You're 9 years old and it's 11:00 p.m.

on a school night. You're supposed to be

asleep, but under the covers, you've

been playing Tetris for 2 hours. There's

no characters. There's no story line.

Nobody's giving you a prize when you're

done. But every time you drop that piece

into a slot and four lines vanish,

something fires in your brain that makes

it feel incredibly satisfying. So, you

keep going. You're not even enjoying it

anymore. You're just waiting for that

one shape of a piece that has to fit

into the gap. The Soviet engineer who

invented Tetris in 1984

didn't know he was designing one of the

most psychologically powerful systems

ever built. But decades later,

researchers would study Tetris to

understand why the human brain can't let

go of unfinished patterns. And 40 years

later, tech companies took that same

instinct. The discomfort of almost the

tension of unfinished and wired it into

every app on your phone. Streaks that

punish you for missing a day. An owl

reminding you that your Spanish lesson

is overdue. Badges that reward you for

things that are not real. And guess

what? They do it because it works. Today

is about the rise of gamification. why

people are becoming sick of it, the

business of gamified apps, and what will

replace it in the AI economy. Let's dive

in.

This may come as a surprise, but

gamification existed for a century

before anyone came up with that name.

The core principle is taken from basic

human psychology and reinforcement

principles. If you reward people with

something, with tokens, for example,

they tend to perform desired behavior.

One of the oldest examples of

gamification that history remembers till

this day is the green stamps in 1896.

SNH green stamps were a legendary

loyalty program. Customers would get

stamps for everyday purchases that could

be redeemed for products from an SNH

catalog. By the 1960s, SNH were issuing

three times as many stamps as the US

Postal Service. The stamps were not

worthless because a full book of stamps

could buy you real merchandise. The

peculiar part though is that the tokens

themselves became emotionally valuable

long before they added up to anything

meaningful. People chose supermarkets

based on the number of stamps they would

get and families devoted entire kitchen

drawers to those booklets. The behavior

wasn't really driven by the return on

investment. It was driven by the

psychology of progress and the

anticipation of eventually cashing in a

stack of points. Almost a century later,

American Airlines launched a advantage,

which became the first frequent flyer

program in the United States. The

program replaced paper coupons with

miles that were tracked through a

reservation system. The next year,

Holiday End followed with the first

hotel loyalty program. Within five

years, a boom in points and miles

programs took airlines, hotels, and car

rentals by storm. These programs proved

that people don't necessarily need a

physical reward to sign up or to buy.

The motivation can occur with

non-angable points, points that can be

touched or don't have any nominal value,

but still drive loyalty. This behavior

migrated to tech and the last step

towards the epidemic of gamification

became as you might have guessed the

rise of online gaming and the

introduction of leaderboards, streaks,

points, social status and this is where

our story of gamification and software

begins. Microsoft came up with Xbox

achievements and gamer score in 2005.

When they did that, every game on the

platform contributed to a single score

that would work across multiple games,

visible to all players. This single

action elevated the concept of rewards

to meta rewards that would exist outside

any individual game. This introduction

also altered gaming behavior because it

drove users to explore more, do side

quests, replay games on harder

difficulties. Xbox achievements were

arguably the first mass market proof

that imaginary badges with zero monetary

value could reshape the behavior of

millions of people. In 2010s,

gamification started leaving the borders

of gaming and migrated into social

media. Now, this might tell you how old

I am, but I remember the days of

Foursquare. For the younger demographic

on the channel, Foursquare was a social

media app where you could earn points

for checking into certain places, gyms,

restaurants, cafes, coffee shops, and

you would be labeled according to the

places you visit. For example, a gym rat

or a coffee coner. Then came the

legendary game called Farmville. And

then after Farmville, the Silicon Valley

began showing interest in gamification

startups. The gamification market grew

200% in 2 years between 2010 and 12.

Deote cited gamification as one of its

top 10 technology trends of 2012. Then

came the first university level

gamification course at Wharton. Numerous

online courses across various platforms.

And this is how in the span of 24 months

gamification went from a strange word to

having a dedicated spot in Gartner's

hype cycle. It became a $40 million

startup category and the default

prescription by consulting firms. If

your product was struggling, add points,

add streaks, and add leaderboards. Now,

as a product manager, like the vast

majority of product managers in the

field, I had a time when I went through

a classic set of product management

books. One of them being Hooked, how to

build habit forming products. Now, this

book is fairly controversial, always has

been. The core of it is based on the

concept of a four-step loop. Trigger,

action, variable reward, and investment.

