Behavioral Science For Brands: Leveraging behavioral science in brand marketing.

Interview: Rory Sutherland, author of Alchemy, on why irrational ideas work

Consumer Behavior Lab Season 1 Episode 73

In this episode we sit down with Rory Sutherland, author of Alchemy. As one of advertising’s most original thinkers, he makes the case for embracing irrationality in marketing, argues why logic is overrated and explains how small shifts can lead to big behavioral effects. 

MichaelAaron Flicker: [00:00:00] Welcome to a very special episode of

Behavioral Science for Brands In a wide ranging conversation, Richard and I

spent over two hours with Rory Sutherland, vice Chairman of Ogilvy UK, and

founder of its behavioral science practice. Rory is one of our industry's most

defining voices on the application of behavioral science and marketing.

Richard Shotton: It was a really great conversation and we covered a wide

range of topics, everything from an exciting new idea from Rory about reverse

benchmarking all the way through to the state of our industry and how we

should grow brands in the future. We decided to deliver this as a single long

form episode so you can go through it at your own pace.

MichaelAaron Flicker: Like always. You can find our show notes for this

episode along with all of our other episodes online at the consumer behavior

lab.com, and you can subscribe to our podcast anywhere you listen. We had a

great time with this episode and we hope you all enjoy it too. Happy listening.

Welcome back to Behavioral [00:01:00] Science for Brands, a podcast where

we bridge academics and practical marketing. Every other week we sit down

and we look at some of the best behavioral science that's powering today's

brands. I'm Michael Aaron Flicker.

Richard Shotton: And I'm Richard Shotton.

MichaelAaron Flicker: And today we're very glad to be sitting with Rory

Southern Behavioral Scientist, vice Chairman of Ogilvy and author of Alchemy,

one of Richard and I's favorite books, the Magic of Original Thinking in a

World of Mind Numbing Conformity.

Let's get into it. Rory, welcome. Welcome to the show.

Rory Sutherland: Yeah, I'm not really a behavioral scientist. I describe myself

as a behavioral science impresario. Impresario is that what I really liked about

behavioral science, if I'm being absolutely candid, is not the science bit, it's the

mischief making bit, which is that there's far too much certainty in the worldcaused by over reliance on sort of narrow reductionist models of how things

work.

People become very content with anything that just seems to make sense. And

what I love is the ability to. Play [00:02:00] that gadfly role of going maybe,

yeah, but maybe not. Or maybe the opposite is true. And what I loved about

behavioral science is there seemed to be so many kind of confident decisions

made on the basis of assumptions that weren't really empirically tested.

That probably wouldn't have made much sense to people who are of an

entrepreneurial or marketing mindset, but were nonetheless confidently asserted

simply 'cause they seem to make sense. And I've got a friend actually who

worked for Ogilvy pr, brilliant man called Chris Graves, who you may know.

And he spent part of his life in journalism.

And one of the mantras he adopted in journalism is just because it makes sense,

doesn't mean it's true. And of course it's a good mantra for a journalist because

someone is coming up with a plausible story to mislead you. And if that story

makes sense, you are inclined to put a big tick beside it and walk away.

But actually, the sensible explanation isn't necessarily the real explanation.

MichaelAaron Flicker: And, that [00:03:00] insight is to say, just because it's

easy doesn't make it right. And so to and to, and so to push to that next level is

really, it's really a exciting part of the field. And you've spent a long time taking

this and applying it to marketing specifically.

Rory Sutherland: I think, I think what's really important is that, I mean, the

concept of the econ, which I think is Richard Taylor's invention, in other words,

this strange species that doesn't exist in the wild but is only found inhabiting

economic models. Yes. That was a really, really useful concept. 'cause you

suddenly realize that we are designing the world for econs, not for humans.

And that's, that involves a massive mystery. Yeah. I mean, at best maybe, I

mean, it can be worse, but at best it's just a massive misdirection of effort. And

it always interests me because actually really successful technologies really

succeed because someone's managed to find an interface that's designed around

human perception.

An emotion [00:04:00] rather than an interface that is optimal in some, I mean, I

don't think anybody's yet been the Steve Jobs of ai. I think a lot of nerdy people

have improved it in one dimension in terms of sort of all kinds of artificialmetrics. But nobody's asking the, I mean, the lesson most tech is that loads of

nerdy people compete for years and years and years.

Then someone comes along with a cute user interface and makes all the money.

Yeah. I mean, that was basically, you know, that was Facebook. Okay. Yeah,

absolutely. Yeah. I mean, I, Facebook bothers me because we, in the advertising

industry have given literally a trillion to this company, which hasn't had a

second idea.

MichaelAaron Flicker: Yeah.

Rory Sutherland: Okay. I mean, if you've given me Mark Zuckerberg's money,

I think by now I would've launched a decent craft beer brand or, you know, a

chain of cafes. Just something from crying out loud. Have a second idea of art.

Right. You know, say what you like about Elon. Right. You know, he has, you

know, there's a hell of a lot you can say about Elon.

He has got approval of a record of innovating more than once. But actually, you

know quite often, you know, [00:05:00] whether this is good or bad is another

question. The person who cracks the interface and the experience is the person

who, ultimately cleans up. And we are not spending enough time looking for

what do we want to interact with and how, so , I got a lot of people in AI saying,

what you'll do is you'll say, I wanna buy a toaster, and it'll show you the perfect

toaster.

Okay. Based on its knowledge of you and its infinite knowledge of the world of

toasters. Toasters. Okay. And you can, but actually estate agents know you

never show people one house. I. Right, because we can't really choose unless we

have a frame of reference or a comparison point. So what I probably want the

AI to do in the world of toasters is show me four toasters with relative strengths

and weaknesses.

And a fifth toaster, that's a bit of a wild card. That could be an air fryer. Okay.

And then I might be able to make a choice from those five. But dating sites,

whatever it is, we fundamentally need a frame of reference before we can

actually make a decision. And that's the classic case where I think people who

are logical don't really understand human [00:06:00] psychology very well.

MichaelAaron Flicker: Yes. And if we are toaster makers, if we are a toaster

brand, we want to put an expensive toaster first so that way everybody anchors

to that more expensive toaster. So also who's designing the AIRory Sutherland: and, and, and is it advertising funded because the

inshitification of everything? Yeah. I mean, there is a website I really

recommend, which I, I occasionally talk to them.

KAGI cgi.com. Okay. Which is a pay to use search engine, meta search engine.

And it's like search used to be 15 years ago where when you search for a hotel,

the first search result is the hotel with its phone number and the address. Okay.

What you want rather than 17 other hotels that are trying to actually attract your

business, combined with 15 effectively online travel agents who aren't remotely

interested in actually putting you in touch with that hotel directly.

Right. What they want you to do is book through them. You know, we, we've

gotta be concerned about this, that we could end up basically creating an

economy [00:07:00] where effectively we just have AI is playing chess with

each other. Yes. At an immense energy cost and act and effectively getting us

nowhere.

MichaelAaron Flicker: Is that related to AI ethics in your mind?

Meaning there's big capital B concerns about AI ethics, but then I would say

this is a commercial concern with AI ethics, which is you could spend a lot of

energy cost, you could spend a lot of computing power and not end with a better

product.

Rory Sutherland: And also where you have a problem, which I don't think

we've been alert to enough in advertising, because the reputation of media

owners previously took care of that which is that the dishonest actor in a market

will have more funds to play with than the honest actor.

Mm-hmm. So the story I tell about that is I, I had COVID, I was stuck in a

French hotel room. I wasn't on my A game, but I had to buy one of those

Canadian Esther equivalents. Okay, now you go on Google. Sorry Google, but

the top results should be the Canadian government. [00:08:00] Okay. The

Canadian government charges you 14 Canadian dollars for that kind of it's a

visa waiver thing.

MichaelAaron Flicker: I see, I see. Got it.

Rory Sutherland: I dunno why we have to, as Brits, we have to pay this. I

mean, we gave them a fucking country on a plate.

MichaelAaron Flicker: They forgot that.Rory Sutherland: Yeah. They said I'm grateful. But nonetheless, nonetheless,

we gave half a consonant on a plate, but nonetheless they charged us $14. But

there are lots of dishonest actors.

They're not wholly dishonest. Not a total scam. Yeah. If you try and sell

Bitcoin, you'll come across total scam merchants. Here, they'll charge you 60

Canadian dollars. You still get your Canadian CTA, I think it's called Canadian

Travelers Advisory or whatever. You still get it, but you've paid $60 rather than

14.

And of course the people making money that way are out bidding the great

government of Canada. Your 51st state.

MichaelAaron Flicker: Yes.

Rory Sutherland: Making that for my attention.

MichaelAaron Flicker: Yes.

Rory Sutherland: So you will have a problem unless you have some sort of

ethics applied, you'll simply have a problem that in any field, the Dodger actors

have more cash to play with than the people who are playing straight.

MichaelAaron Flicker: Or at [00:09:00] least those with the highest margins,

whether they're dodgy or not. Yeah, yeah,

Rory Sutherland: absolutely. Right.

Yeah. So I mean, this is an interesting problem, which I think besets online

advertising, and I keep arguing about this, saying that I barely ever see any

advertisements for Unilever or Proctor and Gamble brands that might be, 'cause

I'm male and they're still stuck in the 19th century looking for female audiences,

which is not impossible.

Okay? But I do all the shopping for that stuff. My wife's stingy you know, shed

buy the actual midrange, dishwasher, tablet responsibly. She do that in there,

whereas I go, look, it's called Finish Quantum Uber Pro, I've gotta buy those.

Right? You know, it's got four compartments in the tablet rather than, so I'm a

sucker to marketing and my wife is, unfortunately, she used to work in

procurement.It's tragic. But but anyway, I don't see any ads for those things. And it occurs to

me they're low margin, frequent purchase, low attribution. Okay? And also,

they're not really an impulse buy, so you can't argue that the advertising is

actually driving [00:10:00] incremental sales, right? So you've got those four

factors that make it hard to justify advertising.

I, I call this the Walford paradox, which is a bit weird. When my daughters were

in school, they had a school uniform policy that required them to wear black

tights. And they kept laddering the bloody things. And so a friend of my wife

said, actually, it seems crazy, but expensive tights probably work because they,

you know, they cost an insane amount of money.

They're 20 qui a pair, but they do last five times as long. And also because

they're expensive, your daughters will probably take a bit better care of them,

right? It's a bit like the psychology of umbrellas. You either buy a five pound

umbrella or a 200 pound umbrella. One, you don't care if you lose it.

The other one, you're so nervous about it, you never lose it. Don't buy a 50

pound umbrella. This is, by the way, the opposite of a good idea is another good

idea. It's a good idea, by the way now. What I noticed, I, I went online to the

Walford site. Now I dunno what their margins are, but it's gonna be whack, it's

gonna be proper whack, right?

Yeah. Yeah. I mean, a lot of it's marketing cost anyway. [00:11:00] It's, you

know, fantastic brand. Very, very good product. I'm not, by the way, this did

work. It made sense. It's a good move to buy ladies. Okay? It's a good move to

buy expensive hosiery. But what I noticed is I bought direct bought direct, I

think they sent them by FedEx, so presumably they got a bit of margin okay.

From Austria or somewhere. And what I noticed is for the next few months, I

got advertising for nothing else. Okay. And then I suddenly realized, okay, I'm

in a niche group and that I buy direct. When people buy direct from them, their

margins are insane compared to selling through retailers. It's kind of an impulse

buy.

It's very high attribution. So all of those things make it very, very easy to justify

ad spend for that category versus say, finished dishwasher tablets, which are

my, you know, other extravagance of the month. And so the ease of, at, so what

what I'm saying is that people in a, in an ecosystem, an advertising ecosystem,

which is working.We're obviously gonna see more advertising for luxury [00:12:00] premium

goods than we are for mainstream goods. You know, that's just how it goes. We

might see a lot of advertising for things which are what you might call

subscriptions to things, because the lifetime value of a customer is, they're very,

very high.

Okay. But in a really good advertising ecosystem, which I think was basically

the analog advertising ecosystem, what I saw ads for was vaguely

commensurate with where I spent my money. Mm. Okay. You know, it was

very far from perfect. You know, I saw ads for jewelry and I never bought any,

you know yet. Okay.

I'm not saying it was perfect, but I think what we're seeing online now is a

complete disconnect between where value lies in the economy and where

attention is directed, which is caused by those kind of distorting asymmetries in,

you know, how we justify ad spend, effectively

MichaelAaron Flicker: understood

Rory Sutherland: How we justify.

Does that make sense? 'cause you are a media guy, Richard. Yeah, I think, I

think this might be a, it's it's quantification bias at some level. Yeah. But it's

[00:13:00] also high margin things. Effectively they could argue that they could

afford to spend 30 pounds on me. Okay. Me as an individual, and if I only

bought two extra pairs of Walford thing thingy Bobs, you know, three months

later, they were still quids in.

Okay. It's impossible for finished dishwasher tablets to do the same thing you

do.

Richard Shotton: I think there's always this danger that whenever you are

measuring something, you don't measure every element. I. And therefore the

areas that are disproportionately likely to be captured that can be quantified,

then suddenly loom large in people's decisions.

And actually there are certain things which are important,

Rory Sutherland: which can't be quantified. Yes. Yes. So I'll give you a lovely

example of this. You can quantify them only in a free market where consumers

are free to spend their money as they like. Now there's a form of transportation.

Have either of you that used Heathrow Pond parking?No. No, no. So you park about a mile from Heathrow Terminal five. I can't

believe you haven't done this. No. Well, it's absolutely tragic. Okay. And you

park, [00:14:00] and then you park your car and you wheel your luggage to a

little pod, which is personal. You don't share it with, unless there's massive

demand, you don't share it.

And you, you've got car one end of the carpark. The other end of the carpark is

served by effectively separate stations. And then if you're perverse, you ask to

go to the other end of the carpark just for the lulls. But basically you ask to go

to terminal five and this little pod opens its doors. They're autonomous electric

things that don't run on tracks, but they run on wheels.

But there's a kind of specially made roadway. So there's no driver, no driver.

They seat six with a lot of luggage and it scuttles off on its own. And they do

little intelligent things. So when you arrive, a pod will get out of it the way, go

off and charge itself to free up space for your own pod to dock at Heathrow

Terminal five.

And it occurred to me that this is a brilliant form of transportation for all kinds

of reasons. In other words, it's not hub and spoke like most mass transit. You

could actually create a complex network and it could take you not from

[00:15:00] A to B. It could take you from A to B to A to Z, A to Y, A to Z, G,

whatever.

Okay? So you could literally have a road network replicated in a driverless pod

system, very, very cheap to build the actual infrastructure compared to building

rails. Okay? Why hasn't it taken off? And my argument is that probably when

procurement set a brief set against a shuttle bus, this thing doesn't score very

highly.

And they've got in mind a shuttle bus. What procurement wants is three

comparable shuttle bus operators to bid for the route so they can compare apples

for apples comparison, compare them on price. And that actually is directly

inimical to innovation because most innovations, electric cars being interesting

case are actually worse on one dimension.

Okay? But they're a lot better on, on some a, some some existing dimensions,

but also on dimensions that you weren't even factoring in. Now, the really

interesting thing economically with the Heathrow pod is that the price of

[00:16:00] parking in the PO parking is usually only a few pounds less than the

price of the short stay.And the real reason is people love going on the pod. Okay? But enjoyment,

which is, I hate a shuttle bus. I love the pod, is not a factor that's in any transport

planners matrix of decision making. Now, I had a colleague who created

Director Oglevy, and he used to drive in his Jan down to Heathrow Pod parking.

And on a couple of occasions they say, I'm terribly sorry Mr. Smith, but the pod

parking's completely full. So we've upgraded you no extra cost to the short stay

parking, which is vastly more expensive real estate right next to the terminal.

And he just looked childishly, downcast and go, but I wanted to write a po.

Okay? Now, so I'll give you the classic example where procurement wouldn't

have allowed an innovation to happen, which happened in consumer in, in, in

the B, in the B2C world, the original iPhone had the shittiest battery [00:17:00]

life. You can, we've forgotten this, okay? But the first iteration of the iPhone,

basically you have to take a charger to work with you, okay?

It was never gonna make it through the day. Now, anybody who'd set up a

standard list of procurement balance scorecards would've made one of the

requirements a 20 hour battery life. Alright? Okay. That, you know, because

Nokia, you know Blackberry, they all had 20, 24, 36 hour battery life. And the

iPod would've failed at the first procurement hurdle because the battery life of

the first iPhone, the battery life of the first iPhone was a fucking, a combination.

Right? People loved all the other facets. Basically the usability and the

attractiveness, the emotional facets so much. They were totally prepared to do a

workaround for the for the battery life.

MichaelAaron Flicker: They would forgive that life.

Rory Sutherland: They'd buy a case with a huge, great charger built in, or

they'd carry one of those charging bricks.

Yep. Or they'd just go into the office as soon as they got in, because, you know,

the thing was hard. 30% off your trade journey, they'd plug the bloody thing

into their desk. [00:18:00] You see? And so most innovation involves basically

the discovery of value in an area that's been under quantified before. And I've

actually got a theory about this, which I think is an exercise that everybody can

steal, which I call reverse benchmarking.

