πŸ’Ž On the danger of only evaluating projects on what is easy to quantify

A question was given to a bunch of engineers about fifteen years ago: How do we make the journey to Paris better? They came up with a very good engineering solution, which was to spend Β£6 billion building completely new tracks from London to the coast and knocking about forty minutes off the 3.5 hour journey time. It strikes me as a slightly unimaginative way of improving a train journey to merely make it shorter. Now, what is the hedonistic opportunity cost of spending Β£6 billion pounds on railway tracks? Here’s a thought; what you could do is employ the world’s top male and female supermodels, pay them to walk the length of the train handing out free ChΓ’teau PΓ©trus for the entire duration of the journey. … At which point you’ll still have about Β£5 billion left in change, and people will ask for the trains to be slowed down.

Excerpt from: Transport for Humans: Are We Nearly There Yet? by Pete Dyson and Rory Sutherland

πŸ’Ž The power of reframing costs in a B2B context

In the same way, in the early stages of a food delivery brand (now worth over Β£1bn), the proposal was to pay the restaurant directly for each meal it supplied and then to invoice them monthly for the commission on the month’s past sales. A marketing thinker pointed out that this was a mistake. “We should keep the money from each meal sold, deduct commission, and then send them a payment every month”. He or she understood that, if the restaurant saw the new business as a source of incremental revenue they would value it; if they saw it primarily as a cost, they would look for ways to avoid it. Again, in economic terms, there is no difference between the first proposal and the second, but the psychological effect on the business will be dramatically different.

Excerpt from: The Objectivity Trap by Rory Sutherland

πŸ’Ž A wonderfully simple opportunity, that would cost nothing, but allow the government to reduce irritation (and therefore boost compliance)

As Shakespeare wrote, β€œthere is nothing either good or bad, but thinking makes it so’.

A few hours before I sat down to write this chapter, I received a parking ticket. It was only for Β£25 and I was completely to blame, but it nevertheless annoyed me to an extraordinary degree – and it is still annoying me now. Perhaps a parking ticket is made even more annoying because we can see no way of reframing it in a positive light.

Could the local authority that issued me with the ticket give me a chance to play the same mental trick on myself as the easyJet pilot – a reason, however tenuous, to feel slightly upbeat about the fine? For instance, how different would I feel if I was told that the money from my fine would be invested into improving local roads or donated to a homeless shelter? The fine would have the same deterrent effect, but my level of anger and resentment would be significantly reduced. How would that be a bad thing?

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the importance of scoring systems to the enjoyment of sports (Nadal now leads Murray by 127 points)

A few years ago a mathematician friend explained to me that the game of tennis is enjoyable to watch only because of the scoring system.

If players swapped serve alternately, and the tally worked as in basketball, (Nadal now leads Murray by 127 points to 43; new balls please) it would be almost unwatchable. But because tennis breaks the score into watertight compartments, namely games and sets, it creates a structure wherein a losing player feels he is still in with a chance right to the end. That makes the narrative of the game far more enjoyable to fans and players. And because some rounds (break-points, set-points) are more critical than others tennis’s moments of high tension are interested as in a good opera or play, with quieter moments when spectators can relax.

Excerpt from: Rory Sutherland: The Wiki Man by Rory Sutherland

πŸ’Ž On the avoidance of regret being a much bigger factor in brand selection than the pursuit of perfection (I hope this TV isn’t a crock of shite)

Yet marketers very rarely acknowledge this distinction when debating the role of the brand – and it pays little attention to the job of being assuredly not crap – even though I suggest it is by far the more valuable economic role that brands play: not to be a promise of ultimate superiority but a cast iron assurance of pretty dependable non-shitness. The Fina ad is one good example. Even better is that great CDP ad for Smirnoff: “why waste money on real lemons”, which I can’t find, or the Volkswagen promise of reliability. But overall this proposition of “loss avoidance” is rare – most ads seek to boast a lot more than they reassure. Yet when you are handing over Β£1,000 to buy that flat screen TV, how much of your brain is worried about whether it is the best TV you can buy for Β£1,000, versus the part of the brain thinking “I hope this TV isn’t a crock of shite?” I’d put the ratio at about 1:2.

Because we all work in the field, marketers and advertising people are by temperament maximisers when it comes to brands. They use the fine distinctions between them to delineate themselves and to highlight their individuality.

