Bias from association

Pavlov came up with his famous conditioned response theory during his research on digestion in dogs. He observed that the dog would start salivating (an unconditioned response) when it was given meat. If a bell is rung every time the dog is given meat, then after a period of iterations the dog starts salivating when it hears the bell ring. This is a conditioned response.

Companies use Pavlovian association successfully in advertising. Famously, Coca Cola always serves ads during events and moments that evoke a happy emotion - sporting events, movie awards, etc. Over time audience starts associating happy emotions with Coke.

Companies that are able to successfully execute this have an enormous pricing advantage. Another example of this is the social media companies. Instagram, Facebook, TikTok - all serve hits of regular dopamine to users every day. Once users are hooked to start browsing beautiful pictures and funny videos on these apps, they start associating the ads shown on these apps with beautiful, funny, happy moments in lifestyles that they crave. Most of the work in valuing these internet companies is assessing how they capture the moments of relevance in our daily lives. If a company’s hold on these moments is strong, then they will have a thriving advertising revenue stream.

Bias from association may not always help a small company grow big, but its one of the deepest moats in helping a big company stay big.