#19 Rory Sutherland: The Psychology of Advertising | The Knowledge Project

Hey, it's Shane Parrish and welcome to a new episode of The Knowledge Project where we deconstruct actionable strategies that you can use to make better decisions, learn new things, and live a better life.

This time around we have one of my dear friends, Rory Sutherland.

Rory is the Vice Chairman of Ogilvy and Mather, one of the largest advertising companies in the world.

He's also co -founded their Behavioral Sciences Practice, which is applying behavioral insights to advertising.

This interview was recorded live in London, England.

Rory and I talk about a host of subjects and I think you'll find his views, his sense of mischief, and his insights well worth listening to.

A complete list of books and websites mentioned is in the show notes at fernomstreetblog .com slash podcast, that's F -A -R -N -A -M street blog dot com slash podcast.

A full transcript is also available for members of our Learning Tribe.

If you want to join, head over to fernomstreetblog .com slash tribe.

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Without further ado, here's Rory.

Let's start with something maybe simple but not easy to answer, which is, tell me a little bit about what you do on a day -to -day basis.

So having worked at Ogilvy and Mather for 27 years, about four or five years ago I started a division of the company called Ogilvy Change, which has recruited sort of seven or eight recent psychology graduates or graduates from what may have variously be called the Decision Sciences nowadays, with a view to

taking the best and most interesting work from behavioural economics, evolutionary psychology, a little bit of complexity economics I would argue as well.

And using that mental mug -tree of tools that are presented to us in those disciplines to solve problems that conventionally advertising agencies haven't been asked to solve.

So it's always easiest to give anecdotal examples.

A brief we received just yesterday was how do you prevent this problem where half of the backlog at airport security is caused by people trying to smuggle liquids through.

Now, in 99 .99 % of cases, when I say smuggle liquids through, they're not intending any nefarious purpose, they're not trying to blow up the plane.

No, it's a 105 -milliliter bottle of shampoo.

You've got it exactly or actually I didn't realise this myself, that it's the size of the container that's the discriminator, not the volume of the content.

So if you've got a third of a large tube of toothpaste remaining, or of course in North America where everything's effing massive, you have sort of six pint tetra packs full of orange juice for some, you're all survivalists, aren't you really in North America?

You're all preppers deep down.

But if you have that, but it's only a sixth full, it still doesn't count because the size of the container is the discriminator, not the volume of the content.

And it's an enormous problem because, partly because airports are partly rewarded or punished on the speed of throughput through security.

It's painfully annoying to passengers.

It's one of those glorious problems which if you can solve it, it's a win -win all round.

Now what I love about this is no one would have gone to an advertising agency 10 or 15 years ago and asked them to solve this problem.

They might have gone to a consulting firm, they might have gone to, I don't know, I mean, they might have actually treated it as an engineering problem and just said, we've got to build six new, you know, six new x -ray lanes and engaged in changing reality rather than changing behavior, which is strangely

often a default public sector behavior.

Because it's always much more acceptable to spend money on infrastructure than it is to spend money on psychology.

Why do you think that is?

I don't know. There's something, something about the human brain tends to think that if you solve problems through intangible means, it's somehow cheating.

I don't know which part of the brain that is.

I'd love more research.

And obviously you can understand there's a notion that says that actually the advertising industry is kind of cheating, that you add perceived value to something.

It isn't really value.

You know, if you make people like something more without changing its, its real objective qualities, you know, is that cheating?

Or is it value creation?

But changing the intangibles of how we think.

I mean, if you take, if you take a very extreme case, purists in the tech industry kind of hated Steve Jobs because they look at Apple products and say, well, look, if you look at the objective measures of clock speed or process of power or whatever, they're actually less impressive than you'll get

in this new LG Android phone or whatever.

And therefore they kind of thought that Steve was a bit of a snake oil salesman.

What Steve was doing was saying, actually, beyond a certain point, you hit the law of diminishing returns with all this clock speed objective stuff.

Actually let's let's focus the market on something like the loveliness of the interface and the joy that results from using it and will create psychological value rather than the objective value.

Now, if you're a purist engineer, you regard that as a bit of a cop out.

I obviously don't because I work in advertising and I have a natural proclivity towards favoring the creation of subjective value.

I mean, you do see that divided in different schools of economics so that in the Austrian school, one of my favorite quotations is Ludwig von Mises, who in his book, I think on a human action says, there is no sensible distinction to be made in a restaurant between the value created by the man who cooks

the food and the value created by the man who sweeps the floor.

Now, in this metaphor, this kind of parable by the man who sweeps the floor, he means quite literally advertising and marketing.

The enjoyment of a restaurant, the value created by a restaurant is a product of, and I probably mean product almost in the mathematical sense, the intrinsic qualities of the food that's being produced and the context in which you consume it.

Yeah. If you produce Michelin -starred food in a restaurant that smells slightly of sewage, you can make the food as good as you like, no one will really enjoy it.

Rather, I always give the example, you know, if one of the tines on your fork is misaligned, it's impossible to enjoy any meal.

You know, if just one prong is slightly out of alignment.

And I think that once you accept the fact that humans haven't evolved to deal with perfect information and therefore the chance of making a purely objective decision is going to be difficult anyway.

But secondly, we perceive the world in a way which is, which aggregates a lot of information to form a unified impression.

And actually, the taste of the food will be affected by the decor of the restaurant.

Once you accept that, you have to get a bit, a little bit more forgiving of intangible value.

I'd also argue, by the way, as you know, if you're an environmentalist, intangible value is the most environmentally friendly way of creating value.

You don't have to chop down any trees, you don't have to burn any coal.

You generate value simply by getting people to look at something that already exists in a more favorable light.

Now, that's a kind of alchemy.

I don't think we should reject it.

I think we should look for ways to do it.

An example I give of this of creating intangible value out of nothing.

I'm very, very keen in looking for brilliant examples of accidental real world marketing where someone without necessarily intending it just changes the way you look at something so that something that was bad becomes good.

Those of you familiar with Mark Twain will know the example of painting the fence.

In this instance, you know what it's like when you land in an aircraft and you're parked on the tarmac and told, we haven't been able to get an air bridge, all the gates are full, we're going to dump you on the tarmac and bus you to the airport.

Every single passenger on a plane in those conditions generally goes, oh shit, I've been shortchanged here.

I kind of paid you for that service.

The least you could do is at least connect me to a proper gate with a tube.

Now you just dump me on the tarmac and you're putting me on a bloody bus, partly because bus automatically creates the assumption of second bestness in our mind.

And a couple of months ago, I'm on an easy jet flight, I think, and I land and the pilot is either just an accidental genius or he's a brilliant psychologist because he suddenly says something I've never heard before or since.

He says, I've got bad news and good news.

That's always quite a good way to start.

Actually, we like we like a little bit of a trade off.

OK, in our news. The bad news is all the gates are occupied.

So we haven't been able to get you an air bridge.

But the good news is that the bus will take you all the way to a gate right next to passport control so you won't have far to walk with your bags.

OK, hold on. That's always true, isn't it?

When you get a bus, it takes you right next to passport control so you don't have to schlep past 700 yards of duty free shops in order to actually get to your luggage and then get to the arrivals.

So I notice that 30 people on the plane were suddenly and miraculously transmuted into happy people by the presence of the bus.

Well, actually, I got two quite heavy bags.

I'm quite glad there's a bus to bloody long walk over that bridge.

So suddenly, by getting someone and Robert Cialdini's work on presuasion covers a lot of By getting us to shift our focus to what's good about something rather than what we assume to be bad about it, you can synthesize happiness out of nowhere.

Now, deep down, I know that's kind of the view of this is well, it's kind of cheating that I should only really appreciate an object or appreciate a good in proportion to the amount of real work and pain that's gone into its creation and delivery.

But that's kind of Marxist.

When you think about that, that's kind of the labor theory of value.

Actually, you know, it's a miraculous attribute of capitalism that it has more than one means of creating value of just grueling human labor and suffering, the fact that you can take something fairly banal that's easy to manufacture and make it magical.

Now, that's a great thing, not a bad thing.

Now, OK, bear in mind, I work in marketing and advertising, I'm obviously biased because this is my bread and butter.

Nonetheless, I'm interested by the fact that we intrinsically tend to think that marketing value is kind of cheating, whereas engineering value is the real deal.

And it's worth remembering that the way we actually perceive the world, as I said, actually, we don't separate what we taste, from what we smell, from what we hear, from what we see.

Wine will taste better if you pour it from a heavier bottle.

Wine will taste better if you tell people it's expensive.

But there's a story to it.

And essentially, we drink.

It was always said of lager, whether no one can distinguish between lagers in blind tastings.

And effectively, they were drinking the advertising.

And you may argue that the way to add value to lager isn't through brewing, it's through storytelling.

Now, I think, in truth, whether you think that's cheating or not, I think it is inescapable.

