JoyFX: The Origins of JoyFX

Updated 02.08.24

Today’s best-in-class companies enjoy four distinct types of competitive advantages.

• Brand Effects

• Embed Effects

• Scale Effects

• Network Effects

Brand Effects

The more customers engage with your brand, the stronger the brand becomes for a competitive advantage. Customers are proven to respond to brand recognition and tend to stay loyal, even fanatical, with their favorite companies.

It’s easy to see this effect in brands like Apple. But recently, Supreme Streetwear cut through the competitive landscape of clothing brands by using a strategy of scarcity to create a resale market of dedicated customers. Supreme was acquired for $2.1 billion.

CEOs can become brands unto themselves. Elon Musk is a prime example. Musk’s name alone can supercharge any brand beyond Tesla and SpaceX. As a demonstration, his other venture, the Boring Company, sold out 20,000 flamethrowers for $10 million in revenue in five days. Previously, 50,000 Boring Company caps sold out for $20 each. What do flamethrowers and headwear have to do with a venture digging underground tunnels? Does it matter with the Elon Musk effect? At this point, the popular CEO, who would happen to make a perfect James Bond movie villain, could pretty much brand anything for success (his purchase of Twitter turned X is still a work in progress, it seems).

The challenge to brand effects is when there’s a lack of differentiation. Most brands do not differentiate themselves from the competition. An easy test for this is to swap brand logos on top of any company’s marketing collateral. For example, if you switched the logos of the major hotel chains, very little differentiation, if any, would be evident.

Embed Effects

Embed effects occur when your product or service becomes “embedded” as part of another product or service. The most obvious form of this competitive advantage is technology-driven, such as Intel computer chips or Nvidia graphics cards as a component of computers. WordPress is the content management system for approximately 43% of all websites. In comparison, Amazon Web Services represents 33% of all cloud infrastructure. And Stripe’s embedded effects as an online payment processor currently make the company worth $95 billion.

While powerful, competitors will quickly attempt to replicate embed effects by offering alternatives that do the same thing. For every Intel, there’s an AMD. There’s continual pressure to innovate, which is how Nvidia staves off its competitors. Another example is companies migrating to the cloud. Mainframe companies such as Fujitsu and IBM are forced to adapt, which they’re attempting now.

Combining embed effects and network effects exponentially increases a company’s defensibility. A great example is the open-source programming language JavaScript, which is used in some form for 98% of all web applications. Because it’s open source, the more developers use it, the better the JavaScript becomes, which is the network effect. More on network effects in a moment.

Scale Effects

Scale effects are straightforward. The more customers you serve, the easier it is to achieve scalability across unit economics. Walmart and Costco are the retail poster-children of scale effects. Amazon’s scale effects allow the e-commerce to offer free shipping and next-day delivery because of the magnitude of Amazon Prime members.

As the adage goes, “It takes a lot of money to make a little money” on the way to achieving scale effects. It took Amazon seven years to break even. Uber, another company that relies on scale effects, was founded in 2009 and turned its first cash-positive quarter in 2022. Yet, Uber still lost $2 billion due to its investments in greater-scale effects.

In today’s financial market, scale effects are no longer recognized as they once were without profitability. For years, many founders were advised to prioritize growth over profitability by investors. We’re now seeing venture capital change its tune to combine growth and profitability. As of now, it will be a fine line and an interesting balance challenging founders in the years to come.

Network Effects

According to Metcalfe’s Law, a network's value is proportional to the square of the number of connected nodes. It’s a concept that has become immensely popular, especially within the communications industry. But it’s not as simple today. The definition of value wildly varies based on the type of users and purpose of the network.

Building upon Metcalfe’s Law, network effects occur when a growing number of users improves the quality and value of the product. Therefore, it’s not just how many connected users there are but how each participates in the network to create exponential value. Therefore, it’s easy to confuse network effects with brand, embed, and scale effects, but they are all fundamentally different.

