ABCDEFGHIJKLMNOPQRSTUVWXYZAAAB
1
2
Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life
3
By Rory Sutherland
4
----------------------------------------------
5
Amazon: Link
6
7
#Pg.TC Highlight
8
1164The mythical ‘butterfly effect’ does exist, but we don’t spend enough time butterfly hunting. Here are some recent butterfly effect discoveries, from my own experience: A website adds a single extra option to its checkout procedure – and increases sales by $300m per year. An airline changes the way in which flights are presented – and sells £8m more of premium seating per year. A software company makes a seemingly inconsequential change to call-centre procedure – and retains business worth several million pounds. A publisher adds four trivial words to a call-centre script – and doubles the rate of conversion to sales. A fast-food outlet increases sales of a product by putting the price . . . up.
9
2176It’s true that logic is usually the best way to succeed in an argument, but if you want to succeed in life it is not necessarily all that useful; entrepreneurs are disproportionately valuable precisely because they are not confined to doing only those things that make sense to a committee. Interestingly, the likes of Steve Jobs, James Dyson, Elon Musk and Peter Thiel often seem certifiably bonkers; Henry Ford famously despised accountants – the Ford Motor Company was never audited while he had control of it.
10
316There are two separate forms of scientific enquiry – the discovery of what works and the explanation and understanding of why it works. These are two entirely different things, and can happen in either order. Scientific progress is not a one-way street. Aspirin, for instance, was known to work as an analgesic for decades before anyone knew how it worked. It was a discovery made by experience and only much later was it explained. If science did not allow for such lucky accidents,* its record would be much poorer – imagine if we forbade the use of penicillin, because its discovery was not predicted in advance? Yet policy and business decisions are overwhelmingly based on a ‘reason first, discovery later’ methodology, which seems wasteful in the extreme. Remember the bicycle.
11
417Perhaps a plausible ‘why’ should not be a pre-requisite in deciding a ‘what’, and the things we try should not be confined to those things whose future success we can most easily explain in retrospect. The record of science in some ways casts doubt on a scientific approach to problem solving.
12
518What are the great achievements of economics? Ricardo’s Theory of Comparative Advantage, perhaps? Or The General Theory of Employment, Interest and Money by John Maynard Keynes? And what is the single most important finding of the advertising industry? Perhaps it is that ‘advertisements featuring cute animals tend to be more successful than ads that don’t’. I’m not joking. I recently had a meeting with a client where I learned that a customer prize draw to win ‘free energy for a year – worth over £1,000’ received 67,000 entries. The subsequent draw, where you could win a cute penguin nightlight (with a value of £15) received over 360,000 entries. One customer even turned down an offer of a £200 refund on their bill, saying, ‘No, I’d rather have a penguin.’ Even though I know this is true, so great is my desire to appear rational that I would find it very hard to stand in front of a board of directors and recommend that their advertising should feature rabbits, or perhaps a family of lemurs, because it sounds like nonsense. It isn’t, though. It’s a different kind of thing, which I call ‘non-sense’.
13
620Evolution is like a brilliant uneducated craftsman: what it lacks in intellect it makes up for in experience. For instance, for a long time the human appendix was thought to be nonsense, a vestigial remnant of some part of the digestive tract, which had served a useful purpose in our distant ancestors. It is certainly true that you can remove people’s appendices and they seem to suffer no immediate ill effects. However, in 2007, William Parker, Randy Bollinger and their colleagues at Duke University in North Carolina hypothesised that the appendix actually serves as a haven for bacteria in the digestive system that are valuable both in aiding digestion and in providing immunity from disease. So, just as miners in the California Gold Rush would guard a live sourdough yeast ‘starter’ in a pouch around their necks, the body has its own pouch to preserve something valuable. Research later showed that individuals whose appendix had been removed were four times more likely to suffer from clostridium difficile colitis, an infection of the colon.
14
722Religion feels incompatible with modern life because it seems to involve delusional beliefs, but if the above results came from a trial of a new drug, we would want to add it to tap water. Just because we don’t know why it works, we should not be blind to the fact that it does.
15
824Imagine that you get into financial trouble and ask a rich friend for a loan of £5,000, who patiently explains that you are a much less needy and deserving case for support than a village in Africa to which he plans to donate the same amount. Your friend is behaving perfectly rationally. Unfortunately he is no longer your friend. It is impossible for human relations to work unless we accept that our obligations to some people will always exceed our obligations to others. Universal ideas like utilitarianism are logical, but seem not to function with the way we have evolved. Perhaps it is no coincidence that Jeremy Bentham, the father of utilitarianism, was one of the strangest and most anti-social people who ever lived.
16
924The drive to be rational has led people to seek political and economic laws that are akin to the laws of physics – universally true and applicable. The caste of rational decision makers requires generalisable laws to allow them confidently to pronounce on matters without needing to consider the specifics of the situation.* And in reality ‘context’ is often the most important thing in determining how people think, behave and act: this simple fact dooms many universal models from the start.* Because in order to form universal laws, naïve rationalists have to pretend that context doesn’t matter.
17
1034The problem that bedevils organisations once they reach a certain size* is that narrow, conventional logic is the natural mode of thinking for the risk-averse bureaucrat or executive. There is a simple reason for this: you can never be fired for being logical. If your reasoning is sound and unimaginative, even if you fail, it is unlikely you will attract much blame. It is much easier to be fired for being illogical than it is for being unimaginative.
18
1142Just as your GPS has not yet been configured to understand a wider set of human motivations, our conscious brain has not evolved to be aware of many of the instinctive factors that drive our actions. A fascinating theory, first proposed by the evolutionary biologist Robert Trivers and later supported by the evolutionary psychologist Robert Kurzban, explains that we do not have full access to the reasons behind our decision-making because, in evolutionary terms, we are better off not knowing; we have evolved to deceive ourselves, in order that we are better at deceiving others. Just as there are words that are best left unspoken, so there are feelings that are best left unthought.* The theory is that if all our unconscious motivations were to impinge on our consciousness, subtle cues in our behaviour might reveal our true motivation, which would limit our social and reproductive prospects.