Mm-hmm. Now I've nicked it. I've not the name I've named it. Yeah. 'cause

you've got name it. Because otherwise you can't, you know. Yeah. We all knowthat if the, the, the most greatest economic value in the last three years has been

created by the person who came up with the phrase loaded fries. Right.

Because everybody loves chips with tasty shit on top of them. But until they had

a name in Canada, you call them poutine, right? Yeah. Yes. And the Canadians

eat, ate, they basically eat nothing else, you know, apart from maple syrup.

Right. And the thing is, until you had a name for loaded fries, you couldn't sell

them.

Okay. You can't, you can't have a menu that says chips with shit on top of them.

What the hell's, you know what, what? What's going on there? They had cheesy

fries admittedly. And you had cheesy jalapeno fries and then the final

flourishing, but the reverse [00:19:00] benchmarking, I'm gonna tell this story

again. Will Gudara fantastic book.

I'm reasonable. Reason F from

MichaelAaron Flicker: 11 Madison Park.

Rory Sutherland: He takes, he goes from 11 Madison Park when they're

number 50 in 2011, and the World Restaurant Awards sponsored by San

Pellegrino. And he wants to get to number one. Personally, I'm a satisfier. I aim

to get to number seven, but Will's not like me. He wants to get to number one.

And he takes everybody a cross section of his team to the number one

restaurant, which is also three star Michelin gaff in New York. And all his

colleagues are jotting down things they do really well. And at the end of the

meal, they're all going, we ought to copy this thing with the napkins. We ought

to do that thing with the bathroom.

And he goes, no, I don't do that stuff. 'cause they're already doing it. Well, I

wanna know, and this requires an act of imagination sometimes, or at least an

act of curiosity and imagination. What's a, what was a bit disappointing? Two

things. Do you remember what it was? I think it was the coffee, wasn't it?

Yeah, coffee and the beer, yeah. Yeah. So the beer drinkers got really short

shrift compared to the wine drinkers, and the coffee was nothing special. So he

has, in his [00:20:00] team, there's a coffee obsessive and there's a beer

obsessive, I think the beer obsessive was a chef. He says, from now on, you are

the beer sommelier and you're gonna bring out a beer menu and you're gonna

suggest food pairings to beer drinkers.And the coffee sommelier is there, presumably talking about single origin,

bloody roasts and stuff.

Richard Shotton: That, that whole book to me is a, an amazing example of

someone who isn't behavioral scientist. He never mentions psychology. All

Rory Sutherland: s

Richard Shotton: but, but a behavioral scientist. Yeah, but, well, I've, he's, it's

not like a,

Rory Sutherland: the food industry, QSR is the same.

It's a fast feedback business. Yes. So you learn it's not, you know, learn really,

really quickly and observing,

Richard Shotton: not from studying paper. So you work in a restaurant shop,

it's free, MBA basically. But the one I really liked was he talks about their wine

flight. So you go to 11 Madison Park, it's $200 say for wine pairing.

And he would say, well, if you're a restaurant, if that's $40 per wine, everyone's

paying, they pay a fixed [00:21:00] $200 in total. We'd spend about $20 an

average per wine. And what he said most restaurants would do, even Michelin

Star runs, it'd be the first one would cost the restaurant $20. The second one

would cost the restaurant $20, the third, the fourth, or fifth.

What he said to his somelier was, look, just shave off a few pounds from that

first one. Maybe give him a $15 wine, then another $15 and you've saved

enough money that the final one, you can spend 50 or $60. So like Jesus, well,

you leave like Jesus best one. The last I thinking more a mind, but it is. It's

absolutely the peak end rule.

Yeah, that's right. Don't do everything quite well. Have one absolute stand

moment, a standout moment, and then put that standout moment absolutely at

the end. And that whole book is just full of these descriptions about how he

created an amazing experience by taking a principle. Behavioral science

Rory Sutherland: don't optimize for average.

And that's actually, I don't know if you know Gary Stevenson, Gary's

economics. Oh, I've never met him about, yeah. Yeah. But one of his really,

really, I don't agree with him on everything. Yeah. Also, he could help the[00:22:00] economy by actually spending some fucking money on consumer

goods rather than using the, wearing the same pair of shoes to work.

If for Christ's sake, Gary, get down to JD Sports, you know, spruce yourself up,

you know, help us out. Right. But he's absolutely right in saying that all

economic models rely on a single representative agent. So you optimi you, you

treat the average as if it's representative of the whole. And I think that, I think

that idea with the wine flight, you could actually, you could actually end on

actually a really cracking dessert wine would be a fantastic thing to end

Richard Shotton: wine.

Well he, well he, he says like, you would give someone a wrong PR burgundy

where they would be absolutely flat carrot. I'm bri they, they, they,

Rory Sutherland: let's have a

Richard Shotton: problem.

Rory Sutherland: The

Richard Shotton: Americans, they bloody burgundy. Something would never

expect. And it's not costing the business a single penny more. No. But by

changing that allocation of funds, you end up getting mean

Rory Sutherland: if I ran British airways, I'd shave money off the dinner and

the tea, Okay.

Off the, off the lunch and the dinner. Okay. [00:23:00] We are Brits, right.

We're not very good at that stuff. But tea and breakfast, we hit it out of the park.

So I'd actually, if I were British Airways, I'd actually have tea and a pot. Okay.

In business class?

Richard Shotton: Yeah. Or, or, or as you said, optimized to something that it's

optimizing for.

It's a surprise. Yeah. It's optimi. I mean, this is, you give them a nice lolly. I

mean, ice lollies is the world's best ice. Lo it probably cost 10

Rory Sutherland: that the virgin did that, didn't they? They handed out Cho

ices Yeah. During the film. And that was what everybody remembers. So theywere unusual in having in-flight entertainment, in seat back in-flight

entertainment in nineties.

In economy class.

MichaelAaron Flicker: Yes. Yes.

Rory Sutherland: Okay. And then actually this is a bit interesting because

Americans were completely confused by this because the chalk ice cinema

connection

MichaelAaron Flicker: Yes.

Rory Sutherland: Is a totally British thing.

MichaelAaron Flicker: I wouldn't know it. I don't know it.

Rory Sutherland: It's exactly the same. We were talking earlier about the

Hendrix Cucumber.

Yes. Where the Americans are making a joke at our expense. Yes. But we're

completely blind to it. 'cause we don't find cucumbers. Inherently comedic

MichaelAaron Flicker: cucumber sandwiches is not cucu funny to you. Cucu.

No,

Rory Sutherland: it's [00:24:00] a perfectly good sandwich. You need a bit of

pepper and salt, but it's a perfectly service. It is not an object of ridicule.

MichaelAaron Flicker: Okay. It here.

Rory Sutherland: So I didn't realize that Hendricks were basically criticizing

themselves in the United States, but were putting this slice of cucumber in

'cause of course, to us it's, it's a cucumber. There's nothing British about

cucumber. But of course, to Americans, it was incredibly, and the choise, of

course, was completely confusing to American passengers on Virgin Atlantic.

But everybody in Britain at that time, who'd gone to the cinema in the 1970s.

That people came around selling chalk ices at the cinema. So the idea was

popcorn would've been the American Yes, correct. The American equivalent.Okay, interesting. Which we now have adopted for no readily apparent reason.

Yeah, like, like Halloween and yeah, school shootings

Richard Shotton: that, that Hendricks are trying to play on us.

I think that's responsible for its success because with virtually every other gin.

Purchase of the gym once you've walked away from the bar is, is completely

invisible. But if you do a distinctive serve, like over [00:25:00] cucumber,

everyone knows you're drinking Hendrix and then you are using social proof.

You know, even if 5% of the gin drinkers are having Hendrix, it looks,

Rory Sutherland: but that's optimizing for visibility.

Guinness know that if there's someone visibly drinking Guinness, of course

drinking Guinness is very visible. 'cause it's black for God's sake. Yes. Yeah. It

was actually invented in Wales, not in Ireland. I'll just make that claim just to

really, really annoy everybody. But there is actually, I can see that's actually a

wel drink which the Irish stole.

It's

MichaelAaron Flicker: dangerous.

Rory Sutherland: Okay. No, no. But cider, ice cider, it made it obvious you're

drinking cider. So it was a visual prompt and a bit of social proof because that

was an era when people didn't have branded glasses and cider people thought

you're drinking la laga. And cider I think is a problematic drink because like

talking to the Unilever people on ice cream, you've gotta recreate your market

every year, roughly speaking because cider is for mo.

I mean, unless you're a west country farmer cider is mostly a summer drink like

[00:26:00] pims. Okay. And there have been attempts to obviously spice it up

and create winter variants, but it's more of a, so actually you actually need a

kind of nudge every May or June in the UK to add reintroduce cider to your

repertoire of alcoholic beverages.

And so the interesting thing there is when I think about reverse benchmarking

is that, hmm. We noted. So all these McKinsey people come in and they

benchmark you against your competitors. Roger L. Martin do you know? No, I,

I think he's the best business writer. Best strategy writer going, he's like the air

to Peter Drucker.He's coming to Nudge Stock on June the 27th. Tickets now available. Okay.

And he, he's written a piece on Medium called Benchmarking is for Losers. He

fundamentally thinks that what you're doing is that you're getting involved in a

race to the bottom by comparing yourself not differentiating yourself from your

competition, but by effectively entering red water space where you're competing

head to head.

Now, one of the greatest quotes of all time, I think it is [00:27:00] the great guy

at London Business School, whose ridiculous name I've, I've Jules Godard,

professor Jules Godard, who said, strategy is the art of staying one step ahead of

the need to be efficient. That if you're competing on operational efficiency, you

are already out of the game.

You know, if you've got nothing else commoditized right, you, you're just

commoditized as useless. Okay? And so. The argument o of reverse

benchmarking is that don't do what exactly, what will Gadara did? Don't say,

what do they do? Well, we'll do the same thing. Yeah. Okay. Instead say, what

are they doing slightly badly?

Or where is there un effectively unserved space for value creation? And let's go

and hit it outta the park. And I think you could make the case that 90% of

innovations emerged from exactly this phenomenon. So Apple is loads of nerds

competing for technological superiority. Apple goes, yes, but why does it have

to be so ugly and, and, and difficult to use?

So what? So, [00:28:00] so that was a non, non-numerical space is a ripe for

innovation because nobody's measuring them. So no one's benchmarking them.

'cause you can't, you can't put a figure on apple's loveliness. I mean, I'm an

Android user by the way, but I'm, but I nonetheless acknowledge some of what

they did. Yeah.

Okay. Now you could look at a lot of businesses and say the really disruptive

thing they did was to double down on something that was everybody else had

neglected. Yeah. Okay. It's effectively a kind of side bet. And I was talking

about this last night and my colleague Anoni caches, came up with this fantastic

example of reverse benchmarking, which I'm not familiar with those stuff.

Brazilian Juujitsu, have you come across this? So this Brazilian guy wanted to

invent a new martial arts. Okay. I dunno anything about this stuff. Okay. But it.

Basically, given that martial arts have been kicking around for thousands of

years, most forms of fighting have already been [00:29:00] optimized withinsome sort of martial art or codified to an extent where there isn't much space for

a new martial art.

He said, hold on a second. Every other martial arts assumes you're standing up

because once you're lying down, it's game over or you've lost. What we need to

create is a martial art for how you fight when you're on the ground, not when

you're standing up. And that was the unexplored space. That was the reverse

benchmark.

Yeah. So smart. And so it's, did you know anything about that? No. That was,

again, we are not probably the, I have a

Richard Shotton: very strange image now in my head. Yeah, yeah. But it, but

it is, that is around the floor, but that is how

MichaelAaron Flicker: Brazilian jiujitsu is competed and how you watch it

Yeah. On the ground. That is right.

Rory Sutherland: Yeah. So it's, it, it's, and often the unexplored space is

Richard Shotton: unexplored because it's unquantified. Yeah. So you've talked

about Apple as an Brazilian juujitsu, as examples of people who've used that

process. Is there a Cashie hotel? Moie hotel. I was gonna say there, you

Rory Sutherland: optimized for the grand floor. You the room.

Now, by the way, I'm gonna be very clear about this. What, [00:30:00] what

will g did not say is we'll make everything shit, but we'll have the best beer and

coffee in Manhattan. Okay? You've gotta be kind of in, in the zone in terms of,

and the Moxie hotel rooms aren't crap. They've got a very good tv. They've got

good wifi.

The bed's comfy. Okay? But there's no room service. There's no laundry service.

And, and the locations are good, by the way. It's not just the grand floor, but

they're in constrained good locations where real estate is a bit more expensive.

So making the rooms all a bit smaller. And let's face it, you're only there one or

two nights.

Okay? But on the ground floor, you have 24 hour barista serving really good

coffee. It's a space where you can chill out. You can actually just go, and

actually, they gave it to me for free. It was great advance being Maori famous,but you could rent a little meeting room, you can do video calls, you can hang

out with your laptop, you can meet friends.

So you actually have access to this kind of de facto club for the whole duration

of your state, even after you've checked out. And so moxie is a really, really

good example of effectively most innovations [00:31:00] are actually a sort of

appear to the rational mind or the procurement mind is a defamation of.

What they're looking for. But actually the reason it's it's a defamation is because

it's effectively flowed into the space that's as yet unoccupied. Yeah. Yeah.

MichaelAaron Flicker: And, and almost that would be the ra that would be the

understandable outcome of procurement trying to drive the best price for the

outcome that they've identified and innovation.

They, they define

Rory Sutherland: room size as a metric. Now, room size is not irrelevant if

you're in a country house hotel and you're staying for a week. Okay. Or, you

know, or if you've got kids. Yep. I mean, actually, I, I, I plug Moie and it occurs

to me, there are people at the Marriott group going, Jesus, why does this 58-

year-old man keep having to praise our hotel, which is targeted in like, cool

young people?

You know, why do we have to have this old fart visiting around in the Jeremy

Fox effect? Yeah. It was rather like, I can't remember who it was, but it was

someone who's someone journalism who, whose father [00:32:00] covered over

the Nike logos on his shoes. He got old enough where he had to use, he had to

use federally trainers because his feet hurt.

And he actually put tape over the Nike logo because he said, I don't see why my

feet should advertise somebody. And his daughter said, dad, you are an 83-year-

old academic. Nike would actually pay you to cover up. Please hide it. Please,

please, please obscure these Leeds. But, but the moxie thing, I mean there's

another example that rush the hairdressing chain when they open a new salon.

Actually, the, the toilets thing is really interesting. So there are, in, in about

three different countries, there are three players who've really succeeded at the

gas station market. There's one in Turkey, bizarrely, a Turkish gas station chain

founded by a husband and wife who are previously teachers. I have no idea how

that pivot happens.Okay. There's another one called [00:33:00] I think it's called, is it called

Chucky's in Texas?

MichaelAaron Flicker: Bucky Bucky. Bucky Bucky's. Bucky's.

Rory Sutherland: Bucky's, thank you. That's which has a huge Beaver.

Bucky's is the, yes. Bucky.

MichaelAaron Flicker: Bucky The Beaver. Yeah. Bucky the Beaver. I've

actually

Rory Sutherland: got some of their branded merch. Yes.

Tragically. Yeah. I I've got a Bucky's Hawaiian shirt. It's very American of you.

No, no, no, no, no. But, but it, they have, they make this huge feature of selling

Dear Corn. What's all that about? That I don't know. No. Okay. Yeah. But

anyway, but the, the toilets they make their toilets the hero, the, the Turkish

chain does the same, okay?

And what rush do is when they open a new hairdressing salon, they spend 30

grand on the loose. And a lot of people go, well, why are you spending all that

money? Most people don't even go to the toilet while they're having their hair

cut. Well serve them enough free coffee, and you can make sure they go.

But they said, no, no. The point is, we're optimizing for surprise. We're not

optimizing for predictability because everybody who asked to use the loo, the

10% are expecting mop buckets, storage of cleaning products, you know, a load

of hair products stacked up against the [00:34:00] wall, and you're pissing

somewhere where, you know, which is, you know, that business in five star

hotels where you mistakenly go through the staff only door and everything turns

into like, you know, a slum, you know, in the space of one door.

You know, because this is now where the staff go, not where the guests go. And

they deliberately go against that by making it bel. So it's sort of gold taps and so

forth. Big shout out actually to Kisa in Seven Oaks Indian restaurant for doing

exactly the same thing. Indian Re fantastic Indian restaurant in Seven Oaks, by

the way, folks, Q-I-S-S-A I, I always think I'm starting the principle, by the

way, that podcast guests should be allowed to advertise.

MichaelAaron Flicker: I, well, we're feeling that because you are gonna,Rory Sutherland: you are gonna break into a bloody space where you start

talking about VPNs any, any minute now. So I thought I preemt you.

But, but I think this high, hold on now. I think the, the brain science behind it

comes from that book, which you, you must know, which [00:35:00] is the

Experience Machine by Andy Clark.

Richard Shotton: Oh,

Rory Sutherland: cio. Oh. Most of what we perceive is actually a prediction

and that we only use our limited back bandwidth in our optic nerves and our

ears to correct for prediction error.

