The following is transcript of Beverage Digest's podcast, The Breeze, Episode 6. Today we talk with Sigi Hale, Principal Neuroscientist and Director of Research at market research and consulting firm Alpha-Diver. Sigi's work takes him deep into consumer behavior to understand why brand purchase decisions are made and how companies can act on that learning. Alpha-Diver, in partnership with Beverage Digest, just released the world's first ranking of beverage brands by consumer psychology. The Bev50 report and webinar are available for download here. During the episode, Duane and Sigi discuss the research findings and the ways neuroscience is illuminating consumer research.

DS:

Hello and welcome back to The Breeze with Beverage Digest. I'm your host, Duane Stanford. This is where we bring you into the kinds of industry conversations that we have daily at Beverage Digest. We dissect what's happening, connect the dots and ask the most important question, what does this mean? Today's guest is Sigi Hale. Sigi was a National Institute of Health-funded neuroscientist and a principal investigator at UCLA before he entered the private sector. What he is now is the Principal Neuroscientist and the Director of Research at Alpha-Diver, which is a market research and consulting firm that applies neuroscience to more deeply understand marketplace behavior. The firm's behavioral scientists and strategists work with leading brands, retailers, Wall Street analysts, and what they're trying to do is explain, measure and predict consumer behavior. Now, Sigi spent some time with us last December in New York at the Future Smarts Conference and we had a great fireside chat. We wanted to continue the conversation today.

The jumping point today is our BEV50 study that we released earlier this week in a webinar on Wednesday that's available for download at the Beverage Digest website and on the podcast link information. So feel free to download that, but we're going to talk a little bit about that today and also just find out how Sigi and his team do the work they do. So I'd like to welcome Sigi Hale to the program. Hello, Sigi.

SH:

Hello, Duane. Thanks for having me.

DS:

So the BEV50 is, we bill that as the industry's first measure of the psychological drivers of real world consumer behavior. So let's unpack that a little bit in terms of what you have learned as a neuroscientist and a researcher in academia over the years and how does that translate over to the corporate environment and what you're trying to do to help brands by moving that knowledge and information over to the brand side of the equation?

SH:

Sure. Yeah. So as you mentioned, I was a longtime academic at UCLA, which I spent all pretty much, yeah, all of my career as an academic was at UCLA, undergraduate, graduate, and then eventually faculty and professor there. And while I was there, I was delving very deep into the mysteries of how people process information and make decisions. And I was looking at it through the lens of a systems neuroscientist and figuring out lots of really exciting and cool things that were sequestered off behind the wall of academia, if you will. Enter Hunter Thurman into my life. I started doing some consulting work with their group out of Cincinnati when I was an academic. It was just an amazing synergy that unfolded and that we came to realize that the kind of work that I was doing to unravel the mysteries of how humans engage with the sensory world and process information and make decisions was so vitally needed in the consumer marketplace as companies strove to better understand their consumers and what made them tick and how they navigated through the marketplace.

And what we also came to realize is how far away market research was from what we were doing inside of academia. And so we began the long journey and the long process of figuring out a way to try to bring these two worlds together. And that started quite a long time ago. I jumped ships from academia full time in 2015 and we've been really going at it and overcome a lot of hurdles and figured out ways to adapt some of these models and methodologies into marketplace research. Being able to do things that I used to do with very fancy technology back at UCLA and now we're doing them in different ways that are amenable to marketplace research. But we've overcome a lot of hurdles and it's been a really great journey and we're doing things now that I think are at a whole different level because we've been able to bring these two worlds together.

DS:

So is that to say that what you've learned on the corporate side of this has informed a lot of what you do and how you proceed with your work as well? They're almost synergistic in that way?

SH:

Well, absolutely. I mean, if what you mean by what we've learned on the corporate side is that essentially when I stepped into this world, because I only knew market. I mean, I only knew research as an academic scientist, as a neuroscientist. And then I confronted the realities of what research meant in the corporate world and they were vastly different. And again, bringing these two worlds together has been a really challenging but also really exciting adventure and it's taught us a whole heck of a lot. Academia has its limitations. Obviously there's a lot more bureaucracy, things move at a much different rate and pace. And in the private sector, we're really looking for the big so what, what moves the needle on an actionable effect in the real world? And if you can improve and solve problems, that's the bottom line.

And there was something really cathartic about that for me, whereas in academia, as you might imagine, you can spend an entire career back and forthing over various nuanced issues and topics. And so I guess the corporate part that really accelerated our work is really the bottom line orientation. It's like, what's the big so what? How does it matter? How does it move the needle? How can we move things forward along those lines? And I found that to be a really exciting shot in the arm to an otherwise much more detail oriented and slow moving research process.