19
1242Robert Trivers gives an extraordinary example of a case where an animal having conscious access to its own actions may be damaging to its evolutionary fitness. When a hare is being chased, it zigzags in a random pattern in an attempt to shake off the pursuer. This technique will be more reliable if it is genuinely random and not conscious, as it is better for the hare to have no foreknowledge of where it is going to jump next: if it knew where it was going to jump next, its posture might reveal clues to its pursuer. Over time, dogs would learn to anticipate these cues – with fatal consequences. Those hares with more self-awareness would tend to die out, so most modern hares are probably descended from those that had less self-knowledge. In the same way, humans may be descended from ancestors who were better at the concealment of their true motives. It is not enough to conceal them from others – to be really convincing, you also have to conceal them from yourself.
20
1343The late David Ogilvy, one of the greats of the American advertising industry and the founder of the company I work for, apparently once said, ‘The trouble with market research is that people don’t think what they feel, they don’t say what they think, and they don’t do what they say.’* Trivers and Kurzban explained the evolutionary science behind that conundrum: we simply don’t have access to our genuine motivations, because it is not in our interest to know. Here’s Ogilvy’s contemporary, Bill Bernbach: ‘Human nature hasn’t changed for a million years. It won’t even change in the next million years. Only the superficial things have changed. It is fashionable to talk about the changing man. A communicator must be concerned with the unchanging man – what compulsions drive him, what instincts dominate his every action, even though his language too often camouflages what really motivates him.’
21
1445For a business to be truly customer-focused, it needs to ignore what people say. Instead it needs to concentrate on what people feel.
22
1545the fact is that, while we know how we feel, we cannot accurately explain why. Nature cares a great deal about feelings, and feelings largely drive what we do, but they do not come with explanations attached – because we are often better off not knowing them. What we think about how we feel may have little to do with our real reasons for feeling it, so it pays often to ask naïve questions to which the answers seem completely self-evident. ‘Why do people go to restaurants?’, say. ‘Because they are hungry,’ comes the answer. But if you think about it a little, someone merely hungry could satisfy their urge to eat far more economically elsewhere. Restaurants are only peripherally about food: their real value lies in social connection, and status.
23
1654The first lens is market research or, to give it a simpler name, asking people. However, the problem with it is that, if we remember David Ogilvy’s words: ‘The trouble with market research is that people don’t think what they feel, they don’t say what they think, and they don’t do what they say.’ People simply do not have introspective access to their motivations.
24
1760A few years ago, my colleagues produced an extraordinary intervention to reduce crime. They hypothesised that the presence of the metal shutters that shops in crime-ridden areas covered their windows with at night may in fact increase the incidence of crime, since they implicitly communicated that this was a lawless area. One of my colleagues, the brilliant Tara Austin, had seen research that suggested that ‘Disney faces’ – large-eyed human faces with the proportions of young children – seemed to have a calming effect. Combining the two ideas, she created an experiment where shop shutters were painted with the faces of babies and toddlers by a local graffiti artist collective. By all measures, this seemed to reduce crime significantly; moreover, it did so at a tiny cost, and certainly by less than the cost of direct policing. Several other local authorities have since repeated the approach, though take-up is low – it is much easier to argue for larger policing budgets or for the installation of CCTV, than to approach a problem psycho-logically.
25
1863Until 1948, the Wright brothers’ Flyer was displayed not in the Smithsonian, but in the Science Museum in London. This might seem strange, but for years after the bicycle shop owners from Ohio had flown their manned heavier-than-air device on North Carolina’s Outer Banks, the US Government refused to acknowledge their achievement, maintaining that a government-sponsored programme had actually been first.
26
1963All too often, what matters is not whether an idea is true or effective, but whether it fits with the preconceptions of a dominant cabal.
27
2065As the novelist Upton Sinclair once remarked, ‘It is difficult to get a man to understand something, when his salary depends on his not understanding it.’
28
2169It seems likely that the biggest progress in the next 50 years may come not from improvements in technology but in psychology and design thinking. Put simply, it’s easy to achieve massive improvements in perception at a fraction of the cost of equivalent improvements in reality. Logic tends to rule out magical improvements of this kind, but psycho-logic doesn’t. We are wrong about psychology to a far grater degree than we are about physics, so there is more scope for improvement. Also, we have a culture that prizes measuring things over understanding people, and hence is disproportionately weak at both seeking and recognising psychological answers.
29
2272Similarly, ‘Why do people go to the doctor?’ seems like an idiotic question, until you realise that it isn’t. Is it because they are ill and want to get better? Sometimes, but there are many more motivations that lie beneath this apparently rational behaviour. Perhaps they are worried and crave reassurance? Some people just need a bit of paper to prove to their employer they were ill. A lot of people may go in search of someone to make a fuss of them. Perhaps, what people are mostly seeking is not treatment, but reassurance. The distinction matters – after all, not many people make unnecessary visits to the dentist.
30
2379Similarly, Islam requires that the dead are buried as soon as possible after death, in order to ‘reduce the suffering of the deceased in the afterlife and to return them to Allah’. As a result, throughout the Gallipoli campaign in 1915,* Muslims went to great lengths to bury their dead; by contrast, allied bodies often lay on the battlefield for days before they were collected. The outcome was further casualties from disease for the allies, and comparatively lower levels of disease among their opponents. Scientifically unverified beliefs about burial norms drove rational and life-saving behaviour.
31
2480If you confine yourself to using rational arguments to encourage rational behaviour, you will be using only a tiny proportion of the tools in your armoury. Logic demands a direct connection between reason and action, but psycho-logic doesn’t. This is important, because it means that, if we wish people to behave in an environmentally conscious way, there are other tools we can use other than an appeal to reason or duty. Similarly, if we wish to discourage people from drink-driving, we do not have to rely solely on rational arguments; if that approach does not work – and often it doesn’t – there is a whole other set of emotional levers we can pull to achieve the same effect. Just ask the 1920s ad industry.
32
2581Consumer behaviour, and advertisers’ attempts to manipulate it, can be viewed as an immense social experiment, with considerable power to reveal the truth about what people want and what drives them. What people do with their own money (their ‘revealed preferences’) is generally a better guide to what they really want than their own reported wants and needs.