I think that, you know, if if you pour someone a perfect beer and said, actually, I just pissed in that, okay, it would be impossible for you if we look at negative examples, we see they're all over the place, you know, that actually, you know, one negative story about something, you know, you know,

that lovely sweater, you know, you bought an eBay, it used to belong to Ted Bundy, right?

You know, we understand that negative storytelling makes things worse.

We've got a friend who owns Fred West Junction box from 25 Cromwell Street, as mum won't allow it into the house.

Okay, so we understand the negative side of it.

The fact that there's a positive side is just something we need to accept.

Because apart from anything else, the biggest source of economic waste is when people produce something that's objectively brilliant.

Or they produce the invention, which should be life changing.

But then they tell the wrong story about it, and it doesn't sell.

So a great product badly marketed is exactly like a Michelin starred restaurant, where unfortunately, the drains have backed up, and there's a smell of poo that pervades the whole thing.

It doesn't matter how good the damn food is.

If the context in which it's consumed, or as von Mises would say, if the people are no good at sweeping the floor, no one will enjoy the food.

Because, you know, a restaurant, it would be very difficult, maybe not for hipsters who would actually enjoy the food more if the floor were covered with wood shavings and other detritus.

But for most people, you know, a really grubby restaurant would make it very, very difficult to enjoy an ambitious meal.

We might be able to enjoy a sandwich in fairly grubby conditions, but anything more than that will be difficult without some sort of framing and some sort of expectation setting.

So I think an example I always give of that I think there need to be more is the example of videoconferencing, which I think should have been adopted much more.

This is pure now bear in mind, I'm going to be really clear here, I don't think I would ever have been able to predict this in advance.

I think this is a post -rationalisation, and it may even be wrong.

But it's a theory of mine, that part of what went wrong with video conferencing was it was sold as the poor man's alternative to air travel, not the rich man's phone call.

So videoconferencing was like owning a pager in about 1989.

It was what your company gave you when they didn't trust you with a mobile phone.

Yeah. And a videoconferencing was what your company allowed you to do when they didn't allow you to board a flight to Frankfurt.

Yeah. Yeah, that's kind of the idea.

Well, I've been on Southern actually going to Frankfurt because he might raid the minibar and watch a pornographic film in the hotel.

And there was a bit of a high -end here.

But we'll allow him to go down to a basement room in the office, sit in front of a breezebrock wall in some windowless room and talk to Jurgen over a screen.

Now, if you'd made videoconferencing the way that chief executives made phone calls, I think you could have sold it much, much more.

You could have made it something aspirational rather than a poor, a zat substitute for something better.

It should have been the rich man's British Telecom, not the poor man's British Airways.

Maybe I'm wrong, but I would assume that the CEOs were still traveling to meet people face to face.

And so it also became a class or hierarchy distinction as well.

There's possibly, and this is a fairly large part of air travel, maybe driven by costly signaling.

Possibly if you'd made videoconferencing cost four thousand pounds an hour.

Possibly you would have replaced air travel more effectively, because a large part of the reason for air travel is not that you couldn't do what you do in a phone call.

It signals through both the cost of the tickets and the effort required to make the journey the importance of a client's business.

Right. It also signals how important you are that you have to go.

That you have to go.

So it signals actually maybe self -signaling to a large part that you're signaling to yourself.

Well, since my company spends a fortune moving around the place, I must be an indispensable human being.

Yeah, exactly. And it I suppose it also signals the importance of the job at hand.

So if you fly in from London to Frankfurt or London, New York, it effectively says, right, someone spent an air ticket on this project.

So we're going to devote the whole day to focusing on this project while Bob is over from London.

If you have a one -hour video conference, it's something you kind of cramming in between doing your emails, and it doesn't signal the same level of focus and attention.

So that's one of my one of my big, big obsessions.

If only we could replace the communications language of marketing and use the language of signaling, particularly biological signaling, costly signaling, reliable signaling with skin in the game, for example.

Costly doesn't just mean financial could mean effortful signaling.

Marketing would make a lot more sense to everybody because a very large part of marketing is really costly signaling.

So the cost of something, particularly the upfront cost of something which may only pay off over time, is a very, very reliable gauge of commitment.

So a strange argument I've had recently is that in London, the taxi drivers to qualify as a black cab driver in London, you have to do a thing called the knowledge takes about three or four years to qualify, during which time you spend a lot of your spare time riding around on a moped with a clipboard,

memorizing all of the six or eight thousand streets within six and a half miles of Charing Cross.

Oh, wow. Now, bear in mind, this is non -American city stuff where you just go 12th Street, 13th Street, every God -am -Street or road has a different name.

There are probably 40 streets called Belsize something, Belsize Park Avenue, Belsize Park Crescent, Belsize Park Road.

You have to memorize all of them.

They're all over the place.

You have to memorize the best route from one to the other and you will be examined on it.

Now, the reason this originated was Prince Albert, Queen Victoria's husband.

He being German, the Germans have a general view that you have to be qualified before you can do anything.

They're obsessed with vocational qualifications.

I was joking that in Frankfurt Airport, there's actually a sex shop called Dr.

Muller's because the Germans are incapable of buying sex toys from someone who doesn't have adequate medical qualifications.

You know, in Britain, we're not that bothered.

You know, no one asked whether Ann Summers has a PhD, right?

But anyway, this is the Germans way.

So Prince Albert sets down this thing.

No, no, no. Before you can drive the handsome cab in London, you have to master this incredibly complicated exam and test.

And people have come recently and said, well, hold on a second.

Well, now we've got sat nav.

What the hell is the point of making someone learn this thing?

Now, my answer is part of it, whether this is still necessary or not, I'll I'll leave to further debate.

Part of that was nothing to do with memorizing the streets.

It was a commitment device.

Effectively, I can still put my two teenage daughters in a black cab in London driven by a total stranger and without bothering to memorize the badge number even I can just say to the driver, can you take them there?

OK, without really giving in any thought as to their safety.

Now, part of the reason is that if you're prepared to spend four years becoming a cab driver and four years of your life, which you'll never get back, is spent reaching that level of qualification, you're paidly committed to the job.

Secondly, you have a lot of skin in the game because it's not worth risking losing that badge, which took you four years for the sake of ripping off a random Canadian on a trip from Heathrow to gain 10 quid.

Just not worth the risk.

So as a reliable gauge of honest intent, you can trust a black cab driver in a way that you couldn't trust a black cab driver if the qualification has simply demanded two weeks at night school and buying a Tom Tom.

Right. So understanding some of that stuff, I think he's really, really vital to understanding a lot of what goes everything from medieval guilds.

A lot of these things are kind of trust placebos.

And it's very, very easy to look at them in a kind of modern technologist's rationalist's eye and going, well, clearly the knowledge is unnecessary because it's been supplanted by the sat -nav.

But maybe the purpose of that wasn't really to do with the knowledge at all.

This is a criticism I have of Silicon Valley, that what they often do is they take something that a human does, they define its role very, very narrowly, devise an algorithm or a technology which replaces that very narrow role, and then assume that the human being has become redundant.

But in truth, as I say, an automatic revolving door is not the same as a doorman.

If you define a doorman as simply a man at a hotel who opens the door, then you can replace him with technology very easily.

If you recognize that the role of the doorman also encompasses things like security and recognition and status to some extent, it says something about the hotel and handily helping with directions, if you're lucky, then you realize that what Silicon Valley is doing is sometimes taking the simplest and most

salient part of someone's job, replacing that and then leaving the rest of the functions to go hang.

Yeah, I'm always really cautious of that because I think in complex evolved systems, quite a lot of people, just as your mouth serves multiple purposes, it helps you breathe and speak and eat.

Okay, quite a lot of things have evolved to have multiple purposes of which one may be more the most obvious.

But that doesn't mean if you replace the one with a technological solution, that actually all three somehow become miraculously technologized.

So what would be an example, I guess, in your mind of how that will play out with self -driving cars?

Well, it's an interesting question, of course, one of them, which would be that if you're in a very large number of parts of the world, you employ a driver or a taxi driver, partly for security, not only for actually maneuvering.

I mean, okay, it tends to coincide with countries where you have low labor costs.

But most people in, say, you know, large parts of, you know, let's say Pakistan, you wouldn't hire a car and drive it yourself.

And part of that is just navigating local customs, its local knowledge.

Now, to an extent, some of that can be replaced with technology.

But the fact that actually if you have a local driver, no one's going to dick with him.

Whereas if you've just got two American tourists in the back of the thing, you know, they're quite vulnerable.

A second one, by the way, with human driving is that Google's mostly tested this thing in California.

Two things about Californians, there are very few pedestrians.

And I would argue that Californians have a very low level of mischief.

Okay, compared to say let's try Liverpool.

Okay, let's try let's try a really mischievous British town where the people are just canny and slightly, you know, cunning.

