New Power: How Power Works in Our Hyperconnected World--and How to Make It Work for You

by Jeremy Heimans

The work of behavioral economists Michael I. Norton, Daniel Mochon, and Dan Ariely helps us understand the dynamics behind companies like Xiaomi. They have identified what they call the “IKEA effect,” a tendency of people to place a higher value on self-made products. Their key observation was that when people put together furniture from a self-assembly kit, they tend to seriously overvalue their (often poorly constructed) creations. To test whether the phenomenon holds more broadly, they designed an experiment with a group of people directed to fold origami swans. They asked those who did the folding—“the builders”—and others who were not involved—“the non-builders”—to place a value on the creations: “While the non-builders saw the amateurish creations as nearly worthless crumpled paper, our builders imbued their origami with value.” The effect was stark: “Builders valued their origami so highly they were willing to pay nearly as much for their own creations as the additional set of non-builders were willing to pay for the well-crafted origami made by our experts.”