33
2682One of the great contributors to the profits of high-end restaurants is the fact that bottled water comes in two types, enabling waiters to ask ‘still or sparkling?’, making it rather difficult to say ‘just tap’. I had the idea of turning up at an apartment with five smoke detectors; the fire officer was to casually carry in all five, before saying, ‘I think we can make do with three here . . . How many would you like, three or four?’ We are highly social creatures and just as we find it very difficult to answer the question ‘still or sparkling?’ with ‘tap’, it is also difficult to answer the question about ‘three or four’ smoke detectors with with ‘one’. As Nassim Nicholas Taleb remarks, ‘the way a question is phrased is itself information’.
34
27831.8: ‘A Change in Perspective Is Worth 80 IQ Points’ So said Alan Kay, one of the pioneers of computer graphics. It is, perhaps, the best defence of creativity in ten words or fewer. I suspect, too, that the opposite is also true: that an inability to change perspective is equivalent to a loss of intelligence.
35
2884Strangely, as we have gained access to more information, data, processing power and better communications, we may also be losing the ability to see things in more than one way; the more data we have, the less room there is for things that can’t easily be used in computation. Far from reducing our problems, technology may have equipped us with a rational straitjacket that limits our freedom to solve them.
36
2989what happens on average when a thousand people do something once is not a clue to what will happen when one person does something a thousand times. In this, it seems, evolved human instinct may be a much better at statistics than modern economists.
37
3092Yet in 1925, Sears opened its first bricks-and-mortar shop. By 1929, the companies had opened a further 800 between them – perhaps Amazon’s purchase of Whole Foods Market is history repeating itself.* I could go on endlessly about the psychological factors at play here, but let’s go back to the lazy assumption that 1 x 10 is the same as 10 x 1, which is also relevant.* Online shopping is a very good way for ten people to buy one thing, but it is not a good way for one person to buy ten things. Try and buy ten different things simultaneously online* and it turns chaotic. Items arrive on four separate days, vans appear at your house at different times and one delivery always fails.* By contrast, the great thing about Walmart, which investors tend to overlook, is that people turn up, buy 47 different things and then transport them home at their own expense. Amazon can be a very big business selling one thing to 47 people, but if it can’t sell 47 things to one person, there’s a ceiling to how large it can be.
38
3198Remember, anyone can easily build a career on a single eccentric talent, if it is cunningly deployed. As I always advise young people, ‘Find one or two things your boss is rubbish at and be quite good at them.’ Complementary talent is far more valuable than conformist talent.
39
32100Metrics, and especially averages, encourage you to focus on the middle of a market, but innovation happens at the extremes. You are more likely to come up with a good idea focusing on one outlier than on ten average users. We were discussing this recently in a meeting when a round of sandwiches arrived. ‘This proves my point exactly,’ I said, pointing at the food. The sandwich was not invented by an average eater. The Earl of Sandwich was an obsessive gambler, and demanded food in a form that would not require him to leave the card table while he ate. Weird consumers drive more innovation than normal ones.
40
33103Real excellence can come in odd packaging. Nassim Nicholas Taleb applies this rule to choosing a doctor: you don’t want the smooth, silver-haired patrician who looks straight out of central casting – you want his slightly overweight, less patrician but equally senior colleague in the ill-fitting suit. The former has become successful partly as a result of his appearance, the latter despite it.
41
34107A seminal example explored by Ariely is the Economist magazine’s subscription offer. The middle option – where you are offered a print only subscription for $125 – is known as a decoy. No one – except perhaps someone who deeply loathes technology – would ever choose it, since for the same price you could get the full print and online subscription, but it does have a huge effect on behaviour. By creating a very easy ‘no-brainer’ decision, it encourages more people to take up the higher-value full subscription. In one experiment carried out by Ariely, it led 84 per cent of putative subscribers to choose the full-price, all-in subscription. However, when you remove the dummy option and only have the two sensible ones, preferences are reversed: 68 per cent chose the lower-priced, online-only subscription.
42
35113There are two lessons to be learned here. Firstly, it doesn’t always pay to be logical if everyone else is also being logical. Logic may be a good way to defend and explain a decision, but it is not always a good way to reach one. This is because conventional logic is a straightforward mental process that is equally available to all and will therefore get you to the same place as everyone else. This isn’t always bad – when you are buying mass-produced goods, such as toasters, it generally pays to cultivate mainstream tastes. But when choosing things in scarce supply* it pays to be eccentric. The second interesting thing is that we have no real unitary measure of what is important and what is not – the same quality (such as not having a lift) can be seen as a curse or a blessing, depending on how you think of it. What you pay attention to, and how you frame it, inevitably affects your decision-making.
43
36116Here is the brilliant American physicist Richard Feynman, in a Lecture in 1964, describing his method: ‘In general, we look for a new law by the following process. First, we guess it . . . Then we compute the consequences of the guess, to see what, if this law we guess is right, to see what it would imply and then we compare the computation results to . . . experience, compare it directly with observations to see if it works . . . In that simple statement is the key to science. It doesn’t make any difference how beautiful your guess is, it doesn’t matter how smart you are, who made the guess or what his name is . . . If it disagrees with the experiment, it’s wrong. That’s all there is to it.’ A good guess which stands up to observation is still science. So is a lucky accident.
44
37118However, most valuable discoveries don’t make sense at first; if they did, somebody would have discovered them already. And ideas which people hate may be more powerful than those that people like, the popular and obvious ideas having all been tried already. We should test counterintuitive things – because no one else will.
45
38119Imagine you are climbing a large mountain that has never been climbed before. From the bottom, it is impossible to tell which slopes are passable, because much of the terrain is hidden behind the lower foothills. Your climb involves a great deal of trial and error: routes are tried and abandoned; there is frequent backtracking and traversing. Many of the decisions you take may be based on little other than instinct or good fortune. But eventually you do make it to the summit, and once you are there, the ideal route is apparent. You can look down and see what would have been the best path to have taken, and that now becomes ‘the standard route’. When you describe the route you took to your mountaineering friends, you pretend it was the route you took all along: with the benefit of hindsight, you declare that you simply chose that route through good judgement. Is this a lie? Well, yes and no.* It may be that, in the course of your climb, you did end up at various times covering most or all of the optimal route.* What you say is also true in so far as it confirms that there is a navigable pathway to the top, which you did not know for sure when you first attempted the climb. And the route you describe does exist, so in that sense your description of the climb is perfectly accurate. However, in one respect it is a monstrous lie, because it completely misrepresents the process by which you progressed to the top. It pays an undue tribute to rational decision-making, optimisation and sequential logic – a tribute that really should be laid at the altar of trial and error, good instincts, and luck.