Someone is going to find a way of hacking that driverless car within seconds, by which I mean, you know, they'll work out that by putting a particular pattern of balloons on the road, the driverless car basically starts just going around in ridiculous circles or becomes unable to proceed.

The extent to which a driverless car could be manipulated, I don't mean software hacking in this case, simply by if you think about it, humans, humans have learned how to capture elephants and, you know, enormous pachyderms through a combination of ingenuity and cooperation.

A driverless car may be very, very good at certain aspects of navigating, but it's probably stupider than a rhino balance.

So the ways in which I would have thought people could very quickly learn ways to really one of the problems by by the way, being that the driverless car doesn't have emotions.

Now, one of the reasons you don't dick with large animals is they might lose their temper.

They might be very placid, but they might get angry.

Great book here, by the way, if you want to put recommendation Robert Frank, and I think the strategic value of the emotions, Robert H.

Frank at Cornell. But one of the reasons as humans we need to be we need to be capable of rousing to anger is to stop people dicking us around.

So let's let's say when I came in here, you kept sort of farting around with my jacket, which was hanging over the chair and sort of throwing it to the other side of the run.

OK, well, you know, we're friends.

I'd be highly tolerant of that, you know, for the first 20 minutes.

I think it was an interesting whimsical obsession of yours.

Eventually, I'd be at the point of hitting you.

OK. Right. And the reason I have to be capable of rousing to anger at some point is to stop people simply becoming victims of anyone who wants to dick around with them.

Now, one of the problems with the driverless car is that pedestrians will know that it's already known in London, by the way.

If you want to use a pedestrian crossing as zebra crossing, as we call it here, black and white crossing, that means without the without the traffic lights.

It's simply as a stripey area of road where the cars traditionally stop for pedestrians.

It's a useful hack in London that you wait for a black cab and you walk out in front of the black cab because black cabs get very, very heavily disciplined if they're caught breaking road regulations.

So they're much more eager to stop at a stripey crossing for you.

Now, you're not doing it to annoy them.

You're doing it for safety.

You're doing it for safety because they will always stop.

And because if anybody reports them for not stopping, they get into a whole lot of crap with the licensing authority for cabs.

Now, if we take this in in the driverless car kit situation, we'll know that when we want to cross the road, we just walk out in front of a driverless car, it's always going to stop.

Now, this may cause the passengers in the driverless car to lurch around in a comical and uncomfortable fashion.

But without the fear that the driverless car will either make a mistake and hit us because it didn't notice or lose its temper.

We're just going to dick around with those things.

Californians. There's no consequence.

There are no consequences.

So there's no potential downside to dicking around with a driverless car.

So at what point will other drivers just learn, you know, if I were a bit of a shit, right?

I have done this. My wife is still an Anglican curate, so I do need to explain the context.

But when I see people with a Jesus fish on the back of the car, I always tease to my wife, why don't we just, you know, slightly mistreat this person because they're not going to retaliate.

Okay. Now, my wife, who's an Anglican curate, is not very keen on my game theoretic obsessions.

But nonetheless, someone who displays obvious Christian symbols on the back of their car is probably safer to dick around with than someone who, for example, has, you know, some heavy metal band or whatever, or bikers.

You wouldn't dick around with that.

Now, the driverless car is the most, you know, never mind, never mind, fundamentalist Christians.

The driverless car is the easiest thing to dick around with because its reaction is going to be entirely predictable.

This is a fundamental philosophical question about rationality, by the way, which is it's impossible for anything rational to successfully evolve because the byproduct of being rational and efficient, optimally rational and efficient, would be that you'd be predictable.

And if you were completely predictable, you'd be dead.

The military do not look for the most efficient route from A to B, because they know that the most efficient route will be the one that's most heavily guarded.

So there's a huge danger in looking at life as if it's an optimization problem in every angle, which is a fundamental one that once you accept the fact that our psychology is the is the product of evolution, then at some point, our psychology has to evolve to be a big weird and random and unpredictable.

Right. For the simple reason that anybody who's completely predictable is, you know, what do you call someone who's predict, who's totally predictable?

The answer is the deceased, you know, and, you know, it could be people would set traps for them, it could be people would fool around with them, take advantage of them, whatever, but some degree of kind of, you know, the capability to rile to anger or whatever, or revenge has to be built in.

So, so I mean, it'll be interesting to see when the driver's car start to actually infiltrate some of the tougher parts of the world where people aren't quite so Californian.

We also have a system where it probably won't be overnight everybody switches to self -driving cars, you'll have a combination of self -driving cars, car, cars, people in vehicles now taking advantage of maybe the same level of mischief, whereas you can cut off a self -driving car with it worry about retribution.

The lack of social intelligence in the first ever crash of a Google self -driving car where the car was in arguably at fault, it pulled out in front of a bus expecting the bus to give away.

Now, the interesting question is where I let's be absolutely clear, in aggregate, driverless cars are going to be safer than driven cars, at least until people work out how to hack them, which is a slightly different question.

But that showed a slight lack of social intelligence because my hunch was there that a human driver would have said, I can pull out in front of traffic because my route is blocked by some sandbags on the road, but don't pull out in front of a bus.

In other words, if you pull out in front of someone who's a commercial driver, their willingness to give way, and of course they don't own the bloody vehicle they're driving, OK?

The bus driver doesn't have to pay for the repairs to his bus.

If you're driving a massive truck, there won't be any repairs anyway, because all the damage will be done to that Google car.

You know, if you're driving some sort of Mack truck, you know, I mean, you know, that's you could practically have one of those kind of, you know, bars at the front and it'd be undamaged by crashing into a Google driver's car.

So that showed a little bit of lack of social intelligence.

Now, how much of driving depends on unconscious social awareness in the UK, more than it does in the US?

The US drives, if you want to get into Hofstadter's dimensions here, the UK and Ireland and Sweden and Holland and, I think, Norway, Finland, New Zealand, Australia also, a country is marked out by a fairly high tolerance of ambiguity, by which I mean they're not totally rule driven.

So, weirdly, the accident statistics for Holland are much better than they are for Germany.

There's no genetic difference.

Dutch friends would go crazy, but there's not much genetic difference between Dutch people and Germans.

But the cultural difference is one of giving other people the benefit of the doubt.

It's kind of, why is that guy doing that?

Oh, I'll just let you eat.

He shouldn't have done that.

I'll let him, you know, I'll let him go.

Now, Ireland or Sweden, you would assume might have quite a high accident rate.

I won't explain why you might assume that in the case of Ireland, but lots of windy roads.

OK, quite a heavy drinking culture.

Sweden has heavy drinking culture, snow all over the place, yet they have a very low rate of accidents because they're highly tolerant of ambiguity.

And they can't, you know, it's what my Danish friend calls the benefit of the doubt, you know, well, maybe he meant to do that, but we all make mistakes, don't we?

The Germany and the US are slightly more tutonic in that they say, this is my right of way and I'm going to stick to it.

And if you get in the way or you do anything that interferes with my rights, I'm basically not going to make allowances for it.

So you do get it, you do get it.

There does seem to be there's a paper on this about Hofstad as cultural dimensions and how it affects driving style.

Now, the interesting question is, a lot of a lot of that benefit of the doubt, social intelligence and driving.

Now, you're Canadian.

You can't even cope with roundabouts.

We can't. We're learning slowly.

In fairness, it's difficult to introduce roundabouts in very big countries.

Yeah. Because obviously, to get good at using a roundabout, for it to become instinctive, you've got to use them a lot.

And if you only have 500 roundabouts in Canada, a hell of a lot of people approaching that roundabout will be new to roundabouts.

Now, the interesting thing with a roundabout, it involves a huge amount of social intelligence, including probably totally unconscious things like reading people's intention from their road position, looking at the direction in which their wheels are pointing when they're parked.

There's going to be an enormous amount of kind of give and take that goes on in navigating a roundabout, which may be perfectly easy to do when you have what you might call roads exclusively populated by driverless cars.

But in the intervening period where you have to have mixed use, it's going to be much more difficult.

Yeah. I want to switch gears just a little bit here and talk about reading.

I know we want to talk about behavioral economics, decision making.

Maybe we can get into some ethical stuff about behavioral economics and even advertising and creating intangible value.

But first, let's talk about reading a little bit.

I know you're a big reader.

What's your process for selecting what you read?

I mean, we're all struggling these days with filtering a massive amount of information.

And you, out of all people, I know we've had conversations on this before.

I'd like to take credit for this.

I have to admit that in the last two or three years, I've been I've probably fallen behind.

I don't know why that is partly.

I partly blame email.

I had a friend who is a barrister who, as part of his job, would effectively have to read hundreds of pages of sort of court papers and transcripts.

And the biggest resentment he had about this was he said that when you have to read for work, it slightly kills reading for pleasure.

Because by the time you get home at the end of the day, your your mode is to zonk out in front of the television like a zombie because simply because you've read enough that day and you've been paid to do it.