So it's exactly the same architecture model as used in EGS and JPEGs. You

need very little data when the pixel's basically conforming to the expected value

and you only use the data where the pixel is unexpected. Either it's different to

the preceding pixel in the case of an EG or the adjacent one.

And it's a, that's, that's why I mean, if you ever shoot digitally in raw mode,

okay. Every pixel's individually described very good for photo editing. The files

are sorting enormous.

MichaelAaron Flicker: Yeah.

Rory Sutherland: I mean, I used to have a professional photography who lived

near me in deal, and you'd have to come and borrow my HighSpeed broadband

when he needed to upload raw mode photos and by parking outside the house.

'cause it just took too long to send them over his. And the point is, the brain has

come up with exactly the same model for [00:36:00] understanding and

interacting in the world where we, we direct our attention to what's surprising.

Not what's expected. And consequently, the way to achieve emotional effects in

a customer is the DoubleTree cookies.

But not by actually matching at people on their, you know, your balance

scorecard of, you know, service agreement levels. It's by doing something out

there where people go, what the hell's that about? Whoa. Okay. And I think that

business of designing for pleasant surprise, I mean, I go even further, actually, I

was talking last night to somebody who just read this, the first book by Kurt

vga, which is about a world where everything's perfect, but everybody's

miserable.Everybody has everything they want. And I said, the problem with such a world

actually is we wouldn't be very happy 'cause there were no pleasant surprises.

It's a bit like Singapore, where if their, if their subway train is three minutes late,

they all go into a total meltdown state. You know, if you give people something

that's too nice and they're no pleasant surprises, actually [00:37:00] that doesn't

get that, that's not actually that nice

Richard Shotton: and environment for us.

I think that's L links back to that idea of the hedonic treadmill. So I think the

original study's been criticized, but it was the Brickman study where he finds

people who've won a reasonable rig lottery or they've been a car accident and

there've been life changing industry injuries, and to begin with, their happiness

is miles apart lottery person.

Much happier. It keeps on contact to 'em and over time they come almost the

same level

Rory Sutherland: of happening. 'cause your expectation level and actually it's

comparison to expectation, which is the determin. Yeah. You, you

Richard Shotton: are habituating, you know, however good or bad something

is that, that enjoyment or, or, or dislike of it eases over time.

And

Rory Sutherland: Paul Doan puts it very well, which is, he said everything's a

bit like heroin in the sense that you need more and more of it to replicate the

initial effect. Probably true of wealth to a degree.

Richard Shotton: Yes. So the clever brand. [00:38:00] We've talked about this

with pumpkin spice latte is you, you have it a time limit.

You don't let people habituate to it. You know, pumpkin spice latte, it's

available for a month or two and before people are satiate, before they're bored,

you remove it and then when it comes back next year, there's a genuine level

give spice latte. Yeah.

Rory Sutherland: Whereas if

Richard Shotton: they've sold, of course that's aRory Sutherland: beautiful counterintuitive thing because no economist

would, would get the logic of the Cadbury's cream egg.

Exactly. Exactly. Yes. No economist. I always remember talking to Jeremy

Bullmore about after eight mins. Yeah, okay. Which gives them a very specific,

I don't, they, they're an after dinner thing, which in, in the seventies and

eighties, they're still currently, they're still very nice actually. But every, every,

every finance person would've wanted the people to call them all day mints.

Ah, yes. Because only after eight. Whereas the idea was you handed around

after dinner and then you ruled around a lot of empty envelopes from which the

mints had already been removed. And eventually you found a, an envelope with

a mint in it, which gave you a pleasant surprise. But no, I think, I think that

question by the way, [00:39:00] I always recommend, and I'm just doing

another plug.

That's why you should go on holiday to Wales because you don't expect that

much from Wales. But actually it's surprisingly good. That's the slogan for

Wales is actually what you'll do is you'll be in some fairly unprepossessing

place in Wales and you'll just discover there's a cafe. That's fantastic.

Or a, you know, something just you weren't expecting. Just, that's why I always

say actually always rent a car when you're on holiday. Mm. Because you, it

enables you to have lucky accidents. Yeah. Or do the thing, which is you go for

a random walk on the basis that you can al always Uber at home if it goes

wrong.

But optimize, and this is actually one of the, I think one of the greatest problems

we're suffering in business is people are optimizing for attribution and

efficiency rather than optimizing for opportunity fundamentally. You know, I

genuinely think philosophically in everything from a business to life, you

should, and I'm quoting the same tale here, increase your surface area exposure

to positive upside optionality.

Okay. Which is make it likely that people will [00:40:00] bring you

opportunities from which you can choose. Okay. I mean, one person said

yesterday, they said about fame, a brilliant guy called Blair Ends actually author

of Win Without Pitching. And four questions Canadian. And he, he said that

fame, actually the great value of fame is because you're no longer finding your

customers.Your customers are finding you. And because you're no longer looking for

opportunities, opportunities are coming, looking for you. It enables you to

choose your future because you can decide, okay, I've now got 47 opportunities,

which of the seven do I really want to pursue? Whereas if you're searching for

opportunities, you are basically, you are trapped in terms of what's actually

available to you in the here and now.

MichaelAaron Flicker: So let's apply that to how brands think about

marketing, because in that, in that because I think that's a challenge. Your

position. Okay. An exciting challenger position.

Rory Sutherland: What we've never had the courage to say as marketers is that

finance people are bad at maths. And they're not bad at maths 'cause [00:41:00]

they're enumerate, they're bad at maths 'cause they're using the wrong maths and

they're using the maths of certitude and determinism, not probability.

And consequently, we've created a world, and this is true if you work in an ad

agency, they have this ludicrous mentality where every quantum of time or

effort has to, has to be matched to a quantum of revenue. Okay? Now. That is a

totally appropriate thing to do if you're doing something very repetitive, very

predictable, very deterministic in a factory.

It's the point about marketing and this is Naem. It's not me. Naem, no naem.

You know, I'm, I'm not, I'm, I'm, I'm a maths groupie. I'm not a, got very little

mathematical ability. My brother's very good. But na marketing is fat tailed.

Okay? And the way to look at marketing is the 80 20 rule also applies to your

marketing activity.

I mean, I worked on American Express for about 10 to 15 years, and looking

back on it, five things we did, probably [00:42:00] delivered five ideas. One of

them, by the way, was Ogilvy's single sentence in a direct mail acquisition piece

for American Express back in the 1970s or sixties, which said, quite frankly, the

American Express card is not for everyone.

Okay? That made them a billion dollars e easy, that single insight, which is, it's

intriguing, it's exclusive. We're gonna sell this on scarcity rather than, you

know, Okay. That was worth a billion dollars. We did two or three other things,

which were probably worth, you know, tens of millions in terms of what you

might call 10 x moonshots.

Okay? But you don't know what those are in advance. Okay? So it's, you know,

in a perfect world, you know, you would be able to say, let's just concentrate onthe three moonshots and then we'll go home to the pub. But actually it's

probably 3% of what you do in marketing contributes 50% of the value. Okay?

And certainly I'd say that, you know, 20% of what you do contributes 80% of

the value.

And it's also, again, Roger Martin [00:43:00] it's probabilistic, not deterministic.

Overall, the odds in this casino are pretty good, but it's still a casino. And by the

way, direct behavioral science improves the odds. That's all we do. That's the

point. That's all we do. That's all, that's all, that's all we can do.

Actually. We, we do two things. We improve the odds and we make people test

things that they think are irrelevant, but which aren't that, you know, in terms of

the, you know, and so the promotion of testing exploration and the

consideration of alternative approaches. But what we've never had the courage

to do in finance is to say, look, guys, you're very good at adding up.

I probably trust you to work out the surface area of a triangle. But the maths

you're using to actually quantify what we're doing, including even ROI, which

is the wrong measure for marketing investment, particularly anything that's

actually under conditions of compounding growth. Okay? So it's a dynamic,

complex system under what you hope are to be growth conditions.

That's not linear maths at all, okay? And it's certainly not it's certainly not

deterministic maths. So [00:44:00] fundamentally. What we've done is we've

never fought back and said, look, the way you are judging what we do is

fundamentally ous. The way in which advertising agencies are paid by the hour

is fundamentally leads to massive misdirection of effort.

Because someone there looking at a spreadsheet thinks, this is where we make

money. This is the worst, this is the worst thing about economics. Okay? This is

where we make money. Ergo this is where we add value and the, what you

might call the executional phase of an advertising agency or a media agency for

that matter.

The actual implementation is more time consuming. Maybe it shouldn't be, and

maybe AI will change that ratio. We can all have a debate about that is more

time consuming and actually probably involves less expensive fungible people

compared to the ideation phase, which probably relies on a small number of

fairly rare people, and the, and a group of people who are going to become

those people.Okay? That's where the, that's where most of the [00:45:00] value is created, but

it's not where the money is made. So you have this fundamental

misunderstanding. I think I mean, I think there was a terrible mistake in

offshoring manufacturing because people thought the values in design and the

pro and, and, and effectively, so this is the opposite case and manufacturing is

just implementation of our designs.

Whereas actually, if you understand how it works, a huge number of innovative

ideas emerge from the bottom up.

MichaelAaron Flicker: One thing that comes to mind. About the a a third

thing, we can credit behavioral science with that, that would be instructive for

our listeners when they're talking to the boardroom. Our listeners, Rory, are

marketers.

They're CMOs, they're people that are driving marketing innovation in their

organizations and in their brands. In addition to the two you listed, we also are

hopefully trying to uncover white space or blue sky areas to add the next level

of value. Because if you only focus on what's currently driving, you're

Rory Sutherland: over-optimized on the past.

Yes. Correct. So [00:46:00] fundamentally you end up shrinking and you are

completely non resilient. That's right. So this is the whole explore, exploit trade

off, which I think is a fundamental rule of life, which is what proportion, now

you must know this in media allocations. Did you ever follow the 70 20 10

media allocation model?

Oh, is this where you're talking about having 10% of wild card, 10% wild card?

20% is we think this'll probably work, but we don't know yet. And 70% is do

Richard Shotton: what we know works. I would say a remarkable number of

media planners suggest doing that. But it's always the 10% that gets cut. That's

the first thing to go.

Rory Sutherland: Yes. 'cause of course, it's, it. What what that is, is not, is not

that the 10% doesn't pay. It's that the 10% doesn't reliably pay. Yes. Correct.

Yeah. So we've created a business world where predictability is more important

than profit actually. Where people would rather have a constant 3% than have a

50% chance of 30%.Richard Shotton: Whereas I've heard you use a lovely analogy about the

waggle dance, so maybe marketers should learn more from bees.

Rory Sutherland: [00:47:00] Yeah.

Richard Shotton: Apologies

Rory Sutherland: to everybody who's watched me before on podcast, but it it,

it's annoying 'cause like the Eurostar story Yeah. People go, can you tell us that

story? And I go, oh God. And then I realized that if I don't tell the story, it's like

gonna see the Eagles and they don't play Hotel California and everything.

Oh, that was shit. Yeah. Right. Okay. Played all this new album. So the, can you

just play material for my but the, the waggle dances is this business where bees

are 80% is a grotesque oversimplification of the B world. It varies enormously

depending on actually the, both the environment and the conditions in which

they find themselves.

Okay. Mm. So they will shift that ratio of explore exploit quite dynamically and

between B species. And it also varies according to how close you are to the

equator because the nature of plant life and pollen and its distribution is

different in temperate versus equatorial climate. So without wanting to pretend

that I'm a bee expert, I'm not they, they were surprised at first because a certain

number [00:48:00] of bees ignored the waggle dance.

Okay. And they thought that why has 20 million years of be evolution tolerated

this level of inefficiency? And then they modeled it as a complex dynamic

system over time. Not a snapshot of not, it didn't assume that the next five

seconds is representative of the next five weeks. Okay? They modeled it over

time and realized if you didn't have the random bees, the hive got trapped in a

local maximum starve to death.

And three things it couldn't do without explore is one adapt to changing en to a

changing environment. Okay? So update your current map of the world with a

new map of the world heavily weighted towards pollen, nectar and resin. Okay?

Possibly water. Do they collect water? I have no. Okay. Anyway okay, so first

of all, you can't update your map of the world, so you can't adapt to changing

circumstances.

Secondly, you can't grow, okay? Because your, the entire size of the hive is

limited by your existing knowledge of, of known pollen [00:49:00] reserves.

Thirdly, and most importantly, you can't get lucky. And actually, if we look atour own lives, you married? Yes. Yeah. Okay. Basically, you know how you

met your wife total, okay?

I was very lucky, you know, if you had to justify, very lucky. If you had to

justify it to procurement, they go, you didn't do an adequate kind of, you know,

you should have done far more comparison. You didn't get two competing bids,

right? You know, you know. But getting lucky and actually effectively that

point that.

I think it was Blair Ends, or it might have been David Baker made, which is that

fame increases your chance of getting. Now my daughters understood this.

Have, have, have you got teenage daughters?

MichaelAaron Flicker: He has a teenage daughter. I have young kids. Okay.

Do

Rory Sutherland: you have to fucking pick her up at Saturday night? 'cause

she's going to a fucking party.

Okay. So you are you I'm I'm 59. You know, I, at the time I was like, what,

what, what was I, I was in my forties. Okay? Basically, my idea of a good

Saturday night is you're sitting down in front of YouTube premium and we

watch a two hour documentary on like steam locomotives. Okay? But

[00:50:00] your daughter would always be at this bloody party and you had to

go and pick her up so you couldn't drink.

Okay? And then I realized what they were doing, okay? Which is, it's entirely

opportu. FOMO is opportunity maximization, okay? They don't have a party

strategy, right? They don't do a cost benefit analysis for every party they attend.

They do a sort of vague assessment, okay? What they know is that if you don't

go to any parties, you'll never get lucky.

And when I say get lucky could mean sexually romantically. It could mean

getting invited to a better party could mean getting invited on holiday. They

could be meeting somebody whose dad works in a field where you want to work

yourself. And so you can milk them for information about where to imply

apply.

Okay? It could be anything, right? Mm-hmm. But if you stay at home, you don't

know when you go to a party. My, my plan from this party is to extract this

particular value from it. You simply know that if you stay at home, none of that

stuff's gonna happen. And so the compulsive networking among teenagers isactually probably a rational evolutionary approach in terms of [00:51:00]

forging allegiances, forging alliances, sharing information.

It's fundamentally that absolutely pathological, sociability and extroversion that

they have. Yeah.

Richard Shotton: And paradoxically, if they were too task focused, they'd end

up probably having less successful results. It's like that idea of John k and

Obliquity, that the companies that are solely resolutely focused on shareholder

value then end up having a problems in the long term.

It's the ones who have that general broader, that end up it making the most

money. So's effecting money as

Rory Sutherland: a byproduct?

Richard Shotton: Yes. Yes. I think you use strategy farmer example, not

Rory Sutherland: money. I mean, the, the, the great thing is cost reduction is

not a strategy. That's the first point. And yet probably what 50% of companies

broadly look to operational efficiencies or operational efficiencies empowered

by it.

Okay. Not all of those will deliver the promise. That's just as probabilistic, if

you're being honest. It looks deterministic. But there are a hell of a lot of it

innovations that have been [00:52:00] brought in that haven't delivered.

MichaelAaron Flicker: But maybe this is the point for listeners to, to, we can

use biomimicry and we can learn from bees, we can learn from teenagers, but

you're the

Rory Sutherland: best bit of biome anyway.

Yes. So they eventually just master some technology where you could spray

like a miniature QR code on an ant. So you could actually look at individual ant

behavior. Ah, and their discovery, at least in the particular colonies they studied,

is that 40% of ants do bugger. All right. They just wander around.

And ag the, the theory there is they're in reserve. Okay. Which is if there's a

disaster, okay. Or if the, the high, the nest gets attacked. These people are

effectively a reserve army. And they tested that hypothesis by picking outuseful, hardworking ants, removing them from the nest and the lazy ants,

basically the stepped up into the plate.

And so effectively you've gotta remember that nature is optimized not just for

short-term efficiency, but for long-term resilience and [00:53:00] survival.

Modern businesses basically fetishize the, the short-term optimization at the

expense of a whole load of things. In particular, of course, it's much easier to

quantify a cost than an opportunity cost.

MichaelAaron Flicker: That's right.

Rory Sutherland: So finance basically nev you'll never get sacked as a finance

person for killing something because the counterfactual doesn't exist.

MichaelAaron Flicker: And I think this is what we want to encourage our

marketers to think about. How can we bring the other side of the rational into

the discussions about how do we grow brands and how do we grow businesses?

Because otherwise we are not looking at the opportunity.

Rory Sutherland: What, and,

MichaelAaron Flicker: and

Rory Sutherland: also we shouldn't predefine the objective too strictly because

we'll undervalue the, the value of fame. Okay? If I said that I want to get famous

so I can do X, okay. Right? That's actually a misrepresentation of, of what

you're trying to do because the whole point of fame is it brings you unexpected

[00:54:00] opportunities that you, yourself were unaware of until people

effectively brought them to you.