46
39122It is time to ask another stupid question: What is reason actually for? This may seem absurd, but in evolutionary terms it is far from trivial. After all, as far as we know, every other organism on the planet survives perfectly well without such a capacity. It is true that reason seems to have given us remarkable advantages over other animals – and it is unlikely that we could have produced many of our technological and cultural successes without it. But, in evolutionary terms, these must be a by-product, because evolution does not do long-term planning.
47
40136We don’t value things; we value their meaning. What they are is determined by the laws of physics, but what they mean is determined by the laws of psychology. Companies which look for opportunities to make magic, like Apple or Disney, routinely feature in lists of the most valuable and profitable brands in the world; you might think economists would have noticed this by now.
48
41141In nineteenth-century Prussia, a glorious feat of alchemy saved the public exchequer, when the kingdom’s royal family managed to make iron jewellery more desirable than gold jewellery. To fund the war effort against France, Princess Marianne appealed in 1813 to all wealthy and aristocratic women there to swap their gold ornaments for base metal, to fund the war effort. In return they were given iron replicas of the gold items of jewellery they had donated, stamped with the words ‘Gold gab ich für Eisen’, ‘I gave gold for iron’. At social events thereafter, wearing and displaying the iron replica jewellery and ornaments became a far better indication of status than wearing gold itself. Gold jewellery merely proved that your family was rich, while iron jewellery proved that your family was not only rich but also generous and patriotic. As one contemporary observed, ‘Iron jewellery became the fashion of all patriot women, thus showing their contribution in support of the wars of liberation.’
49
42144But surely this kind of alchemy no longer works today? Well, have you ever eaten Chilean sea bass?* It is the product of a particular sort of alchemy, ‘The Alchemy of Semantics’. The $20 slice of fish that graces plates in high-end restaurants under the name ‘Chilean sea bass’ actually comes from a fish that for many years was known as the Patagonian toothfish. No one is going to pay $20 for a plate of Patagonian toothfish – call it Chilean sea bass, however, and the rules change. An American fish wholesaler called Lee Lentz had the idea, even though, strictly speaking, most of the catch doesn’t come from Chile and the toothfish isn’t even related to the bass.* Dishonest as it may seem, Lentz’s action in fact sits within a long tradition of rebranding seafood.
50
43146Monkfish was originally called goosefish, orange roughy was once called slimehead, and sea urchins were once whore’s eggs. More recently, a similar thing happened to pilchards. Caught off the Cornish coast before being salted and shipped all over Europe, they had been a delicacy for centuries, until the advent of domestic refrigeration and freezing caused the appetite for salted fish – at least outside of Portugal – fall away. ‘The market was dying fast as the little shops that sold them closed down,’ says Nick Howell of the Pilchard Works fish suppliers in Newlyn. ‘I realised I needed to do something about it.’ Fortunately, Nick thought creatively. He discovered that what the Cornish often called the pilchard was related to the fish that was served, with lemon and olive oil, to British tourists in the Mediterranean as a fashionable sardine.* So he changed the name from the pilchard, a name redolent of ration food,* to the ‘Cornish sardine’. Next, a supermarket buyer who called to ask for French sardines was deftly switched to buying ‘pilchards from Cornwall’. A few years ago Nick successfully petitioned the EU to award Cornish sardines Protected Designation of Origin (PDO) status, and the result was extraordinary: the Daily Telegraph reported in 2012 that sales of fresh sardines at Tesco had rocketed by 180 per cent in the past year, an increase that was partly explained by a huge increase in the sales of ‘Cornish sardines’. This rebranding exercise had reinvigorated the entire Cornish fishing industry.
51
44147Cornish sardines are another example of geographical alchemy at work.* Merely adding a geographical or topographical adjective to food – whether on a menu in a restaurant or on packaging in a supermarket – allows you to charge more for it and means you will sell more. According to research from the University of Illinois at Urbana-Champaign, descriptive menu labels raised sales by 27 per cent in restaurants, compared to food items without descriptors.
52
45147On menus, there seems to be more money in adjectives than in nouns. Even adjectives that have no precise definition such as ‘succulent’ can raise the popularity of items. The Oxford experimental psychologist Charles Spence has published a paper on the effect the name of a dish has on diners. ‘Give it an ethnic label such as an Italian name,’ he says, ‘and people will rate the food as more authentic.’* We make far more positive comments about a dish’s appeal and taste when it is garlanded with an evocative description: ‘A label directs a person’s attention towards a feature in a dish, and hence helps bring out certain flavours and textures.’
53
46147Never forget this: the nature of our attention affects the nature of our experience.
54
47149In 2006, Maria Klawe, a computer scientist and mathematician, was appointed president of Harvey Mudd College in California. At the time, only 10 per cent of the college’s computer science majors were women. The department devised a plan, aimed at luring in female students and making sure they actually enjoyed their computer science initiation, in the hopes of converting them to majors. A course previously entitled ‘Introduction to programming in Java’ was renamed ‘Creative approaches to problem solving in science and engineering using Python’.* The professors further divided the class into groups – Gold for those with no coding experience and Black, for those with some coding experience.* They also implemented Operation Eliminate the Macho Effect, in which males who showed off in class were taken aside and told to desist. Almost overnight, Harvey Mudd’s introductory computer science course went from being the most despised required course to the absolute favourite. That was just the beginning. Improving the introductory course obviously helped, but it was also important to ensure that women signed up for another class. The female professors took the students to the annual Grace Hopper Conference, an annual ‘celebration of women in technology’. It was an important step in demonstrating that there was nothing weird or anti-social about women working in tech. Finally, the college offered a summer of research for female students to apply their new-found talents to something useful and socially beneficial. ‘We had students working on things like educational games and a version of Dance Dance Revolution for the elderly. They could use computer technology to actually work on something that mattered,’ says Klawe.