I'm less good than I was.

I think I was very, very lucky in who I chose.

The early influences, Robert Frank, Bob Cialdini.

Nudge was obviously a very important book.

Some slightly unusual things.

Quite a lot of evolutionary biology and evolutionary psychology.

Jeffrey Miller's The Mating Mind was one of those game changing books.

Then he wrote Spent.

We invited him actually to give a talk at the Institute of Practitioners and Advertising on the links between evolutionary psychology, sexual selection, and signaling and consumerism.

That sort of stuff has fascinated me.

Some of the happiness literature.

But I probably was just lucky.

Tim Harford, another very good British writer, whom you must meet in an interview, by the way.

But they've been very good writings on the hinterland of kind of economics and biology, evolutionary thought and psychology, which fairly obviously, for someone working in advertising should interest me.

I was lucky because back in 1989, I had a kind of road to Damascus moment where I said, okay, however elegant economic theory may be, it patently doesn't describe individual real world human behavior very well.

Now, my luck was when I went into the advertising industry with Ogilvy, I first started working at a place now called Ogilvy One, which was then called Ogilvy May the Direct, which was the direct marketing wing of the agency.

And there you do what are effectively social science experiments, but very well funded at a grand scale, which is testing different advertising approaches to see which gains the most response.

And fairly early on, sometime in about 1989, 1990, we were writing letters to let's say 100 ,000 people at a time and selling, you'll remember these, things like call waiting and call diversion, in other words, they were called, they called star services with AT &T enhanced calling features on your phone,

and you'd pay some two pounds 50 a month, 67.

You've got a star, the numbers seem to be more or less the same all over the world.

Call diversion, then there's call waiting and call a display.

And we send out the letters and the letters at the time, bear in mind, this is before the internet exists, you know, before the web existed, so there was no online components.

This would have a telephone number to call if you wanted to order it, or a prelasered coupon at the bottom where you could ticket and post it back to order the product.

The result was the same either way.

And the client said, look, I don't understand why we're effectively encouraging postal response here.

I think they actually wanted to get call center volumes up for some reason, or they had spare capacity to call center.

Why don't we just send letters with just the phone number and not bother with the coupon?

And we said, let's not forget, by the way, that the randomized control trial was being widely used in advertising in the Edwardian era.

And it took medical science until about 1947, before they they they reached the same point of sophistication as the advertising industry.

Just a bit of a brag here.

But you know, dating back to people like Claude Hopkins in the 1920s and before you ran a thing called Navy split run in the newspapers so that newspapers were usually printed on two printing presses, sometimes four in parallel.

So you'd produce different advertising copy for the different presses.

They'd have different plates.

The coupons would be coded so you could tell which advertisement had generated the response.

And you then thought through a sort of Darwinian winnowing process, you'd get rid of the worst creative executions and focus on the best.

So anyway, we said, well, before you do that, let's just test it.

So we send out some 50 ,000 letters, phone number only, 50 ,000 letters, coupon only, no mention of a phone number.

And then 50 ,000 letters, which are phone number plus coupon.

Now, tragically, I don't have any copies of the original results, but I can remember them to within a, you know, a point one or so.

I'm pretty sure the response rates was as follows.

Phone number only around about two point five percent.

Coupon three point five percent.

OK, coupon plus phone number five point nine percent.

Was it six point nine percent?

Anyway, it was five point.

It was practically the sum of the other two methods.

So basically the people who responded by the phone were people who would only respond by phone.

The people who respond by coupon were more or less people who'd only respond by coupon.

And so the sum total when you offered people both modes of response.

Was it was something like, let's say, two point four, three point six and five point nine.

It was something exactly like that.

So it was only point one percent shy of being the sum total of the two.

Now, if you think about that and you think about economics, something very weird is going from here, which is that regardless of what the product is and how much it costs, which is the same in all instances, the single biggest determinant of whether someone bought that product or not was how they could order

it. Yeah, my recommendation then was we ought to order it.

We want to offer a fax number so that an additional 0 .4 percent will order the product by fax.

That when you think about it is very, very strange.

And from that moment on, it was kind of, you know, as I said, the road to Damascus moment, I thought, OK, there's a whole missing science here, because this doesn't make sense in any conventional model.

Still doesn't quite make sense to me, to be honest.

But by the way, it has been found to be true in lots and lots of other instances.

It's highly replicated.

So, you know, if you offer if you offer a web page and a phone number, you will sell a lot more than if you only offer a web page.

And OK, I mean, if you're a really sort of defensive economist, you'd burble on about transaction costs, I guess.

But that was, I suppose, similar to wonderful experiments.

You know, I love Richard Thaler's thought experiment about the beach and the difference between transaction utility and acquisition utility.

Oh, I think it's one of the most fantastic.

It's not quite a thought experiment because he did actually ask people.

So this is you're on a beach and you've been there with your friend and it's a pretty hot day and you've been there for a few hours and you're both of you getting pretty thirsty.

And you mentioned the fact that you really could do with a drink and your friend just says, well, actually, I haven't noticed that about, you know, three quarters of a mile down the beach, there's a blank selling bottles of chilled Heineken.

Tell me how much you're prepared to pay for a bottle of chilled Heineken.

And I'll then if the price is lower than that, I'll buy you a bottle and bring it back.

And if they're quoting a higher price, I won't buy your bottle because it's obviously too high a price.

So tell me what you're prepared to pay.

And in experiments with admittedly, you know, weird Western students, but nonetheless in those experiments, if you describe the place down the beach as a boutique hotel.

Now, this is an experiment from, I think, the late 80s or early 90s.

So we'll have to multiply by two.

But from a boutique hotel, people were prepared to pay perhaps the modern equivalent of six dollars.

OK, if you describe it as a beach shack, they're prepared to pay about three.

Now, the utility you gain from drinking a cold Heineken, all bottles of Heineken being identical is going to be the same.

You can't say, well, it's the presence of the boutique hotel.

You know, I'm gaining status by drinking in front of a boutique hotel because it's been described as three quarters of a mile away.

It's not even within sight.

It's just your expectation.

Instinctively, humans go, well, boutique hotel, they've got higher overheads than a shack has.

Therefore, the amount I'm prepared to pay for a bottle from that is higher.

Which is a fairly good thought experiment at showing that the assumptions of just maximizing expected utility aren't the whole story in explaining willingness to pay.

I always think that's a really, really wonderful point because I think it explains why there's a sales promotion industry.

I think it explains why, you know, why retailers have sales in many ways.

You know, that there's that there's in other words, there's the value we get from the ownership or consumption of an object and there's the immediate positive or negative feeling we get from how much we pay for it and under what circumstances.

I've got a hunch that, for example, if you wanted to buy a pair of shoes and they were on sale at 30 pounds, I mean, I mean, Richard Taylor was surmises that actually the when you buy a heavily discounted pair of shoes, you know, you quite often buy a pair of shoes that don't really fit very well just

because of the hit of the reduced from three hundred dollars to 150 or whatever.

I don't know what shoes Richard wears that I might have been either vastly too extravagant there or too stingy for all I know.

His shoes are actually handmade by Austrian elves out of the finest cashmere.

But but nonetheless, I mean, there's something very, very interesting going on there, which is that it isn't just a question of, you know, a simple one dimensional transaction between the value of a good and how much you pay.

There's a context to it as well.

Context is so important.

Do you think that factors in with people, too?

And I mean this in the sense of one of the questions that I love to ask people and get answers from is, how do you separate the people who know what they're talking about from the people who don't?

Is there a context to that?

I mean, there's a lot of people that pretend or they sound like they're they know what they're doing.

And you probably want to run across.

But in behavioral science or in just in general, just in general, but in every industry in every trade, there's, you know, for every Warren Buffett, there's a hundred people trying to sound like Warren Buffett and emulate him, but they don't have his skills and attributes or Warren's luck.

It might be it's definitely that all these people are equally virtuous.

And Warren happened to get very lucky.

I mean, without without Warren, they both admit that to some degree, that, you know, that fortune of birth apart from the else and the time of your birth, and of course, the geographical location will play a large part in how successfully maybe I think Warren himself or Charlie Munger said, you know,

had I been born in the middle of Pakistan?

It's unlike I would have made it as a major investment.

A lot of us don't even recognize that, right?

Like a lot of the virtues that we have that are valued today in a different time or different circumstance may not have been as as valued.

Right. I mean, bullshit confidence is probably of huge evolutionary value, particularly in sexual selection, I would have thought.

So, I mean, one of the great people we've had in to speak here and it's been an absolute privilege to have him is Robert Trivers.

And his you'll know him as the man who did the great work on reciprocal altruism and some extent was behind the whole selfish gene idea.

But his his recent work on the on self -deception, of course, self -deception is evolutionally advantageous and that we deceive ourselves, the better to deceive others, because the best way to bullshit is to start by believing your own bullshit.