The loop is drawn from gambling

psychology. Variable rewards create

dopamine-driven anticipation. And the

idea is that you apply this loop to

consumer software. There are a lot of

different opinions around the ethics of

this principle. Some people being more

pragmatic and some people criticizing

it. As I was doing research for this

video, I found a comment on Reddit that

sums up the opinion of the latter group

pretty well. My biggest problem with the

book is its basic premise that hooking

people, that is making them compulsive

users of your technology product, is

something worth doing. Now, by no means

am I moralizing. You guys know I try my

best to be as neutral as possible. To me

personally, the shocking aspect around

the popularity of this book is the

realization that billions of people get

a Pavlovian level feedback from a fairly

basic concept and the fact that smart

product teams who work at technology

companies figured out how to ring a

bell. This is the reason why I consider

gamification phenomenon quite

fascinating because of how basic it is

and because of how people figured out

what to do with it.

My biggest problem with the

book is its basic premise that hooking

people, that is making them compulsive

users of your technology product, is

something worth doing. Now, by no means

am I moralizing. You guys know I try my

best to be as neutral as possible. To me

personally, the shocking aspect around

the popularity of this book is the

realization that billions of people get

a Pavlovian level feedback from a fairly

basic concept and the fact that smart

product teams who work at technology

companies figured out how to ring a

bell. This is the reason why I consider

gamification phenomenon quite

fascinating because of how basic it is

and because of how people figured out

what to do with it. By 2014,

gamification had evolved from a gaming

term into a full-blown bucket of

features for enterprises. Deote used

badges to gamify executive training and

time to certification dropped 50%.

Salesforce gamified sales pipelines with

achievement tracking. LinkedIn

introduced profile completion and badges

for completing courses. But the pinnacle

of this mania is the company that

everybody has definitely heard of. The

company that embodies the single most

important case study for gamification

use. Dualingo.

The undeniable star, Dualingo, that took

gamification mechanics to the next

level, has a lot of interesting nuances

that are very much worth noting. Many

other learning apps try to repeat the

success of Dolingo in many ways,

including using Dolingo's name and their

marketing campaigns. Dualingo, but for

history. Dualingo but for math. Dualingo

but for science. Point is, Dolingo

developed a model that isn't about

learning a language. It's a game that

just happens to teach a language. Now,

here's another interesting comment that

I came across. I quit Dolingo after 555

days of learning Chinese. Didn't learn a

damn thing. Gamification is when you end

up farming points instead of knowledge

and the little owl bullies you about it.

I can say things like nihow and what's

your phone number? But I can't hold a

basic conversation. True. On a personal

level, I was never into apps like

Dualingo simply because it has nothing

to do with the mechanism of language

acquisition in humans. Collecting owls

and maintaining a streak has nothing to

do with the cognitive ability to write

and speak a language. Nevertheless, I

got to give it to Dolingo. They are the

most frequently used language app on the

planet. And I'm sure lots of you would

disagree with me. Now, there has been a

wave of general sentiment around fatigue

from gamification across various apps.

And to understand how we got to the

point when we're sick of it, let's go

back to how and why it happened in the

first place. There are three factors

that made the rise of gamification

inevitable. Number one, smartphones.

Before the rise of smartphones, game

mechanics required a console or a

computer. The games, no matter how well

engineered, required you to be

physically present at your desk.

Smartphones, on the other hand, made the

reward behavior available 24/7. Number

two, data infrastructure. Modern apps

can measure everything. session length,

retention, churn, lifetime value, and

gamification gave product teams and

technology companies specific levers to

pull against those metrics. And number

three, the attention economy. As apps

multiplied, as smartphones became more

ingrained into our hands, retention

became harder. Gamification was the

cheapest possible way to hold your

attention without building new expensive

features that would require lots of

research and engineering resources. The

reason why the reward behavior worked in

the gaming industry is because in a game

the relationship between effort and

reward is very transparent and

predictable. Unlike a slot machine, for

example, a gamer knows that the more

they play, the more points or coins they

will collect. What do you need the

points for? To upgrade a character, for

example. What's going to happen when you

upgrade a character? You get a better

status in the game. Does it mean

anything in real life? No, it doesn't.

But it has a meaning in the game. Now,

apply this to fitness apps. For example,

you stick to a meal plan for 30 days in

a row. You collect a bunch of points to

unlock premium version for 5 days, let's

say, and then you get a badge at the end

of the month that you can put up on a

wall of achievements. And the phenomenon

that's been confirmed across decades of

research in psychology and neuroscience

is that the largest dopamine surge

occurs during the anticipation of a

reward. Green stamps proved back in the

60s before any of these psychological

mechanisms had formal names that

stacking rewards, stacking anticipation,

collecting illusions and unresolved

tension changed the purchasing behavior

of 80% of American households. Every

gamification system ever since, from

frequent flyers to dual lingo streaks,

is a descendant of that standbook.

