. And watching the consumers rate the different spaghetti sauces on how much they liked it, how much tomato flavor, how homemade it was, how sweet it was, and then all of a sudden all the data came together at the end of the study in a mathematical model. This wonderful psychophysics model.

Scott: You know, it makes me think as you talk about that it's interesting because I've listened to and read Malcolm Gladwell's work and some of his presentations. If you were going through taste testing like that, what do you have to do to prevent the blending and blurring of all those flavors and different things across consumers? Do they... I mean I'm just kind of curious about the process of that. That it doesn't cause some sort of interference or something as I'd be tasting spaghetti sauce, after spaghetti sauce, after spaghetti sauce.

Howard: That's a wonderful question. First of all let me reassure you you're not the first, you are probably the 900th person who has asked that. And they've asked that for Pepsi Cola, Prego, Vlasic Pickles, Maxwell House Coffee, various fruit beverages and the like, Pizza Hut Pizzas. So, of course it is a very good question, how do you prevent sensory burnout? You know the common wisdom, which by the way is not true, is that you can only eat one product and then of course your taste buds, and your palate flatten out, and you can't tell.


Well, nobody who says that has ever gone to a Chinese buffet and watched people go back for the eighth time. But be that as it may, you randomize the products. Of course you don't try the same order of products for each person. Everybody gets a different order. You wait about five minutes between one product and another. And of course, the most important thing and I think the audience will laugh, you pay the participants many $50 or $60 to compensate them for their time.


Anybody who has got children will know that children are incapable of doing any work if there's no money involved. But, once you give a kid some money for the work that they do or allow them to go outside after they do the work all of the sudden they are very peppy. Well, this is the same thing here. Just motivate the consumers, give them some money, spend a little time between products, have them do five or six products in a couple of hours, and you will be fine.

Scott: How do they, this is man... Question on that because it's something that I've always been worried about, I now LASIK surgery so I guess I don't need to be worried about it anymore, but when I used to go to the eye doctor and he or she would put is this one better or is this one better, is this one better or is this one better. I was always scared to death that I was going to say the wrong thing. Or, I wasn't going to remember which was better and as a result my glasses or contacts would be forever set to the wrong setting.

Howard: Does that sound familiar. That sounds familiar, heaven forbid any of us should make a mistake, like not learning how to do multiplication in the seventh grade we would be forever tarred.

Scott: I'm wondering on the food thing. So I understand and I believe that what you say is true, that people give them a little space between tasting and they'll be fine, their taste buds won't flatten out or whatnot, but remembering do I like this one better than the one I tasted three times ago? How do you help them remember? Or, do they rate each one on a scale of one to ten as they go along?

Howard: Yeah, that's a good question. You know the psychophysics literature, which I'm not going to go into for the audience but you can read it, deals with this. The best way of doing this is not to pay attention, just tell the person a sign and number between let's say 0 and 100. So it's the number is as high as you like the product, or the number is as high as it is sweet, with 0 it's not sweet at all, and 100 is extremely sweet. And don't worry about being perfect. Don't let the perfect be the enemy of the good. If you have 10 or 15 or 20 people it will average out.


This is not a case of heart surgery. You get ten people's judgments and by and large, after a little while, the data will become very, very tractable, very solid even though each individual might feel he or she isn't doing so well. The average almost always conforms to what the physical stimuli say. That is to say stronger, more spaghetti sauce, or more tomato will come out being rated on the average as being more tomato-y.


Remarkable, it's absolutely remarkable. By the way, this is one of the things that intrigued me when I began in the field, even though I too thought, "My heavens, how could I possibly remember all these things?" The numbers are pretty consistent over a bunch of people.

Phil: So, does this start to then potentially say that there are certain neurological to sensory patterns that are just sort of hardwired in large segments of the population?

Howard: I think so. Although there's not all that much proof yet. There was some proof in the sensor pace about 40 years ago when they were able to do some recordings from nerve called the corta tympani. That's the nerve that innervates the tongue. And, they were able to show that if you have solutions of different amounts of sodium chloride, the neural activity of this corta tympani--this innervating nerve--was pretty proportional to the amount of sodium chloride. Just as you expect for what you perceive.