DS:

Can you encapsulate for me maybe the core difference, the one or two key differences in what you were doing as an academic that hadn't yet been translated to the corporate world when it came to research into consumers? How that differed from what corporations generally were measuring or thinking about or doing to make their decisions prior to you bringing some of this neuroscience to the table?

SH:

Yeah, the biggest differences is that when you delve into the domain of psychology and associated neuroscience topics where you're trying to understand not just what people do but why they do it, you're entering into a vastly more complex space and more complex territory. It's one thing to go out and record a lot of what people say and what they're doing and capture lots of information about observable behaviors and reported experiences. But to really understand why people do something, to be able to delve into spaces that are largely run by the subconscious and associated features of cognitive functioning and neuro systems, you need a whole different approach. You need the full force and rigor of the scientific method. And the scientific method always relies on a series of operations that aren't being instituted regularly in market research.

And those are at the beginning, you do a lot of just scholarship. For every topic that you're interested in looking at, it's sort of as a matter of discipline, you look at everything that's been learned up until that point by scientists that come before you. You use that scholarship and information to build the best models that you can about the phenomenon that you're interested in. So it always starts with models. You never work model-free. You're building these models and then you're going into the world and saying, this is what we think is going on, let's test it. And so you're never flying blind, you're never just going in and doing what we might think of as a bottom up approach and just kind of saying, let's ask a lot of questions and then we'll put it together on the back end. You're putting in the scholarship, you're building the models, you're testing the models.

And so what I was essentially doing was I worked on various set of pointed topics related to information processing and decision-making and neurodiversity from evolutionary systems, neuroscience perspective and I had all of these models. What we were essentially doing is taking these models into the private sector and figuring out how to test them. And so our research is basically going in now and utilizing these well-developed models that we have now a great deal of data behind them, and we're using those models to diagnose different features of people's psychology, different features of people's decision-making styles, et cetera, et cetera. So we're working a lot more like the way a doctor would work. They don't fly blind. You come into the office, they're looking for things that match diagnoses. They're looking for things that tell them how your profile fits into their set of models that they carry with them as medical experts.

So similarly, we have a set of models that we utilize in this space that relate to information processing and decision-making styles and neurodiversity and different features of psychology and we are using those to diagnose the way people are operating in different contexts and also in relation to neurodiversity. So it's really a fundamentally different kind of operation than just getting a bunch of people in a focus group and asking them questions of interest and then having a backend work session to try to pull inside out of what they're saying.

DS:

When you work with brands and brand owners, who are you typically working with at a company? Are they some of the research staff? Are they marketing professionals, all of the above? I mean, what would that team look like that you're collaborating with?

SH:

I think it varies quite a bit. I'll preface this by saying I'm really back of the house person. Like using a restaurant analogy, I'm the chef back in the kitchen. So I don't do a lot of interacting with the front of the house operations. But my impression is that we work with lots of different people all the way up from C-suite, all the way down to people who are in charge of specific brands. We get a lot of interaction with some of the research, the specialist on the other side of the fence. And that's where some of this evolution really comes to the fore because in order for them to work with us, we've got to build these bridges of understanding between what they're used to doing as market research professionals and then what we are going to do for them to help them understand the consumers of interest.

It's like going from horse-and-buggy to an automobile. Everyone says, well, what do you want? They're like, we want a faster horse. And you're like, well, but we have a car. And it's sort of building those bridges of understanding to be able to make this leap to this new approach and being able to help them move through that experience as smoothly as possible. And that's why there isn't a lot of the applied neuroscience in the market research world at this point, has focused on technology and gadgetry because it's engaging, it looks exciting. But really, not to besmirch it or anything, but there's so much more that just comes from the models and the understanding and the depth of knowledge that we've born out today inside of academia. And then being able to apply those more rigorous quantitative research methodologies that are model-based and that do the things that we're used to doing in the way that inside of a formal research community, there's like a lot of growth that can happen inside of market research that doesn't necessarily require us looking at eye trackers and biometrics and things like that.

DS:

So when you talk about gadgetry, that's the kind of thing you're talking about, biometrics?

SH:

Yeah. Measuring brainwaves and eye tracking and biometrics and things like that. I mean, the utility of those things are still contingent on being grounded in models that bear utility. So it's not measuring a brainwave on its face, doesn't solve the world for you unless you have a very well-developed model that lets you interpret what those brainwaves mean in a way that's actionable.