For example, the more websites indexed by Google, and the more users search and click the best sites, the better the search algorithm becomes and, therefore, the user experience—network effects beyond branding, embedding, and scalability. YouTube, Facebook, Airbnb, and Apple are other examples. That’s how Amazon’s scale effects are different than network effects. The more buyers and sellers on Amazon do not necessarily improve the quality of products in the network, except maybe through natural competition, which doesn’t always happen anyway (some would argue that the opposite of network effects is true).

According to a study by the venture firm NFX, network effects account for 70% of the value creation in the tech industry. The firm also concluded that very few founders understood how to design network effects for their startups. To be fair, if it were easy, everybody would do it, and network effects would no longer represent the competitive advantage we acknowledge today. Another challenge is creating network effects outside of tech. How do you achieve network effects without the advantage of a software-based product? It turns out it’s not so easy.

So then, why joy?

I’ve spent years analyzing brand, embed, scale, and network effects while building companies and working with clients. The challenge has never been the “What?” and “Why?” of each. It’s easy to see what they are and why they’re important. The eternal question is, “How?” How can an organization achieve at least one or more of these effects for value creation and defensibility?

After a particularly frustrating business trip, I began to reflect upon the times I worked with organizations that achieved these four effects and how they got there. I realized joy was the one element that tied them all together.

I’m convinced that a company is more vulnerable today than ever without joy.

The Case for JoyFX

In my book The Qortex Circuit, I presented a four-step framework for training an individual’s brain for joy and transformation. Here’s the excerpt on the science of joy.

Joy is the renewable resource that powers all Qortex coaching. Joy is different from happiness. Happiness is associated with your external circumstances. Joy is the feeling of being glad to be with someone not only in our celebrated strengths but especially in our vulnerable weaknesses. Joy is a relational experience. It’s the sparkle in our eyes when we see those that delight us. Joy gives us the peace to share our deepest shame and bond with others that protect us. Therefore, we don’t have to feel happy or excited to have joy.

Joy strengthens loving relationships. We love people as a response to joy, not the other way around. Joy creates a high-energy state in the brain. It helps us process suffering and pain while maintaining connections with the people we love. Joy allows us to be resilient and productive with others, even in the hardest times.

According to the work of Dr. Allan Schore and others such as Dr. Antonio Damasio and Dr. Karl Lehman, we all have an “experience-processing pathway.” This pathway starts at the bottom of the right brain and works its way through four major centers. It ends at the “joy center” in the right orbital prefrontal cortex, which is the center that has executive control over our entire emotional system. When this center is fully developed, we more effectively regulate emotions and control pain. It even boosts our immune system. It’s also the only part of the brain that can override the main drive centers of food and sexual impulses and the emotions of terror and rage.

Your joy center is the only section of your brain that never loses its capacity to grow. We can continually train the joy center for the rest of our lives. The implications are that no matter what age, with the right joyful relationships in our lives, we can grow and even repair our capacity for emotional intelligence, agility, responsibility, and maturity—all thanks to joy.

In my experience, transformative companies start with resilient employees because they operate with high degrees of joy, starting with the CEO. This joy translates into innovation and branding strategies that foster a joyful connection with customers. The organization, employees, and customers make the intentional emotional investment to go above and beyond. Through the good times and bad, they enjoy each other.

The Cost of Being Joyless

When companies are joyless, their employees suffer, causing a chain reaction affecting performance, customers, and ultimately the bottom line.

Joy in the workplace is crucial as Generation Z enters the workforce after a global pandemic. Mental health statistics indicate that employees are more stressed than ever because the world has changed forever. Employees lack resilience and “emotional professionalism because they’ve found themselves disconnected and lonely. They burn out their coworkers because their emotional issues leak onto their teams with expectations that their employers provide mental health resources to fix their problems. This work state is the new normal and will only worsen if ignored.