55
48150The invention of the ‘designated driver’ was an even cleverer use of semantics and naming to create a social good. The phrase, meaning the person who is nominated to stay sober in order to drive his friends home safely, was a deliberate coinage that spread with the active support of Hollywood who agreed to use it in selected episodes of popular sitcoms and dramas. The phrase first originated in Scandinavia, was adopted by the Hiram Walker distillery in Canada to promote the responsible use of its alcohol products and was then deliberately brought into the US, at the bidding of the Harvard Alcohol Project. Once you can casually ask, ‘Who’s going to be the DD on Friday?’ it’s easy to see how this behaviour becomes much easier to adopt, and it’s also much easier for the sober person to defend their sobriety when anyone offers them a drink. In Belgium and the Netherlands, he (or she) simply explains I can’t drink tonight, I’m Bob’ – a Dutch acronym* for Bewust Onbeschonken Bestuurder or ‘deliberately sober driver’. In both cases, creating a name for a behaviour implicitly creates a norm for it.
56
49155Even when you are designing for the able-bodied, it is a good principle to assume that the user is operating under constraints. This is why a door handle is better than a door knob: it allows you to open a door with your elbow – either because you do not have any hands, or because your hands are holding cups of tea. The provision of wheelchair ramps at airports may benefit the owners of rolling suitcases almost as much as wheelchair users. Subtitles meant for the ‘hard of hearing’ are likewise useful if you want to watch television in a bar or airport, or while your children are asleep.
57
50159With his business partner Masaru Ibuka he founded Sony (as the Tokyo Telecommunications Engineering Company) in 1946. Magnetic tape recorders were the company’s first area of focus, followed by the first fully transistorised pocket radio.* But his greatest moment of genius was perhaps the creation of the Sony Walkman, the ancestor of the iPod. To anyone born after 1975 there is nothing outlandish about people walking around or sitting on a train wearing headphones, but in the late 1970s this was a very odd behaviour indeed; comparable to the use of an early cellphone in the late 1980s, when to use one in public carried a high risk of ridicule.* In market research, the Walkman aroused very little interest and quite a lot of hostility. ‘Why would I want to walk about with music playing in my head?’ was a typical response, but Morita ignored it. The request for the Walkman had initially come from the 70-year-old Ibuka, who wanted a small device to allow him to listen to full-length operas on flights between Tokyo and the US.* When the engineers came back, they were especially proud. Not only had they succeeded in achieving what Morita had briefed them to create – a miniature stereo cassette player – they had also managed to include a recording function. I imagine they were crestfallen when Morita told them to remove that extra function. The technology involved,* given the economics of mass production, would have added no more than a few pounds to the final purchase price, so why would you not add this significant extra?* Any ‘rational’ person would have advised Morita to go with the engineers’ advice, but according to multiple accounts, Morita vetoed the recording button. This defies all conventional economic logic, but it does not defy psycho-logic.
58
51160In the same way that McDonald’s omitted cutlery from its restaurants to make it obvious how you were supposed to eat its hamburgers, by removing the recording function from Walkmans, Sony produced a product that had a lower range of functionality, but a far greater potential to a change behaviour. By reducing the possible applications of the device to a single use, it clarified what the device was for. The technical design term for this is an ‘affordance’, a word that deserves to be more widely known. As Don Norman observes:
59
52162However, all I can rely on here for evidence is a recurrent pattern of events – it is surprisingly common for significant innovations to emerge from the removal of features rather than the addition. Google is, to put it bluntly, Yahoo without all the extraneous crap cluttering up the search page, while Yahoo was, in its day, AOL without in-built Internet access. In each case, the more successful competitor achieved their dominance by removing something the competitor offered rather than adding to it.
60
53163Similarly, Twitter’s entire raison d’être came from the arbitrary limitation on the number of characters it allowed. Uber originally did not allow you to pre-book cars. Highly successful publications such as the Week effectively take the world’s newspapers and make them digestible by removing a lot of extraneous content; McDonald’s deleted 99 per cent of items from the traditional American diner repertoire; Starbucks placed little emphasis on food for the first decade of its existence and concentrated on coffee; low-cost airlines competed on the basis of what in-flight comforts you didn’t get. If you want to offer ease of use – and ease of purchase – it is often a good idea not to offer people a Swiss Army knife, something that claims to do lots of things.* With the notable exception of the mobile phone, we generally find it easier to buy things that serve a single purpose.
61
54174In game theory, this prospect of repetition is known as ‘continuation probability’, and the American political scientist Robert Axelrod has poetically referred to it as ‘The Shadow of the Future’. It is agreed by both game theorists and evolutionary biologists that the prospects for cooperation are far greater when there is a high expectation of repetition than in single-shot transactions.
62
55175Yet there are, when you think about it, two contrasting approaches to business. There is the ‘tourist restaurant’ approach, where you try to make as much money from people in a single visit. And then there is the ‘local pub’ approach, where you may make less money from people on each visit, but where you will profit more over time by encouraging them to come back. The second type of business is much more likely to generate trust than the first.
63
56176There are many forms of expenditure – of money and of effort – which make sense within the context of a relationship, but which make no sense in a single transaction. Small acts of discretionary generosity, such as waiving a charge when a passenger has bought slightly the wrong kind of train ticket or a complimentary chocolate at the end of a meal are regarded by customers as reassuring indicators of trustworthiness; we correspondingly see the absence of such signals as being a cause for concern.
64
57178But I most recall it because we worked on it with a Midwestern account director called Steve Barton, who said something telling when he briefed the project. ‘Look’, he said, ‘I’d like you to produce a stand-out piece of creative work here. But if you can’t, what I’d like you to do is write them a really nice one-page letter – and we’ll send it out by FedEx.’ Steve was effectively describing what biologists call ‘costly signalling theory’, the fact that the meaning and significance attached to a something is in direct proportion to the expense with which it is communicated.
65
58179Bits deliver information, but costliness carries meaning. We do not invite people to our weddings by sending out an email. We put the information (all of which would fit on an email – or even a text message) on a gilt embossed card, which costs a fortune.
66
59180‘Credo quia absurdum est’, said Saint Augustine, supposedly – ‘I believe it because it is ridiculous.’ He was talking about Christianity, but it is equally true of many other facets of life: we attach meaning to things precisely because they deviate from what seems sensible. It is hardly surprising that we have evolved to invest more significance in unusual, surprising or unexpected stimuli and signals than to routine, everyday ‘noise’. As a result, like any social species, we need to engage in ostensibly ‘nonsensical’ behaviour if we wish to reliably convey meaning to other members of our species.