DS:

I see. So one of the things that brand managers and marketers are very familiar with, their brand engagement scores for in instance. How do those factor into what you do? How are they different from what you do? What can be learned about those? How useful are they? Give me some sense from your perspective how to think about something like a brand engagement score, or is that something that's perhaps elevated by some of the work you do? Give us a sense of that.

SH:

Well, it's my understanding that the vast majority of those types of scores that have been offered up to this point is that they're very dependent upon dollars moving through the economy. So a lot of sales-based metrics, purchase-based metrics and things like that. And then we're sort of inferring consumer psychology via those behavioral indicators. What we're doing with our work is we're going directly to the psychology and consumers. So none of the things that comprise the BEV50 list that we just shared out are anchored on sales data or purchase data or anything of the kind. What they're doing is they're giving us, it's anchored on a set of what we would call behavioral psych measures and then our decision-making psych measures. So it's really these two different domains. And the behavioral psych measures cover three really critical topics. One of them has to do with what we're calling routinization, which is essentially a measure of the extent to which a given behavior has become automatic or has become sort of a habit in a person's life and lifestyle.

The next one is what we call psych attachment. And that has to do with the extent to which a person feels that a given brand or product or experience is vitally related to their wellness in some capacity, sort of psychological wellness. And to the extent that it becomes more attached to their wellness in that way, it's stickier, it's more emotionally potent and vital part of their life and lifestyle. And then the third one is what we call trajectory or momentum. And what that's really doing is looking at approach and avoidant psychology. So the extent that somebody's in these different modes, and these are actual constructs that have been well studied in psychological research for a long time now, this idea of approach and avoidance psychology. And we know a lot about the differences in the way that the brain works when somebody's in approach versus avoidance and things like that.

And so with those three measures in aggregate, the extent to which it's routinized, the extent to which they're showing the psychological attachment, whether they're in approach and avoidance and where they fall on that continuum, those are behavioral psych measures. And then we have another set of measures that are a part of this that are decision-making psychology measures and what we traditionally call our nine whys metrics. And those are telling us a different set of things that are more purely related to neurodiversity of information processing and decision-making styles.

DS:

And so what we did with the BEV50 is we collected, we pulled together a list of 50 brands that were the largest brands, important brands, category defining brands, brands that were at the top of categories that we also wanted to include in this study. And you took those and you did consumer research to measure each of those three elements, the trajectory, the routinization, the attachment, and you pulled those together into aggregate scores that then ranked these brands, these top 50 brands. But also it was really interesting because you broke out some of the changes in how these brands fared when it came to individually trajectory, routinization and attachment. Tell us a little bit more about just your takeaway from that work and your takeaway from that top 50.

SH:

Yeah, I mean, I think it's really interesting because it's opening the door on a whole new way of thinking about these stratifying of brand potency or vigor in the marketplace. And again, traditionally we think of this in terms of sales and purchase information. And here we're really looking at the sort of psychological strength of the bond between the brand and its consumer base and not just looking at the strength of it, but also looking at the nature of it. So that second set of metrics that we get into that are associated with our nine whys that characterizes the nature of that relationship. So yeah, I think it's a very interesting exercise. I think it's a very interesting list because it's not just telling us about dollars moving through the marketplace. There's a lot more information yet to be had about this, but it's giving us a lens through which to understand some of the psychological going ons in the way that people relate to these different brands.

And there's some surprises in the list as have been mentioned to this point. And they actually make a lot of sense as you start looking through the data. There are certain brands that are highly routinized, meaning they become very automatic components of people's lives and lifestyle. But then there's some liabilities associated with that. We see with the trajectory and the approach and avoidance metrics that once something becomes highly routinized in an automatic behavior, there's a liability for the relative salience of those experiences to diminish over time. It's like how do you keep a relationship fresh and alive and new kind of a thing. And so we saw that in a lot of the bigger brands that are more routinized, that there was some weakness around the approach and avoidance aspect, which is getting at that. And then even with the psych attachment, there's certain brands that might be highly routinized, but they don't show very high psych attachment. And that would be an indicator that a person, although is using this brand and it's a regular part of their life and lifestyle, if they had to give it up and switch to something else, they could.

Maybe there's something else inside of the category that they could switch to, it's just become an automated feature of their life, but if they really give it a hard think or feel through, they could walk away from it. And so there's a vulnerability signal in that that is important for us to pay attention to that we wouldn't see if we were just looking at the sales data.