Okay? Now, what I think happens if you look at the value of a brand, what we'll

tend to do is we'll value, we'll evaluate brands on things like short term sales,

which are easy to measure. If, if you're a business and you've got a great brand,

the best definition of this, you know, the guy, I think it's called Michael

Johnson, and he wrote a book called Blind Sight, and he's written another book

called, oh, Matt Johnson.

Matt Johnson. Matt, sorry, sorry. Yes. Why don't, yeah, yeah. Matt Johnson,

he's brilliant. He wrote Blind Sight and he also wrote a book called The

Business of Brands, I think it's called, and his great phrase is, having a greatbrand means you get to play the game of capitalism on easy mode. Mm-hmm.

Okay. And I would argue by the way, that behavioral science is cheat codes.

Yeah, yeah. If you want to use the same analogy. Okay. Behavioral science is a

series of cheat codes, and what he means by that is that loads of things

fundamentally become lubricated through fame and familiarity. Okay. When

your chief executive rings someone, they'll call you back. Okay. You know, if

you're the [00:55:00] chief executive of a famous company, you know, I mean,

99% of the people who you want to talk to will return your call, okay?

People work for you for less money, and they stay for longer, and they apply

for you, and people come and apply for jobs of whose existence you are

otherwise completely unaware. Okay? All of these things, all of these things

fundamentally become, you know, five times easier. Because fame and

familiarity make what was once hard work, something that happens

automatically.

And yet when we only look for the value of that in the thing, we, it's a bit like if

you go to, what's that joke about that person who wants to, who goes to a party?

'cause they want to, they want to do some fairly trivial thing and in the end

something lucky happens. They end up winning the lottery, but they regard the

day as a failure because they didn't achieve the thing they wanted to achieve it.

Yeah. That, that's a bit of what, of what's trying to happen if we overly define

success in advance. Mm-hmm. Yeah. Mm-hmm. [00:56:00]

Richard Shotton: But it also has implications. I think that point of things

becoming easier with fame. It shows you how hard it is to predict, predict

success because you could have a number of people who are all very, very

similar in ability.

One of them has a random freakish bit of good luck. Yep. They edge ahead of

the others.

Rory Sutherland: And then once they edit, I got Ill outta you. I read a lot of

books about economics. If I hadn't got Ill sometime in 1990 something, no one

knew who the fuck I was. I mean, and, and genuinely, I mean, you know these

extraordinary freakish things.

There's a great book by Brian k class called Fluke, which is all about how, you

know, I mean, effectively, I. The first World War happened because a chauffeur

took a wrong turn into a one-way street. Okay, I don't know this. So this guywas trying to kill the Archduke? Yes. Okay. Prince it, but he failed and he got

pissed.

Got pissed off 'cause he couldn't kill the archduke. So he goes and sits outside a

cafe and orders a coffee instead. And then the chauffeur of the a Duke's

[00:57:00] car makes a wrong turn and gets stuck in front of the cafe. Worse

still, I think the car was incredibly difficult to get into reverse gear. Okay. It's a

bit like that joke, which is the terrible thing about the Kennedy family is their

taste in cars.

'cause the whole of American history would've been different if Jack had a

sedan and Teddy had had a convertible.

MichaelAaron Flicker: Right? Yeah. Okay. So I'm obligated not to laugh.

You're obligated not to laugh.

Rory Sutherland: Okay. It is American comedian who tells that joke. So I'm, I

I've got it. Okay. Right. But actually, really, really trivial events have

extraordinary knock on effects.

Okay. And actually simply in Nems, great thing I, I've learned half of what I've

learned from Nasem. Okay. Let's, let's give the guy, you know, the due credit,

which is effectively using really quite good maths to look at things differently.

And there's a difference between an option and an obligation. Okay.

It's the difference being invited to a dinner party and being invited to a drinks

parties. Drinks parties. Actually shit compared to dinner parties. But one

exception, [00:58:00] which is if you don't feel like it, if you don't turn up at a

drinks party, no one goes, where the hell were you? Okay. So I, my wife gets

really furious about this 'cause I go, let's get, let's leave the car here and I'll

leave my car here.

'cause now we've got more optionality. Okay. I'm just getting cheese here. Can't

you just make a decision? But but optimizing for optionality Yeah. Rather than

optimality. It just requires a different approach. And this is why I say that

finance is optimizing for certainty and predictability and actually the way in

which you get lucky.

I mean, you know, I, I believe in being, to be honest, I believe in, you know,

30% of your life should be driven by expediency to be absolutely honest. You

know, just, oh, I know. You know, what's that? What's so fascinating is you talk

to entrepreneurs about this. What's very interesting, okay, you talk to someonein a big business about behavioral science and they go, I don't like this 'cause it

messes with my fucking head.

I've got a nice, clear, deterministic, mechanistic view of my world, and I don't

want you [00:59:00] and your right brain stuff coming in and fucking it all up.

Okay? You talk to an entrepreneur and you say, isn't it weird that people do this

instead of that? And they go, arbitrage opportunity. I can make a business out of

that.

And that's the fundamental difference in mindset between I don't like conflicting

information and hey, conflicting

Richard Shotton: information. Yeah. And I think there's, maybe that happens

because there's completely different motivations in a big bureaucracy. It's about

maintaining the respect self for the people. It's self-defense for the entrepreneur

who owns a business.

Well, it's all that, it's all maximizing revenue. And those conflicting stories are

great opportunities in their eyes. Hmm. And I, I,

Rory Sutherland: and they are actually going effectively. What an

entrepreneur wants to know is not how can I be right? Just like everybody else.

It's what are my competitors wrong about.

Mm-hmm. That's what really excites them. If they, if you can point out

something where you go, everybody assumes this. You know the Uber map,

you know, everybody assumes people want tab cabs to turn up quickly. If you

have a nice little map, they don't really mind that much 'cause they can see

where the cab is.

Okay. [01:00:00] You know, that's the kind of thing where effectively they go,

Ooh, that's interesting. Everybody is directing effort and attention and

investment in the wrong direction. Ing unexplored space. Value creation

opportunity. Yeah.

MichaelAaron Flicker: Meaning that it could take the same amount of time as

a yellow cab, or we call them black cabs in London.

Yeah. A black cab as an Uber. But because I have a map that shows the Uber

making its way towards me, that's the unexplored space, that behavioral science.Rory Sutherland: I think there's also a mindset question. 'cause we talked

about the divide between an entrepreneurial business and a bureaucratic

business, but we've got the worst thing at the moment, which is even in the us,

less so in the US than in Europe, but basically a bureaucratic, large business

which doesn't really believe in growth or opportunity because they're convinced

they're operating in a kind of stagnant market.

And markets are only stagnant because people behave as if they were. And so in

the eighties, in fairness, if you worked in our business in the 1980s, basically

[01:01:00] everybody believed they're gonna take over the world. And that false

optimism, which often was completely misplaced if we're being absolutely

rigorous about it, nonetheless, it created a mindset where people were going, oh,

you never know.

Maybe, maybe we could, okay. Whereas now everything is batten down the

hatches and act as though every everything is a potential threat and that the only

possible way you can survive is by the optimization of your established

processes.

Richard Shotton: Yeah, it's

Rory Sutherland: tragic.

Richard Shotton: Yes.

Rory Sutherland: I thought you were gonna get into slight it also, it's also

really fucking boring as well, working in one of those things.

I always remember some Scandinavians going, yeah, well there are two ways,

sorry. Okay, I'll, I'll get the you know, I'll get the DEI people into me for being

unkind to Scandinavians. But they said there are two ways to run a mobile

accounting company. You do the whole thing on price and you compete on

price.

Said we could do that, but we realized that working for those companies is

really shit. So we went and did something else. Perfectly honest description of,

you know, [01:02:00] there is, there is by the way, a cost leadership strategy in

most categories, you know, Ryanair, et cetera. It, it, it's a perfectly valid, and

Ryanair is a bit complicated 'cause it flies roots that nobody else flies.

And as you said, it gets subsidies from the cities which it serves, which the

consumer isn't even aware of. So there's a whole lot of stuff going on there. Butnonetheless, there is, you know, that's a perfectly, there, there's always a group

of people who will buy on price in a market. The only problem is, okay, now

I've got a little theory here, right.

Which is the standard behavioral economics narrative is that econs don't exist.

And that in any evolutionary environment, anybody who behaved in a way that

was purely economically self-interested and rational wouldn't, well, you

certainly wouldn't have any friends. Okay? Right. And so the idea is that econs

only populate economic models.

I would argue slightly differently, I would say in every category. Okay. There

are people who are de facto econs. Right. Here's the thing. You don't want them

as your customers. Who would you want? Okay. Do you want I Caro's

customers or do you want the customers of people who go and go, Ooh,

[01:03:00] look, cheese Whiz is on special right now, my view is that there are

econs in categories.

Mm-hmm. And that you can actually deceive yourself because by attracting

econs you think you're doing really, really well. But actually they're totally unli.

Yes. They, you know. They're probably not really trustworthy, but they, they,

they have no value. 'cause they have no capacity to reciprocate. They have no

loyalty.

They have no, they, they won't give you the benefit of the doubt. You know,

they're just really, really painful people

MichaelAaron Flicker: to serve because they're only mo motivated by

economic exchange and transaction. It's similar to a point we were talking about

before the show started, which is if marketers only look at the average, only

look at, at the, at any demographic or any, or any population as down to one set

of stats, it misses the point.

It's a, it's an adjacent concept.

Rory Sutherland: I talked to a coach driver once. He said he used to do holiday

tours, okay? And he said, the worst job you have is the [01:04:00] worst the last

week of the season. Right? Because there are people who basically can't afford a

holiday at all. But they feel they need a holiday. So they buy the cheapest

holiday they can.

He said you drove them to Tinton Abbey. I come from Mon Show. Okay. You

drove them to Tinton Abbey and they all got off the couch and half of them gotback on again three minutes later and they go, this is back in the seventies.

Okay. They, it's 50 p to go in. Right. And they'd steal all the toast from the

hotels in the morning to make sandwiches for lunchtime.

Now I'm not, you know, okay. They haven't got much money. I'm not being

mean about them, but he just said the whole experience 'cause they had no

discretionary money. Okay. No capacity to kind of, he said he, he said the, the,

the, the peak time tourists, you know, who actually probably were actually no,

no richer the off peak thing, they were just slightly more extravagant.

He said they were delightful. You know, he said the people who were on the

edge where basically everything was a kind of cashflow decision. One big

reason for redistribution of wealth, by the way, I've never understood this, why

Unilever and p and g never argue for a more redistributive tax [01:05:00]

system.

Because what you want, if you're a consumer goods business is a lot of people

with quite a bit of money, not a few people with too much money, which is

what we have, by the way. I mean, I'm politically right of center, but this

question of both the property market and the completely unequal distribution of

wealth and the creation of an meritocracy strikes me as a really fundamental

problem and nobody's doing anything about it.

And your point is, it's bad for

MichaelAaron Flicker: commercial,

Rory Sutherland: it's bad for business, bad for business. It's bad for business.

You don't, you don't wanna live. The worst place you could live is where a

place where you are really rich and everybody else is really poor. I always

thought that about Danton Abbey. Right? Okay, so I'm watching Danton Abbey,

and I'm a cons, I'm not really cons, I'm a consumerist.

Okay. Actually, somebody met a really eminent historian a few nights ago who

said all this stuff about the industrial revolution, because we've got the kind of

mills and the buildings, it's all overplayed. The really great thing the Brits did

was invent consumer capitalism and marketing for mass produced products.

In other words, we make things abundantly and we go and sell them to people

who didn't know they [01:06:00] needed them. That was the real economic

triumph, not the sort of steam engine stuff. Now, obviously they're

interconnected. I'm not suggesting, you know, we could have somehow createdmass consumerism outta nowhere, but he always thinks that was the great

British thing.

Actually, Nile Ferguson says something similar. Consumerism has actually

been a pretty good thing. Okay. And when I watched Downton Abbey, I always

thought if you just doubled the salaries of your servants, right, A decent cafe, or

if you're really lucky, an Indian restaurant would open any nearby town. Okay?

And you wouldn't have to eat food cooked by the same woman every single

fucking day of the week. 'cause they had Mrs. Whatever her name was in the

kitchen, didn't they? In Downton, right? Who was the cook? Yeah. Okay. And

they were hugely rich people. Okay? But all the food they ate was cooked by

this one person.

Okay? Now you have best will in the world, right? If you just doubled the

salaries of your servants, you would've got a bit of a nightclub in the Yorkshire.

You know, you would've had a bit of, you would've had a pub, you know, you

might have had an Indian restaurant opening, and you could have got a bit of

[01:07:00] variety.

So actually, inequality of wealth isn't even very good for the very wealthy.

'cause you get surrounded by utterly pointless lin goods and utterly, utterly

misdirected forms of expenditure.

Richard Shotton: Yeah. Well I think the, the other one that's always struck me

in terms of that argument for redistribution is when you see curves of

diminishing response.

So if you look at any studies by Conan and the like, where they try and look at

life satisfaction and happiness, yes, it goes up. Consistently with yes, wealth,

but it is on a log scale. It, it, it, it bends very quickly. So you can do, you can

have a magic by taking a pound off a millionaire and giving it to someone on

10,000 pounds and that pound being, yeah.

Rory Sutherland: So that's everything is a bit like heroin, that actually you

need more and more incremental wealth. Wealth exactly. To, to retain the same.

There was a guy who became a millionaire who remembered thinking that when

he was about 15, he'd bought some fancy silk dressing gown, which he'd saved

up with. I know.

Strange thing for a teenager to buy, but he'd saved [01:08:00] up for it for years

and he remembered something like buying a new Rolls-Royce and realizing itdidn't give him the same thrill as the dressing gown had given him. Okay. Yeah.

So I think one, it's also different of course, between country wealth comparisons

are totally different to within country wealth comparisons because we do

fundamentally set our expectations.

So that's sort of Lord layard stuff.

Richard Shotton: Yes. I mean, no one walks into a a room and then gets

excited 'cause the electricity comes on. But if you went back a hundred years, it

would've been a technical marvel again. We have big, my kids

Rory Sutherland: find aspects of the internet totally boring, you see? And I

find that rather depressing because I must have told the story of it.

So I, I was on the, I was on the tarmac at Sydney airport waiting to take off to

fly home, and I just laughed and I, I and my daughter said, what the hell's so

funny, Dan? I said, well, just for 30 seconds about that, I turned on the central

heating at home. Yeah, okay. Now bear mind. I was born in 1965, so the idea of

being able to make a boiler click into life 25,000 miles away was just childishly

[01:09:00] enjoyable.

My daughter's dad, you're such an idiot. And I suddenly realized, of course,

she's grown up in a world where that's infrastructure. There's a Douglas Adams

thing isn't there about technology, which is the technology that's invented before

you are born or up until the age of 10, 15 is just infrastructure, okay?

Then you have the technology that's invented between your age of 15 and about

40, which is absolutely brilliant. It's like magic. It's fantastic. And then after

you're 40, it's all absolutely stupid idea. Why would anybody want to do that?

And by the way, there is a lot of. One of the things that I think there's a lot of

now is what you might call defensive opinion forming, which is, I don't know if

this, you notice it when you were a kid, everybody admitted they wanted to own

an Aston Martin, but they just acknowledged they couldn't afford one.

Okay. And now you get a load of young people in cities who go, I don't have an

Aston Martin, so I'm gonna pretend I don't like cars. And there is a bit more of

that. Do you think there's a bit more of that going on? You know, what you

might call, you form your opinions to suit your circumstances. [01:10:00]

Richard Shotton: Okay. I think that certainly happens, but whether it's changed

over time, I guess that's the only one that's harder to, to quantify.No, I Maybe people,

Rory Sutherland: maybe actually people did

Richard Shotton: it in

Rory Sutherland: a totally different way and people have always done that. It's

called, there are two things. The opposite of sour grapes is sweet lemons. Have

you heard of that? No. No.

MichaelAaron Flicker: I don't know that.

Rory Sutherland: So sour grapes is, here's something I can't have. I'll pretend I

never wanted it anyway because the grapes were probably, it's esop and I don't

think sweet lemons is esop.

I think that's the corresponding, and that's something bad has happened to me,

but I'm gonna pretend it was, you know, like my, my six years I spent in

Leavenworth prison were a really formative experience. And I wouldn't be the

man because you, you don't wanna admit I wasted five years of my life and

chokey.

Okay, so you actually say in the end, it turned out to be really decisive. Okay.

So you actually take a bad thing and you reframe it as a positive or you take, so

a bad thing. You had to have you reframe as a positive and a good thing. You

couldn't have you reframe in negative terms. Yes. One of those things that we

can see in other [01:11:00] people, but never see in ourselves.

No, no, no, no. Absolutely. Right. Absolutely true. And, and so, I mean actually

esop, I'm so glad you mentioned him 'cause he was the first behavioral scientist.

It's, what is it? Seventh, sixth century bc. Seventh century BC I mean, fucking

two and a half thousand years ago. Okay. And actually if you read the whole of

ESOP's fables that, and actually Jesus.