67
X60183Effective communication will always require some degree of irrationality in its creation because if it’s perfectly rational it becomes, like water, entirely lacking in flavour. This explains why working with an advertising agency can be frustrating: it is difficult to produce good advertising, but good advertising is only good because it is difficult to produce. The potency and meaningfulness of communication is in direct proportion to the costliness of its creation – the amount of pain, effort, talent (or failing that, expensive celebrities or pricey TV airtime) consumed in its creation and distribution. This may be inefficient – but it’s what makes it work.
68
61190Flowers spend a great deal of their resources convincing customers that they are worth visiting. Their target audience is bees, or other insects, birds or animals that may help to pollinate the flower – a process that dates back at least to the time of the dinosaurs.* For the pollination process to be effective, the flower needs to convince the customers of its worth. To borrow the language of the Michelin Guide, a flower can be ‘vaut l’étape’, ‘vaut le détour’ or ‘vaut le voyage’; ‘worth stopping at’, ‘worth going out of your way for’ or ‘a destination in itself’.
69
62201Yet the status markers for which we compete don’t have to be environmentally damaging; people can derive status from philanthropy as well as through selfish consumption. For instance, as Geoffrey Miller notes, a tribe where males advertised their hunting prowess by conspicuously sharing meat from their kills would prosper, as a result of economically irrational behaviour. On the other hand, an otherwise identical tribe whose males signalled their strength by violently fighting each other would suffer as a consequence: even the eventual winners of these contests might end up badly wounded and with a lower life expectancy. The first one is a positive sum game, while the other is anything but.* An extreme pessimist might suggest that, although competition for wealth markers is wasteful and harmful to the planet, it is a lot less harmful than many other forms of intergroup or interpersonal competition.
70
X63208In many ways, expensive advertising and brands arise as a solution to a problem identified by George Akerlof in his 1970 paper ‘The Market for Lemons’ in the Quarterly Journal of Economics. The problem is known as ‘information asymmetry’, whereby the seller knows more about what he is selling than the buyer knows about what he is buying. This lesson was learned the hard way in Eastern Bloc countries under communism; brands were considered un-Marxist, so bread was simply labelled ‘bread’. Customers had no idea who had made it or whom to blame if it arrived full of maggots, and couldn’t avoid that make in future if it did, because all bread packaging looked the same. Unhappy customers had no threat of sanction; happy customers had no prospect of rewarding producers through repeat custom. And so the bread was rubbish.
71
64215A few years ago, the rationalist killjoys at the Australian Competition and Consumer Commission prosecuted the global consumer goods manufacturer Reckitt Benckiser over four products: Nurofen Migraine Pain, Nurofen Tension Headache, Nurofen Period Pain and Nurofen Back Pain. Their complaint was that ‘each product claimed to target a specific pain, when in fact it was found that they all contained the same amount of the same active ingredient, ibuprofen lysine’ – the problem was that these variants were often sold at a higher price than the basic brand, despite being pharmacologically identical.
72
65216The psychologist Nicholas Humphrey argues that placebos work by prompting the body to invest more resources in its recovery.* He believes that evolution has calibrated our immune system to suit a harsher environment than the current one, so we need to convince our unconscious that the conditions for recovery are especially favourable in order for our immune system to work at full tilt. The assistance of doctors (whether witch or NHS), exotic potions (whether homeopathic or antibiotic) or the caring presence of relatives and friends can all create this illusion, yet policymakers hate the idea of any solution that involves such unconscious processes – too little is spent on researching the placebo effect in proportion to its importance.
73
X66224An article in New Scientist in 2012 examining the nature of the placebo effect described new evidence from a model that offered a possible evolutionary explanation. It suggested that the immune system has ‘an on-off switch controlled by the mind’, an idea first proposed by psychologist Nicholas Humphrey a decade or so earlier. Pete Trimmer, a biologist at the University of Bristol, observed that the ability of Siberian hamsters to fight infections varied according to the lighting above their cages – longer hours of light (mimicking summer days) triggered a stronger immune response. Trimmer’s explanation was that the immune system is costly to run, and so as long as an infection is not lethal, it will wait for a signal that fighting it will not endanger the animal in other ways. It seems that the Siberian hamster subconsciously fights infection more energetically in summer because that is when food supplies are sufficiently plentiful to sustain an immune response. Trimmer’s model demonstrated that in challenging environments, animals fared better by weathering infections and conserving resources. Humphrey argues that people subconsciously respond to a sham treatment because it assures us that it will weaken the infection without overburdening the body’s resources. In populations where food is plentiful we can, in theory, mount a full immune response at any time, but Humphrey believes that the subconscious switch has not yet adapted to this – thus it takes a placebo to convince the mind that it is the right time for an immune response.
74
67228As with getting to sleep, the trick in generating bravery lies in consciously creating the conditions conducive to the emotional state. With sleep this might mean fluffy pillows, darkness and silence;* in the case of bravery it might involve trumpets, drums, banners, uniforms, camaraderie and so on. Soldiers live together, call themselves ‘brothers in arms’, march in lockstep, wear the same clothes and are allocated to ‘fictive-kin’ groups such as platoons, regiments and divisions – much of this fosters the illusion that you might be willing to make the ultimate sacrifice for the people within your group.
75
X68229There is an important lesson in evaluating human behaviour: never denigrate a behaviour as irrational until you have considered what purpose it really serves.
76
X69230I invent my brutally honest slogans to make the point that most products have both an ostensible, ‘official’ function and an ulterior function. The main value of a dishwasher, I would argue, is not that it washes dirty dishes, but that it provides you with an out-of-sight place to put them. The main value of having a swimming pool at home is not that you swim in it, but that it allows you to walk around your garden in a bathing costume without feeling like an idiot. A friend who had been invited to spend a week on a luxury yacht explained why they are so popular with megalomaniacs: ‘You can invite your friends to join you on holiday, then spend the week treating them like you are Captain Bligh.’ If you have the most magnificent villa in the world, there is still the risk that your friends and rivals might hire a car and wander off on their own: on a megayacht, however, they are your captives.