DS:

So let's look at the top five. We've got our number one on the list was Gatorade. Number two was Frappuccino, Starbucks Frappuccino. Number three was Lipton. We had at number four, Nestle Pure Life, which on one hand might seem a little bit of a surprise, but makes sense when you look at those three categories. And then Coca-Cola coming in at number five. Now if you look at Gatorade, it's interesting, going back to those behaviors you were talking about. You've got the trajectory of Gatorade, it's pretty much even, so it's holding its own in that regard. You've got routinization, which is really high at a 94 on a hundred point scale. And then you've got attachment at 100. So talk a little bit about in the context of Gatorade, how a brand would think about those three scores. And then from there, what do you do about that? Do you want to try to change those individually or how does that work?

SH:

Well, Gatorade's a really great example I think of how these metrics are teaching us things about these brand dynamics, and that you'll notice in all those top five that the trajectory's either flat or going south. And that's again, something that we're learning as we look into this and it makes sense, right. These are things that are very well established, they're big brands, they're part of people's lives and lifestyles and they sort of hit a steady state to some extent. And we only see that downward trajectory on Coke, which is something we should pay attention to or Coke should pay attention to. But then with Gatorade, we've got that flat trajectory, we've got really high routinization, but they're hitting it out of the park on psych attachment. And so these things in aggregate are telling us that Gatorade is doing something unique among these big well established brands.

And when you think about Gatorade's brand, it contains a ton of variability. They've got a ton of different flavors and a ton of new offerings, and it's super fresh and alive all the time. So even though the brand itself is a highly established sort of mainstay in people's life and lifestyle, I think what's happening is that variability is constantly preventing it from suffering the ills of routinization. It's able to stay, I think, fresher psychologically and more salient in people's life and lifestyle in a way that's harder for a brand like Coke. I mean, we all know what happened with the new Coke experiment back in the day. And so that's a distinct advantage that they have, I believe, is that they're able to stay so salient and it becomes this... Routinization and automaticity is, like I said, it's a good thing, it gives you a guaranteed behavior that's going to happen automatically. It's going to get triggered in a certain predictable way and people are going to behave in a certain way that's automatic.

But without the psych attachment and something that's showing that I'm regularly reinforcing the importance of this in my emotional experience on a day-to-day basis, then that psych attachment can start to wane. And you see that with the Coke, the psych attachment is significantly below Gatorade. And so I think that what we're seeing there is a strength that's derived from consumers of Gatorade's ability to be constantly refreshed and exposed to novelty that keeps their impression of that brand new and interesting. So it's like they're always in vacation mode. It doesn't become old hat.

DS:

So when you talk about Coca-Cola and that attachment rate being so different than what you see with Gatorade and the way Gatorade's consistently keeping things fresh and all, and then you look at Coca-Cola and they've got this new creations program where they create these limited time flavors for brand Coca-Cola that are based on space or bites and things that are a little amorphous, but they're trying to tap into some of these generational affinities. Is that the kind of thing that can affect that attachment score or not? How would you think about that?

SH:

Yeah, Coke is an interesting situation because their brand is synonymous, I think, or my impression is it's synonymous with the flavor of cola. It's like the Corn Flakes phenomenon. And so Gatorade did something different right at the outset where they had just those two or three sort of core flavors in the early days of Gatorade.

DS:

Lemon Lime Orange.

SH:

Yeah. And the Fruit Punch, I think.

DS:

Right.

SH:

And then they quickly went beyond. And so that people associate the brand Gatorade more with that type of beverage, which is inclusive of this broad range of flavor profiles. And whereas Coca-Cola, it's synonymous with that flavor of a cola beverage. And so I don't know because like every time they've tried to fiddle and add in various diverse flavors and things like that, it's almost like I'm not sure if they're going to be able to expand the notion of the Coca-Cola brand to be inclusive of a broader swath of flavor profiles and still be the Coca-Cola brand. It makes me think of what the car companies did. Instead of having Toyota be inclusive of luxury vehicle, they made Lexus, and Honda made Acura. They just said, we need another brand. And so that's an interesting thing to ponder and to consider, whether Coca-Cola could expand its brand concept to be inclusive of things outside of cola, traditional cola flavor profiles. An alternative means would be to add variability in the way that cola plays a role in people's lives. So you could make cola novel by mixing up how people experience it without messing with the actual flavor profile.