Phil: Interesting. And would those potentially go back to theoretically to geographic locations or origins of their ancestry. I mean, would this potentially relate to where people even came from and the foods that they had eaten way back?

Howard: Good question. I think that not the intensity, but I think how much you like it. I think some people like spicy foods and some people like bland foods. I think there are these fundamental sensory segments around the world, and in fact that there are sensory segments even in the United States. So, I think it's almost like differences in hedonics or liking in the genotypes, you might find a population spread through the United States that really likes high impact products, another population that likes low impact products.


I think this is an enormous opportunity for product marketers around the world to find these segments. We did that in Prego. We found that there was a chunky group, and a mild group, and a high impact group--three groups. We did it with pickles and found there's different groups of people with pickles. We've done it with pizza and we find different kinds of groups. And, these groups are all over the world in different proportions, but the same groups keep coming up.

Phil: That's an important point I think. When you do this you're not looking for the best or the answer, you're trying to figure out which things are good for which groups. Is that right?

Howard: Yes. And the groups are sort of interdigitated or they are within any block in the United States or around the world, in India, in China, within the same location, within a block, or two, or half a mile. You'll have all of these different groups in different proportions. So, it's not like people in one area of China or one area of the United States are all high impact people, they like spicy strong tasting foods, and individuals in another area like weak tasting foods. In the same area you may find a split of 60% high impact, 25% medium impact, and 15% low.


So, I think that the reason that we see so many products on the market is marketers are recognizing this proliferation, this different group of preferences, and then they are proliferating the products around them. There's not one perfect soda. There's not one perfect Prego. There's not one perfect coffee.

Phil: Do you think there is a problem with too much choice though? I mean, with Prego, you go to the store and there're 15 shelves of spaghetti sauce and I go, "My word, which one do I want, I have no idea." So, I go buy a hamburger.

Howard: You know, somebody once said, "Too much of a good thing is wonderful." But, I think marketers picked this up 20 years ago. 20 years ago when we developed this notion of sensory segmentation there were two or three spaghetti sauces and that was it. You know, it was like Henry Ford: you can have it whatever color you want as long as it's black. But, I think they've discovered that this is a real opportunity. And if you don't like spaghetti sauces, take a look at olive oil. And if you don't like olive oils, take a look at mustards. It's death by choice.

Scott: You know, it's funny, you talk about the taste area, I'm curious if you have done work in the visual and audible stimulation also. As I look at some of these brands there's got to be some player or research I guess that I'm assuming that you have done in that space too. It made me think of it when Phil talked about which one do you pick? And I've heard before that all of the things about placement, and how humans respond to different levels on the shelves, and colors, and different things like that. Do you do work in that area also?

Howard: Yes. And, a little bit less. It's far less developed, but we've begun in the last year, we have a program called Idea Map Net. And the listeners can get it at www.ideamap.net. We've started to do the same approach, which is systematically vary the composition of a picture, or a package, and figure out the algebra of the mind.


It's like the algebra of Prego. With Prego it's how do the different ingredients drive liking or perception. With a packaged design it's how do the different features in the package design drive perception. If I substitute one color for another, or one typeface for another, or one picture for another what kind of change do I get? This is almost the psychophysics of the mind.


And, by the way, it's a lot of fun. The audience should know that, I don't know if you can tell by my voice, but not only is it a business; it's really a lot of fun.

Phil: Yeah, you are very enthusiastic about it. That's great. There's obviously a science to this. And I know from reading your book that you have an acronym, RDE, that you use to describe this. I said read your book, I looked at your book. Let's not be too... I don't want to claim more than I have. But, can you walk use through, just kind of an overview of what the process is?

Howard: Yeah, OK. First of all RDE is an acronym for Rule Developing Experimentation. Rules because the goal is to come out with rules of the mind. Developing because you develop it on the spot with your consumers. And experimentation is self-explanatory--it's experimentation.


