The Demise of the Psychopathic Business

In today's e-social world, companies that don't treat customers with empathy will soon become extinct.

In our last Face to Face article, Empathy, Self-Interest, and Economics, we said empathy was such a natural human instinct that it is rare to find someone with zero empathy for others, pursuing his or her own self-interest without regard for anyone else. Such a person is called a psychopath, and only about 1 percent to 2 percent of us get so short-changed in the empathy department as to earn the label psychopath or borderline personality.

When "normal" people encounter psychopaths and borderline personalities, they are usually astounded. They just cannot fathom how it could be possible for someone to show no feeling for the impact his or her actions have on others. They don't "get it," and so they don't believe it could be true. In Evil Genes, Barbara Oakley argues that healthy, psychologically normal people fall into two classes: those who have been personally victimized by a person with psychopathic tendencies, and those who have not. Only the victims, she says, truly grasp the ruthlessness and self-interested "evil" that such a complete lack of empathy represents.

When a completely self-interested company pursues immediate economic gain to the exclusion of all other considerations, however, we could make a direct analogy with the human psychopath, oblivious to how his actions affect the interests of those around him. And while only a few of us may ever have been victimized by a psychopathic person, all of us interact regularly with at least a few "psychopathic" companies and brands. We have become so accustomed to non-empathic customer "service," in fact, that we don't even consider it abnormal. But as standards improve, non-empathic companies will become rare, then rarer, then endangered, and eventually extinct.

Fail to respect your customers' interests and pretty soon your customers just won't be coming back so often. Nor will you be able to rely on them when your business needs to make a transition. Case in point: AOL, a firm that once had some $5 billion in annual revenue, a market cap of $222 billion, and more than 30 million paying subscribers, the vast majority of whom connected their computers to the Internet via AOL's toll-free telephone numbers. Over the past decade, however, AOL has been a business in decline, and is today a shadow of its former self with a market cap of just $1.5 billion.

AOL's decline was almost certainly hastened by its aggressively self-interested dealings with customers. Stories of how the company refused to let subscribers disconnect, for instance, are legend, even as broadband technology rapidly eclipsed dial-up connections. The company has tried to transition itself away from its dial-up business, and today it does earn some money from selling advertising and operating a few interesting and useful online properties such as MapQuest and Moviefone. But fully 80 percent of its profit still comes from the subscription fees charged to its members, whose numbers have dwindled to just 4 million, as cited in "You've Got News" in The New Yorker. One senior AOL executive said, "The dirty little secret is that seventy-five percent of the people who subscribe to AOL's dial-up service don't need it."

By contrast, consider how a trustable company might have fared, when faced with such an existential threat. Apple, for instance, has had no trouble at all moving its business into music retailing, interactivity, and even mobile phones. Of consider, whose original book-selling business is now just one part of a much larger enterprise that includes all sorts of other retailing categories, as well as a considerable range of business services. And Ally Bank will probably continue earning a decent profit even as the retail banking industry is squeezed harder and harder by punitive consumer-protection regulations. It's doubtful that any of these companies could have made such transitions without having first earned the trust and support of their customers.

Customers in the e-social world take delight in exposing and punishing the non-empathic actions of psychopathic businesses. According to John R. Patterson and Chip R. Bell in Wired and Dangerous: How Your Customers Have Changed and What to Do About It, the average post is read by 45 people and more than 60 percent of those who read about a bad customer service experience online stop or avoid doing business with the company involved. And the "Customer Experience Report: North America 2010," commissioned by RightNow and conducted by Harris Interactive, showed that 79 percent of customers who had a negative customer experience told others about it, 85 percent said they wanted to warn others about their bad experiences, and 66 percent wanted to dissuade others from doing business with the offending brand. Some 76 percent indicated that word of mouth had influenced their purchasing decisions.

In the e-social world, companies will be expected to act toward their customers the way people act toward other people. With empathy.

Violators will be prosecuted.