DS:

So they've been in a process for a number of years now of, you know, there was a time when you had Coca-Cola and it was in a red can for instance. You had Coke Zero and it's in a black can. You have Diet Coke that's very attached to silver, that color. And what they've been doing over time is pulling that under an umbrella of red so that for instance, Coke Zero now is in a red can but it has a black script to denote that it's the zero sugar version of that. But trying to pull it all under that, does that speak at all to the kind of thing you're talking about in terms of the variability within the cola umbrella? Or how would you think of that in the work you do when you see that progression happening?

SH:

Well, my initial thought on that is that even looking at the way people orient towards the zero sugar and alternate, those kinds of variants of the Coke brand, people think of them very differently. As we see, they're in very different spot on the list. So I almost feel like, yes, I mean, it's interesting that they're trying to make the Coca-Cola brand be more inclusive of those variants, but my guess is that people think of those variants as almost being a different product type or category, maybe product type is a better word for that. But they really think of it as there's almost like a categorical shift in the nature of the product when you get into those zero sugar.

DS:

Can you change that over time? Is there a process by which you can change consumers' perception of that? And would you want to?

SH:

Yeah, I mean think it's within the realm of possibility. And I think the key is, and what we're speaking to the broader theme is, is that if you're one of these brands that are highly established and you've gotten to the top of the mountain in terms of automaticity and the nature of engagement between you and your consumers, it's just the way we think of in life like with a marriage. It's like how do you keep it fresh and new and alive? How do you keep people's attention? How do you keep that mindful awareness, that focused attention engagement that allows people to experience something with acute reward? I'm trying to avoid using jargon, where they're getting that positive reward of the experience in a salient and conscious way. And you do that through novelty. I mean, that's why we love going on vacation. It's like you put yourself in unusual circumstance, you pay more attention. And as you pay more attention, all of your capacity for reward-like experience come to the fore.

Attention bears fruit with regards to the reward systems in the brain, it potentiates those systems. And so that's the challenge if you're at the top of the routinization stack here, is figuring out ways to enter, inject that novelty experience, increase that mindful awareness orientation towards the experience that consumers are having with your brand and product, and making sure that it doesn't become something so automatic that it's just done without engagement, without emotional engagement. It's like the way that we all drive home from work every day, and it's like you can navigate all the way home with hardly any explicit thought about turning here or turning there. It's because your brain has this model. And once it has those highly developed models, it can go through the behavior with very little conscious attention. And you want to avoid that when it comes to producing highly rewarding consumer experiences.

DS:

I'm struck by, in our top five, I'm struck by number four, Nestle Pure Life. I mean, on one hand, people in the industry might think of the bottled water category as commoditized and Nestle Pure Life is not a flavored or enhanced brand. It's kind of a core shelf brand, case packed brand as they would say in the industry. They come in at number four here. Why is that? Why does a brand like that able to penetrate to the level that it has with the three different measures that we see here?

SH:

Yeah, they're near the top because they're pretty strong on all three measures. They're not super strong on any of them, but they're doing solid performance in each of the domains that we're measuring here. And they show very strong, in particular, relatively strong psych attachment score. And you're thinking, okay, well, what's going on there? And then if you look down later in the report, when we're looking at the kinds of information processing psychology, sort of the motives, the drivers and things that are associated with that particular brand, it's very tribal. It's very likely that people are trying to, water is a bionecessity. You have to drink water. And the water space is very complicated with lots of offerings that range wildly in price and claims and there's lots and lots of things to navigate your way through in order to establish a routinized interaction with a particular water brand.

And I think that what we're seeing here is that Nestle Pure Life has been able to achieve some high level of routinization that's absolving people from the difficulty of navigating that marketplace. There's so much stuff going on in the water market space, I'm guessing that this has the right price point. It's universally available for everybody. Everybody needs to get water. It's bionecessity. Locking into this brand, it makes it so I now no longer have to expend tons of mental and physical effort to navigate this difficult market space. So I think we're seeing some psychological strength around this because it gives people a way to get out of a tough decision-making exercise.

DS:

And then you've got brands later on the list in the thirties and forties, brands like Celsius and Alani Nu. They have upward trajectory. They have fairly low routinization and attachment. Of course they're new brands. But this upward trajectory, is that just a function of simply they're kind of new and up and coming and growing or there's more happening than that? Correct?