So, the goal is whether you are dealing with Prego, or whether you are dealing with statements about public policy, the goal is to find out rules of how physical features, or communications, or package features drive responses.

Phil: So, it really is a rule in the sense that a technologist would understand. If you do this, you get this.

Howard: Yes, exactly. Technologists therefore ingredients, or an advertiser for a communications, or a package designer for package design features, or even public policy. If you apply this to statements about public policy like engineering the President of the United States as a consumer product.


And, it's really quite simple without belaboring the points. And I can almost list out just the limited number of steps. Step one: what can you vary. If you can't vary anything, then you are not in the game of RDE. You've got to be able to vary. If it's Prego you can say you can vary the sugar, you can vary the tomato solids, you can vary the acid, you can vary the amount of mushroom. If you are into communications of magazines you can talk about the name of the magazine, what it has, how it is going to be published, what the price is, where you get it. So you have to be able to vary the features.


Number two: mix and match different combinations of these things that you can vary. And create either test products for Prego or small vignettes that you can show on the computer screen, like small ads.


Number three: test them among consumers and get responses.


Number four: relate the response that the consumers give you to what was under your control using an equation, a mathematical equation, using what's called ordinarily squares.


And number five: add pops your rule. It's very simple. You know, I've often been asked why don't you make it more complicated and I say nature, like an Einstein saying, "Nature should be as complicated as needed and just no more."

Phil: So, how is this different from focus groups, which you hear a lot about?

Howard: Well, focus groups you sit around, and a moderator asks you questions, and the group is sitting in the back listening, and one person plays off another in the group, and you end up essentially with a discussion. And, if you have four or five groups an analyst will go through the verbatims, the language, the videotape and try to pick up the tread of a conversation. It's very much like when you discus things with somebody, when a doctor takes your history, the doctor puts in certain things. This is what the focus group is. It's sort of probing a person to find out how they feel.


This is very different from an experiment; the focus group is not an experiment. An experiment systematically varies the factors under one person's control, the researcher's control, so you have an array of combinations that you know what are in each of the combinations.


You get the consumer reactions to these in terms of some scale of liking, or scale of sweetness, or scale of convincible, I'm convinced by this statement, or scale in interest in buying this magazine cover if that's what's being varied. You systematically vary, you get their responses, and then you relate what you have done, these antecedent changes, to what the person says. And come out the result is an equation, a model, which allows you to predict, first to describe the relation between what's under your control and what the people say. And then allows you to predict new combinations that have certain properties that you did not suspect.

Phil: Do you actually have to have them experience these things, or can you just describe them to them? Like, what if the magazine cost $3 versus $12?

Howard: Typically what you can do is, if you're doing a magazine, you'll have that as a visual graphic. You'll vary the headline, you'll vary the story, you'll vary the price. And the consumers will see different combinations - of different headlines, different prices, different stories, different pictures. Then you'll be able to relate the prices and all of the variables independently to how the consumer says she or he will buy the product or buy the magazine. So you'll actually know what is the effect of going from $3 to $4, holding everything else constant. That's what the nice thing is about a model. You'll really end up figuring out what's happening.

Scott: So it's scary to me, and I have to sit here and think after reading this week - I don't know if you're familiar with Jeff Hawkins and his work at Numenta, but they're building some models in software of learning systems based around a possible model of the cerebral cortex and one of the things there is framing it to do pattern matching and pattern recognition. I sit here thinking of utilizing his machine tied with your formulas and your research, and what might be able to come out of something like that.

Howard: I think that that's an absolutely wonderful opportunity. In fact, that something that all of us in psychophysics want to do - not only relate the ratings of the consumer to the stimuli, but also to the brain, so we can tie all of them together. Wouldn't that be wonderful? Not only to know what is the relationship between pricing the magazine to perceived interest in buying, but also to location and how much the brain fires. It's a wonderful opportunity, and believe me, people are trying it - they're beginning to look at this stuff.