Customers are trending the same way. Every day, brands are attacked for being politically incorrect or not correct enough. The term “Karen” describes an entitled woman who demands to see a manager for an unrealistic level of service. Social media is peppered with “Karen sightings” but also horrifying video clips of customer service gone wrong. In turn, brands try to back-peddle in futile attempts to make everybody happy. The loudest customers seem to have hair triggers, waiting for “gotcha” moments to virtue signal—a performative act of moral grandstanding for social recognition.

About a decade ago, the term “Snowflake” was coined for someone suffering from an inflated sense of uniqueness and an unwarranted sense of entitlement. Snowflakes are considered overly emotional, easily offended, and unable to deal with opposing opinions. To this day, it’s a derogatory label applied in the context of employees and customers alike.

Becoming a snowflake is the epitome of being joyless. However, the real question is how we arrive at such a state where snowflakes exist in the first place.

In his book, The Madness of Crowds: Gender, Race and Identity, author Douglas Murray offers a different take:

It is wholly unsurprising that studies show an increase in anxiety, depression and mental illness in young people today. Rather than being a demonstration of ‘snowflake’-ism it is a wholly understandable reaction to a world whose complexities have squared in their lifetimes. A perfectly reasonable response to a society propelled by tools that can provide endless problems but no answers.

So, what is the answer?

Joy is the Antibiotic

When coaching startup founders, I ask whether their product is a vitamin, painkiller, or antibiotic. Vitamins are great to have but hard to sell, and thus, harder to attract venture capital. Painkillers are better. Customers will change their behaviors to address their pain, especially an underserved one, making it a promising venture with investors. But antibiotics, like the invention of penicillin, have the power to change the world and get Wall Street salivating.

Joy is the answer for the new volatile, uncertain, complex, and ambiguous economy. Joy is no longer a nice-to-have vitamin or temporary painkiller. Joy is the antibody that boosts the immune system of an organization so it can adapt and innovate for competitive advantages. As per the science of joy, this one powerful emotion regulates fear and anger, preventing them from becoming terror and rage. Joy ensures performance through a deeper psychological connection.

Joy Creates Meaning

During the industrial revolution, the understanding of an organization was compared to a machine. Simultaneously, scientific management theory engineered the organization for better productivity and economic efficiency. But the machine metaphor fell short because organizations are far more complex and nuanced. After all, they’re made up of people, not robots (not yet, anyway, if you believe in dystopian futures and that sort of sci-fi stuff).

Subsequently, the conceptual upgrade was that organizations are living organisms and require more of an organic management approach. Whereas scientific management was a modernist construct, an organismic paradigm required a postmodernist critique of outdated modern methodologies. Postmodern business theories sought to humanize employees and create new incentive systems that integrated their needs. The concept of a career path was born out of this movement.

The shortcoming of a postmodern approach to business is that it’s highly subjective, particularly regarding the value of an individual’s opinions to an organization. Internal inconsistencies occur when customers and employees are led without objectivity by subjective opinions alone. In psychology, this leads to cognitive dissonance, which inflicts the mental toll of contradictory internal information across feelings, ideas, beliefs, and desired actions.

All organizations are systems. But today’s organization cannot be a modern mechanistic system, like a machine. Although they are living systems, treating them as postmodern organic systems, like the human body or a family unit, falls considerably short because of collective dysfunction.

So what’s the answer? All organizations must become meaning-making systems, which requires a meta-modernist approach.

Without boring you with pontification, the meta-modernist asks, “What is most useful to us right now?” It leaves room for objective science and subjective opinions, often in paradoxical harmony, because both are appropriately useful depending upon the system and context. In other words, the meta-modernist approach provokes a conversation about meaning first, which is dialogic, and then asks what is most useful.

Today’s employees want meaning in their work. So do customers. Customer behavior has changed to seek more meaning in every buying decision. They’re called “conscious consumers” for a reason.

Using meta-modernism, an organization first asks, “What would bring our entire organization, including employees, customers, and shareholders, the most joy?” And for that to occur, everyone must engage in a dialogic process to explore the meaning of joy individually and corporately. That’s how any organization, like your organization, becomes a meaning-making system to start creating JoyFX.