Excerpt from: Rory Sutherland: The Wiki Man by Rory Sutherland

πŸ’Ž On knowing your market (expanding into new markets)

The gin brand Hendrick’s engaged in a very clever bit of non-sense, when they suggested that their product be served not with lemon but with cucumber, which gained immediate salience. Being British, I failed to notice the genius of this move, which was that it also positioned the drink as sophisticatedly British in the United States; Americans find cucumber sandwiches a British peculiarity. To a Brit, of course, a cucumber is not seen as being particularly British – it is just something we make sandwiches with.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the burden of (self-imposed) rationality limiting what we think we can do

When I recently talked to Paul Smith here about advertising in the late 1970s, he remarked that the great virtue of the time was that no one demanded the same tedious logic be applied to every message. Hofmeister had a bear on the logo – that was enough. Hovis wasn’t even northern – but let’s pretend it is…. Hamlet had a message which was surely generic to all tobacco – indeed which was truer of cigarettes than cigars (cigars are rarely consumed at moments of stress).

And so on….

Freed from the wearisome burden of self-imposed rationality, and by the tyranny of consistency, there’s no limit to what we might do.

Excerpt from: Rory Sutherland: The Wiki Man by Rory Sutherland

πŸ’Ž On turbo charged logic being a valid form of creativity (statistical modelling can be immensely creative)

In fact I eccentrically believe data analysis and really good statistical modelling can be immensely creative – because, just like a good creative team, well-worked data can reveal wonderfully unexpected, unasked for truths. In Freakonomics the guns vs swimming pools insight is arrived at numerically, but it is no less an astoundingly original thought for being uncovered by computers. Never forget this, folks: turbo-charged logic is a valid form of creativity.

Excerpt from: Rory Sutherland: The Wiki Man by Rory Sutherland

πŸ’Ž On the power of a name (the Cornish sardine)

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 though 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.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the dangers of everyday low pricing (as JCPenney and Macy’s found)

Every day, companies or governments wrongly make highly simplistic assumptions about what people care about. Two major US retailers, JCPenney and Macy’s, both fell foul of this misunderstanding when they tried to reduce their reliance on couponing and sales, and instead simply reduced their permanent prices. In both cases, the strategy was a commercial disaster. People didn’t want low prices – they wanted concrete savings. One possible explanation for this is that we are psychologically rivalrous, and we like to feel we are getting a better deal than other people. If everyone can pay a low price, the thrill of having won out over other people disappears; a quantifiable saving makes on feel smart, while paying the same low prices as everyone else just makes us feel like cheapskates. Another possible explanation is that a low price, unlike a discount, does not allow people any scope to write a more cheerful narrative about a purchase after the event – ‘I saved Β£33’, rather than ‘I spent Β£45’.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the pratfall effect (and how it destigmatised low cost airlines)

When you think about it, it is rather strange how explicit low-cost airline are about what their ticket prices don’t include: a pre-allocated seat, a meal, free drinks, free checked luggage – such deficiencies help to explain and destigmatise the low prices. ‘Oh, I see,’ you can say, when you see a flight to Budapest advertised for Β£37, ‘the reason that low price is possible is because I won’t be paying for a lot of expensive fripperies that I probably don’t want anyway.’ It’s an explicit, well-defined trade-off, and one that we feel happy to accept.

Imagine if cheap airlines instead claimed: ‘We’re just a good as British Airways, but at a third of the price.’ Either nobody would believe them, or else such a claim would raise instant doubts. ‘Maybe the only reason they’re cheaper is because they don’t bother servicing the engines or training the pilots, or because the planes are scarcely airworthy.’

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the danger of ignoring small data sets (almost killing Nokia)

The ethnographer Tricia Wang even suggested in her 2016 TEDxCambridge talk that quantifications bias created by big data led to the near death of Nokia as a handset manufacturer. All their data suggested that people would only spend a certain proportion of their salary on a phone handset, so the market for smartphones in the developing world would be correspondingly small. Wang noticed that, once people saw a smartphone, their readiness to spend on a handset soared. Her findings were ignored as she had ‘too few data points’. However, in reality, all valuable information starts with very little data — the lookout on the Titanic only had one data point… ‘Iceberg ahead’, but they were more important than any huge survey on iceberg frequency.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On how Nespresso increased willingness to pay by changing their comparison set (“the machine’s paying for itself”)

I’ve just got one of those Nespresso machines, it’s fantastic. The really interesting thing about this Nespresso machine is that if I asked you to go out and buy those Twining’s super premium teabags which are Β£6.50 for 25 teabags you’d look at me as if I’m bonkers. For Β£6.50 you should get 100 teabags, 1,000 tea bags, you know? But actually it’s 25p for a cup of tea, it’s not bonkers, you pay a quid or two at Starbucks, but paying that for a teabag seems impossible. Wha’t clever about the espresso machine is that because it comes in individual pods, if you had to buy a jar of espresso coffee it would cost about 150 quid. You say to yourself: “I can’t, I simply cannot buy this thing, I cannot bring myself to pay 100 quid for a jar of Nescafe, it’s impossible”, but because the things come in individual pods, our frame of reference isn’t Nescafe, it’s Starbucks, where we actually pay a quid or two for a shot of coffee at Starbucks, so at 26p, well the machine’s paying for itself, right?