I know you're on the other side. That's

MichaelAaron Flicker: okay. But we can learn. No, I'm just kidding. Yeah,

Rory Sutherland: Bible a bit like the Godfather, you know, the sequels

actually better than the original.MichaelAaron Flicker: See, now we have a, we have a different podcast to do.

We got a different podcast. Okay.

Rory Sutherland: Okay. Yeah. But but the interesting thing there is that you

know, Jesus' parables, you know, loss aversion in the parable of the lost sheep,

and people were obviously thousands and thousands of years ago, were

basically wrestling with what you might call the difference between perception,

emotion, and behavior, and objective reality in some sense.

And, and doing it in the case of esop really, really well. And I, I, I, I actually

went and dug out [01:12:00] esop and there are a whole load of parables there,

which are really, really interesting nudge experiments. There's the guy who

leaves his, the, the farm to his children and tells 'em that there's treasure buried

on the land.

So they all dig up the land looking for the treasure. And his actual wording is,

you know, you'll find treasure. What he's done is he's encouraged them to plow

the farm. Yeah, okay. So by effectively pretending there's tr now that's, that's a

failure worthy nudge, isn't it? Okay. So they do get the treasure, but the treasure

they get is greater crop productivity rather than, yeah.

MichaelAaron Flicker: Because those fables, the, the Bible, and many others

are observations of humanity are observations of behavior that then can bring to

insights. And in the

Rory Sutherland: case of both parables, ESOPs fables made Beau beautifully

illustrated. Anecdotally,

MichaelAaron Flicker: yes,

Rory Sutherland: there's nothing wrong. Nothing wrong with anecdotal

information.

I mean, one of the things I'd argue about the use of data is if you're using

aggregate data, you're probably using it for [01:13:00] just self-justification.

And if you're looking for anomalies, you're probably using it for illumination.

Okay? So in general, when people use big, chunky data and they aggregate it,

it's usually self-defense.

Okay? When people go, let's look for a Simpsons paradox, or let's look for some

unusual outliers in the data, that's when you're actually doing the right job. And

I always make this point that cops. Better than scientists. Okay. In their method.'cause they accept the fact there's an investigative phase and then there's an

evidential phase.

And in the investigative phase you don't demand evidential value. Right. You,

you'll, you'll go to the next door neighbors of someone who's been murdered

and go, did you notice anything unusual last night? You're literally, you're on

the lookout for anything you can use that might help you direct your attention.

So I'll, I'll Americanize this for you. I usually use Peter Sutcliffe from the

Yorkshire Ripper, but they caught Son of Sam. Yes. You know that? Yes. Okay.

You're not from Long Island, do you know that?

MichaelAaron Flicker: No, but I'm from near there. Yeah. Nearby. I know

[01:14:00] it.

Rory Sutherland: So they caught him because someone happened to mention

they'd seen a traffic warden and someone thought, what if he'd got a parking

ticket?

It's an outside chance, but let's just go and look. Let's find out who got a parking

ticket on that evening. 'cause no one was expecting a traffic warden that late in

the evening I think. 'cause it was definitely a kind of. Nighttime operation

Middle night. Yeah. Okay. And of course, these two cops that are this totally

routine thing, we've gotta check up on this guy.

You got a parking ticket, maybe he saw something and they actually see his car

parked outside the flat and there are a load of sort of guns visible in the back

foot. Well, and a load of loony messages. I think at that part they go, I think we

better call for backup. I think it's, but that's how actually scientific investigation

happens.

But what we do is we publish the evidential phase in a paper, but all, there's a

podcast called Night Science. Have you ever come across it? And it's by a

bunch of scientists who actually argue that the more important bit of science,

the penicillin noticing the, the thing Yes. Is actually the more important part of

science.

But instead of optimizing for [01:15:00] observation, we're optimizing for

evidence.

Richard Shotton: Yeah. That reminds me of so Paul Wick, who's written series

of brilliant, brilliant books anatomy of Humberg, probably being the best one.He has an issue with case studies because he says, with advertising case studies,

what happens is there is this rewriting of the actual experience.

It looks very logical and methodical. Feld, who went to mom school by the

way?

MichaelAaron Flicker: I'll just plug Little plug.

Rory Sutherland: Yeah. Yeah. We, we, we never overlapped quite, but

weirdly, we both read the same school library copy of the hidden persuaders.

Okay. And both of us, so he feld back in the, it would've been 73 or something.

He lived in agave. I was in Ragland. He he, he took the hidden persuaders outta

the school library in Reddit. I then 19 79, 80, yeah. Read the same copy. Okay.

And admittedly, both of us had the same reaction, which is rather than going,

gosh, this is absolutely scandalous. They must put a [01:16:00] stop to this.

We read it and thought, this sounds fucking brilliant. Okay. Right. So both of us

have the same,

Richard Shotton: same reaction reading, no logo. No logo. You have the same

reaction. Well, oh, this

Rory Sutherland: is great. Right. And actually, I think Robert Cialdini set out

intending to effectively aid regulators to say, these are the tricks.

And, and, and, and sim something similar happened actually with Thaylor and

Sunshine, to some extent, I think they hope to inform government regulation

and they really, they found their most enthusiastic adepts amongst car salesmen

and people like us. Yeah. But but Feld actually writes an accurate story of how

the Barclay card now, the Barclay card campaign which features Ron Atkinson

as a secret, as a bumbling secret agent with his trustee sidekick called B.

Okay. This was an ad campaign which gave rise to Johnny English. So actually

some of the royalties for Johnny English should really have been paid to

whoever was in the [01:17:00] advertising agency, or indeed to bark the card

who probably owned the copyright. Okay. So it, it actually went into a sort of

multimillion dollar film franchise.

Eventually it started as an ad campaign. Also true of that case where a football

manager takes an American football manager that started as an ad campaign and

was converted into an Emmy winning. And the poor copywriters behind that gotno credit for it. Interestingly, okay, so really good copywriters are actually

looking for something that has the potential to be a property art directors.

Likewise. Okay? And so occasionally you get these things, but what was so

fascinating is the whole story was basically, it was a series of lucky accidents

where at one point they were trying to write funny scripts and someone in a

research group said, look you're trying to be funny. Look, sometimes you

succeed, sometimes you fail.

One, I do go and get Ronan Atkinson in 'cause he's funny in ev in everything.

And they got Ronan Atkinson and with Ro Ronan Atkinson came John Lloyd,

who I know quite well. Brilliant, brilliant you know, producer and director

[01:18:00] and fantastic comedy writer. Okay. And once they got that, they had

got the ingredients of the whole thing.

But the actual thing was a whole series of serendipitous kind of movements,

including a hell of a lot of kind of iteration. Okay, we'll go and start you. This

isn't working in research. We'll go back and start again. Now. The great thing

with BNP is they conducted their own research so they could actually on the fly,

rather than just going, doing some research, spending a load of money in

research and coming back, going, it doesn't work very early on if they found

something wasn't working.

The H monster, you know, okay, so this, this enormous, tell them about the

honey mummy creature. Okay. When it was originally conceived by the

creative team, it was a small mischievous thing and the mums hated it 'cause

they saw it as a badly behaved time. Now, most research people would go back

and say, not all of them.

I'm not, I'm not besmirching the entire sector. No, it's not really working. The

Hil, the mums don't like the fact that the H monster misbehaves and someone in

doing a research, a planner probably at BMP said, what have we [01:19:00]

made the H monster? Massive. So it's a bumbling adult. Okay. Rather than

being a small mischievous creature, and when they made the H monster,

massive everyone.

Oh, wonderful. Right. And so literally these little executional tweaks, these ad

tweaks sometimes totally change the emotional response to an ad and therefore

mean the difference. I mean actually famously Solutions for a Small Planet for

IBM, great end line that Ogilvy gave them back in, I suppose the late nineties.Okay. That came outta research group and it was actually voiced as a criticism.

Okay. So somebody, all you people are, all you're doing is coming up with well,

okay. Solutions for a small planet. Okay. And someone sitting at the restaurant

went, okay. And that's fine, by the way. I mean, actually listening to things as a

creative person, it's not an act of origination.

It's an act of observation. Yeah. A lot of creativity is just a act of inspired

observation

Richard Shotton: and nothing more, [01:20:00] nothing less on, on that point. I

think it's fascinating how many times band names are criticisms. So led

Zeppelin, someone said that you'll go down balloon a balloon and then balloon

manic street preachers, it was a drunk walk past 'em, and they were busking and

shouted out you know, you're just manic street preachers.

And they took it. The impressionist, the art group was a, was a, as a criticism,

daft Punk was a c. And

Rory Sutherland: of course, there's only insult, of course, in things like we

Welsh rugby fans take inflatable sheep to the matches because you are accused

of sheep shagging. Yeah. You also get it, you know, so, I mean, funny enough,

Tori comes outta that.

You, you, you own the insult.

Richard Shotton: Yeah.

Rory Sutherland: Yeah. Which is actually Cheeseheads would be your yes.

Translating for Thank you. It was an insult to Wisconsinites. Okay. Which they

own now. But if you go to a Milwaukee Brewers game, people wear enormous

wedges of cheese on their heads and take it as a badge of pride.

MichaelAaron Flicker: That's right.

Rory Sutherland: And Welsh people will do that actually, which is, [01:21:00]

it's too tedious to deny the fact that you have sex with sheep. So you just

pretend it's a, well, obviously

MichaelAaron Flicker: what? Well, yeah. So if you wanted to guide marketers

on how to best use research, we've talked about observation being a key part,

but how else should we think about using research to get to the best outcomes

for brands?Research

Rory Sutherland: is great because it's a source of information, and I'm in favor

of any source of inspiration that you can mind for inspiration. The only thing is,

it's the old joke about which isn't David Ogilvy, it's always credited to him. You

use research like a drunk uses a lamppost for support rather than illumination.

And this is the whole question of modern business, which is to what extent is

effort being directed defensively towards self-justification versus being directed

offensively in the quest for opportunity and and, and progress. And gr and I

would argue that there, it's very, very easy in modern business to disguise as

covering as rigor.[01:22:00]

Actually all this stuff you're doing isn't designed to make a better decision or

even a different decision. Okay. It's simply there so that in the event that things

go wrong, you've got your workings out. Mm-hmm. Okay. And actually, I

mean, I, I spoke to s about this and said if we didn't practice defensive decision

making in organizations what.

What would be the principle effect? He, he said basically, you could all go

home a Wednesday afternoon, you know, spend the rest of the week in the pub.

Now here's another interesting thing, which is that I think this is actually

mathematically important, okay? The part, part of the point of a larger

organization is that under multiplicative growth dynamics, if you share risk and

reward, you grow faster than if you apportion risk and reward compartmentally.

Okay? If anybody wants to see the maths around this, there's a thing called the

farmer fable.org, which is an animation on the web, might be called farmers

fable.org, or the Farmer's Fable find, which shows the whole [01:23:00]

principle that under gon it, it's about Ergon, it's about non IC conditions. Okay?

I, I, I, the second thing is a story which actually comes from Richard Thaylor,

which I think is hugely important.

Thaylor, I think, I think it's Thaylor, is talking to the board of a large American

company, possibly ge. We're not quite sure. It's never said, okay? And he goes

around the boardroom table to the heads of the eight largest GE divisions and

said, I can offer you a decision which has a 50% chance of success, where your

profits and and, and, and, and revenue will go up by 50%, but it also comes with

a 30% chance of failure, where your profits and revenue will fall by 30%.

You're not gonna make a loss, okay? Your profits are gonna fall, okay? How

many of you would take those odds and all, but two of the eight said, no, Iwouldn't take those odds. Two of them said they wouldn't. He said, well, you

are all good enough mathematicians to realize that this is an uneven bet with,

you know, a net upside.

Why wouldn't you take the odds? He goes, because 30% of the time I'd lose my

job. I'd only have [01:24:00] to take those odds three years in a row and I'm

bound to lose my job. 'cause one year in three, it's probably not gonna happen.

Right? And then this is the fascinating bit. The chief executive is sitting at the

end of the room now he, he's responsible for the aggregate of all their decisions.

Okay? And you go, but I want all of you to take those odds because net net

between the eight of you we're almost certain to end up up. Now what seems to

be happening is the cult of accountability where every single component of a

business has to justify itself on its own terms. Okay? Seems to be creating an

absolute cult of risk aversion because you want people individually within an

organization to be slightly bolder on the assumption that the whole point about

risk sharing and risk pooling in an organization allows you to take decisions

which no individual would take, but which make perfect sense to the collective.

Okay? Right.

Richard Shotton: As long as they're dispersed.

Rory Sutherland: [01:25:00] Well, that's why people go hunting. Okay. In, in

hunter gatherer societies, you have the base level, which is taken care of by

gathering fruits and berries. And the point about hunting is it has a low

probability of success, but massive gains in the event of success.

Okay. And you can't be a lone hunter, you'd starve to death. Okay. But if you're

a group of people, particularly when some of the group are involved in

gathering rather than hunting, the hunting makes absolute sense. And so, hunter

gatherer groups will grow faster than gatherer groups. And yet what we've done

is we've created a, basically a gatherer culture, which is, I spent six hours today

and look at all the berries.

Right. Okay. So that is, that is a classic case of what you act, NAEM called that

the barbell, you know, you basically ensure survival by doing the sensible

things. You know, that's exploit, you know, don't, yes. Don't, don't, don't stop

doing sensible things. Okay. But at the same time, you, you, you, you go to the

other extreme and you look for things that have a, you know, a a a survival

downside.Survival worst case scenario, which [01:26:00] I suppose hunting just about

comes into, but potentially limitless upside. Okay. And actually, companies

aren't doing that anymore. They're just gathering.

Richard Shotton: But that, that, I think that's a, a critique we'd all agree with.

But how do you encourage companies to change that behavior?

How

Rory Sutherland: someone left google and they went into some, did some

research. And their whole PhD, they left Google to do a PhD on why big

companies no longer innovate once they reach a certain size. And she met Blair

Ends who said, I've got a single word explanation for this, which is inefficiency,

which is the quest for efficiency, destroys the ability to innovate.

And she said, I've also gotta single word explanation, which is slack. You said

what happens in a large organization is everybody becomes so defined and

optimized for the part, not for the whole. There's great phrase in, in which is to

optimize the whole, you have to suboptimize the parts. It's w Edwards Deming,

I think his name is.

Okay. And it's known in complex systems that [01:27:00] you know, the reason

we have a central nervous system is to stop individual components running

away with their own particular metric. Okay. You know, because all, all we'd be

is enormous pair of testicles or something if you didn't have that kind of

command and control mechanism.

Okay. And so consequently she said, when you lose slack. Nothing lucky

happens. One thing that stops happening, okay? If I ran my own business, I'd

hire people on the basis of their talent and find a job for them. Next. Okay?

Large companies have a role that's vacant and they hire for the role. Totally the

wrong way to hire.

Okay? Now, who's the football manager who did that? Was an American

football manager. There was a guy who probably Vince Lombardi. It always is.

Could have been a good guess. Just said, Vince just said, hire the best talent.

Yeah. Don't worry about all this running back versus this stuff. Yeah, well, it's a

good guess.

It's a good bad, you know, as Vince Lombardi said, when you're looking for a

good pitch, then okay, no. Okay, okay. Probably as Vince Lombardi and he did

hire the best talent, you, in other words, you hire the [01:28:00] best talent, youfind the, you know, you find the role for 'em later and actually, so everything

becomes effectively a quantum and everything gets siloed into individual things

which are optimized in isolation.

Now the really interesting thing about innovation is if you look at two really

great innovations that big companies have managed to succeed, the IBM PC

Division Watson basically placed a whole seaboard away from IBM

headquarters down in Boca Raton, Florida. 'cause he said, if you're anywhere

near to hq, we'll kill it.

Okay. Only survive partly. They were actually in a separate office in Lasagne.

Not in Verve. It's not that far away, but it's not in the same building. And

actually the guy was involved in a massive I Nissan stroke. I think Nespresso is

the Swiss apple. I think it's a magnificent, magnificent creation of a whole

system of things.

I know you prefer your Keurig cape. So no espresso is on the rise. Right? It's on

the, okay. Right. But but the other thing is that they had a huge route about

whether it [01:29:00] was branded NECA or not. Okay. Which is predominantly

an instant coffee brand, which would prevent the premiumization that the guy

thought was necessary.

But they also survived because they lied about their figures for two years. They

basically just basically f brilliant in my opinion. I might stop doing that actually

with my time sheets. Just, just fucking

MichaelAaron Flicker: lying. This past Saturday from when we were

recording was Berkshire Hathaway made the announcement that Warren Buffett

is no longer going to be the chairman.

He's stepping down as chairman. And interestingly, the Wall Street Journal

wrote as you would expect them, dozens of articles about Warren Buffet. But

what they said, the reason there will not be another Warren Buffet is because

the game that current private equity and investment banks play, and not the

game that he created when he started, when he took over Berkshire Hathaway

and grew it to what it was and, and, and what we're talking about.

Another angle of what we're talking about is where do you get the biggest

reward? Because corporations get the biggest reward through, [01:30:00]

through quarterly reports, quarterly profit and sustainable plantable profit. You

couldRory Sutherland: argue that private equity or venture capital in some cases,

are actually playing the probabilistic game.