Yeah. So and also you as an outsider, then recognize that.

Well, I might be bullshitting.

I mean, one of the things I would say is that I have a higher bullshit tolerance coming from business than academics do.

And I occasionally scandalize academics in the behavioral science by saying, you said off the record, if you've got any slightly rubbish research, there's a bit inconclusive, doesn't quite hit the value test.

But, you know, it's showing some fairly interesting results.

I think, how could you say such a horrendous thing?

You're actually the whole bacconian message is being put method is being polluted by your latest standards.

My point is that if you're an academic, your job is to try and be right unambiguously, completely, absolutely right about something.

In business, if only 30 percent of people do a weird thing, 20 percent of the time, there's still a business opportunity in that.

It's I mean, one of the comments I made is that occasionally in attacking some of the behavioral science, which has appeared not to replicate, people have said, well, the jam experiment, the paradox of choice, you know, we've actually done a similar experiment and it doesn't work.

And my view is not actually, I said, all I need to know is that that might be worth testing because economics, the problem of economics, now this is the most important sense in the entire podcast, OK?

So, you know, the problem of economics isn't only that it's wrong, it's that it's incredibly creatively limiting because it tends to posit a very one dimensional view of human motivation.

And therefore, if you wish to change human behavior, the only two ways you can do it are basically by bribing people or finding them.

So once you define something as an economic problem, essentially your answer will boil down to a very, very simple assumption about human motivation.

So it would be almost universally assumed in the business world that if you have more choice, you will sell more.

Now, I would argue that is exactly the sort of thing which belongs in the category of if you reduce the price of something, demand will go up.

It is true more often than it isn't, but it isn't always true.

There are cases where putting the price up increases demand.

We've recommended our clients test that our argument is, look, eventually you may have to drop the price, but let's try putting the price up first.

Which products work best for that?

If you're choosing from a menu in particular, a menu of options, let's say a fast food restaurant, OK, you use price to navigate the menu to an extent, you know, am I two pounds, 70 hungry or am I three pounds, 80 hungry?

So if you have a fantastic, generous burger and you price it too low, you may actually miss out on people who are looking for a, I mean, the most extreme case is sometimes in the art world where someone says if a product, if a painting doesn't sell in the window of your gallery, if it hasn't sold after three

months, double the price.

And part of the reason that is someone who's looking to buy a 10 ,000 pound painting doesn't want to buy a 5 ,000 pound painting.

I mean, because they've already set the expectations.

They've kind of set the expectation of a level.

The funniest case was me as a Brit going to Baker, I think it was Bakersfield, California in the early 90s and my first ever visit to a Taco Bell.

OK, now Taco Bell is a fantastic value for money.

And so I can remember that I think a bean burrito back then was 59 cents.

It might have been 69.

So I'm a Brit and I'm used to the McDonald's being, you know, four pounds, 80, three pounds, whatever.

So this is basically this is this concept.

It's tapas. It's basically tapas, isn't it?

So I'm just going to have two bean burritos, I have three of those.

This bloody great pyramid of chops of Taco Bell food.

I'm standing there, the other people behind me are looking at me, obviously aghast, because there's this pile of food on my tray, which would have fed actually all six of us for the rest of our holiday.

So, you know, there are cases where there's a whole expectation level where you can throw people completely.

There's a strange thing I always notice, which is there's always a breed of hotels in really low labor cost countries, OK, which are charging the same prices as Savoy.

You see what I mean?

I mean, if you're going to like Bhutan or something, you go, well, you can probably hire really good Bhutanese people for, you know, a tenth of what it costs or less than what it would cost in, you know, California.

So you'd expect the best hotel to be a bit cheaper.

But people basically want to spend four hundred dollars a night.

They read up their mind, they just made up their mind, they go, anything, anything less than that might be a compromise.

I don't know where the excess money goes, probably into the pockets of the owners of the hotel brand.

But I mean, what do you think the psychology behind the prison deciding that is, is it I'm treating myself and I've decided I can treat myself to four hundred dollars a night?

Like, how do you think that framing happens?

Well, there's also the fact that holidays are scarce.

OK, so you may say taking back to your multiply by zero thing, you know, there's no point in spoiling the ship for hape another tar.

It's going to cost you a bloody fortune to get to Bhutan or match you, pitch you or whatever.

You're going to be burning sort of, you know, if you're at that kind of market, you're probably traveling business class, you're burning three or four thousand on the journey.

Maybe if you're American or Canadian, you only get an absolutely meager and pathetic annual vacation allowance, which, by the way, is the most extraordinary case of status quo bias.

OK, I have never met anybody in Europe or the including the UK.

OK. And the UK is a bit more Trumpy than the rest of Europe generally.

OK, I've never met anybody in the UK who is so right wing.

They think we should have less vacation.

Nobody says, well, we get an extra two percent of annual GDP growth if people just worked 50 weeks of the year instead of 48, 47.

We don't even work between Christmas and New Year.

I didn't let you let you into that, but no, no, nearly every office.

OK, basically about December the 23rd, the bugger shuts down, doesn't get going until January the 2nd.

OK, and then we have four weeks, five weeks, maybe vacation on top of that.

Germans have about six and then tons of paid holidays, not as many of the weird holidays as Americans have.

Actually, you have slightly more of those kind of one day, weird Labor Day kind of things, which used to be a case where just the DMV closed but now have become slightly more slightly more.

But I've never met a Brit, not a single Brit who says, no, no, no, we ought to have less this vacation thing.

It's getting out of hand.

And yet when Bernie Sanders and it was Bernie goes into Congress and tries to get two weeks mandatory paid vacation for every American worker.

He's basically looked on as if he's fucking Lenin.

OK, I mean, this is considered like practically communism.

But I mean, the Germans are perfectly efficient at making stuff.

I'm not even sure that the United States wouldn't be economically better off with more vacations simply because when people spend leisure money, it generally generates more labor and more work and more locally than if you buy manufactured goods.

I mean, Henry Ford created the two day weekend so that people would buy cars.

It's slightly apocryphal, but not that story, by the way.

But I mean, it was Henry Ford rather than legislation that seemed to have created the two day weekend in the US, partly because of his surmise that if that became a norm, then it was worth the American worker owning a car.

If you only had one day off every week, not so much.

So that's a really interesting case of status quo bias, which I mean, I mean, generally, if you went to the UK and said, we're just going to go down to two weeks vacation, there would be I mean, just total rioting.

I mean, it's it's inconceivable, except in case of wartime or something that you could achieve something like that.

And Canadians weirdly go along with it, don't you?

Despite all your liberalism and stuff, you fancy, you know, your fancy left wing views, you still go along with this grueling work schedule.

Oh, my boss. I don't know.

He's a bit weird. It's a bit weird.

OK, but there are a few Silicon Valley places I get on the time off.

I want to go back to something we were talking about before we started recording, actually, which was thinking through decisions forward and backwards along the axis of time.

And you had some pretty profound thoughts on that and I'd cut you off.

I'm wondering if we could reintroduce that.

And I think the context in which.

OK, well, I'll go back to the little point I made that economics is problematic because it's very, very uncreative.

Yeah. Because it defines human motivation, as I said, as if humans just have this single lever, which is patently ridiculous in evolutionary terms for all kinds of reasons.

And therefore it reduces when you reduce something to an economics problem.

What you effectively do is you create artificial certainty, which is, of course, appealing to decision makers in institutions because certainty, the artificial certainty effectively means they can't get fired for making the decision because it involves no subjective judgment whatsoever.

Right. So they love a formula.

Bureaucrats really, really love a formula because it prevents them having to exercise judgment for which they might be blamed.

So economics creates this idea of certainty and we automatically have to pretend that everything we do is scientific.

Now, no one goes home to their family.

I've just bought a really expensive pair of headphones.

Now, I don't go back to my family and do a whole presentation on why I made that decision.

I just felt like it, you know, a couple of nights ago.

I don't have to justify it to other people why I bought this pair of headphones rather than another pair of headphones.

Because the great thing about being a consumer is you don't have to generate a whole load of self -extricable, pay -free bullshit every time you make a purchase decision.

But in a business, what you have to do is pretend there was a science behind your decision because then you effectively you've covered your own ass.

Look, the answer to this is 74 and that's what we're going to do because the formula told us to or the algorithm tells.

And then if it works, they get credit for it.

If it doesn't work, it doesn't work anyway because we did the best we could.

So what you've done is you've created, you've exploited this incredibly asymmetric reward blame culture that exists in most corporations.

Now, it's interesting debate.

Do you have to have absolutely insane bonuses for people in the financial industry?

Because if you actually paid people in the financial industry by salary, they'd become so risk averse they'd never do anything at all.

I don't know. But one thing about insane bonuses is at least they do.

You know, they do mean there's a reward for being different.

Right. And a punishment for being bad.

