Why People Do What They Do

Why People Do What They Do

There was a point in my entrepreneurial journey when I had to accept a tough truth: I was terribly wrong at predicting what people were going to do. I had reduced human psychology to a utilitarian model as we're first taught in school. My model of what people wanted and how they behaved was boiled down to Maslow’s hierarchy of needs: 

This framework has validity, but it repeatedly failed to explain the world around me. How was Bitcoin mooning? What do people behave irrationally? 

I explored the great thought leaders in the space: Freud, Kahneman, and Jung, but their frameworks fell short as well. My big surprise was in clinical psychology. Clinical psychologists generally deal with the front lines and hard realities of what is going on people’s minds.

After reading through CBT and studying day trading psychology, I came across the work of Dr. Albert Ellis, who founded Rational Emotive Behavioral Therapy.

A Better Framework

As I stress-tested the assumptions against the craziness of the world, markets, and my own career, I fine-tuned it to the following framework: 

The power of storytelling is no secret and beliefs strongly drive behavior as the emotions associated with each empower action. The two together also explain why religion can be so powerful in influencing human behavior. Religions consist of narratives and beliefs.

Knockoff Pokemon and Smooth Love Potion

From the article: Axis Infinity Finds Ready Players in Hyperinflation-racked Venezuela

I came across a story last year about Venezuelans playing a game called Axie Infinity, a P2E game based on Pokemon. Players were playing the game and making so much money from it that they considered it “a way out”, even creating “scholarship programs” and finding more faith in their game currency, “Smooth Love Potion”, than their country's currency. 

Smooth Love Potion was the native currency of Axie Infinity

At face-value, you would think this was insanity, but let’s empathize with the characters. If you were in a country with a minimum wage of $2.40 a month (Yes, a month) for hard manual labor, you heard about your cousin’s friend making bank playing a new  computer game from America (Narrative) and you believed you needed to feed your family (Belief), you would definitely feel intrigued (Emotion) and try to find out more (Action).  

Narratives are nested, so this can get pretty meta from here. When reading this story as an entrepreneur, it’s also easy to feel intrigued. “Wait, a second here’s a game changing trend I need to be a part of”. I immediately felt FOMO and probably greed wondering how on earth I could buy this Smooth Love Potion and effortlessly make money. Saner heads prevailed, but the story definitely influenced market price action.

There was a huge surge up through the end of 2021 for Axie Infinity tokens

Eventually the narrative of Axie Infinity lost strength and crypto as a space went to the dark ages, but $0.20 to $160 peak is incredible price action.

Why am I Writing About This?

I am writing about this to lay a foundation for why the world is the way that it is and nudge it in a better direction. All efforts to change the world rely on changing people. It’ll be helpful to have productive discussions about collectively unpacking our psyches for collective change. 

I also have found it useful in my own personal growth. Sometimes, we find ourselves waking up from the matrix wondering why am I doing the things I do? Is this my own thought or something someone else has influenced me to do. In an age of social media and mass marketing, I find it imperative for the individual to be empowered to examine their own psyche in the quest for self-liberation and the quest to challenge the narratives we accept by default.