SH:

Yeah, there is more happening than that. You see that there is, yes, there is a trend that there's a relationship between routinization and momentum that's inversely related. But we also see that there's a great deal of variability even amongst the less scrutinized brands in terms of how much momentum we're seeing. I mean, for this report, we're showing you basically in turnstiles like up, sideways or down, but there's a lot of interesting data in terms of how this momentum varies across some of these less routinized brands. And when you look more closely kind of under the hood of some of this information, you can really start to see that even among these newer brands, which ones are showing the most approach mode psychology, which ones are already showing the most psych attachment. And I think that's going to be some really interesting learning as we dig deeper into this data to be able to delineate out the real strong performing newcomers from some of the ones that have a little bit less wind in the sails.

DS:

I mean, this is the first BEV50, so it sounds like you believe you're going to evolve this over time and dig into it in different ways. You've mentioned that a couple of times. What's your thinking? Is this a data set that can evolve over time?

SH:

Well, what we're showing here is really a surface level depiction of the data. There's a lot more resolution and fidelity, which for the sake of a report that one would deliver to an audience via webinar or podcast, it's not practical to go deep, deep into the nuances and the weeds of the data. But there's a lot of data in these things and we can look a lot more deeply to get richer, sort of more high fidelity stories about these individual brands. And we're doing some of that work because it's edifying and it's also helping us to get our arms wrapped around the possibilities and how to use this kind of data. In terms of the regularity with which we will be capturing this, TBD to some extent. But for a good long while now, we've been doing what we think of as our longitudinal work where we regularly measure our psychological metrics at a gen pop level and monitor at a gen pop level how the psychology, the decision-making and nine whys psychology is fluctuating over time.

And we've seen some really fascinating things like across the span of the pandemic, for instance. And this introduction of these lists of these multiple brands I suspect are going to become a regular part of that ongoing work. And so yeah, we'll continue in that studying of the world's psychology, so to speak, at least the US gen pop version of that. We'll likely be continuing to gather this kind of information going forward.

DS:

I'm scrolling down the list a little more, and I'm looking at number 45, Starry, which is the new lemon lime. We did a podcast all about that brand and the lemon lime sector and the competition with Sprite a couple of podcasts ago. Really interesting category. Starry is introduced early this year and it's actually been able to gain share, seems to be doing the job that Pepsi set it out to do, but it is still a very new brand. So how does a new brand like that end up in a study like that? Is there enough consumer perception of this to even measure it? How did you go about sorting through that?

SH:

Yeah, we did a couple. For this, we did two independent studies. Replication is the way you come to trust data, you replicate. And so we did two independent studies looking at all of this data. And in putting that data together, at the end of looking at that replication analysis, we have a nice size data set of about 3,000 people. And for the initial routinization measure, we're capturing that on everybody because it basically, it naturally lends itself to that to be able to ask everybody, to what extent is this an established part of your life and lifestyle? And for some people they can say it's not at all. And some people say, yeah, it's highly established. But for the psych attachment and for the trajectory measures, we're only capturing those among people that have some usage experience with these. And we have strict protocols in place to where we have to have a minimum threshold number of people that we find that are users who've had some experience with these things in order to be able to look at that data. And I think for instance, as an example, the smallest amount of data for a given brand that we would analyze is somewhere north of 300, somewhere between three and 400 people. So that would be the tiniest brand on our list. We have at least three to 400 people that we're looking at data from.

DS:

Wow. One thing that strikes me before we go is just the notion that you've started doing a lot of this work back in 2015 with Alpha-Diver. Of course you have a longer history than that, but this marrying up the academia and the corporate environment since 2015. Neuroscience, I mean, that's an evolving field from what I understand. To what extent has there been an evolution of expertise and understanding and advancement within the field of neuroscience that you're able to bring to bear on on this sort of work? How fast is it moving?

SH:

It's moving really fast. The problem with extracting value from neuroscience research, and I think this is true for many fields, but certainly with neuroscience, is not our ability to do research and collect data. It's really to make sense of it. We collect, there's so much experimentation that goes on, it's incentivized. As a professor, your job is to get money to do research. And so you're writing grants and pulling money out of NIH and doing these research process. People end up collecting an enormous amount of data. And what we really need is to sit back and make sense of that data. I have a proclivity for doing that kind of work. I'm a big picture person, I'm a dot connector. I really like to do integrative types of work. And so yeah, there's a ton of information. We're learning very, very quickly about things. We're learning so fast that even amongst rank and file neuroscientists, the tip of the spear on one topic is something that even other sort of neuroscientists and whatnot were not aware of all of the novel discoveries being made just within the rank and file of active researching neuroscientists.

