The Psychology of Business, Part 1

How understanding the psyche drives success

I get asked almost every day why I left my career as a CEO to study psychology. I also get asked quite often how psychology and business are related.

My short answer: business IS psychology, whether you know it or not. And the more you're aware of this, the more successful you'll be.

The first person to figure this out was Edward Bernays. You might not know his name, but you're impacted by his work every day.

The Father (and Nephew) of Psychology

Bernays was the nephew of Sigmund Freud, the most well-known psychologist in history. Freud laid the foundation for psychology as we know it today, but before Bernays, the field was confined to medical treatment, academic research, and understanding mental illness. It was considered a clinical discipline with no commercial applications.

In the 1920s, Bernays saw something no one else did: he took his uncle's revolutionary insights about the unconscious mind and systematized them into what became the foundation of modern business influence. He was the first person to apply psychological principles to commerce and mass persuasion.

This work began on accident, working on government propaganda during World War I. Bernays served on the Committee on Public Information, which used speeches, posters, newspapers, and film to whip public opinion into supporting American intervention. When he returned from the war, he realized that these same principles—using psychology to shape the minds of the American public—could be applied to commerce.

He had seen how psychology could move entire populations. Now he would apply it to business.

His first major success came in 1913, when he faced an unusual challenge. Actor Richard Bennett wanted to produce "Damaged Goods," a controversial play about venereal disease and prostitution—what Bernays called "a propaganda play that fought for sex education." The problem was that moral censors would never allow it, and the taboo subject made it impossible to raise funding.

Bernays saw an opportunity to test a radical new approach. Instead of fighting the controversy, he transformed it into a public health cause. He created the "Medical Review of Reviews Sociological Fund Committee" and convinced prestigious figures like John D. Rockefeller Jr., Franklin and Eleanor Roosevelt, and prominent industrialists to join for just $4 each.

By positioning the play as a sociological study fighting the spread of venereal disease, Bernays made it impossible for anyone—even the censors—to question its respectability. The technique worked perfectly: "Damaged Goods" opened without incident, became a hit, launched the social hygiene movement, and introduced Americans to the concept of sex education.

Within a decade of starting his PR firm in 1919, Bernays had acquired the most impressive client list in American business: General Electric, Procter & Gamble, CBS, American Tobacco Company, Dodge Motors, and even three presidential administrations. The speed of his success proved the power of his psychological approach—companies saw immediate results that traditional advertising couldn't deliver.

The Bernays System

Here's the system Bernays ultimately developed from Freud's insights:

1. Unconscious desires drive all decisions. Freud proved that people are motivated by psychological forces they can't even articulate. Bernays realized that businesses needed to appeal to these hidden drives rather than rational benefits.

2. Sell symbols, not products. Instead of promoting functional features, attach products to deeper meanings—status, identity, belonging, transformation. Make people feel something about what you're selling.

3. Use third-party authority. Don't promote yourself directly. Get credible experts, celebrities, or institutions to endorse your message. This bypasses natural skepticism and leverages trust.

4. Leverage group psychology. People follow social proof and want to belong. Show them that their desired peer group already uses your product or believes your message.

This wasn't just theory. Bernays used this system to reshape American culture (some ways for better, some ways for worse). He made bacon and eggs our standard American breakfast, convinced women that cigarettes symbolized feminist freedom, and turned consumption into a form of self-expression. Each campaign succeeded because it operated on psychological rather than rational principles.

What Bernays proved is that psychology isn't a "soft skill" that supplements business strategy—it IS the strategy. His work created the foundation of modern advertising and media relations that every major company uses today. Every major brand you know—Apple, Nike, Tesla, Coca-Cola, Disney, Amazon—operates using the advertising and PR frameworks he established.

Even today's biggest PR firms acknowledge their debt to Bernays. Harold Burson, CEO of Burson-Marsteller (one of the world's largest PR companies), said: "We're still singing off the hymn book that Bernays gave us."

The psychological principles he systematized from Freud's work became the foundation for all modern marketing, advertising, and brand communications. Whether companies realize it or not, they're using methods that trace directly back to his pioneering work in the 1920s.

How Psych Built My Career

I learned this firsthand when I majored in media relations in undergrad, almost 20 years ago. My program was built on the psychological foundations that Bernays established—teaching us not just how to communicate with mass audiences, but how to understand the deeper psychology of human connection and influence.

This education didn't just teach me tactics—it taught me the value of deeply understanding people and how their psyches work. I learned to create work that connects with people on a psychological level, which ultimately provides the most value and creates the most resonance.

This psychological understanding became the foundation of everything I built. It influenced how I approached brand development, growth strategies, PR and investor relations. When I credit psychology with the success of my career, this is what I mean—the ability to understand humans at every level of business.

The Dark Side

Of course, this knowledge can be used nefariously. Bernays himself wrote a book called "Propaganda" and his techniques were studied by everyone from advertisers to political manipulators. The same psychological principles that can build authentic connections can also exploit vulnerabilities and manufacture consent. You can look around and see evidence everywhere of powerful people, politicians, media and brands using psychological tactics for nefarious purposes.

Understanding psychology isn't just about gaining an advantage—it's about understanding the world you are living in, and recognizing when others are using these techniques on you. In a world where every interaction has psychological dimensions, awareness becomes protection.

Once you understand the foundations of psychology, you enter an entirely different game.

If you’d like to learn more about Freud/Bernays' impact, give this documentary a watch.

In my next newsletter, I'll cover the darker side of psychology and what you'll need to know to protect yourself once you become successful. Because understanding how to influence others is only half the equation—you also need to understand the parts of yourself that others will try to exploit, and where your own belief systems and behavior, if unchecked, might lead to your downfall.

Until next time,

H