77
X70234Whichever is right (and they are not mutually exclusive), my offspring are clearly are not alone in their behaviour. I once attended a presentation on the worldwide beauty industry, which includes clothing, perfume and cosmetics. I was briefly confused by a chart that showed billions of US dollars as its scale but which listed annual spending figures in thousands, before realising that the annual expenditure we were discussing ran into trillions of US dollars. It turns out that more is spent on female beauty than on education.
78
71240According to Pierre Chandon, the branding of Red Bull, through slogans like ‘Red Bull gives you wings’ or the extreme sport competitions they sponsor, may not merely determine whether people buy the product but also how they respond to its name in a cocktail and how they interpret its effects. Are there lessons here that pharmaceutical companies could learn from? For instance, rather than merely putting medications in containers with a childproof cap, might they insist that they are kept in a metal container with a combination lock? After all, even if the contents aren’t particularly poisonous or potent, our inner monkey can deduce that they are – remember that the prefrontal cortex isn’t involved in this decision at all, and that it is the monkey alone who decides whether a placebo works.
79
X72242Things which involve a degree of sacrifice seem to have a heightened effect on the unconscious, precisely because they do not make logical sense. After all, eating tasty, nutritious food is unlikely to signal anything to the immune system, since it doesn’t feel out of the ordinary; drinking something foul, on the other hand, carries a greater amount of significance, since it is something you only do under unusual circumstances.
80
73243Cathedrals are an over-elaborate way of keeping rain off your head. Opera is an inefficient way of telling a story. Even politeness is effectively a mode of interaction that involves an amount of unnecessary effort. And advertising is a hugely expensive way of conveying that you are trustworthy. My contention is that placebos need to be slightly absurd to work.* All three elements that seem to make Red Bull such a potent mental hack* make no sense from a logical point of view. People want cheap, abundant and nice-tasting drinks, surely? And yet the success of Red Bull proves that they don’t. Something about these three illogicalities may well be essential to its unconscious appeal, or to its potency as a placebo. If we are to subconsciously believe that a drink has medicinal or psychotropic powers, perhaps it can’t taste conventionally nice.
81
X74251Like bees with flowers, we are drawn to reliable signals of honest intent, and we choose to do business where those signals are found. This explains why we generally buy televisions from shops rather than from strangers on the street – the shop has invested in stock, it has a stable location and it is vulnerable to reputational damage. We do this instinctively; what we are prepared to pay for something is affected not only by the item itself but by the trustworthiness and reputation of the person selling it.
82
75256Joel Raphaelson and his wife Marikay worked as copywriters for David Ogilvy in the 1960s. We recently ate dinner at Gibson’s Steakhouse at the Doubletree Hotel near O’Hare Airport in Chicago,* and talked about Joel’s 50-year-old theory concerning brand preference. The idea, most simply expressed, is this: ‘People do not choose Brand A over Brand B because they think Brand A is better, but because they are more certain that it is good.’* This insight is vitally important, but equally important is the realisation that we do not do it consciously. When making a decision, we assume that we must be weighting and scoring various attributes, but we think that only because this is the kind of calculation that the conscious brain understands. Although it suits the argumentative hypothesis to believe something is ‘the best’, our real behaviour shows relatively few signs of our operating in this way. Someone choosing Brand A over Brand B would say that they thought Brand A is ‘better’, even if really they meant something quite different. They may unconsciously be deciding that they prefer Brand A because the odds of its being disastrously bad are only 1 per cent, whereas the risk with Brand B might be 2.8 per cent. This distinction matters a great deal, and it is borne out in many fields of decision science. We will pay a disproportionately high premium for the elimination of a small degree of uncertainty – why this matters so much is that it finally explains the brand premium that consumers pay. While a brand name is rarely a reliable guarantee that a product is the best you can buy, it is generally a reliable indicator that the product is not terrible.
83
76260This example illustrates that, when we make decisions, we look not only for the expected average outcome – we also seek to minimise the possible variance, which makes sense in an uncertain world. In some ways, this explains why McDonald’s is still the most popular restaurant in the world. The average quality might be low, compared to a Michelin-listed restaurant, but so is the level of variance – we know exactly what we’re going to get, and we always get it. No one would say that a meal they had had at McDonald’s was among the most spectacular culinary experiences of their lives, but you’re never disappointed, you’re never overcharged and you never get ill. A Michelin three-star restaurant might provide an experience that you will cherish for the rest of your life, but the risk of disappointment, and indeed illness, is also much higher.
84
77264As a friend of mine once remarked, had tennis been given the same scoring system as basketball it would be tedious to play and even worse to watch: if you glanced at your TV and saw Djokovic leading Murray ‘by 57 points to 31’, you would shrug and change channels to something more exciting.* Tennis scoring isn’t quite socialist – one player can demolish another – but, in such uneven cases, the contest is over in a mercifully short time. There is, however, a kind of social security system in the sport’s scoring system, which means that for the duration of any match, the losing player feels he might still be in with a chance. It’s frankly genius. The system of watertight games and sets means that there is no difference between winning a game to love or after several deuces. A 6–0 set counts as a set, just as a 7–5 win does. This means that the losing player is never faced with an insurmountable mountain to climb. The scoring system also ensures variation in how much is at stake throughout the game; someone serving at 30–0 is a relatively low-engagement moment, while a crucial break point has everyone on the edge of their seats. This varies the pitch of excitement, and consequently makes the game more enjoyable for players and spectators alike.
85
78268Because JFK is more popular, it is seen as a less eccentric choice. Flying to JFK is the equivalent of buying an IBM mainframe in 1978: an easy default. The great thing about making the ‘default’ choice is that it feels like not making a decision at all, which is what businesspeople and public sector employees tend to really like doing – because every time you don’t visibly make a decision, you’ve ducked a bullet. Newark requires a rational justification: ‘Why is my flight going to Newark; why not JFK?’ By contrast, the sentence, ‘I’ve booked you a flight to JFK’, rarely meets with the question, ‘Why JFK? What’s wrong with Newark?’
86
79273A few years ago, the British chocolate manufacturer Cadbury’s received a large number of customer complaints, claiming that they had changed the taste of their Dairy Milk brand. They were at first baffled, because the formulation hadn’t been altered for years. However, what they had done was change the shapes of the blocks you would break off a bar, rounding their corners. And smoother shapes taste sweeter. Truly. Nothing about perception is completely objective, even though we act as though it is.