And so in terms of the public being aware of the most up-to-date sort of understandings of these things, it's really, yeah, we're driving faster than the headlights can see for sure. My story is a great example of that and that I was really working on topics of systems of neuroscience and neurodiversity and information processing and intelligence styles. And as we started to learn and was popularized by the Daniel Kahneman work and book that he put out about fast and slow thinking and whatnot, this increasing appreciation that most of the decision-making is happening before we're consciously engaged in decision-making. And that sort of puts it back square into the domain of these earlier stage information processing sort of systems in the brain. And so anyways, studying information processing, we learned that there are these different systems in the brain that have evolved to handle this problem of understanding what something is and what we should do about it.

There's all this great work that looked at each one sort of piecemeal. There's people who studied instinctual kinds of responsivity. There's people who study perceptual processing, and it's as related to episodic memory. And then there's people who studied language and semantic processing. There's people who study what we call executive functions and how people utilize that to navigate their experience. What I did was sort of see how all of these are component pieces of a broader system that we have to orchestrate in order to set how we're engaging and making sense of the sensory world. And then I took that information and took that model and used it to make a lot of sense of various things that I was being funded for at UCLA. Like people that have variability and attention capacity, all the way out to the extremes with ADHD, on the other side with something like OCD. So it was this moment where the field studied all of these things independently.

And then really when you saw how they interconnected, now we have this entirely new way of thinking about diversity of information processing. And then with the understanding that information processing is a way bigger ingredient in quote, "decision-making," than we would've previously thought, now we all of a sudden realize, oh, now we're also doing something that bears very importantly on the topic of how people are making decisions prior to the conscious agent getting involved.

DS:

That actually ties really well into a really hot topic right now, which is pricing. The pricing environment. There's all this talk about elasticities that are models that are basically broken. I mean, soft drinks for instance, pricing is in the double digits. Consumers are still buying it. The volume drop off that you would typically see hasn't been as strong as people would expect or hasn't fallen as much as people would expect. But you guys have some pretty interesting analysis that relates to what you're talking about a moment ago when it comes to pricing and how brands can think about pricing, but how brands can think about how consumers think about pricing. I lied. I got one more question. I got to know what you think about that too.

SH:

Yeah, so if you think about us having these different systems in the brain for making sense of the world, as I was mentioning sort of instincts, we can think of the other one as sort of memory. One is kind of social knowledge, semantic knowledge is what we might call it. And then this other one is capacity for rational thought, right? And we're orchestrating these different systems to try to decide which system is going to give us the best answer for understanding what a given thing is and what we should do about it in a given circumstance. Now, if we get pushed into using our sort of instinctual mechanisms for navigating the world, when we shift into that mode of processing where our instincts are primarily directing our experience and behavior, we're seeing the world through a very unique lens. One that has evolved over a very long time to serve some very specific sort of goals that have to do with maintenance of homeostasis and survival and procreation and passing on of the genes, these traditional caveman brain type of stuff.

And so under duress, we are inclined via these external pressures to switch into these instinctual modes of processing information and engaging the world. And when looking at the world through that lens, our capacity to measure the sort of risks and benefits associated with pricing structure is very different than say if we are in our hyper-rational mindset that we'd be using to do our taxes. And so we're humans, depending upon which of these systems is being more heavily weighted in a given moment, will have a very different sort of means by which they're making determinations about price. What we are seeing essentially is that in some of that longitudinal data that we're tracking is that a very large proportion of gen pop has been increasingly pushed into these brain states that are associated with heightened expression of these instinctual processes. And those instinctual processes are very, very good at surviving and dealing with danger and those kinds of a things, but they're not good at measuring the potential downside of negative price structures.

And so people are essentially operating from a mindset right now that's unable to measure those things very clearly is I guess one way to put it. It's like your instinctual mindset is very good for escaping a bear. It's not very good at ascertaining the potential pitfalls associated with something that costs too much.

DS:

And so what's the takeaway for a brand then? Should they be concerned about raising prices further or go for it?

SH:

That's one of the things that we are monitoring. So as we're right now, we're still showing this very high peak expression of that instinctual mindset at a gen pop level. I mean, people via the pandemic and via other sort of things that are going on in society at the moment, we're historical high in the expression of this, and so far as we've been measuring it. We're measuring these kinds of things. We have some baseline normative data that goes back a good long while before the pandemic began, is kind of the point at which we started really putting all this together. And then we have our baseline, and then we were looking at deviation from that baseline starting about the time the pandemic began. And we are seeing historical high expressions of this. Now, if those historical highs start to wane and we see the mindset shifting and all of a sudden people start moving towards, for example, a more rational oriented way of navigating experience, then we would expect those price sensitivities to change.