So why did it collapse? The

psychological tricks that sparked the

initial excitement became the very thing

that burned users out. Gamification that

was supposed to be a fun element that

would make the product less boring and

more organic to use and help you learn

things by playing became a commodity.

During the wave of fascination and wild

growth of gamified apps, Gartner made a

prediction in late 2012 that 80% of

gamified apps would fail by 2014. And

the reason for it was poor application

design. This is very similar to the AI

bubble that we're witnessing right now

and the video we made on why most AI

startups are bad businesses. Because you

can only get so far when pursuing trends

and not having a solid product. Remember

how I said that gamification was

inevitable? Smartphones, data, and

attention economy. These three

conditions that made it inevitable are

the very conditions that also made it

unsustainable. When the iPhone came out

in 2007, the App Store had about 500

apps. By 2015, Apple and Google each

hosted around 1.7 million, but the

number of apps people actually used was

around 27. And that number plateaued

even as time spent on phones kept

climbing. Which means that apps were

competing for 27 slots on a person's

iPhone. This environment made

gamification the cheapest available tool

for retaining users. Points, badges,

leaderboards, streaks cost next to

nothing to implement compared to

building genuine product

differentiation.

And the problem is it works in the short

term, but still it works. Introducing

gamification as a patch fix was rational

for businesses. Speaking from

experience, after building a career in

product management, sometimes you have

to find the cheapest possible way to fix

a problem. But this approach comes at a

cost. for gamification. It got bolted

onto apps as a retention hack rather

than building a business with a

defensible value that won't be wiped

away by hype cycles. And what's even

worse is that it disfigured the notion

of games because games are not about

points or coins or badges. These things

are as far from games as they are from

fitness or language learning. Streaks

are the most effective retention

mechanic in modern gamification. And

they also have a destructive second

order effect. They convert genuine

interest into anxiety. Even Dualingo

admits this. Long streaks motivate

through loss aversion rather than

positive anticipation. What this means

in playing English is that the streak

doesn't make users want to learn more.

It means that they're afraid to stop and

therefore they end up doing the absolute

minimum to simply preserve the streak.

But preserving the streak has nothing to

do with learning. The streak is there,

but you're learning essentially nothing.

The gamification of learning in mobile

apps has replaced the product's actual

value. Forsquare is the clearest

business case of gamification fatigue.

The app had 45 million users in 2013,

and all of that audience was built on

check-in badges and mayorship

competitions. But by 2013, the novelty

of checking in wore off, and the

gamification could not sustain the

interest because the value of the

product outside of gamification simply

wasn't there. So, how come Dolingo

didn't follow the same path?

Dolingo is a notable exception because

they invested over 600 experiments to

get gamification mechanics to perfection

and essentially outrun the trademill. I

can have whatever opinions I want about

Dolingo's learning mechanics, but I got

to give it to them. They managed to

build a stellar system for discovering

and testing behavioral signals faster

than any other competitor. In behavioral

economics and psychology, there is a

term called hedonic adaptation. And

Dolingo manages it beautifully. It

constantly refreshes visuals, rules,

rewards, streak freezes so that the

brain never fully habituates to the game

mechanic. They make their app a living

system. On top of it, they built a very

defensible technical infrastructure.

They tracked micro behaviors across

hundreds of millions of users. Most

gabified products back in 2010s never

invested at this depth. And even now,

compared to today's market, Dolingo's

product culture is rare. Yes, they built

their business on points and badges, but

they also built the data science and

experimentation plumbing to understand

why it worked or failed. Now, from the

language learning app standpoint, and

some of you may disagree, but I

personally do not see them as a product

that has anything to do with

linguistics, but that is a subjective

opinion. Nevertheless, Dolingo is a

notable exception. Most companies don't

have the resources or the culture to

sustain that level of experimentation,

which is why the Gartner 80% failure

rate proved accurate for the broader

market, but not for them. Now, where is

gamification headed in the AI economy?

Despite all odds, the gamification

market is projected to grow from $20

billion to $190 billion by 2034. But the

term called gamification eight years

from now will bear no resemblance to the

points and badges system that we see

today. AI will personalize the hell out

of it to the point when there is going

to be a built-in behavioral layer inside

each app. So what exactly will happen?

Number one, personalization is going to

be on the user level. Social media,

gaming, e-commerce will be reading

behavioral signals and know exactly what

motivates each individual user. When

they're about to disengage, how to

change the experience on the spot, what

to put in your notifications, how to

adapt lesson difficulty, how to change

your training plan depending on how

you're feeling today. What AI will do is

mimic the system that Dolingo pioneered.