Phil: It sounds like you've got a process, and it seems pretty simple as you describe it. But isn't building experiments which you can actually get good data out of a pretty complicated affair?

Howard: Well, if I were a priest and I were politically correct, and I wanted to bamboozle everybody, I would say absolutely, and only I could do it. But the truth of the matter is the exact opposite.


Number one, if you want to disabuse yourself of it and prove how easy it is, I would suggest that the audience just take four or five glasses of water, and mix different amounts of sugar, so that they have different sweetnesses, randomize it, and then rate how sweet it is. You'll see how easy it is to build a curve relating the amount of sugar in the water. It's very, very straightforward.


And for the more complicated cases, there are books of experimental layout that will set it up for you.


This notion of being complicated, I think, is a bit self-serving. It's sort of the priesthood trying to assert itself. We do this all the time - we intuitively and instinctively run our own experiments in our mind. If I do that, and I change something - what happens? There should be no reason why people should be afraid of this.


By the way, that's editorial from Howard Moskovitz and not to be construed as a point of view of this program.

Phil: [laughing] So, you build these models, and how do you use the model? You end up with these rules - What do you do then?

Howard: Well, if I'm a food manufacturer, I have this equation or set of equations for cracker jacks, soup or soda. The equations relate the things that I can control; like for example, time of preparation, amount of sweetener - I can dial all of these things.


So, if I'm the product manufacturer, what I find out from the model is - I ask the model, "Give me the combination of factors under my technical control within the specific cost of goods (I don't want to spend a fortune) that gives me a very highly acceptable product and has a certain sweetness that makes it different from the sweetnesses of the other products on the market."


The model cranks away for a few seconds and says here is the formulation. It's within the range tested - it's not exactly one of the ones we tested - but it's within the range. It gives you the appropriate cost of goods so you won't go broke. It gives you a high enough acceptability, let's say 66, and that's above your threshold. And it gives you the sweetness region that you want. It's sort of dial-a-product.


In fact, if I'm doing this, I'm able to, like Maxwell House did, essentially control my entire buying, by knowing what are the best combinations of coffee beans that I have to buy to maintain profitability.

Phil: Many of the people listening to this show are technologists; they build software products, websites, that sort of thing. Have you done work with technology products? Any good stories there that you can tell, that can help us understand how this can be applied?

Howard: Yeah, There, without divulging too much confidence, I'll tell you about the story about some innovations. You know, I've been talking you about this experimental design of Prego, but let's say for the sake of argument (I deal with this in my book), that we're sitting in China and we have access to factories that can create different kinds of electronics-based products and we want to innovate products. So this is some stuff that's recently happened.


The company came to us and said, "We want to appeal to some people in Latin America and we want to create a product that combines the features of a DVD player, a PC tablet, and a small game console." We used RDE to figure out what to do. It was a lot of fun.


Remember we talked about first the systematic identification of what you can vary. So we have features from the DVD, features from the portable game, and features from the portable PC. Using this experimental design, the thing that I talked about - this array of variables, we mixed and matched features. So, we had different combinations of features coming up on the computer screen. You could have something a the DVD, something a the tablet PC, and something from a game console. It was an entertainment device of course.


The consumers who were participating on the web did not know that this was a hybrid product from three different areas, and they would rate how interested they were. Well, at the end of this exercise, if you see 60 to 70 of these combinations, you end up with some combinations that you like and some that you hate. The rule developing experimentation, RDE, essentially identifies the features from three different universes that the young entrepreneurs could create.


Essentially, they could go to the factory and say for the people in this Latin American country, there's a big opportunity for this new entertainment device - new to the world - and RDE suggested has a certain set of features from the tablet PC, another set features from the portable games, and a third set of features from a DVD player.


For those of you who are interested in technology and software and web sites, think about RDE, not so much as Prego, but think about it as a way of mashing features in an experimental design, with these features coming from different worlds, and essentially having an invention machine. Think also of this invention machine being a virtual invention machine on the web where the consumers can be sitting anywhere in the world, whether it's Iceland or New Zealand. Or, if you have someone in the South Pole, the two of them, they can participate too.


