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How Opower’s Dan Yates Persuades People to Use Less Energy
How do you get people to use less energy? Dan Yates says it’s all about sparking neighborly competition. By Kevin Charles Redmon
Comments () | Published July 12, 2012
As CEO of Opower, Yates helms one of the region’s hottest tech start-ups. Photograph by Stephen Voss.

In the Gospel According to Dan Yates, as in the Book of Genesis, building a better world doesn’t happen overnight. Such things take time.

“When we first started Opower,” Yates says, referring to the Arlington firm of which he’s cofounder and CEO, “everybody was doing these really non-incremental, boil-the-oceans, change-the-way-the-world-works companies,” he says. “And you need some of them. But more often than not, they fail.”

Opower is decidedly not a boil-the-oceans—Silicon Valley-speak for “too ambitious to succeed”—type of venture. It’s a software company that does one really boring thing exceptionally well: persuade Americans to use less energy—to turn the thermostat down to 68 in winter, skip the AC in summer, and kill the kitchen lights before bed. But Opower reaches a lot of households—more than 10 million—and it knows a thing or two about persuasion.

Humans, it turns out, are deeply social creatures, carefully attenuated to societal norms. We care about nothing so much as what our friends and neighbors are up to. (Hence Facebook, hence the Kardashians, hence the whole modern shebang, really.)

Tell people they’re energy hogs compared with the folks next door, as Opower does in a colorful mailing each month, and they’ll use less. Once you find out that your Neighbor Rank is a dismal 43 out of 100, 68 degrees doesn’t seem so bad.

No single household is likely to reduce its energy use by more than a few kilowatt-hours per month. But a few kilowatt-hours across 10 million homes add up. Opower is five years old, and it recently announced it has saved Americans more than 1 billion kilowatt-hours of electricity. That’s more than $120 million worth of energy, enough to take Arlington County off the grid for a year.

Yates and his cofounder, Alex Laskey, may have invented Neighbor Rank, but they didn’t invent normative messaging. They borrowed the idea from Robert Cialdini, professor emeritus of psychology and marketing at Arizona State University. In a series of experiments in the early 2000s, Cialdini and a professor from California State University, San Marcos bombarded hundreds of San Diego homes with doorknob hangers, asking residents to use a fan at night instead of air conditioning and to make other small changes. Each hanger made a slightly different appeal: Protect the environment! Save money! Conserve resources for our kids!

Cialdini wanted to know what messages would motivate people to pay more attention to their energy consumption—a tall order because kilowatt-hours are cheap, invisible, and a lot less interesting to track than, say, your fantasy-baseball team.

“Six minutes is the average amount of time that an American spends thinking about energy use in a year,” Yates told a crowd of Google employees during an Earth Day keynote address in April. “Most of us here probably think about Justin Bieber more than we think about our energy use.”

When Cialdini’s research assistants checked the meters each week, they found that most of the hangers made no difference; in some cases, residents started using more electricity. Only one message induced Californians to turn off the AC: Did you know that most of your neighbors choose to use a fan at night? Thus chastened, homeowners dropped their usage by 6 percent.

On a soggy Tuesday morning this spring, Yates and I go for a run in Rock Creek Park. Yates, 34, lives in DC’s Mount Pleasant, in a four-bedroom house that he and his wife, Tobie Whitman, bought two years after moving to Washington in 2007. He appears on the porch like a vision of the late Steve Jobs—gaunt, with thinning gray hair cropped close, a sharp, stubbled jaw, rimless glasses. We set off at a healthy clip.

Yates grew up an only child in San Diego. Dad was a career Air Force man and inveterate garage tinkerer; he retired from the service and went into defense contracting, working on spy satellites. Mom was Israeli with a doctorate in education from Rutgers. She taught Hebrew in the shul where Yates had his bar mitzvah, and she got him into the gifted-and-talented program in the neighboring La Jolla school district.

Sounds pretty dweeby, I tell him.

“I was definitely not the kid at the cool table,” he says. “But I played sports, I had girlfriends, I stayed up late, and I didn’t actually program [computers].”

We hop the guardrail on Klingle Road and drop down into Rock Creek Park. It’s cool along the creek, and the cathedral of trees overhead coaxes out Yates’s inner naturalist. He gives me a mini-lecture about the geology of the Hawaiian Islands, the water wheel that’s been rebuilt at the park’s Peirce Mill, and great blue herons: “They stand in shallow water and basically don’t move for 11 hours till a fish swims underneath them.” He sounds envious, as if he wouldn’t mind having such patience—or predatory instinct.

When Yates arrived at Harvard in 1995, computers were hot. Amazon had sold its first book in July of that year. Windows 95 had appeared in August, just weeks after Netscape’s $2.9-billion IPO sent Silicon Valley into a tizzy.

Yates majored in computer science, joined the Entrepreneurs Club, and in 1996 told a Harvard Crimson reporter he intended to start his own software business. Just after graduation, Yates convinced his roommate, Jay Kimmelman, to move with him to the Bay Area. Within months, a friend of Yates’s older cousin asked them to join his online music start-up, Echo. “We were like, ‘Well, he knows what he’s doing—he’s 25,’ ” Yates says.

They agreed to sign on for a year. That spring, even as the bubble began to burst, Echo raised millions and scaled furiously. It was Yates’s first rodeo in Silicon Valley, and it was a hell of a ride.

Soon he was scheming start-up ideas of his own. “I needed to do something that, even if it failed, I felt good about,” he says. “I wanted to do something that mattered.” Both Yates and Kimmelman had mothers who were educators, so, Yates says, “in spite of everyone saying, ‘You cannot build this business in educational software,’ we looked there.”

Edusoft, which offered educational-testing software to public-school districts, had an inauspicious start. “The bubble had completely burst,” Yates says, and the founders’ combined age was 45. “The fundraising was a total bitch.” Many of their early employees were headed to grad school in the fall. If the operation went bust—oh, well.

Joe Greenstein, employee number nine and now CEO of the social-networking movie site Flixster, says that when he arrived at Edusoft headquarters, in San Francisco’s Mission District, “it was just disturbingly cute. They were in this tiny one-room office that had previously been a teahouse. There were no desks left, so I had to sit in the server closet.” When potential partners came by, Yates and Kimmelman got friends to sit at empty workspaces and look busy.

In four years, Edusoft grew to 140 employees and $20 million in annual revenue. Yates and Kimmelman decided to sell, Yates says, “right as we were about to hit the growing-pains era.” Houghton Mifflin paid about $40 million for the firm, and overnight Yates, who till then had a few hundred bucks in his checking account, became a millionaire. He was barely old enough to rent a car.

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Posted at 10:10 AM/ET, 07/12/2012 RSS | Print | Permalink | Comments () | Washingtonian.com Articles