DS:

Do you have a hypothesis about what factors out in the world would begin to shift that towards the rational? Is it just the further we are from the pandemic and some of these heightened things in the world, the more we'll move to the rational or something else? I mean, what would cause that shift? Or do we have any clue?

SH:

No, we do have a clue actually. And this again goes back to this idea of everything being model-based. And so we've worked for a good long while on understanding how these things interact over time. And the timeframe in which they interact can change dramatically, but they seem to have a certain cadence that's fairly predictable. There's a deeper story here, but to put it simply, at a collective level, at a societal level, we move from epochs of relative stability where we have the recipe book for how things run and how things should operate. The kind of rules of our symbiotic or team oriented or collective behavior are somewhat well-developed and we have certain nomenclature we refer to that. But you can imagine a period of time where the world feels relatively stable and we're sort of cohesive ideologically, culturally, socially, economically, et cetera, et cetera. Invariably, things go sideways because all stability is a faux stability. There's always error in the system, which eventually manifests. And we go through these epochs of relative instability where things get upended and there's a bit of chaos.

And that is also a temporary state, that at some point out of that chaos, we begin to then do a kind of intellectual and self-evaluative kind of assessment to try to reconfigure our understanding of things, gain new information, figure out better ways to organize ourselves, which eventually result in us going back to stability. A great example of this is a teenage lifecycle. Kid grows up in a family, they're a little kid and they're sort of part of the family structure. They're bought into the family cultural dynamics. At some point they're like, nope, I'm going to rebel and be a teenager. They go through this period of relative chaos. And then at some point in their young adulthood, do some internal searching about the nature of who they are and their belief systems and ideology, and eventually formed their own families, which are sort of reflective of that.

And this is a kind of state shifting dynamic that moved between the benefits of individuality like on the part where we're sort of individuated and being more rational and evaluative looking for new information, versus symbiosis, where we're functioning as a team. To function as a team, we need cohesion, we need rules, we need structures, we need coordination. And we move between these two different pulls because they serve different purposes. And so the point is that when the structure weakens and we go into chaos, invariably after that will become a period where we'll individuate and look for new information. We'll become hyper oriented towards discovering new knowledge and new ways of thinking, new perspective, which will then lead us into another epoch of stability bearing the fruits of that work.

DS:

So there's this cadence that you talk about, but perhaps the intervals change and we're in a period where it's a particularly long interval before people are moving back to the rational perhaps. So you know it's going to go back. You know there's going to be a point of moving to rationality. You don't quite know how long it is, and it's somewhat unprecedented, the interval. We're in the middle of now. Do I understand it?

SH:

Well, I would say that these cycles are happening at multiple scales in parallel. So the one scale would be the kid who grows up and becomes a teenager. Then the young adulthood. You can imagine another sort of version of that that associates with the midlife crisis. But then we see them on these societal levels. You can almost see them on decade levels as well. And then you can certainly see them via acute events that have to do with something that comes along that upends everyone's sort of world like the pandemic. Other things can initiate this. The point is that when we're in chaos, what we do in order to get out of chaos is we at some point develop the ability to individuate and do the things that are maximally likely to produce new information, which means that we're going to individuate, create lots of intellectual freedom and really explore new ideas where we become very flexible. We're going to become very creative. We're going to do lots and lots of searching and analysis.

So it's like that, those are the epochs where science and art really reign supreme and they're really important. And so we're going to at some point enter that. And when we do, that more rational mindset and that more exploratory mindset are going to become more expressed would be the idea. And then through the things that are learned through that, we'll eventually go back to cohesion and then we'll see a greater expression of this kind of more social type of mindset being expressed. And so that's the point of interest is, and the gen pop is watching these arcs unfold. And as I was mentioning, we've seen this sort of instinctual part, really, really clear, signal really nice from a data perspective. You see that trend line, you're like, wow, that's undeniable. And it remains to be seen. We have not yet seen that turn. But according to this model and everything that we've looked at in relation to other forms of it cycling, we can't stay in perpetuity in this mode. Something's got to give. And when it does, I would expect this more rational mindset and thinking to come to the fore again.

DS:

I could absolutely spend hours talking about this. It's fascinating. It's compelling. I think it's very important work. It's been a pleasure working with you and your team on the BEV50. This is the kind of interesting thinking that I think is so useful for people to get out of their box. So really appreciate you bringing this all to us. Sigi Hale, he's the Principal Neuroscientist and Director of Research at Alpha-Diver. Thank you so much for joining us on The Breeze today.

SH:

It was fun. Thank you.

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