AI will turn lots of products into

living systems that will constantly

change and adapt. Number two, listen

closely. The definition of loyalty will

be reframed. Latest research and

predictions around transactional

loyalty. Transactional loyalty being

discounts, points, and cash back show

that there is going to be a strong trend

towards emotional loyalty. Things like

recognition, relevance, and relationship

with the product. So to all founders,

techies, and users, of course,

gamification isn't dead. Yes, we're

absolutely bored of it at this point,

but it's about to change fundamentally.

So, say what you will about Gen Z

trends, but vibes are becoming the

factor when it comes to loyalty. As

always, we hope this was helpful. Till

next time. Bye.

So why did it collapse? The

psychological tricks that sparked the

initial excitement became the very thing

that burned users out. Gamification that

was supposed to be a fun element that

would make the product less boring and

more organic to use and help you learn

things by playing became a commodity.

During the wave of fascination and wild

growth of gamified apps, Gartner made a

prediction in late 2012 that 80% of

gamified apps would fail by 2014. And

the reason for it was poor application

design. This is very similar to the AI

bubble that we're witnessing right now

and the video we made on why most AI

startups are bad businesses. Because you

can only get so far when pursuing trends

and not having a solid product. Remember

how I said that gamification was

inevitable? Smartphones, data, and

attention economy. These three

conditions that made it inevitable are

the very conditions that also made it

unsustainable. When the iPhone came out

in 2007, the App Store had about 500

apps. By 2015, Apple and Google each

hosted around 1.7 million, but the

number of apps people actually used was

around 27. And that number plateaued

even as time spent on phones kept

climbing. Which means that apps were

competing for 27 slots on a person's

iPhone. This environment made

gamification the cheapest available tool

for retaining users. Points, badges,

leaderboards, streaks cost next to

nothing to implement compared to

building genuine product

differentiation.

And the problem is it works in the short

term, but still it works. Introducing

gamification as a patch fix was rational

for businesses. Speaking from

experience, after building a career in

product management, sometimes you have

to find the cheapest possible way to fix

a problem. But this approach comes at a

cost. for gamification. It got bolted

onto apps as a retention hack rather

than building a business with a

defensible value that won't be wiped

away by hype cycles. And what's even

worse is that it disfigured the notion

of games because games are not about

points or coins or badges. These things

are as far from games as they are from

fitness or language learning. Streaks

are the most effective retention

mechanic in modern gamification. And

they also have a destructive second

order effect. They convert genuine

interest into anxiety. Even Dualingo

admits this. Long streaks motivate

through loss aversion rather than

positive anticipation. What this means

in playing English is that the streak

doesn't make users want to learn more.

It means that they're afraid to stop and

therefore they end up doing the absolute

minimum to simply preserve the streak.

But preserving the streak has nothing to

do with learning. The streak is there,

but you're learning essentially nothing.

The gamification of learning in mobile

apps has replaced the product's actual

value. Forsquare is the clearest

business case of gamification fatigue.

The app had 45 million users in 2013,

and all of that audience was built on

check-in badges and mayorship

competitions. But by 2013, the novelty

of checking in wore off, and the

gamification could not sustain the

interest because the value of the

product outside of gamification simply

wasn't there.

Now, where is

gamification headed in the AI economy?

Despite all odds, the gamification

market is projected to grow from $20

billion to $190 billion by 2034. But the

term called gamification eight years

from now will bear no resemblance to the

points and badges system that we see

today. AI will personalize the hell out

of it to the point when there is going

to be a built-in behavioral layer inside

each app. So what exactly will happen?

Number one, personalization is going to

be on the user level. Social media,

gaming, e-commerce will be reading

behavioral signals and know exactly what

motivates each individual user. When

they're about to disengage, how to

change the experience on the spot, what

to put in your notifications, how to

adapt lesson difficulty, how to change

your training plan depending on how

you're feeling today. What AI will do is

mimic the system that Dolingo pioneered.

AI will turn lots of products into

living systems that will constantly

change and adapt. Number two, listen

closely. The definition of loyalty will

be reframed. Latest research and

predictions around transactional

loyalty. Transactional loyalty being

discounts, points, and cash back show

that there is going to be a strong trend

towards emotional loyalty. Things like

recognition, relevance, and relationship

with the product. So to all founders,

techies, and users, of course,

gamification isn't dead. Yes, we're

absolutely bored of it at this point,

but it's about to change fundamentally.

So, say what you will about Gen Z

trends, but vibes are becoming the

factor when it comes to loyalty. As

always, we hope this was helpful. Till

next time. Bye.