They accept the fact that this is fat tailed. Yep. Okay. And they're looking for

that. And they're looking for basically 1%, you know, 5% of their investments

cover, you know, basically all of the losses, 200%, all of that, all of the other

losses. So they're at least, at least thinking in that way. Oh, as opposed to

corporate culture.

He was an investor in. David Ogilvy, he met David Ogilvy. There's a letter from

Warren Buffet. That's cool. Which I includes a check for his investment in the

early Ogilvy in May. By the way, I

MichaelAaron Flicker: did not know that. No, no. I, I didn't. Somebody,

Rory Sutherland: somebody who's a real sort of you know, yeah.

MichaelAaron Flicker: Buffet nerd sent it to me.

That's very cool. And so what we want to ask in corporations or in all brands for

people that are listening, is what are the incentives that we're setting up and how

do we define success? The large arc of our conversation is defining success by

finding the next [01:31:00] opportunity, not only optimizing efficiency, about

looking for the the next.

I mean,

Rory Sutherland: you know, you, you've gotta ask, ask, do you think Apple

will come up with another innovation? Do you, do you think that when the CFO

takes over from the CEO, this is the whole thing, you have someone from a

very, very deterministic mindset taking over a job that requires a very

probabilistic mindset.

Mm-hmm. I'm nicking this from Roger L. Martin. What is interesting, by the

way, is what's interesting about this, I feel sometimes I'm totally straying outta

my tram lines by talking about wider business questions, but I think the

problems we have in marketing are actually a microcosm example of wider

problems in business, which is the whole question of accountability versus

ultimate value creation.

MichaelAaron Flicker: That's right.Rory Sutherland: And so I think that marketing is merely a pinch point where

this problem has become particularly visible

MichaelAaron Flicker: and, and it's a little easy to blame CFO versus CMO

when the bigger issue is deterministic or probabilistic.

Rory Sutherland: The only thing is, are [01:32:00] investors actually more

intelligent than the people who are presenting to them, give them credit for.

Mm-hmm. 'cause you can tell a story to investor, which is we're basically going

to do this thing because we believe it will pay in the long term investors. And,

you know, many of them are running pension funds or something. It's not a, you

know, okay, there's trading algorithms that are holding a stock for 16 seconds.

And there is a problem that in the 1950s, the vast majority of American stock

was held by individuals.

MichaelAaron Flicker: And now it's, and it's

Rory Sutherland: now it's held by institutions. Right. And therefore, the need

to justify your existence repeatedly, almost certainly leads to overtrading and,

and short term time horizons. Yeah. I mean the, the book to read on that is John

Kay's, the, the Corporation of the 21st Century, which is really interesting.

But he argues that actually the shareholder value movement isn't actually even

true. Okay. I mean, other people have argued that it's deleterious to the practice

of good long-term business. And particularly because everybody can always

game the system to maximize the rewards of the senior [01:33:00] management

by, you know, share buybacks or whatever bullshit you choose to.

Gotta be careful here, whatever bullshit you choose to engage in. Okay. When

you haven't got a better idea. But he, what's interesting about Kay's book is he

goes, the whole idea that this is fiduciary responsibility and that it's your

obligation that the principle obligation of an, of an organization is to its

stockholders isn't even legally true.

It's just a Milton Friedman convenience. Now, interestingly. What is this led to

is literally boards of directors where there isn't a marketing person on the board

and there isn't an innovation person on the board. So, Peter Drucker's, two

sources of value marketing and innovation and your customers as a group.I would also argue that HR does not represent the employees. It's a total fiction.

Okay. So your customers and your employees are totally unrepresented on the

typical board of directors. Pretty weird, isn't it? I mean, when you think about it

that you have this body of opinion discussing [01:34:00] strategy for an

organization and the people who are actually at the co at the shelf, the p the, the

place where people give you money are not represented in that room.

Mm. It's got a weird state of affairs. I mean, what I'm saying is it's emblematic

of a, you know, I worry about the advertising industry 'cause I go, look, we

haven't got any offices in Austin. We haven't got any offices in fucking San

Francisco. Everything's in New York or Chicago, which is great if we're in the

19th century, but where's the, where's the, you know, where's the Texan office?

Where's the Dallas office? And that just seems the point I'm making is it just

seems emblematic of something,

Richard Shotton: which is a problem. Mm-hmm. You've got some of the most

prominent like intellectuals in a business like Scott Galloway talking about this

myth. Well, I wouldn't say it's a myth, but of the, of the death of, of, of

branding.

There's an increasing argument that marketing is a nice to have, not a, an

essential,

Rory Sutherland: you, you could argue I mean okay, let's take a small

microcosm of that, which is the death of [01:35:00] jingles. Right. I don't think

jingles ever stopped working. Yeah. Okay. I don't think long copy press ads

ever stopped working.

Okay. I don't think physical direct mail ever stopped working. Okay. I don't

think the BMP press out of the 1970s, which was a really god damn funny,

brilliant concept followed by 200 years of 200 words of immortal prose, you

know, I don't think they ever stop working. And all that happens is it's, it's

fashion.

MichaelAaron Flicker: Mm-hmm. It gets outta fashion and no

Rory Sutherland: one, no one tries to do. No one tries to do it because either

because it's unfashionable or because they've stopped believing in it, there's no

empirical evidence to suggest that. In fact, there's a lot of empirical evidence to

suggest the absolute fucking opposite, which is what happened to Nike when

they suddenly started to try and optimize for efficiency by selling direct to theconsumer a decision which could only be taken by someone who had literally

never bought a pair of their own fucking shoes in their life.

Right? Because that's not how we buy shoes. You wanna try 'em on. And also,

they had all these independent retailers who are kind of part of their [01:36:00]

ecosystem. You know, that'd be like Coke trying to get rid of the bottlers, right?

Yeah. Okay. At one level, they're taking some share of your fucking revenue.

But then the other thing is, I think you guys in the media world who stole all the

bloody money basically from the creative agencies, which is where it properly

belongs.

Okay. And you became the first port of call. Okay. Right. And that's, that's

sometimes good and sometimes bad, but they should be, they, they need to be

considered in parallel. So the separation of media and creative was an act of

total self-harm on the part of the advertising industry. Nevermind. Okay.

I, I mean it, the advertising industry is a bit like Meghan and Harry, which is

every time they have a choice Right. They make the wrong decision. Okay. You

know, it is the, the Meghan and Harry of the business world in that, you know,

you, you had, you know, you had Meghan Markle, who they literally had the

opportunity to be the royal family's diffusion brand, right?

Yeah. DKNY to the main machines Donna Car or Ralph Flo and Purple Label.

Right. It was the polo. Right. [01:37:00] Actually, that's even better analogy.

Right. And they had that opportunity. Threw it away by getting really angry

about random shit that was made up. Like saying you couldn't buy avocados in

the uk. Now what's that all about?

Right? Do you hear that? I'd never heard the she, she comes complaining she

couldn't, I think it was the royal servants who didn't like her were persistently

just feeding her complete bullshit. Terribly. Sorry. No, we don't have, and

there's no demand for them. Okay. I, I don't dunno, there's something weird

going on there anyway, but, but but anyway, you look at media, one of the

things I think that's happening right, is we are starting to define if you, well the

great thing about fame is you discover customers you didn't know you could

have.

Okay? You know, a whole load of people buy, I think I bought this thing. Okay,

now you can't market it this way. Samon Galaxy fold. Fucking fantastic. I, it's

turned off 'cause I'm on a podcast. Okay? Now I'll be ly honest with you. Right?

Okay. The whole thing is all about productivity and this that I bought, I'm

fucking old and I [01:38:00] can't see anymore.And I keep going. I'm on this phone. Fucking hell does that Say, Ooh, I know,

I'll open it up. Ooh, it's nice and big. Okay? Now you can't market it to old

people, okay? But if lots of old people have heard about it, they'll go, Ooh, that's

just what I've been looking for. Okay? I can finally do now. What I think is

happening in media is you're now, let's imagine if McDonald's, well I think

they've done this a bit, started saying it's cheaper to serve people on a screen

than it is to serve people face to face.

So in future, we're only interested in people who will order on a screen. Okay.

You're losing a whole load of custom. Okay. Slightly less efficient, slightly as

profitable, custom, but who knows? Okay. By and shop. Okay? You want to sell

to as many people as you possibly can. That's how big brands grow, right?

And your occasional customers are really valuable and your occasional

customers will go, what the fuck's this screen? Can I have a Big Mac please?

Okay. Now what's happened in the media world is your, your defining your

customer, your customer base by who will click with ads in low cost channels.

You're not actually saying who could potentially benefit from having this

product or service.

[01:39:00] Let's go out and use whatever media is available to go and find them.

And in some cases it'll be a bit expensive. American Express was built on direct

mail, right? Okay. Not a cheap medium, but you know, I mean most charities

actually exist because of physical direct mail. Instead, people are optimizing for

efficiency, not for opportunity.

And they're going, we're only really interested in these customers. We can get

really cheaply now. It's hardly surprising that marketing's in crisis if people

think that the main function of marketing is to be as inexpensive as it possibly

can be, rather than to be as effective as it can be. But that is literally strikes me

as being a self-fulfilling prophecy.

You'll start to define your customer base by the people who will click on your

ads in, you know, in, in inexpensive ways, rather than those people with whom

you can embark on a profitable relationship over time by becoming part of their

solution set.

Richard Shotton: Yeah. And it's often a mis quantification. Like the, often the

media that looks like it's performing best in a [01:40:00] really simple analysis,

let's say, is, is is branded search, you know, or you are on Amazon and it's

someone who puts in alchemy or the choice factory.What they, what that measurement doesn't do is net out who is gonna buy it

anyway. It's, it's often a very expensive tactic if it was measured properly.

Rory Sutherland: No, no, no. 'cause of course, I mean the, the famous thing, I

think, I'm just trying to remember who said this, but the most cost effective

form of marketing is to wait until there's a queue outside your restaurant hand.

Everybody a 50% off voucher. Okay. Because you get 100% redemption rate.

Okay. But the, now, you know, if you're advertising for, let's say let, let's say

you're the Marriott Group. Okay, well, there are people who would've otherwise

stayed in another Marriott hotel and you are accounting them as just as valuable

as someone who is gonna stay in an Airbnb.

But they saw your hotel ad. Okay, well patently both in the short term and in the

long term, those two forms of behavioral change are not equivalent in their

value. Especially not in the long term actually. Yeah. But you are [01:41:00]

treating them as though they're completely, you know, the same. Yeah. And it

leads to all these, and actually one of the, cause one of the consequences of this

is that you, you probably know John Sills and his work and the, the foundation

and all their work on customer service being in crisis, that's because it's very

hard to quantify quickly the value of customer service improvements, whereas

it's very easy to quantify bottom of the funnel intervention.

Right. Well, I like your analogy of the, well you call it the dormant fallacy.

Hmm. Which is the, where you, you define the value of the doorman as

someone opening the door. Okay. And you bring in McKinsey or something,

and they go, well, you pay your doorman X thousand dollars a year. We can,

we've defined his role as opening the door.

We'll replace him with an automatic door opener with an infrared device where

the door slides open when people walk up. And we've just, and then, by the

way, did you know this consultancy firms engage in something called a gain

share agreement? Mm-hmm. Where they are entitled to a percentage of

identifiable [01:42:00] cost savings.

Now, as Roger Martin, I know I quote him a lot, but he's the air to Peter

Drucker. He's, he, he's a guy who's a strategy guy who fundamentally believes

that value is created on the shelf, not in the factory. Okay. That's the way to

describe me. He's brilliant and proven and, and done a lot of work with aj l aj,

Laffy and P&G mean, fantastic guy.But the dormant fallacy, what you are doing there is the consultancy then comes

in and claims 8% of the identifiable cost savings, and then six months later,

basically your rack rates fallen off a cliff and their vagrants asleep in your hotel

entrance because the dormant wasn't just about opening the door.

Okay? That was how you defined it for the purposes of automating the role. But

actually, people aren't just their role. People have all kinds of values. So a

doorman is part security, part recognition, part status, part ca taxi hailing part.

Good to see you again, Mr. Jay, you know, all that stuff. Okay. All of which

people value.

And actually opening the door is merely the official, I [01:43:00] mean the, the,

the great phrase from cybernetics, I'll, I'll plug Dan Davis' book, the

accountability machine was the Unaccountability machine, okay? Which is it

comes from cybernetics and Stafford beer, which is the purpose of the system is

what it does.

And what tends to happen in business is you have an, an organization which is

intended to do something, and everybody assumes it does. And nobody looks at

the second order effects and realizes that actually the problem with your finance

department is it's actually killing off more opportunities than it is reducing

costs.

Which seems entirely plausible looking at most, most organ. And the purpose of

your procurement department is to prevent you buying anything innovative.

Because they need to actually have a, like, for like comparison between three

identical bidders before they can appoint anybody. You must have had this with

procurement, right?

They come to you and go, how much does it cost to do six press ads and two

TV ads? And you go, well, it's pretty stupid question to begin with. Okay, but

okay, let, but let's look at your problem because maybe that's not what you need.

So you go in and you say, actually you can put a sticker on this hat [01:44:00]

and it will solve the problem at a 10th the cost.

And they go, we're not interested. We want you to quote for the more expensive

solution so we can compare it with everybody else's. Now that's just bullshit.

'cause we mentioned this about innovation, nearly all innovation is a reverse

benchmarking thing. Mm-hmm. Where at some, usually at some cost to the

status quo evaluation of a category you are dramatically better in another

category, which has been here, the two overlooked.So, and by the way, sometimes it's, it's sometimes I think there's a cycle. So

when I went to school. The rich kids would come back after the school holidays

and go, oh, I went Skippo Airport. It's amazing. I bought Walkman. It's

fantastic. They've got shops and everything. And then it was Changi in

Singapore, then it was Dubai, you know, I went, it's amazing their shops.

It's brilliant. You can do this, you know? No, no, no. Frankfurt Airport. There's

a sex shop. Ha ha. Okay. There is actually Dr. Muller's, the Germans, the

Germans respect qualifications so much that they even require their sex shop

operators to have qualifications. Yeah. No one in [01:45:00] Britain cares

whether Anna Summers has got a PhD.

Right. Okay. But no, Dr. Muller. Okay. Right. Anyway actually Beatta Za, the

other German sex shop operator was actually a Luva pilot. Quite interesting.

That's a pivot, isn't it? Wasn't.

But the interesting thing, I completely off where I was going now. Oh yeah.

And then they come back, oh, it's amazing. They always shop. And then

gradually over time, every fucking airport in the world became a shopping

center with some planes. And then you've got people going, been to London

City Airport, it's brilliant.

There are only five shops. You get through it in 10 minutes. And so literally one

of the things you can do is probably accept the fact that for every trend there's

gonna be a countertrend and actually swimming against the tide if, if you've got

the resources to survive, can be a really, really good strategy.

'cause I will always fly through London City app. I'm going actually a couple of

weeks time I'm gonna go fly down. I've actually gotta fly to Portugal and I'm

actually flying to Malaga and driving. 'cause I'd rather go through [01:46:00]

London City Airport. I don't mind going to Heathrow for a long haul flight.

Right. You know, you're gonna be on a plane for 10 hours being at an airport for

two and a half. That's not totally wacko. But if you're only gonna be on the

plane for half an hour, you know, an hour, an hour and a half, navigating those

bloody great airports, a massive total misdirection of kind of effort.

And so, so, so I mean that, that question where. Actually nearly all innovation is

effectively is unappealing to procurement because it will involve a, it will

involve a worse dimension on some component that people are currently

measuring and comparing you on, and a vastly better component in something

that the procurement person hasn't even factored in.Okay, so we said this about the first iPhone, the shit battery life. Okay? Electric

cars, by the way, I mean, have you gone, have you gone electric in your

Richard Shotton: Not, not yet.

Rory Sutherland: Thanks. You're not one of these fucking lenders where your

fucking bicycle, your fixy, because we're in shortage. You've probably got one

of those bloody fi anyway, but you've got electric.

What? What you get?

MichaelAaron Flicker: We have a Tesla.

Rory Sutherland: Brilliant. Brilliant. Yeah. Now the thing [01:47:00] is, it's

just a better car. Yes. Okay. I mean, okay. In nearly every dimension.

Performance, quietness, comfort, drivability, et cetera. So you've managed to

achieve in a reasonably affordable car, what you might call that synthesis of

performance and comfort, which previously you could get in a petrol car, but

you had to buy a Bentley or an Aston Martin or something.

Okay? You had to spend, you know, you had to spend big money to get a

comfortable quiet butt. Nippy vehicle and the electric vehicle, because the

electric motor is inordinately more efficient than the internal combustion

engine. Internal combustion engine is about 25% efficient. Electric motor, about

80% efficient.

And also the electric motor is invented here in London by Michael Faraday. It's

a proper British thing, whereas the, the internal combustion engine is an infernal

German contraption with needless complexity, in my opinion. Okay? Anyway,

but there's this one thing which is fucking range anxiety and recharging time

now factored against all the other things of how [01:48:00] nice it is to drive, et

cetera, et cetera, et cetera.