It's essentially linked up to a factory. RDE gets the elements from different worlds, the consumers in the target country participate, responding to these virtual new-to-the-world combinations created by RDE. The results are analyzed instantaneously and fed to a factory in China which is able to combine the features and create the prototypes. It's a little different than Prego, but not really.

Phil: As I listen to this, one of the things--as I've been involved in product development in my past life--is it always seems like there was somebody, one or two people, who really seemed to understand. If you really wanted to build this thing, you've got to have Cathy involved. Is it just that Cathy has this intuitive feel for these rules that maybe she's developed through actually interactions, and this is a formalization of what some people do intuitively?

Howard: I think so. I think that there are people who get it, but you don't know who they are, and they don't always get it. In the food industry when we began, there were people with golden palates who knew the taste of the consumer. But this is a personal point of view.


I looked at it and thought, what if we could democratize the palate and make the world create Prego or Vlasic pickles? What if we could make the world create new products like I've just described? What if we took it out of the realm of the expert and democratized it so anyone in the world, small company, large company, startup company, well-established, could understand what the features are for new products that are new to the world. What if we didn't have to have the Cathy? The world of the Cathy's is fine, but what if somebody new to the business could be every bit as good as Cathy in a week?


That's my vision and that's what I see. By the way, I was mentioning at the beginning about Asia. I see that excitement in Asia that I would love to have in the West. But I see that hunger for this ability to not have the expert, but have it democratized so that anybody could compete. I see that much more in Asia.

Phil: I think in your book you mentioned China specifically. What do you think it is about the Chinese culture at this point that makes them so interested in this process?

Howard: Well, they visited us ten years ago when they wanted to do it, so it's certainly not new. I think they're not necessarily hamstrung with the same organizational legacies that we are. In Greek legend, there's an old saying, "Those who the gods would punish they give prosperity first for 40 years." I think the Chinese have never had it. The Indians haven't had it. The Malaysians haven't had this wonderful prosperity the West has had since the end of World War II.


So, they've had to build an infrastructure, not with the benefits of a lot of fat that we in the West have had, and so the young people are intensively competitive, sort of what we were 60 or 70 years ago. They're willing to seize on new technologies. They understand mathematics. And there's a sense of an engineering, scientific, technical rather than business, financial discipline.


That's a long way of saying I think they're hungrier than we are and they're more technologically savvy than we are.

Phil: More willing to apply science?

Howard: More willing to apply science, and I'd even say more willing to experiment. There's a real inhibition about experimentation, almost a rejection in the West of experimentation in favor of "Let's do our standards, let's do our norms. We have our purchasing department contracting for advantageous conditions." I don't see that as much in Asia. I hope I'm not foretelling the doom of the West, but I do have a sense of a rather different mindset, a rather different worldview.

Phil: As I mentioned earlier, I'm involved in outsourcing with both India and the Philippines, and it's funny that that's exactly what I see from the developers over there that just has me so excited working with them. It is, like you say, that level of hunger, and then what's fascinating is that the Internet is a place for them to actually participate and compete on real equal footing with any developer over here in the States or in the Western world. It's amazing to me to see how much they want and what they're willing to do to get it.

Howard: I'm so thrilled to hear that, because I thought that I was being politically incorrect by having chapter 12 of my book called "The China Angle" predicting what would happen in a few years. I think you're right and I'm glad to hear that in some ways. I wish I knew how to wake up the people in the West. Is it too late? Are we going to be a victim of our own success?

Scott: I think it is interesting when you talked about some of the historical models or comparisons and things that have been said. It's funny that those things seem to have that ring of truth in them. You look at great empires and what happens, and there's something that develops within it. You can't say it's across everyone, but it seems in a large number of people there's, "I want it without having to work for it."


