Great Businesses Are Based On Secrets, and Postmates is built on 2 Fascinating Ones…

In the New York Times Best Seller “Everybody Lies” by Seth Stephens-Davidowitz, he quotes Peter Thiel, Silicon Valley bigwig/super villain as saying “Great businesses are built on secrets.”

In the book they give the examples of Facebook being built on the fact that despite public protestations about the addition of the timeline to the feed, users actually spent way more time online seeing what their friends were doing.

Another example is given about a horse racing syndicate which discovers that the larger a certain valve in a horse’s heart is the greater the chance he will become a racing champion.

Netflix was built on the secret that despite the fact that many people claim to want to watch high brow films and documentaries and add them to their watchlist, they end up watching the same old comedies and tv shows.

One you may have noticed and can verify with a short drive, is that while most people talk about eating healthy and say they haven’t eaten Mcdonalds in years, there is always a line at the Mcdonalds drive thru no matter the time of day.

Over the weekend I decided to do some research on an upcoming project by doing a few Postmates deliveries and I discovered that Postmates is built on 2 interesting secrets.

If you’re not familiar with Postmates it’s a gig economy service where you can order almost anything picked up for you from alcohol to fast food for a fee.

Postmates is built on 2 fascinating secrets:

1. People will overpay for convenience if the overall amount is not exorbitant. If you’ve never used Postmates before you’ll notice that the fees rack up fast. It’s almost impossible to order a meal for less than $20 when you factor in delivery fees and some other random Postmates fee which I suspect is based on mileage the delivery person has to drive. While this is a “secret” I was amazed at how many people were willing to pay over $10 for a single Starbucks drink. Because the amount is still under $20, users don’t realize that they often paid more for delivery than for their food. It would be fascinating to learn exactly what the threshold is during a peak delivery time. Would someone pay $20 for a Starbucks drink? $45 for Inn n Out?

2. People don’t tip for delivery. If you’ve ever been sucked into an argument on social media about tipping as I have (I’m not ashamed) you’ve no doubt heard people brag about tipping 20-30% all the time. Even for delivery. I had always suspected that these people were full of it and Postmates clearly knows this too because it sets up its entire service to help the customer avoid tipping. There’s nothing for the customer to sign on delivery and they are sent a copy of the receipt. There is an option for the customer to tip AFTER the delivery is completed but there is no social pressure of having to click no in front of a real human and predictably no one tips after the delivery. My guess is the Postmates algorithm told them that they raise fees and people would pay them in exchange for not having to tip.

I could add another secret about how drivers don’t understand math well enough to add up their hourly rate but I think most people know Americans are bad at math.

Anyway this got me thinking about what other secrets businesses are based on, and I’d love to hear from you, what secrets are other companies built on?