So I've just written a piece for the evening standard where, okay, let's imagine

this in reverse, right? Where all cars are electric and we're all nipping around in

little electric cars and recharging. And this rogue Volkswagen engineer comes

up with, I've got a better idea. Okay. It's massively complicated.

You put a huge tank of an flammable liquid in your car, right? And then it feeds

into these cylinders where we engineer an explosion, a series of explosions.

Now, unfortunately, it only produces torque in a limited range of, of, of the

revolutionary cycles. So we'll need a thing called a gearbox, which we'll needoil for, and then we'll need an air filter, and then we'll need a water filter, and

then we'll need all this stuff and, and it's gonna be vastly more complex.

So you go, is it, does it perform better than an electric car? No, not really. No.

Okay. Is it quieter? No. No. Quite the opposite. It's fucking noisy as hell, right?

Is it cleaner? No. No. It's farting stuff outta the back. Right. Okay. So right.

Okay. So okay. Is it simpler to make? No, no, no. They're 250 [01:49:00]

moving parts in the drive train.

I know the electric cars only have seven, but this needs 250. Right. Okay. So

what's the upside? Well, you can refill it really quickly. Can you refill it at

home? No. Obviously you can't refill it at home, right? You're not gonna have a

fucking petrol. Paris, are you fucking insane. You're not gonna be able to refill

this thing at home, right?

No, no. You'll have to go to a special place, which by the way won't just be a

little thing on the side of the road with a rapid charger. It'll be a massive thing

selling Ginsters and Mark Spencer. Basically that guy's career is over. Right?

Okay, you go. Okay. So the N 0.05% of the population who routinely drive 350

miles a day and have such enormous bladders that they never need to stop.

They're going to benefit slightly from this insanely complicated engine, but the

rest of us are gonna have a horrible time. Now, I don't really see this is gonna

fly. Okay, so this is literally, now the other thing is that the really exciting thing

about electric cars at the moment, we're at the intermediate [01:50:00] stage

where electric cars look like cars, but actually things like the Citron Army or the

or, or the electric cargo bike, or my real fantasy, the electric jet ski.

Oh, okay. Whoa. Because actually the dirty secret of power boats is that the

difference in a boat. And a and a car is that you run it on Max Revs. Okay? So

when you drive around a pub, it's more efficient to run it as a consequence,

unless you have a sort of oligarchs yacht. It's unbelievably noisy, okay? As a

mode of transportation.

It really is. You know, it's just, there's this scream of the engine all the time.

Imagine if you, you know, you're in a Ferrari and you're running it at like 8,000

or whatever. Okay? Awful. Okay? So all these things are gonna be electrified,

and we're gonna get like little micro pods and we're gonna get the Heathrow

pod, and we're gonna get all these wonderful things.

That's the really exciting thing in the moment. We're just electrifying what

we've already got. But there's the opportunity for a kind of Cambrian explosionand innovation if we just shift this thing, which won't happen with, with internal

combustion engines. I mean, you know, if you [01:51:00] think about it apart

from maybe a lawnmower, you now don't own anything with a, with a

combustion engine and your electric toothbrush, et cetera, et cetera, right?

The reason is the electric motor is an unbelievably fabulous, brilliant thing, and

the internal combustion. Now I will on aesthetic grounds defense, steam

locomotives, just in terms of sheer beauty, okay? If you're gonna be a purist

about this. But then you realize that car people, I mean, you have the I Love

Top Gear.

I thought it was a fantastic program. I thought it was brilliant. It was as much

about friendship as it was about cars. The whole thing was magnificent. Okay.

But the one thing that really drove me crazy is when they test electric cars and

they drive them till they ran outta power. And you're kind of going, you

could've done that with any of the petrol cars you had for the last fucking 25

years.

Right. You know, this new Aston Martin DB nine ante. It's not very good.

'cause we kept on driving it and we refused to stop at a petrol station. And now

look, we're stuck by the side of the road. Well, we've all had actually range

anxiety in a petrol car once or twice, of course. Okay. It's not unknown.

Okay.[01:52:00]

And I, I, I've, we've run two electric cars for three and a half years. I've had

range anxiety of any significant extent once. Okay. And I suddenly realized,

well actually with petrol that happened once every three years and you can

charge it at home. Right. But that's the other point. If you wouldn't need that

many petrol stations, if everybody had a little hose pipe at home that produced

like three pints of really cheap petrol every hour.

Okay. Not that many people would be charging up a petrol station.

MichaelAaron Flicker: That's right.

Richard Shotton: Well, your thought experiment for the evening standard

article is, is a fascinating one of. How much of what we do is about path

dependency in the state's quo bias. And if you look to many areas with, with

fresh eyes, if, if the current way of doing it was,

Rory Sutherland: the story I tell is a great one.Now, I'm not saying I know the right answer. I'm saying you don't always

invert, right? 'cause you're a big Warren and Charlie fan. I was intrigued

Charlie. I, I suspect that Charlie was every bit as decisive as Warren was

because

MichaelAaron Flicker: I think Warren would say that even he probably, I

think [01:53:00] he would say that

Rory Sutherland: somebody I know also met Warren and Warren gave, you

know, we were talking about luck earlier and Warren said before I met Charlie,

the really decisive person was my first wife who got me to get my shit together.

No. So, so you know that that kind of lucky, you know, the, the, you know, you

know, you can imagine if Warren had married someone different Yeah. The

whole thing would've been, you know, actually no, he'd still be living in a really

boring house driving a, a 10-year-old car. I think so. But he wouldn't have had

the net yet.

MichaelAaron Flicker: Right. So Rory, we were having a very interesting

discussion about how behavioral science can be scalable for people at any level,

size business to use. You wanna share some thoughts on that

Rory Sutherland: effectively because it concerns decisions. Anybody who's in

a position to make a decision, whether you are designing an application form or

developing a strategy, it's completely scalable, which is one of the things I love

about it.

It's a game everybody can play. It's not one of those things where it can only be

deployed by a certain proportion [01:54:00] of people within the organization.

Anybody who has the power to make a. Well anybody who has the power to

make a sometimes counterintuitive decision, or at least the power to consider an

alternative explanation, has the power to use behavioral science.

So ideally, you know, what I'd like to see is, rather than being a practitioner, I'd

much rather see it infuse general decision making within organizations where

people are both more content to consider the opposite or the alternative or the

less conventionally rational solution or explanation. And where they're also

prepared to test things which may seem utterly trivial to someone who has a

kind of mechanistic mind, if you like.

Mm-hmm. Mm-hmm. You know, someone who has a mechanical view of the

world would regard a variable as beneath their consideration, but it might wellbe the variable that's actually decisive. So what, I mean, one of the things I

always notice about creative people in advertising is they don't have a sense of

proportion.

Mm-hmm. Okay. [01:55:00] And it's actually a feature, not a bug, because

they're aware of the fact that, you know, a precise human expression or a

phrase, or a word added to a sentence can make the difference between

significant success and meh. And so having a sense of proportion going, this is

the important stuff, this is merely executional, I think is a, is a natural tendency

in hierarchical organizations.

But actually I think behavioral science needs to fight against that. What's

important isn't necessarily what's expensive.

Richard Shotton: One of the examples I love of that is some of the work

you've published on trying to generate donations for Christian aid. Hmm. Can

you just talk about the, the stuff actually work.

Rory Sutherland: So we tested they door drop volunteers, door drop

envelopes. People put money in the envelope during Christian Aid Week, and

then the volunteers come around and collect the donations either by credit card

or, or cash. And we tested six things, and we quite often run this as a test with a,

with a live audience as it were, which is which of these changes, including

[01:56:00] orienting the envelope from landscape to portrait using a higher

quality paper using the labor illusion effect, saying delivered by hand, you

know, in other words, establishing a personal message.

And we tested six different variants. And what's interesting is the only one

which is mentioning gift aid, which is that the government actually boosts your

contribution so that for every pound you give, you're actually giving one pound

30 or whatever. That was the only rational, economically rational motivator,

fascinatingly, that actually depressed response and depressed the overall

donation level.

By, by contrast, two or three of the entirely trivial seeming things including the

reorientation of the envelope. By the way. That increased donations by about

14% using higher quality paper. Now you can imagine. In a charity, it's really,

really hard to make the case without an AB test for using better [01:57:00]

quality paper.

But it communicates to people at the tacit level of, you know, what, what,

what's basically, what's felt without being thought. Okay. And one of the thingsI think we notice now, for goodness sake, one of my colleagues may tell me I'm

wrong here, is that the high quality paper a a attracted significantly more higher

donations.

And maybe there's just something slightly incongruous about putting 50 quid in

cash in a really cheap effort. Mm-hmm. Okay. It could be literally as banana as

that. What's certainly true is that that experiment more than paid for the cost of

the paper. And so there's a tendency to engage in, because economics is

effectively newtonian and therefore there are single right answers.

In economics, it's often very convenient for any group of decision makers in

business to pretend that econs exist and pretend that the world is Newtonian

because it's very, very quick to get instant acquiescence and agreement because

everybody's singing from the same rather boring song [01:58:00] sheet. Okay.

It's not a very harmonious song sheet. It's, you know, but it's nonetheless the

same song sheet. And consequently, I think, you know, quite often there's this

sort of thing you might call sort of fictive rationality. Let's pretend that

everybody's economically rational. 'cause it makes life so much easier for us

when deciding what to do.

What's so fascinating about that is we tested things, which in some cases people

go, well that's, you know, you are, you are effectively adding irrelevant

information to this envelope. My propensity to give to someone in Africa

should not be affected by the fact that the envelope was delivered by a volunteer

by hand.

Okay. But it is. Okay. And that's because the amazing thing about the human

brain is that it can effectively absorb information from lots of different sources,

sometimes consciously, sometimes unconsciously. And in many cases, the

information is in a completely incommensurable form. Okay. And yet we

somehow resolve this into either action or inaction, or [01:59:00] some cases, a

perverse reaction.

And fundamentally because the brain does not really work through additively.

Okay. Multiplicative maths is much more helpful here because there are, there

are tiny little things which seems as though they should be actually utterly

irrelevant, which turn out to be weirdly decisive. Beautiful idea of, this is a

very, very good marketer in the, he's actually currently the marketing director of

Preso who is the mark McCulloch.And we were talking to a chain called Chai Waller, and one of the things we

both said is obvious atoms. People will look at that name and they'll assume you

only sell chai. A lot of people don't like chai or aren't in market for chai. One

thing you need to do if you're any kind of food restaurant that isn't McDonald's

is you need to make explicit on the awning or on the outside what it is you sell.

If you sell burgers, say burgers. If you sell pizza, say pizza. And [02:00:00] so

the guy, very good guy, very good. Younger client said we're already changing

that. We're gonna put Indian Street Food Cafe on the front and Mark

McCulloch, this is, this is why it's a joy working with the kind of people you

sometimes get to meet.

He said, actually, I put Indian Street Food and Cafe. He said, now you've got

two things. People who like Indian Street food and people who like cafes. Yeah.

Okay. Whereas if you're an Indian Street food cafe people, I don't like Indian

Street food, so I'm not gonna go into that cafe. Mm-hmm. Now that addition of

a monosyllabic word, you know, multiplied across their a hundred locations is

gonna make a difference.

And, and it, it, it's one of those things where, you know, it's always joyous when

somebody basic basically makes a point where for the first 10 seconds when he

first said it. Oh, you see what I mean? Yeah. It's that wonderful discovery of

things which I can only describe as obvious in retrospect. And by the way, with

all those Christian aid experiments, we can all post rationalize why they were

okay, gee, they may not even be the real reasons, but I don't [02:01:00] think

there's a ultimately the value of behavioral sciences, it gets people to consider

alternative explanations, alternative courses of action, and to test things they

otherwise wouldn't have bothered testing.

And that's the principle economic value of all this is that it's healthy mischief

making. Yeah. In, in an empirical

Richard Shotton: form. Well, well that point of post-rationalization, you

mentioned saying right at the beginning, which I didn't realize. You said you'd

often done presentations where you show people the six options and you ask

them to predict what will best boost donations.

What do most people claim and which one do they most underestimate?

Rory Sutherland: Some we've very rarely had actually in that case, it's quite

interesting because what I occasionally say is actually, in this case, most of

you're rights because all of them work better than the control. Okay. Yeah. Soactually there's another, there are other examples we occasionally share where

people get it diametrically wrong.

Mm-hmm. And, and by the way, you know, even having studied a lot of

behavioral science and having worked in direct marketing for 20 years, all it's

done is really, I think it's improved my hip [02:02:00] rate, but I will still get

things hopelessly wrong. I mean, there are occasions where. Again, we've gotta

be very careful 'cause we can always post, rationalize every result and we tend

to assume that the result, that the explanation that makes the most sense is the

one that's therefore true.

But we've gotta be very careful about that. Because, you know, in terms of the,

in terms of the, the orientation of the envelope, was it that people were

frightened if there's a long flap that the money might fall out, you know, or is it

just that it resembles a pay packet? So it seems more natural. But what's

fascinating is that what's also fascinating about those findings is that most,

actually all of them are not mutually exclusive.

So next time round, you can actually enjoy what Charlie Munger used to call a

lollapalooza effect, which is you combine various behavioral things in

combination where they might well be, they won't be wholly multiplicative. I'm

not, I'm not gonna suggest if you combine all of them will double the donations,

but you would reasonably expect that [02:03:00] using the, the, the ones in

combination would work even better.

Still.

MichaelAaron Flicker: I'm gonna move us to another topic because I want to

try to hit a few interesting things before we run out of time. Before the show

started, we started to get into artificial intelligence. It's a hot topic amongst all

business, but especially among marketers. Richard and I were talking about how

do you see behavioral science evolving.

Because of ai. And let's start with that. In a, an increasingly AI driven world,

algorithmic world,

Rory Sutherland: you can emphatically train AI models to understand and

make allowance for behavioral science. I would argue that it isn't yet anywhere

near hi the, the level of human creativity. Mm-hmm. So we always call

Nudgestock a festival of behavioral science and creativity.

Richard Shotton: Mm. And the, although Indian Street Food, cafe Cafe.Rory Sutherland: Right. [02:04:00] Okay. And the reason we always call it

that is because we regard the tour as not inseparable. Okay. But they, they work

best in combination. Yes. They're effectively a hot dog and a hot dog role.

They're complimentary goods. And that what often AI will do.

I, I don't believe in process. I believe in checklists and AI will sometimes

remind me of things that I, I would otherwise have overlooked. Generally, it

tells you what to do, not how to do it. Now, I know there's a whole load of ai,

which will be able to produce you know, fantastic imagery, but a really, really

creative leap into the unknown.

Now we've gotta remember most of it's trained on the past. Okay. All AI data

training data comes from the same place, the past. And therefore, if your aim is

to do something significantly original. Then that particularly sort of Bayesian

approach can make progress, but it can't make a leap, I think. And sometimes

the answer is to take a fairly banal thing.

Let's take the pratfall effect. Yes, I [02:05:00] think it could understand the

pratfall effect. Would it necessarily come up with reassuringly expensive? Well,

it would now 'cause reassuring. The expensive already exists. Okay. It could

well do it now. Could it have come up with it had such a thing existed in 1974?

Not sure.

Richard Shotton: Genuinely

Rory Sutherland: not sure. Yeah. Yeah.

Richard Shotton: But of course, this is another way of looking at it. We've, we

are talking about how AI can help behavioral science, but you could do it other

round how behavioral science can help ai. Ah, yeah. And you mentioned in that

previous Christian aid discussion, the labor illusion.

And there's an amazing 2023 study from Kobe Miller at VRU where he shows

people posters and he gets 'em to say how much they're prepared to pay for

them. And what he does is show people the same poster, but he changes the

labeling. So sometimes he says it's hand drawn, sometimes generated by ai, and

it's a phenomenal switch in valuation.

It's about 60 odd percent.

Rory Sutherland: The effort, the human effort that's put into the creation of

somethingRichard Shotton: that's more valuable, hand drawn is perceived as more

valuable [02:06:00] than AI generated. And he says, this is due to the labor,

labor illusion. You know, people assume, well, that their experience with the

chat GPT, it spits out blog posts, it spits out ideas all the time because it's

created so quickly, they rate exactly the same thing as lower value.

So you could take that behavioral science principle and say to Bill, look, if you

are gonna use ai, if you are gonna speed up your product delivery, what you've

got to keep on doing is reminding your audience of the effort that went into the

creation of the AI systems or, or, or the protocols.

Rory Sutherland: So actually you will probably have AI artists who do put in a

huge amount of work to generate what they generate.

In the same way that, you know there are the tools and there's the talent and

there's the effort. I mean, there's some very strange things about the valuation of

art. There's a brilliant thing on YouTube, which is a discussion between Mark

Kearney. Now, of course, premier of Canada, former governor of the Bank of

England, and Damien Hurst.

And Damien Hurst makes this really interesting observation about art, which is

he said, when I produce a [02:07:00] crystal skull coated in diamonds, okay, and

I tell people, this is what it costs. They all wanna know what the diamonds cost,

and yet they'll pay 150 million for a Leonardo. And they know it's just made of

worthless canvas and paint, and they don't care.