What generally happens if you're in a kind of bureaucratic or governmental or even any large private organization?

Just as in individual behavior, the big driver seems to be avoidance of regret.

Right. In corporate settings, the big driver is avoidance of blame.

And you can avoid blame by claiming that it was, you know, that what you did was entirely rational, in fact, was therefore unavoidable because Reason told me to do this.

We scoped the market, we did market research.

It told us that people wanted that, so we produced that.

Now, OK, if you follow all those precepts and fail, you won't get fired or blamed because you were rational.

Right. OK. If you do something which is better but involves a degree of human imagination or judgment, if it works well and better, you might get a bit of credit.

You probably will get people saying, well, it would have been even better if you'd follow Reason.

You just get a tiny bit.

If it goes wrong, you get all the blame.

You're fired. This creates a huge amount of hurting behavior in businesses.

No one ever got fired for buying IBM.

We always call this in Ogilvy Change.

We call this the Heathrow Effect.

That when if you ever ask anybody to book your flight from London to New York, they will always book you on a flight from Heathrow to JFK.

Now, both those airports may be suboptimal, particularly if you're visiting Ogilvy in New York, which is much closer to Newark.

OK. The reason they do that is if you book someone Heathrow JFK, which is the default, it's probably not the best solution for a lot of people.

But if anything goes wrong, they'll blame British Airways.

If you do something imaginative and strange, you book someone from London City Airport, you book someone into Newark.

It may be a better decision 95 percent of the time, but in the 5 percent where something goes wrong, they might blame you.

You can't ring your secretary from Heathrow and say, well, how were you thinking booking on a flight to the world's third busiest international airport?

Are you insane because Heathrow is the norm, the normative choice?

Right. The second you do something weird, this is, oh, I thought I'd try London City.

Well, I would I would have been in New York by now if you hadn't booked me for this bloody Toy Town Airport.

You're drawing attention to yourself.

So you're drawing attention to yourself.

You're putting your head above the parapet.

And so that's why there are only four big accounting firms in the world.

OK, if you appoint one of the big four and they cock up, everybody blames PWC or why or whatever.

OK, if you appoint a small boutique accounting firm, it may be better.

But if they cock up, now they blame you because you didn't appoint PWC.

Yeah. So there's this weird thing about what you might call the rational boring norm thing, which is a very, very safe place for all business people to.

And it's exactly like a carpe or antelope or whatever, which heard around.

You know, in other words, I'm not going to get picked off here because I'm in good company.

Now, what's problematic about that is it creates, I think, in business decision making and in government decision making what you might call bogus rationality.

I mean, scientism might be the the better.

The problem with scientism is unfortunate convention is a word because the world really needs a word where you can abuse things that pretend to be science, but aren't.

And scientism is the technical term for it.

But then what you call someone who practices scientism, when you naturally say scientist, I guess, you can't say a scientismist.

OK, so unfortunately, as an abusive term, it's not very flexible because you can't, you know, now what happens, OK, is you basically pretend that you are you have a process that allows you to arrive at the right answer without any imagination being required through the application of pure sequential

logic or either induction or deduction.

I get the muddled up.

You'll know the difference.

One of them goes in one direction.

The other one anyway.

But you pretend that that's how you've made your decision or that that's how.

Now, what happens is often that's how a good way to justify a decision, but it's imagination that gets you to the hypothesis in the first place.

So in mathematics, someone instinctively believes something and then they set about to prove or disprove it.

But it isn't the act of the mathematics they use to prove the theorem.

That isn't the mental process they use to generate the theorem in the first place.

Peter Medawar wrote a paper about this.

You know, is the scientific paper a fraud?

And his argument is that the way in which a scientific paper is written dishonestly misrepresents the mental processes that were involved in generating the insight in the first place, because you downplay the imagination bit and you pretend that it was reason that got you there on its own.

And I think that is a really, really costly and interesting thing that happens in all institutional decision making, which is that you and to a point where it's not always easy to tell the difference between rational decisions and they do exist.

OK, well, if this is the case, that must be the case.

And if that's the case, we must do that.

OK, that's a rational decision and they exist, not denying that for a second.

Then there's what you might call or what Arthur Conan Darl call reverse reasoning.

You know, there's the study of Scarlett where this has happened.

There's a dead body here.

What might now. OK, we're quite good, all of us humans are saying this has happened.

What's going to happen next?

Which is forwards reasoning, the detective, and I would argue the advertising person as well, engage in something different, which is reverse reasoning, which is we got to this state where there's a dead body on the floor.

But what might have happened immediately beforehand to have caused this state of affairs to have arisen?

And in advertising, you may say it's we want people to do this thing.

What prior stimuli will we need in order to get them to that place?

It's almost like seeing people who use moist lavatory paper.

That's one of my total obsessions, by the way.

Why the hell. What is it about the West that thinks that it's OK to wipe your ass with dry paper?

We need Japanese toilets.

You know, if I were Trump, that'd be day fucking one of Japanese toilets in every single building is disgraceful.

You know, the Islamic world's right on that.

They have a proper tap.

OK, it's only some weird Western thing, the idea that I mean, you wouldn't you wouldn't clean your hands when they were muddy with dry paper, would you?

So why do you do the same with your ass?

But for whatever reason, OK, people don't really buy moist lavatory paper.

So I've got to ask as an advertising person what prior conditions might make this more likely?

You know, I mean, let's let's hypothesize a bit.

You know, you might say, OK, actually, it's the shelving, because when you look at supermarket shelves, we instinctively derive social information from the relevant prominence and proliferation of dry versus wet paper.

And so we look at a supermarket shelves and we go, well, basically, there are a ton of dry toilet rolls all over there stretching as far as the eye can see.

On the top shelf, there are two meager little packets of moist lavatory paper.

That means it's basically for perverts or people with a weird medical condition.

So I'll buy the dry stuff.

Now, you know, I've said I've tried to persuade someone to do this.

Kimberly Clark, why don't you just take one supermarket and have three times as much wet paper as there is dry and see how people buy blue paper then if they think the social norm is is wet.

Now, that's reverse reasoning, because that's only one theory.

OK, what Sherlock Holmes has to do.

This is why I slightly I slightly resent the fact that Sherlock Holmes is always described as this paragon of pure reason because he's a really creative guy.

This is an important distinction.

Do you think of Sherlock Holmes as being a model of the scientific method or do you think of him as being a brilliant scientific thinker who is also a really imaginative guy?

Because a large amount of what he does is noticing things that no one else notices.

The dog that doesn't bark in the night, the, you know, strange little details about someone's dress that would be meaningless to ninety nine percent of people, but from which he can infer some interesting thing about the correspondent and so forth.

Now, the act of detection is patently one where some degree of hypothesis, you know, imagine, eliminate is going on.

And then there's the third thing, which is you have an instinctive urge and then you just post rationalize it.

Now, the problem of those three completely different modes is that when you write them down, they all look the same.

But all three of those modes are actually very different modes of thinking.

And in advertising, I'll let you into a secret about advertising.

Most of it works this way, OK, which is you put two or three very interesting or very strange people in a room, you tell them a lot about the problem if you're lucky within a week or so, they notice something really weird, which may seem entirely tangential or irrelevant when they first mention it,

from which you can arrive at a really interesting intervention.

But you don't go into your clients and say, well, we just got these guys in a room and they had a few beers and actually nothing happened.

Then they went down a completely wrong alley for three days.

Total fucking disaster.

I thought we're going to fail.

You actually invite the client in and you pretend that you arrived at this insight or flash of imagination through the deployment of sequential logical thought.

The whole thing is a complete misrepresentation of what happened.

What you did is you instinctively felt there was something in this idea.

And then you looked around creating the backstory for it in retrospect, post hoc.

But the trouble is that you give yourself a rational framework after you've already completely right.

You completely. What's interesting about that misrepresentation is it then causes people to think that there must be a process for doing this stuff, which if followed will work every time.

Because the three kinds of thinking, as I said, you convince yourself, you must have your bullshit that you can then repeat this process.

We can't distinguish really between those processes.

And we automatically this is why scientific papers are written as if as if that you gain more status somehow.

There's a wonderful exercise following on from Peter Medawar's paper about is the scientific paper of fraud.

There's this fantastic piece where Jeremy Bulmore, who is an advertising guy in London, he's about 78, fantastic man.

I mean, one of the great advertising thinkers of the last 50 years.

He writes up an imaginary scientific paper for how Archimedes would have worked out the volume of the crown.

And it is in order to work out the volume of a complex solid, all that is necessary is for you to immerse it in a liquid.

The displacement of the volume of liquid displaced into some suitable measuring container will then tell you the exact volume of the complex solid.

Now, the fact of the matter is, that is absolutely true.

But Archimedes didn't arrive at the conclusion that way.

He had a sudden flash of insight while climbing into the bath.