Excerpt from: Rory Sutherland: The Wiki Man by Rory Sutherland

πŸ’Ž On following the rules of business (or not)

Control Tower: ‘Maybe we ought to turn on the search lights now?’

Kramer: ‘No… that’s just what they’ll be expecting us to do.’

Most of business is run according to conventional logic. Finance, operations and logistics all operate through established best practice – there are rules, and you need to have a good reason to break them. But there are other parts of a business that don’t work this way, and marketing is one of them: in truth, it’s a part of business where there’s never best practice, because if you follow a standard orthodoxy your brand will become more like your competitors’, thus eroding your advantage. The above joke from Airplane! (1980) appears when the air traffic controller is trying to follow protocol, by turning on the lights on the runway for the approaching plane; Kramer, a war veteran, is frightened of being too predictable.” It underlines a serious point.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the local pub approach to (repeat) business

Yet there are, when you think about it, two different approaches to business. The is the ‘tourist restaurant’ approach, where you try to make as much money from people on their single visit. And then there is the ‘local pub’ approach, where you may make less money from people on each visit, but where you profit more over time by encouraging people to come back. The second type of business is much more likely to generate trust and yield positive-sum outcomes than the firsy.

How might people distinguish the second type of business from the first? Well, the scoop of extra fried you get at Five Guys is one such gesture – an immediate expense with a deferred pay-off. It is a reliable signifier that you are investing in a repeat relationship, not milking a single transaction. Likewise, when your company pays your salary this month, it says you are worth this money for now; when it sends you to Kitzbuhel, it signals that it is committed to you for a few years at least.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On behavioural economics being an odd term (it’s just economics)

Behavioural economics is an odd term. As Warren Buffett’s business partner Charlie Munger once said, ‘If economics isn’t behavioural, I don’t know what the hell is.’ It’s true: in a more sensible world, economics would be a sub-discipline of psychology. Adam Smith was as much a behavioural economist as an economist – The Wealth of Nations (1776) doesn’t contain a single equation. But, strange though it may seem, the study of economics has long been detached from how people behave in the real world, preferring to concern itself with a parallel universe in which people behave as economists think they should.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž People don’t just eat food (they eat the brand)

One day, Korzybski offered to share a packet of biscuits, which were wrapped in plain paper, with the font row of his lecture audience. ‘Nice biscuit, don’t you think?’ said Korzybski, while the students tucked in happily. Then he tore the white paper and revealed the original wrapper – on it was a picture of a dog’s head and the words ‘Dog Cookies’. Two students began to retch, while the rest put their hands in front of their mouths or in some cases ran out of the lecture hall to the toilet. ‘You see,’ Korzybski said, ‘I have just demonstrated that people don’t just eat food, but also words, and that the taste of the former is often outdone by the taste of the latter.’

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the dangers of focusing on short-term efficiency (and the waggle dance)

There is a parallel in the behaviour of bees, which do not make the most of the system they have evolved to collect nectar and pollen. Although they have an efficient way of communicating about the direction of reliable food sources, the waggle dance, a significant proportion of the hive seems to ignore it altogether and journeys off at random. In the short term, the hive would be better off if all bees slavishly followed the waggle dance, and for a time this random behaviour baffled scientists, who wondered why 20 million years of bee evolution had not enforced a greater level of behavioural compliance. However, what they discovered was fascinating: with out these rogue bees, the hive would get stuck in what complexity theorists call ‘a local maximum’; they would be so efficient at collection food from known sources that, once these existing sources of food dried up, they wouldn’t know where to go next and the hive would starve to death. So the rogue bees are, in a sense, they hive’s research and development function, and their inefficiency pays off handsomely when they discover afresh source of food. It is precisely because they do not concentrate exclusively on short-term efficiency that bees have survived so many million years.

If you optimise something in one direction, you may be creating a weakness somewhere else.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the dangers of relentlessly seeking cost-savings and efficiency (the doorman fallacy)

Business, technology and, to a great extent, government have spent the last several decades engaged in an unrelenting quest for measurable gains in efficiency. However, what they have never asked, is whether people like efficiency as much as economic theory believes they do. The ‘doorman fallacy’, as I call it, is what happens when your strategy becomes synonymous with cost-saving and efficiency; first you define a hotel doorman’s role as ‘opening the door’, then you replace his role with an automatic door-opening mechanism.