No one asks for the paintings. It may be with sculpture, okay. You know, maybe

people go, what sort of marble is it made of? But with art, it's accepted that the

value is entirely separate from its raw materials. Whereas in, in, for example, a

diamond studded skull people go, yeah, but how much do you pay for the

diamonds?

It's kind of weird, isn't it, in a sense. And of course, the curse of the advertising

industry as we've always been paid on labor, on essentially on what it costs you

to do this, not what the value of what you did.

Richard Shotton: Yes. And one of the stories we came across writing the

Hacking Human Mind was a great example of that and a creative getting round

it.

So that's the famous example of Citibank. So Citibank brief pentagram to come

up with a new logo. 'cause they've just merged. Yeah. And [02:08:00] in thebriefing meeting Paula Cher sketches out the umbrella logo. And eventually,

you know, this is what they hand back to Citibank as the the, the finished goods.

And they're like furious, like, you know, how can you charge us a million and a

half pounds for something that you knocked out in 30 seconds? And her, her

later response was, yeah, it was 30 seconds delivered in 30 years. Yes. And I

think it's that shift from not how long did the actual work take? How long did it

get me?

How long has it take for me to be in a position to do it in, in 30 seconds?

Rory Sutherland: Yeah. There's a famous thing isn't there, about the chap who

repairs the production line. Yeah. He says in the invoice, and it's for marking

one short cross, $1. Yeah. For knowing where to put it. $9,999. And there's a

similar case, I think the guy who designed the Fendi logo did it on a napkin and

handed it over to, I'm assuming it's Mr.

Fendi. Yeah. And invoiced him a million dollars. And he paid Yeah. Because

Mr. Fendi knows. Value rather than [02:09:00] cost. Yeah. And also the

person's talent and so forth. Mm-hmm. There's also a case, a famous case,

David Ogilvy heard that a client had spent thousands and thousands of dollars

designing a new logo and said, well, we would've done it for you for like, you

know, 25.

We would've done it for you for a few hundred dollars. The guy said, I know,

but we would've argued it to death. But they, they, I think management

consultancy works the same way that it's a massive commitment device. It's like

an engagement ring. We've spent so much on these wankers, we really have to

follow through on what they recommended, even when, to be honest, most of it

is information they derived from us.

Okay. It's a kind of, you know, it's a kind of burning your boat strategy in a

sense. Yeah. It's equivalent to or Odysseus tying himself to the Mars. Yeah.

Yeah.

MichaelAaron Flicker: Two more areas we want to hit quickly. Area number

one. Are there new frontiers or areas of behavioral science that you feel haven't

been fully explored yet?

Haven't been applied for the yet?Rory Sutherland: Massive, massive areas in terms of the [02:10:00]

application of technology in line with things like human fairness. Now, let give

you an example of this. At the moment, if my car overstays, its welcome, it'll

have a fine of a hundred pounds, okay? Mm-hmm. Now, I would argue that to

a, a, a human.

Okay. The concept of what is a fair fine for a parking infringement is highly

variable. Right? So overstaying, if you paid for four hours and you overstay by

10 minutes, a hundred pounds is not fair. If the cost of parking there legally

would've been three pounds 50 and you'll find a hundred pounds, that is not fair.

Okay. If you repeatedly park in the same place without paying a hundred

pounds is totally fair. If you pay regularly and legally to park in the same place,

but one day in a hundred, you forget a hundred pounds is not fair. Yeah. Now, it

is possible to use all the data okay. That you have with a parking app to actually

be reasonable with what the actual infringement charge is.

But what we've done is we've made the thing entirely black and white and

[02:11:00] context free, which is if you break the rules, you're liable to pay a

hundred quid. And I, and I think that's it, it no human being would enact rules

with that degree of lack of nuanced context and flexibility. And so what we're

often doing with technology is we're creating, I, I don't think speed cameras are

fair in the sense that, that the, you cannot genuinely say someone's guilty of an

inflection without some wider contextual information.

Okay. I mean, it's three o'clock in the morning, it's a dual carriage way. The

speed limits 35 40. Okay. And you go at 48. Okay? There are no pedestrians

'cause it's dual carriageway. And no, there's no traffic on the road that is not a

particular, you know, that does not deserve three penalty points. Okay? And so

the extent to which we're creating a world where we are powerless to resist

decisions taken effectively, where no human being is accountable for the

consequences of the decision.

That is terrifying. And I mentioned earlier this thing about ai, which is that

[02:12:00] people don't necessarily want to be told the perfect thing to do. They

want to be given a selection to choose from. People don't necessarily want an

answer instantaneously. If I'm planning a holiday in Greece in 2026, I actually

want, I might want the process to extend over three months, what I call slow ai.

Okay? There's a potential application for ai, which is just a turbocharged

concierge service where I go, I'm 59 years old. Is it worth me spending the next

20 years of my life if I live that long? You know, endlessly trying to master newprompts and codes and new, new models. Or should I employ one 20th the time

of a guy who's really good at this stuff, who really likes kite surfing to go and

live in the Canary Islands and answer the phone to me.

So, is there actually a, a way in which what you should do is create a turbo

butler rather than creating a robot? Mm-hmm. Don it. But it, I mean the, the,

this is the great point, which is that one of the things we know is, and this is the

whole thing on which A KQA was based, the [02:13:00] interface determines

the behavior.

What is the interface? You know, or, or choice of interfaces. And we still don't

know that for ai, we don't, you know, is it, is it a mixture of voice and visual? Is

it, you know, do I chat to something and then it shows me pictures of the hotels

in Greece? Do I go, actually, I quite like that one. Can you look for a few more

like that?

But then it will always have the, the mouse to bring in a few wild cards. If you

talk to, okay, this is the really interesting thing. You talk to human estate agents,

real estate agents they always say people come along with a list of criteria for

their house. They end up buying a house that meets some few or sometimes

none of those criteria.

It's very, very rare that they have no wiggle room in making a trade off between

one thing and another thing, and that's if you like the miracle of human

psychology, which is that we can compare things that aren't, you know, does it

have a balcony? Does it have a garden? Does it have a garage? You know, is it

next to a pub?

Okay. We can compare those things and trade them off in a way that no

mathematical model can [02:14:00] actually do. Mm-hmm. It's very interesting.

I always regard an interesting sort of what you might call it, a test case of AI as

being the sat nav or the GPS. Mm-hmm. Which is sometimes it's very creative,

it suggests roots.

I never would've thought of. I don't necessarily literally follow its instructions

unless I'm in a position of total ignorance. Okay? If you put in the wrong

prompt, it can get things catastrophically wrong. You know, you end up as one

friend of mine that in Cambridge, Gloucestershire, not Cambridge, England.

Okay? And I also occasionally like to look for alternative suggestions because it

may be considering things like speed, time, distance, and ecological efficiency,

but not considering things like scenic ness or the fact that there's a KFC on theroute. Okay? So occasionally I'll go and look at the, the two or three next page

routes to go.

Will I trade off seven minutes of journey time for the fact that you keep moving

rather than you get stuck in traffic? Yeah. I'd rather drive at 30 miles an hour

constantly for seven minutes longer than [02:15:00] being in stop go traffic. It's

not factoring that in. Okay. So at some level, the, this is, this comes down to the

Ian McGilchrist master in his emissary, left brain, right brain hemispheric

hypothesis, which is the human brain is divided into two for very good reasons.

And that part of the brain is designed to deal with the specific and the

quantifiable and the actual, and the other part of the brain is designed to deal

with the possible and the contextual and the I suppose the world of wider

possibilities.

Effectively what we have created is, is I asked Ian, I said, why is it that this left

brain dominance happens? And one of the sort of theories, you know, he has is

that it's the need to win arguments that in an institutional setting, you've always

gotta win arguments and pretend you're right in order to get anything done.

Yeah. And that one thing I really hate about [02:16:00] rationality, okay, is in

the construction of a rational argument for a course of action. Implicit within

your argumentation is the idea that not only is this a good idea, an interesting

idea, and something worth testing implicit is the idea that anything else is wrong

and suboptimal.

So what you are saying when you're rational is not this is a really interesting

idea, which is worthy of exploration. You're saying anybody who disagrees with

me is fundamentally wrong. And you then end up with that sort of James

O'Brien, where you construct a rational sequence of arguments. You arrive at

the conclusion you desire to begin with, and then you declare that everybody

else is an idiot, simply because you are able to find a rational part, rational

sounding pathway to the destination you wanted to reach.

Okay. And it's. It's very dubious. Yeah. Because is that the destination you

wanted to get to? If you'd started somewhere else, where would you have gone

somewhere different And actually, you know, the best we can probably do

[02:17:00] in decision making. I mean, it's very interesting that people like Jeff

Bezos have a very interesting decision making style with things like the two-

way door idea.Yeah. Yeah. That there are many things that it's cheaper to test them than it is to

argue about them. Mm-hmm. And actually everybody hated Amazon Prime.

Brilliant, brilliant psychological idea. Everybody except Jeff hated the idea.

Absolutely hated it. Okay. Luckily, he was in a position to override them. I, I've

often asked a question, why do so few other companies copy the idea?

Okay. It's kind of interesting, isn't it? Because it's a proven model that people

seem to really like, pay one's benefit many times. Yeah. Okay. You know, it,

you know, it's a, it's a really, I mean, Amazon call me back that button if you've

got a problem. I don't know a single bank or institution that's copied that.

Yeah. Okay. Now, and I actually asked someone, they said, oh, we couldn't

really do the cost benefit analysis. I said, you've done that already. You've

proved already. 'cause Amazon does it. Amazon tests everything. Amazon is a

fast feedback business. If it works for [02:18:00] Amazon, the odds are

massively stacked. That'll work for you.

Why do you have to prove everything? And the burden of proof that's being

imposed by finance is becoming an absurd obstacle to doing anything. 'cause

you, you know, you, there's no proof about the future. Okay, by definition. And

people are literally demanding sort of a level of granularity of kind of you

know, of, of proof, a level of specificity that's simply ridiculous.

I mean, there'll be some great marketing ideas, which you can basically say, yes,

it worked. Now you mentioned, interestingly, that with one bank you work for

Yes. The advertising campaign worked fantastically for the whole bank, but it

didn't look that great at the level of the individual bank department.

Richard Shotton: Yeah. And it was those individual bank departments who

held the funds so that the overall optimum approach never occurred far less than

it should. So

Rory Sutherland: it's the

Richard Shotton: the, the whole difference

Rory Sutherland: between the whole and the sum of its parts. Yeah. Right.

Yeah. Effectively you created a corporate structure where the [02:19:00] parts

were more interested in the parts

Richard Shotton: loans than they were.The whole only cared about their direct loan sales. So doing any activity that

benefited everyone in quite a small way was off, was off the table.

Rory Sutherland: You also get that apparently there are companies that should

advertise much more than they do like Starbucks apparently. And the reason is,

of course, because you've got a franchise model, it's impossible to impor where

the costs come and everybody would much rather spend the money on

themselves than on the collective Good.

And so this is the whole thing about the central nervous system. You know, part

of the role of running a business is effectively to overcome those silo effects. So

that people are prepared to subsume their own narrow short-term self-interest

for the benefit of the whole. Which is kind of why I think, and actually that's a

great book by the way.

Jillian t's book, the Silo Effect, really, really interesting book. She's an FT

journalist and anthropologist. So the combination of the two is fascinating.

[02:20:00]

Richard Shotton: Yeah. I thought you might have mentioned Uri Gneezy

who's written this amazing book. We're interviewing him in a couple of weeks

mixed signals and it's a whole book around how incentives are phenomenal

things when used write, but so often they backfire 'cause they're they're poorly

thought through.

Rory Sutherland: No, I mean, actually I think that a lot of the. A lot of the

ways in which people are incentivized to work creates absolutely pervasive

effects. Mm-hmm. Because people will gain the system to an extraordinary

extent. Yeah. For example, we all know the examples of sort of Cobra Farms in

India. Yeah, yeah, yeah.

And actually the mixed signal thing is very, very interesting indeed. Also, it

fails to signal any kind of relationship between the employer and the employee

because it's effectively saying, you're only as good as your last quarter. We have

no interest in you other than at the transactional level, which is completely

contrary to the kind of culture you'd want to foster if you wanted your

employees to go the extra mile or put in.

And of course, it, it, it, it, it needs, I mean it's very interesting [02:21:00] that

Goldman Sachs within Goldman Sachs is a highly socialistic organization. My

friend who worked there said that what impressed him is that you got a requestfrom the guy in Goldman Sachs, Bogota, and you are in Goldman Sachs,

London.

And nobody said, okay, who's paying for this? You just put in the work. Yeah.

Very, very high levels of reciprocation. And now obviously, you know, outside

Goldman Sachs, different story, but within the actual organization it operates at

a highly collaborative level without, you know, the demand for the

apportionment.

Now, it probably helps that the guy who runs Goldman Sachs in Bogota in four

years time is going to be the president of Bloody Columbia. Okay. So it

probably pays to make a bit of extra effort for that reason, but nonetheless, it's,

it's very interesting that they had a very, very strong culture that nobody asked

who's paying for this?

You automatically helped each other out.

MichaelAaron Flicker: Bringing us to the final question, we always like to end

Rory with with a question that hopefully gets us thinking and gets our listeners

thinking. [02:22:00] If you had to think about all the mistakes you've seen over

your years

Rory Sutherland: Oh, or made. I I've got No, no, no, no. I mean, one of the

things is that you, there's a value to getting things wrong so long as it's

survivable and manageable.

Okay. Yes. There's a brilliant case in one of our clients where they'd spend a

load of money trying to launch a premium cider and it had all failed and

everybody was getting into the sort of blame game, and they finally report to the

CEO, who goes, actually what we've learned in this failure is easily worth 5

million pounds.

You know, we've actually learned a hell of a lot of, you know, to quote Edison

Yeah. We've learned 20,000 ways not to make a light bulb. Right. Actually, you

know, next time round. If, if, now this is the important thing, by the way, the

rogue bees, the, the, the scout bees have to report back. Yeah. If they keep their

finds secret, it's no good.

If you share the information and it feeds back into the waggle dance, that's no

longer, actually we call it a trade off. It isn't a trade off. It's two complimentary

parts of the same system working harmoniously together. It's a [02:23:00]western mindset that sees any entity doing two apparently different modes of

behavior as being necessarily a trade off or a conflict.

It's not, I mean, I think Asian, the Asian mindset would grasp that much more

quickly. I've got a Hindu friend who accuses the Westerners of monotheism.

You have to have one theory, theory to explain everything. As he said, he said,

my mum goes to a temple in India and there's an altar there, and on the altar

there's an elephant, there's a monkey, and there's Jesus.

And there's no conflict or contradiction in this at all. Okay? Mm-hmm. Part of

the same. Yeah. And what we've done is we've created this sort of fae

rationalism where there actually has to be a right way. And it has to be one way.

It's rather what I say about the modern office. Okay. Everybody tries to

optimize for the average, and you end up in the open plan office.

What you actually need in an office is half library. Half pub. Yeah. Okay. Half

of it look, should look like a studio. Okay. You know, horses being rode, ridden

by naked people, and the other half should be a place of [02:24:00]

extraordinary, you know, quiet and solitude. I, I

Richard Shotton: Heard you say once before about a decision making

approach of like the Romans or the Greeks, where they would decide on

something sober and then they'd get really drunk

Rory Sutherland: Persians.

Richard Shotton: Persians, and according to erotic,

Rory Sutherland: they debate the same thing twice. Once while sober and once

while drunk. And they'd only go ahead if they approved of it in both states. So

that, I mean, that's an interesting case. There's also an argument, someone at

King's College London I spoke to that human neurodiversity is part of the

explore exploits trade off.

Mm-hmm. That if you have a group of 150 people in your Dunbar number,

okay. Yeah. And they all think the same way. It's fundamentally dangerous. It

absolutely pays to have, you know, the Asper guy and the A DHD guy who are,

and actually I would argue the funny guy. Okay. I'd actually argue that humor

probably plays a role in some sense.

It could be error correction, it could be alternative framings, but humor is an

incentive to look at things differently. [02:25:00] And so. So, so I, you know, I'dmake a very, very strong case that actually Neurodiverse teams will probably,

they may, maybe a pain in the ass to work within, but they probably perform

produce better results ultimately.

MichaelAaron Flicker: With that, we wanna say thank you for joining us. A

huge pleasure for us as well. Thank you. And for everyone listening we'll pro

drop all of our show notes. All the book references will be in our podcast.

Rory Sutherland: Oh, I love that you do that.

MichaelAaron Flicker: Oh, absolutely. And for people to,

Rory Sutherland: a long list. It's a long list.

And also the website of Keer in seven notes.

MichaelAaron Flicker: Yes, yes, yes. Of course.

Rory Sutherland: My new principle of the guest gets to advertise.

Richard Shotton: That's right. Come wearing a shirt.

Rory Sutherland: Yes, exactly. Various, various different brands.

Richard Shotton: Good.

MichaelAaron Flicker: Thank you everybody. And until next time, I'm

Michael Aaron Flicker.

Richard Shotton: And I'm Richard Shotten.

MichaelAaron Flicker: Thanks for joining us.

Rory Sutherland: It's been an absolute joy.

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