And so we often make the mistake that we think we spend a whole load of time effectively trying to focus on how you write a scientific paper and that approach.

And there's not nearly enough thought given to how do we just get more people to climb into more baths so they can think of more possible explanations.

So I mean, the other thing that's very liberating creatively here is evolutionary psychology and the understanding of the adaptive unconscious, which is one of the most liberating things creatively is to say, everybody says that this is annoying them about this, but what if they're bullshitting?

So one of the people I'm really grateful to, Robert Kurt Spann.

I don't know if you've ever interviewed him.

Obviously, I mentioned Robert Trivers about self -delusion.

I'd also include John Hight, people like that, who've made the point that most of we're not really a rational animal, we're a post -rationalizing animal.

Right. And that most of the time when we give a reason for an emotional state, it's a plausible sounding narrative that's actually invented in the aftermath of us experiencing that emotion and maybe partly because the thing in evolutionary terms is emotions, most of our really important behaviors are governed

by emotions because now emotions don't have to come with reasons attached, because evolution cares about survival.

It doesn't care about how good your reasoning is like capitalism in that sense.

You know, if you happen to start a really successful cafe.

Yeah. Even if your reasons for choosing the cafe or deciding on the location or the type of food, you know, they're total bullshit.

If it works, it works.

Right. Now, you may go on believing that you were right all along and you knew that a cafe on the corner of that street was going to be fantastic.

And it may or may not be that those reasons you have are true.

But nonetheless, the reason capitalism works is if your reasons are shit, you've got no cafe.

OK. If you basically, if your reasons are, sorry, if your reasons are shit and the cafe actually is in the right place for entirely different reasons, the cafe rules of seed, you know, if your reasons are, you know, if you've got a wonderfully plausible reasons why the cafe should be there, but it's

kind of bullshit, the cafe goes bankrupt.

And so it's really harsh exposure to reality.

The problem with the kind of control economy is that you invest money according to how good people's reasons are rather than according to how good the results are.

Or how good they sound.

So how so there are consumer products out there.

Genuinely, Red Bull makes no rational sense whatsoever.

OK, nobody likes the taste very much.

When you research it, people eat the taste.

It costs a lot of money.

It comes on a tiny can.

The hell's that doing that?

You could never sit down in a complex place like isn't that part of what the fact that it tastes unpleasant is part.

Now, I think there's an evolutionary thing, which is if you want people to believe that something has medicinal or psychotropic powers, it has to taste a bit weird.

Wouldn't this same theory apply to Red Bull, then?

Like if we're expecting to get some sort of energy benefit out of it, it shouldn't.

There's got to be a price.

We've got to pay a price.

Right. Yeah. And I think that I think that's in fact be true that that little bit of kind of grit in the oyster thing is somehow appealing to us.

And it's why, you know, medicine really should taste yucky because I don't think that.

I don't think the placebo effect works very well with neurofen meltlets.

I don't know if you have that in Canada.

But they're kind of lemon flavored ibuprofen.

And my suspicions always been they're a bit too damn tasty for me to believe they're an analgesic.

Has anybody done research into the taste of placebos versus like how well were responding?

I know the color matters, size matters, the number you take and how frequently all of those things have an effect on the placebo effect.

The great guy on this is a theory from a guy called Nicholas Humphries.

And his theory, he takes this even further where essentially he says homeopathy works.

Right. Because unconsciously, the feeling that we're being medicated and treated by an expert causes are unconscious to generate more activity in our immune system and in the costly physiological processes of repair and renewal and fighting infection.

And so just as we can't control our heartbeat consciously, but we can hack it, you know, we can practice yoga and reduce our heartbeat that way, or we can't control our pupil dilation directly, we can only control it obliquely by creating conditions which are conducive to a particular physiological

response. In the same way, basically, placebos when administered with a bit of a weird taste and a very sickly creating our unconscious, the feeling that now is a really good time to invest big and getting better.

So I think we should support them.

Now he takes the idea further and says, this is Nicholas Humphries.

He says that there are placebos in the wild, you know, so trumpets and marching and drums are bravery placebos.

I gave a talk to a very large cosmetics company last week.

Now, OK, if you look at women's fashion and women's beauty, OK, now, the really shallow explanation of why women dress up.

I'm not an expert. No, no, no, no, no, nor me, I've got two six and fifteen year old daughters and their behavior baffles me.

Takes an hour and a half to leave the bloody house.

I mean, for goodness sake, you know, but what you're actually doing is first of all, the theory that you're doing it to attract men.

Well, there's an awful lot of female fashion, which men aren't actually men's tasting the way women would dress if they were dressing for men is not what you see in vogue.

It might be what you see on Pornhub, but it's not what you see in vogue.

OK, OK, that's the first thing.

If you would simply try to appeal to men, you wouldn't dress in high fashion, really.

OK. Second thing is they're doing it to signal to other women, which is a kind of status rivalry between them, which may have men as its object, but which is nonetheless, you know, in the same way that the secondary sort of the secondary status battle, just as men probably do, you know, men probably

compete with other men in that same way that women might be the ultimate object.

But the first object is to humiliate your competition in some way.

OK. But then the other explanation is that in terms of cosmetics and in terms of fashion, you're doing it to signal to yourself that it enables you to feel confident in a way that actually you cannot will into existence.

So you you cut now in order for that to work, it obviously has to be expensive.

You know, because I'm worth it was the L 'Oreal phrase.

OK, you know, that there has to be a kind of just as there has to be a nasty taste to Red Bull, there has to be a slightly pain in the wallet when you buy the moisturizer or when you buy the I'm running out of vocabulary here, mascara, foundation.

Can anybody think of anything else?

Eye shadow. That's the stuff.

OK. But there has to be a kind of borderline pain threshold thing for for that placebo effect to really, really work.

Just in the same way that, you know, homeopathy couldn't work.

You just go, hey, go, here's your home.

You've got to have a little bit of mumbo jumbo and general sort of theater and effort around it and probably probably homeopathy is probably better if you charge a lot for the appointment.

Isn't there something I think it was Dan Ariely who called it the IKEA effect, which was the effort, the effort engaged in the acquisition of something.

Nobody's going to spend four hours putting together a bookshelf, they say, shit after.

So my bookshelf has to be valuable because I spent four hours just down an egg is the famous marketing example, adding a degree of difficulty.

So costly signaling is interesting.

Now I can say I baked it.

Yeah, no. Also, the extra effort actually adds to the perceived value.

So something in the brain does seem to have something a little like that marks labor theory of value, that the more effort you put into constructing the bookcase.

In fact, very interestingly, we have worked with IKEA and IKEA said a very interesting thing once.

They said, if you work with IKEA, do you want to know how to get fired immediately?

And we said, well, we better know what that is.

Yeah, you know, it's handy to know in advance, isn't it?

After all, they want to discover that in retrospect.

So if you ever go to IKEA and say the whole problem with IKEA is that the purchase process is too difficult, what you need to do is set up an IKEA website, have all the products on that and have the furniture delivered ready assembled to the people's homes.

OK, in fact, the man who delivers the furniture can even assemble it for you.

OK, that is how you get fired from IKEA in five minutes, because you don't understand the fact that actually, particularly with low cost items, effort can destigmatize low price.

Pick your own strawberries doesn't mean the same thing as cheap strawberries.

Cheap strawberries raises the question, why are these strawberries so cheap?

If I had really good strawberries, I'd be charging two pounds for this planet.

What's going on here?

Whereas pick your own strawberries, as I get it, the reason the strawberries are cheaper is because I contribute something in the shape of my own labor.

You probably don't have pick your own strawberries in Canada, do you?

We do. I was just thinking of Christmas trees are another one where in Canadians you'd all cut your own Christmas tree, wouldn't you?

Because naturally being a lumberjack in the jeans.

Isn't it? Yeah, the tradition I have is to go every year and cut down a Christmas tree.

It's actually more expensive to go cut it down yourself than it is to show up at Home Depot and buy a precut real tree.

So you're paying more and you're paying for that ritual or experience that you you share with other people.

But the effort contributes to the effort.

Because you're driving, you're often driving forty five minutes to an hour to get to a Christmas tree farm.

So weirdly, if you invented a cosmetic where you could basically just get an aerosol, go and you basically look fantastic immediately.

Nobody would buy it because it just wouldn't work.

Now, that's problematic.

And Robert Frank's right about this, which is the extent to which rivalrous forms of costly signaling can lead to extraordinary economic inefficiency and absurdity.

I think Bob Frank's right there.

I mean, in the book The Darwin Economy.

I think he's I disagree in one area and I think that an awful lot of human innovation has been made possible by really a combination.

Jeffrey Miller agrees with me on this.

But he I mean, he's much better thinking of this than me, obviously.

But that to some extent, sexual signaling or costly signaling sometimes provides the early stage funding for inventions.

So if you think about it, let me give an example.

The car for a good five or ten years, the car was actually worse than the horse.

