The Alice Effect
Patrick D. Lynch · 2026
The first time an AI personalizes an experience for you, it feels magical. By the third time, the novelty is gone. This chapter explores why impressive AI capabilities lose their spark so quickly. Drawing on a Wonderland world where creatures adapt to absurdity with remarkable speed, the author introduces the Alice Effect, where customers rapidly habituate to AI capabilities and breakthroughs become baseline expectations. Combined with the Red Queen Effect, where competitors must innovate constantly just to survive, these forces create an escalation cycle that makes technology-based differentiation increasingly difficult to sustain. Through examples from Spotify, Chegg, and Stitch Fix, the chapter demonstrates how AI changes competitive moats built on personalization alone. It explains why scaling personalization creates noise rather than connection, making authentic human experiences the new premium. Through the science of habituation, we see how innovation raises expectations faster than leaders can respond. Biology explains why adaptation never stops. Sociology helps us understand the types of connection that rise in value when AI becomes commonplace. Psychology shows why AI brilliance alone is never enough, and the future of great experiences depends on designing for meaning, memory, and human attention.