I think back to just, like you said, the World War II thing. What generation that's existing in the United States today really experienced hardship, or what would be seen as hardship? You go back to your parents or your grandparents, or you're at an age where potentially there was a little bit of overlap with some of the later wars. But World War II was long enough ago that any younger generations coming out of college today don't have any understanding.


It's really strange, because I even heard something today on BBC News about China. They were saying that they have what they're calling the "little emperor syndrome" where they're running into one aspect in China that is difficult and related to the Internet where a lot of the single children, because of their population rules, were raised very spoiled and gloated over by their parents. Again, they don't know the hardships in a lot of ways, and as they're getting older they're wanting to continue to be spoiled. They don't want to work for it.


They were talking about these Internet boot camps that they're taking a lot of these kids and sending them to that's almost like a forced military two-week boot camp to try to wake them up and shock them into a little bit of reality from how they were raised.

Howard: My heavens! It sounds very, very rule. I can identify with that. I was born during the war. Growing up after World War II and seeing the hunger of students at Queen's College where I went before Harvard, taking mathematics, engineering, science and then looking at what happened to the University 30 years later, and they are not the same.


And my parents had gone through the Depression and so they always wanted an education, always said study math, study science. I'm really hopeful that there will be, that this book will attract the attention of policy makers in the United States and show how important it is to do these experiments, to understand consumers, and then to create products based on knowledge, not just based on, well, just hopeful wishing.

Phil: It would seem that for something that works people would want to do it. Do you have... What do you think it would take for us to really get to a point where we are applying science to product development?

Howard: Would you like me to tell you the politically correct answer? Which is a great deal of education and a lot of emphasis by schools and by magazines, that's not true. What it's going to take is massive failure and a real, I would not say depression, but a recession. I would say that, like Sputnik, I think Asia really has to quote "kick our butts". I think we have to see a number of massive bankruptcies occur. And, I think people really need to see that the bankruptcies are not financially driven, but really are lack of competence. We can no longer compete in areas where we used to know because we are just not good enough.

Phil: Well, that's just capitalism, right?

Howard: That's just capitalism, yes. I think we need to be really severely trounced in order to wake up. It's like how do you get the attention of a mule, you hit it on the head with a two-by-four. And, I think we need that. I think all of the other things about No Child Left Behind is very nice, it's good social policy, but there's no pain. We need to be in severe pain for a sufficiently long time before we wake up.


Otherwise we are going to have the same anodynes, the same excuses that we've had, which is, well, we will have more courses on the mathematics of making a profit. You won't know how to do anything, but you will know how to make a profit from somebody else doing it. I hope that that appeals to your tech people because they're the ones that have to make the thing.

Phil: Is there any sector that you see more willing to do this kind of thing?

Howard: I think the technical sector, the technology sector, is going to, if anything happens I think they're the ones who will pull us through. I don't see the food because people "always have to eat" and if you miss a shipment of a chip, like a potato chip, nothing is going to crash. But, if you miss a chip and you're in the computer chip business, you can go bankrupt.


I think the faster, the stronger, the harder the feedback loop, the more punishing the feedback for failure, and the shorter the life cycle, the more hope there is. And I think that's happening in the information business. I think it's happening in the technology business. It's not happening in manufacturing.


I think I'm sounding like I'm depressing you. It's OK; it's OK because this is creative destruction. You know, Schumpeter talked about creative destruction 60 years ago. The problem is when you're being destroyed it's not so interesting.

Scott: Yeah, I've heard it; I've heard it in other ways saying you have got to have a pretty severe breakdown to have a breakthrough.

Howard: Yes.

Scott: And it just seems as though... It's funny, what came to mind as you were talking about some of these even when you do look at some of these financial impact things happening around the country, I have a friend in real estate that I work closely with that's turned me on to following the current foreclosure rates around the country and some things that have been going on there.


And it seems though that there is not a lot in the news about it, but we are hitting peaks that have never been seen before in U.S. foreclosures, on people not being able to make mortgages and things on a lot of poorly architected loans and things like that. And a lot of that seems to be, to me, sort of an indicator that something is up.

