Psychic Energy

There have been countless attempts to discover unique characteristics of entrepreneurs.  Are they physically, psychologically or demographically different from the general population?  To date, it seems the answer is no.  For most results of academic research on the topic, it is possible to find an alternative or completely contradictory finding[1], suggesting that entrepreneurs are just normal people. But perhaps we’re asking the wrong question. Instead of asking how psychology makes entrepreneurs, we may want to ask how entrepreneurs make psychology work for them?


Solution Generation

Generating more energy and using the energy we have more efficiently has become one of the central issues of our time.  We could fill years of this column with stories of entrepreneurs creating technology to turn the energy problem into business, and probably will. Today, however, we find two individuals with a solution which turns psychology into energy savings.


Peer Power

Their names are Dan Yates and Alex Laskey. Their firm is OPOWER. Yates and Laskey’s customers are public utilities looking to reduce peak power usage. Cutting peak power demand means building fewer power plants and getting more money out of existing investments for utility companies. OPOWER is effective. About 85 percent of their clients’ residential customers will cut home power consumption by around 3.5 percent. How? Because OPOWER puts homeowners into competition with other homeowners. What OPOWER produces is customized data reports that let people know how much energy they’re using in comparison to their neighbors and follows up with suggestions for a course of action.

 Fueled by Competition

An experiment published in 2007[2] makes the psychology behind OPOWER completely transparent.  Researchers hung announcements on the doorknobs of 1,207 homes in San Marcos, California. All urged residents to use fans instead of air conditioning, but offered four alternative reasons. Some informed residents they could save $54 a month on their energy bill. Others, that using fans would eliminate 262 pounds of greenhouse gases per month. A third announcement described fans as the socially responsible option. And the last group was told that 77% of their neighbors already used fans instead of air conditioning, closing with a caption of “San Marcos’ popular choice!” Subsequent meter readings found that recipients of “everyone’s doing it” announcement reduced their energy consumption by 10%, while no other group reduced energy use by more than 3% (all compared to control group).

“We can move people to environmentally friendly behavior, by simply telling them what those around them are doing.” – Robert Cialdini

Mind in Hand

The closest thing we have found to an entrepreneurial mindset – is what entrepreneurs have learned to do with their means. They prefer to work with things under their control, things already at hand – the bird-in-hand rather than the one in the bush, so to speak.  And everyone has at least three sets of means – who you are, what you know and whom you know.  Yates, a computer scientist used to working with data, learned first hand about environmental issues during a year long expedition with his wife of the North and South Americas and Laskey’ experience working with politics and policy came in handy in educating executives at utility giants such as Dominion Power on a no-brainer solution to reducing energy consumption.  They used “what they knew” to transform simple psychology into complex changes in human behavior that create value for the consumer and the world we all live in.

Mighty Mail

Total energy reduction from OPOWER’s activities with just their existing utility customers is equivalent to one-third of the U.S. solar industry’s energy output. That’s it. No hydrogen fuel cell. No cold fusion. Just a letter. With 45 US utilities already signed on and 2010 revenues of US$35 million, OPOWER is now moving to implementation. The firm just received a $US50 million investment from blue chip venture capitalists Accel Partners and Kleiner Perkins, Caufield & Byers to increase existing staff of about 160 by about 1/3, and expand operations. Clearly, it takes an entrepreneur to create the future, print it out, and mail it to homeowners across the United States.

[1]The least challenged finding is that entrepreneurs are likely to come from entrepreneurial parents, but even that has mixed support.  There are new efforts looking into the neurology of entrepreneurs that may yield unique insights into the entrepreneurial mind, but to date we are unaware of any result that has received broad support.

[2] Schultz, Nolan, Cialdini, Goldstein & Griskevicius (2007) The constructive, destructive, and reconstructive power of social norms. Psychol Sci. 18(5):429-34.

British Airways Business Life
Relevant Principles:
Bird-in-Hand (Means)
Crazy Quilt (Partnerships)
Pilot-in-the-Plane (Control vs. Predict)
pdfBABL Opower