The problem arises because opening the door is only the notional role of a doorman; his other, less definable sources of value lie in a multiplicity of other functions, in addition to door-opening: taxi-hailing, security, vagrant discouragement, customer recognition, as well as in signalling the status of the hotel. The doorman may actually increase what you can charge for a night’s stay in your hotel.

When every function of a business is looked at from the same narrow economic standpoint, the same game is applied endlessly. Define something narrowly, automate or streamline it — or remove it entirely — then regard the savings as profit.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On increasing the diversity of your team (when 10 x 1 does not equal 1 x 10)

But 10 x 1 does not equal 1 x 10. Imagine you have ten roles to fill, and you ask ten colleagues to each hire one person. Obviously each person will try to recruit the best person they can find — that’s the same as asking on person to choose the ten best hires he can find, right? Wrong. Anyone choosing a group of ten people will instinctively deploy a much wider variance than someone hiring one person. The reason for this is that with one person we look for conformity, but with ten people we look for complementarity.

If you were only allowed to eat one food, you might choose the potato. Barring a few vitamins and trace minerals, it contains all the essential amino acids you need to build proteins, repair cells and fight diseases – eating just five a day would support you for weeks. However, if you were told you could only eat ten food for the rest of your life, you would not choose ten different types of potato. In fact, you may not choose potatoes at all — you would probably choose something more varied.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On reframing the frustration of waiting times (by Uber)

Let me give a simple example. The Uber map is a psychological moonshot, because it does not reduce the waiting time for a taxi but simply makes waiting 90 per cent less frustrating. This innovation came from the founder’s flash of insight (while watching a James Bond film, no less) that, regardless of what we say, we are much bothered by the uncertainty of waiting than by the duration of a wait. The invention of the map was perhaps equivalent to multiplying the number of cabs on the road by a factor of ten — not because waiting times got any shorter, but because they felt ten times less irritating.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the importance of social context when interpreting messages (the art of gift giving)

Robert Zion, the social psychologist, once described cognitive psychology as ‘social psychology with all the interesting variables set to zero’. The point he was making is that humans are a deeply social species (which may mean that research into human behaviour or choices in artificial experiments where there is no social contest isn’t really all that useful). In the real work, social context is absolutely critical. For instance, as the anthropologist Pierre Bourdieu observes, gift giving is viewed as a good thing in most human societies, but it only takes a very small change in context to make a gift an insult rather than a blessing; returning a present to the person who has given it to you, for example, is one of the rudest things you can do. Similarly, offering people money when they do something you like makes perfect sense according to economic theory and is called an incentive, but this does not mean you should try and pay your spouse for sex.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On the idea of alchemy (in psychology, 2 + 2 can equal more or less than 4)

The advertising agency J. Walter Thompson used to set a test for aspiring copywriters. One of the questions was simple: ‘Here are two identical 25-cent coins. Sell me the one on the right.’ One successful candidate understood the idea of alchemy. ‘I’ll take the right-hand coin and dip it in Marilyn Monroe’s bag. Then I’ll sell you a genuine 25-cent coin as owned by Marilyn Monroe.’

In maths it is a rule that 2 + 2 = 4. In psychology, 2 + 2 can equal more or less than 4. It’s up to you.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On second-order social intelligence (and the dangers of discounting)

The following is a perfect illustration of the tendency of modern business to pretend that economics is true, even when it isn’t. London’s West End theatres often send out emails to people who have attended their productions in the past, to encourage them to book tickets, and it was the job of an acquaintance of mine who worked as a marketing executive for a theatre company to send out these emails. Over time, she learned something that defied conventional economic rules; it seemed that if you send out an email promoting a play or musical, you sold fewer tickets with the email. Conversely, offering tickets at full price seemed to increase demand.

According to economic theory, this makes no sense at all, but in the real world it is perfectly plausible. After all, any theatre selling tickets t a discount clearly has plenty to spare, and from this it might be reasonable to infer that the entertainment on offer isn’t all that good. No one wants to spend Β£100-Β£200 on tickets, a mean, car-parking and babysitting, only to find that you would have had more fun watching television at home; in avoiding discounted theatre tickets, people are not being silly – they are showing a high degree of second-order social intelligence.

Excerpt from: Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

πŸ’Ž On confusing the quantity and quality of work (a lesson from Henry Ford)

This last point reminds me of Henry Ford’s reaction to a consultant who questioned why he paid $50,000 a year to someone who spent most of his time with his feet on his desk. “Because a few years ago that man came up with something that saved me $2,000,000,” he replied. “And when he had that idea his feet were exactly where they are now.”

Excerpt from: Rory Sutherland: The Wiki Man by Rory Sutherland