Howard: Maybe that will be a blessing in disguise. I hope it's not a curse in disguise.

Scott: You know, I was going to ask one kind of going back to your research, a long time ago I really started to think a lot about the data mining, and things that can happen, and one specifically that I used to joke about in presentations that I would do, which is around these grocery store food cards. And it was interesting to think about what they are doing there when you use your discount card at the grocery store and they're logging everything you bought--time, day, who you are, and all that type of thing. And the various information that they could glean from that.


And my jokes in the presentation were things like what phase of the moon do you buy the most Jello. And of course people would say, "What do you mean?" And it's like the grocery store knows that about you.

Howard: Sell it.

Scott: And I start to think about all of that data that they are gather from all these products and all these things. Do you see, do you believe that there are even other external [inaudible], even the direct taste of when people crave certain foods, or when certain things go that there really would be those level of subconscious purchases, and things like that that occur that could be mined and gleaned from that kind of data.

Howard: Yeah, that's, I was listening to a lecture about that and business trends. I think business information, competitive information of business information systems are going to be able to get a lot of that information. I have a vision of the information on the shelf where you organize a lot of this stuff and you have data mining things that could actually answer when should I articulate certain kinds of messages on television. And, I think we're getting there. It's not very far into the future. I think it's all a function of doing it right.

Scott: It seems like a pretty fascinating area. The thing that I love doing, some of the conferences I've been attending over the last couple years is the level of brain research that's going on and what we are learning about different parts of the brain and reactions to stimulus, it's a fascinating area.

Howard: As long as that can be correlated with what you can do operationally, I think it's wonderful.

Scott: You talk about all of the data that Albertsons and other grocery stores have about us because of those purchasing cards. Do they really do anything with it? Or is it all sitting in some disk somewhere and they just haven't figured out what to do with it?

Howard: They sell it to various companies who do data mining. But, I think the data mining is only very primitive. They are doing a lot of things like what happens when a product is out of stock, what else gets bought. I think they are going to start marrying that with attitudinal stuff, with the stuff that I've been doing in terms of the algebra of the mind. Because if you can link the mind with store behavior, then again the psychophysics notion, you can engineer store behavior.

Scott: You know, what's funny to me is I thought of another one related to that was if you were mining what types of products you could pick key products that would even allow you to determine children, potential quantity of children, and ages of children to then even start marketing to those people--target marketing. You know, what are the next products that they're going to be interested in based on the ages of their children.

Howard: Yes, I think demography is destiny.

Phil: I think there are two different things here though because and maybe you see them as the same so help me understand that if so. There's the idea of I want to design a product, so I'm going to vary things, and figure out what product variability I can use to produce things that people want, " versus "How can I figure out how to manipulate people into buying what I've got?"

Howard: One of them is "how do I vary the product, " which you just correctly said, and the other one which is the same thing is, "how do I vary the messaging." Two sides of the same coin. If I want to sell Prego, what do I do to make it good and what line do I use, what specific words, what specific pictures do I use to make it interesting?

Phil: Because I think there's a lot of people who would look at the first thing and go, "Wow, that's good, somebody is giving me something that I want," whereas, they look at the second thing and say, "I don't want to be manipulated."

Howard: Right. 1984, although that's 23 years in the past, it's inevitable if you do the scientific method of experimental design, why should anyone stop at ingredients? Why shouldn't you, in fact we do that in our work, why shouldn't you engineer messaging. In Selling Blue Elephants, we actually have most of the book talking about messaging and not about products.


By the way, I want to digress for a second. You asked, what was the origin of the name "Selling Blue Elephants?" Well, originally, it was going to be "Selling Green Eggs" from, I don't know if your listeners remember green eggs and a ham, Dr. Seuss, about Sam, I am and trying all of the different permutation to get his green eggs sold. Well, we loved that, Alex and I. Except that we ran into some potential difficulties with selling green eggs because of the Dr. Seuss foundation. So then I decided, well let's start selling blue Eggs, but the publisher thought a little bit more and said, "Well, it can be construed as selling green eggs." So I said, "OK, let's..." Then the publisher asked me, "Well, think about something else." So of course in a great scientific experiment that lasted over a cup of coffee, I said, "Selling blue broccoli, selling pink elephants, selling blue elephants." Selling blue elephants sounded kind of nice and that was the choice.