87
80285Strangely, one of the greatest sources of linguistic confusion arises between British and Dutch speakers of English. The Dutch are, almost universally, fluent in English:* their grasp of idiom is superb, their accents are flawless, and they have a similarly cynical sense of humour to the British. After an evening with a couple of Dutch contemporaries, you would have no consciousness of a language barrier, and would find it hard to believe that any misunderstanding could arise. However, misunderstandings are all too common, because Dutch conversation tends to be astoundingly direct, while British English is oblique and often coded to the point of derangement. In a business context a Dutchman might say, ‘We tried that and it was shit, so we won’t do it again,’ while an Englishman intending to say the same thing might say, ‘I think it might be a little while before we try that again.’ Eventually the Dutch compiled a sort of phrasebook, which translates British English into Dutch English. WHAT
88
81298When Kraft wanted to introduce a healthier formulation for their Mac & Cheese, they were terrified of a similar reaction, particularly as the malignant combination of social media and newspapers keen for a story can turn a small number of hostile tweets into national news. So they removed the artificial yellow dye and added paprika, turmeric and other natural replacements – and then kept silent about it. Practically no one noticed a thing – until they announced the change retrospectively, under the headline ‘It’s changed. But it hasn’t.’ This way, they were able to gain the potential custom of people who had previously avoided the product because of its artificiality, without creating an imagined taste change among its regular customers, who suddenly discovered they had been eating the healthier variant all along.
89
82299The old advertising belief in having a Unique Selling Proposition (a ‘USP’) also exploits the focusing illusion: products are easier to sell if they offer one quality that the others do not. Even if this feature is slightly gratuitous, by highlighting a unique attribute, you amplify the sense of loss a buyer might feel if they buy a competing product.
90
83312A final note. When working with pharmaceutical companies, I discovered that every developer tried to make their drug as easy to ingest as possible – however, the behavioural economist Dan Ariely and I disagree with this apparently logical assumption. We both feel that the placebo effect might be strengthened if the drug requires some preparation, whether prior dilution or mixing. In additon, by creating a routine around the preparation of a drug before you take it you also create a ritual, which makes it much harder to forget. It’s easy to forget whether you have swallowed two miniscule pills, but much harder to forget whether you have mixed liquid A with liquid B before adding powder C.
91
X84314Conventional wisdom about human decision-making has always held that our attitudes drive our behaviour, but evidence strongly suggests that the process mostly works in reverse: the behaviours we adopt shape our attitudes. Perhaps someone who separates their rubbish into waste and recyclables will become more environmentally conscious as a result of having adopted the behaviour, just as Tesla drivers will wax enthusiastically about the environmental purity of their vehicles, regardless of their initial reasons for buying the car.
92
85314Behaviour comes first; attitude changes to keep up.
93
X86319After landing at Gatwick Airport, the plane taxied for five minutes or so before coming to a halt, the terminal still somewhere in the distance. I heard the engines wind down and a horrible thought occurred to me: we might be about to be loaded onto a bus. I had always felt mildly resentful about being bussed to the terminal, suspecting that it was a tactic used by airlines to save landing fees by parking far away from the terminal building and avoid paying for an airbridge. Then the pilot made an announcement that was so psychologically astute that I felt like offering him a job at Ogilvy. ‘I’ve got some bad news and some good news,’ he said. ‘The bad news is that another aircraft is blocking our arrival gate, so it’ll have to be a bus; the good news is that the bus will drive you all the way to passport control, so you won’t have far to walk with your bags.’ After decades of flying, I suddenly realised that what he had said was not just true on that occasion – it was always true! The bus drops you off exactly where you need to be, meaning that you don’t have to lug your carry-on bags through miles of corridors before you can get to the exit – this was a revelation. We soon arrived at passport control, and were all rather grateful for the bus. Nothing had changed objectively, but we now saw the bus not as a curse but as a bit of a bonus. The pilot’s alchemical approach had redirected my attention to a different judgement.
94
X87325As Shakespeare wrote, ‘there is nothing either good or bad, but thinking makes it so’.
95
X88334The job of the alchemist is to find out which framing works best. I persuaded my father to pay for TV at the age of 82, simply by reframing the cost. He begrudged paying £17 a month for a satellite television package – it seemed like a waste of money to him. However, when I pointed out that £17 each month worked out to around 50p a day and he already spent £2 each day on newspapers, everything changed. As 50p a day rather than £17 a month,* the same cost seemed perfectly reasonable.
96
89336This is one reason why public services and monopolies, even when they do a good job objectively, are often under-appreciated – it is harder to like something when you haven’t chosen it.
97
X90340Acting on Spool’s advice, the site’s designers fixed the problem simply – they replaced the ‘Register’ button with a ‘Continue’ button and a single sentence: ‘You do not need to create an account to make purchases on our site. Simply click Continue to proceed to checkout. To make your future purchases even faster, you can create an account during checkout.’ The number of customers completing purchases increased by 45 per cent almost immediately, which resulted in an extra $15 million in the first month; in the first year, the site saw an additional $300 million attributable simply to this change. So, people hate registering, and you can increase sales spectacularly by allowing them to bypass registration? Well, it’s not quite that straightforward – there’s a stranger aspect to this story, which is that most of the site’s customers (90 per cent or so) who chose to ‘continue as guest’ were subsequently happy to register as customers once they had made their purchase – the very people who had baulked at registering before completing the purchase were only too happy to leave their details and create an account at the end of the process. This shows that what mattered was not the actions we asked them to perform, but the order in which they were asked to make them.
98
91343I didn’t set out in this book to attack economic thinking because it is wrong – I think we should absolutely consider what economic models might reveal. However, it’s clear to me that we need to acknowledge that such models can be hopelessly creatively limiting. To put it another way, the problem with logic is that it kills off magic. Or, as Niels Bohr* apparently once told Einstein, ‘You are not thinking; you are merely being logical.’
99
92343Remember, if you never do anything differently, you’ll reduce your chances of enjoying lucky accidents.
100
93343Solving Problems Using Rationality Is Like Playing Golf With Only One Club