Phil: So I have to ask you, did you, it doesn't sound like it, but did you apply your methodology, RDE to figuring out the book cover and the name and the pitcher and all that?

Howard: A little bit of it. We had a couple of alternative book covers and a couple of alternative phrases, but it wasn't to the extent that it should have been.

Phil: One of the questions that springs to mind as you talk about demographics is, do you know, or do you have any sense of, if there is some fundamental limit to how small a demographic can get before it becomes unmeaningful or something you just can't deal with? I mean, is it possible we can get to the point where RDE, or maybe its successor 20 years from now or whatever, gets us to the point where we have demographics of one, where essentially every message is completely targeted to me?

Howard: Yes. Let's look at the following scenario. Let's say, I meet you on the web and I don't know you, but for some reason, you are interested in, say, a car. And I say, "If you participated my game, then, I'll give you a chance to get a free car" and I have you do an RDE interview where you get mix and match different kinds of messages about cars, about pricing, about terms, etcetera. Then, I know something about you and I can offer you right away that combination of features which you really want.


So, in fact, the thing is, it's very possible to do that if I can engage you for a few moments in an experiment to learn about the algebra of your mind. I think it's quite possible then to tailor an offer to you and to people who look like you.

Phil: What if I wanted to turn that around and I wanted to say, "I'm interested in getting the best things for me. So I'm going to build a model of myself and I'm going to put it online and if you want to sell me stuff, here are my rules."

Howard: That's brilliant. That stuff, I've never heard anything like that! What a brilliant idea!

Phil: Good! Let's start a company, Howard, right here.

Howard: What a brilliant idea because, do you realize what you've just done? You've essentially turned the whole thing around and with a series of fixed experiments, you've essentially put your profile online and people can compete for your business.

Phil: Right. Exactly. That's...

Howard: I'm sitting here basically on the floor. What a phenomenal and brilliant idea!

Phil: Well, I can't claim all the credit. There's this movement called Vendor Relationship Management. Doc Searls is kind of the center of it. I'll introduce you to Doc sometime. You'd love him.

Howard: Yes, please.

Phil: You'd love it.

Howard: That idea is a brilliant breakthrough. Know me and give me what I want.

Phil: Yeah. I like that because now I'm telling you how to make me happy.

Howard: Yes and it's quite doable.

Scott: So then, it turns around being the vendors out shopping for consumers.

Howard: That's exactly what it does. Wonderful!

Phil: Yeah.

Howard: God, I hope some of the audience who are listening to this runs with it, I'm going to run with it.

Phil: I think like I said, I think it's the vision that Doc Searls has, because that's exactly what he wants, because he wants vendors to compete for your business. As we were talking, it just kind of clicked in me that this is exactly what Doc wants to see. He wants to see these rules, essentially, in a way that people can interact with.

Howard: And this is exactly... It doesn't matter who generates the rules, whether it's generated by the company wanting to sell, or by the consumer wanting to buy.

Phil: Yeah. A while back, as when we were talking about China, you said, 'Well, maybe I'm depressing you.' But I think that, actually, this has been a great interview, and as people listen to this, nobody who listens to this ought to be depressed because they know the secret. I think they need to go buy the book, figure out RDE and then they don't have to be depressed because they will be on the winning side. Right?

Howard: That's exactly, just do the experiment.

Phil: Yeah. Well Howard, thank you. This has been a really, really enjoyable interview and I'm so glad you could do it with us.

Howard: I'm delighted. Thank you, gentlemen and thanks to your audience in advance.

Phil: Yeah and, Scott and Matt, thank you very much for helping, too.

Scott: Yeah, that's awesome conversation, awesome words.

Matt: Thank you.


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