It was unreliable, expensive, you know, ludicrously, you know, crap and slow compared to a horse.

The reason people persevered with cars is because of the status and the novelty.

So there are whole technologies which before they reach proper sort of Model T realization have to go through these painful early stages which in themselves don't make sense purely in terms of utility.

I would argue the computer actually, I think the computers basically computers were a hobby for nerds.

Yeah. OK. Yeah. I've been told.

I mean, I mean, though until until actually the Web came along for 95 percent of the world's population, the computers were kind of dumb because the only thing you could read on them was something you'd written yourself.

But even at the very infancy of the Web, they were still very hard to use cumbersome protocols.

I think the first four years of Web use after what was it?

Ninety seven. Was it 94?

Sorry, 94. Yeah. Yeah.

I first used the Internet in 88 and 87 before and I was young Usenet and things like this.

And it struck me that it was unbelievably kind of unwieldy and ugly that deep down here was something absolutely brilliant, which had been ruined by not having a friendly interface.

But all my geek friends said, no, no, that's the whole point.

It's really minimalist.

We don't waste bandwidth on pictures or typography.

No, no, it's just just what it is.

This is just. And I suddenly realized that this was it was really the hobbyists and the neophiles and the kind of weird people who are doing it for all manner of non utility based reasons who are the people who are probably essential if you're to get out of kind of local local Maxima in innovation in a way.

You know, I mean, if you think about the earliest electric cars are kind of shit.

I mean, not now, but I mean, 10 years ago before Tesla and a few serious people came along, basically, people had electric cars because they were novelty or because they wanted to show off their electric.

It's like the minimum viable product that people will buy.

And then you'll increment incrementally improve or improve rapidly after that.

So I'm never sure about the typewriter because the typewriter was in a sense a rival signaling device that if you wanted to look like a serious business, you have to type all your letters.

That meant that everything you wrote had to be written twice and corrected twice.

So getting a letter out of an ad agency in nineteen eighty four might have taken you three days by the time you'd gone back to the typing pool.

That's an interesting one because once one business is to the typewriter, everybody asked to switch.

The bad side of that is I think you had.

Well, the good side was it limited the amount of communication in a business.

It also meant that senior people when you had a typing pool because of the friction cost, the friction costs were huge.

Someone who worked in Ogilvy in the in the late 70s said that if you're a junior guy at Ogilvy, if you're the chief executive or the chairman, it didn't matter.

You get anything you want to type to meet.

Yeah. And so senior people, unlike the email age, senior people had more communicating power than junior people, which is probably sensible when you think about it.

Because they could get in and just say, OK, I've written this.

Send it out tonight.

And it would get out.

If you're a junior accounting executive in Ogilvy in the 1970s, it was recommended to you that it was worth spending about half an hour a day Terry Thomasing around the typing pool, basically going up being a hell of a charming dude and going, hello, lady.

Well, what sort of weekend did you have?

I said, because if the typing pool didn't like you, you couldn't get anything.

Exactly. And basically if the time pool didn't like you, you might as well just resigned because you're getting nowhere.

You can get a letter to your client.

Now there's both good and bad to that.

The cost of the cost of signaling, of course, meant that signaling is more reliable because, you know, it requires effort and time multiplied by seniority in order to get something produced.

So you might argue that the typewriter in a weird way had a benefit in reducing the amount of superfluous communication that was produced.

But it did have this insane inefficiency that everything had to be written twice.

So I've often wondered, is email better?

We assume it's free, it's instantaneous.

Therefore, it's got to be better.

But if you look at information theory, the great problem of information is it's easy to create and hard to trust.

Now, if there's a cost, if email had a stamp attached to it, arguably the donation should be to charity.

You know, I want to be able to stick a stamp on an email which has a one dollar charitable donation on it so that you look at it and go, shit, this is serious.

Now, this is costly signaling and advertising.

I can explain this beautifully with a single anecdote, which is very good guy called Steve Barton, who is an American account man here.

We had to launch back in the 90s a new, very significant product for Microsoft and we had to launch it to a community of about 300 developers, very niche audience.

OK, maybe it was a thousand, it might be a thousand or two thousand developers.

Those are the kind of numbers.

And they had a budget of about 50 ,000 pounds to devise a launch communication back then.

This is this is again, pre -internet.

That meant sending something elaborate through the post.

And they came and said to us, what I really want you to do.

And we did actually something quite good in the end.

It was quite arresting and quite fun with with a sort of ironic mouse mat and various things like that.

But he said, I wanted to come up with something that uses this budget, you know, which is sort of, you know, six pounds, seven pounds per pack with real theatrical effect.

But if you can't do that, just write a really good letter and I'll send it to them by FedEx.

And the point is, if something arrives, we instinctively know as human beings that the importance of a communication is proportionate to the cost of its generation and transmission.

Yeah. Now, in the same way that bumblebees can detect costly signals from flowers, the smell that correlates, there's a particular smell that you can only produce if you're capable of producing a lot of nectar.

And bumblebees are disproportionately attracted to that as a reliable signal.

Now, bumblebees don't have massive brain, so it doesn't strike me as implausible that humans have developed a similar instinct around communication, that the cost of generation of transmission, not not necessarily the financial cost.

Any communication which involves a high degree of difficulty or scarcity in its creation is a more impactful communication as well.

Now, that scarcity or difficulty could be sending it by FedEx.

Shit, no one would send a trivial message by FedEx because that's going to cost $8 a pop.

Right? That's simple financial cost.

Creativity. Shit, they got someone with a real sense of humor or real talent to devise that message.

Shit, this is an important message.

It could be just the degree of difficulty of construction, craftsmanship.

It could be, you know, literally, you know, if you had a beautifully crafted wooden board with with the invitation to test Windows NT server on it, that would have said a lot of effort was put on put into this communication.

That's the difference in poetry and prose.

What's the difference in poetry and prose?

Poetry is more difficult to write.

Therefore, we automatically, as listeners, attach more meaning and profundity to a piece of poetry than we do a corresponding piece of prose.

I wasn't right. I'm conscious of the time here.

This is an amazing, fascinating conversation.

Thank you so much for taking the time.

One more theory on this.

I just want to share in case anybody wants to riff on it because your readership and your listenership are exactly the kind of people who can tell me whether I'm full of shit here.

As I said, as a marketing guy, as a business person, I'm much happier occasionally saying things that are a bit shit because my job, my job is to some extent, it's partly to be right, but it's partly to come up with hypotheses or ideas that other people wouldn't and then test them.

The point of an advertising agency is it's a place where you can make slightly silly suggestions and still get promoted.

Because if you create that atmosphere of fear where one or two daft interventions and your job is on the line and there's no point in having an ad agency like that because you have to have the confidence for people to say, maybe we should just put a dog in this ad, you know, literally off field kind

of stuff like that has to be permissible.

But my hunch is that nearly all things that you could define narrowly as marketing automatically as a human being, there are two strategies you can play as a human.

There's the one off game in Game Theory and the repeat game.

Any behavior which costs more upfront.

And only pays off over time.

So something which could be advertising, it could be an engagement ring, it could be replacing the awning on your cafe, right?

Anything that costs now and only pays off in the long term is a reliable signal of a business or an individual who's playing the repeat game, not the one -off game.

Since he's playing the repeat game, it will pay him to care about reputation and care about property and to do well by his customers.

So you could define marketing as the costly signaling of faith in your futurity.

So the point is that once you understand satisfying, you realize that what we're really trying to do when we make decisions is often it's not to attain perfection, it's to avoid disaster.

I would argue that one of the reasons why people pay a premium for brands, and we didn't get this.

This was earlier when I was not being recorded, wasn't it?

Yeah, let's get it now.

So a man called Joel Raffleson, who was a copywriter, contemporary of David Ogilvy's back in the 60s in New York, went on to found Ogilvy Chicago, and I met him for dinner recently.

He's the son of Sam Raffleson, who is the script writer for The Jazz Singer, would you believe it, and Ernst Lubitsch films, things like Heaven Can Wait.

And he became a copywriter in the 50s and 60s, working with David Ogilvy.

And he, not knowing of Herbert Simon, etc.

He and David Ogilvy in a conversation, it was mostly his theory, got very close to understanding, satisfying.

When Joel said to David, I don't think people buy brand B rather than brand A, because they think brand B is better.

I think they buy brand B because they're more certain that it's good.

In other words, they're considering not only the expected utility, but the variance.

You know, OK, if I buy brand B, it might be $10 more to buy, $100 more to buy a Samsung TV, rather than this apparently identical TV from person over there.

But Samsung has more reputational skin in the game.

They've got more to lose by selling a bad product than someone I've never heard of.

Patently, Samsung are playing the repeat game because they've been in business for 25 years and they invest a lot of money in advertising and new product development.

Ergo, if I spend the extra $200 and get the Samsung TV, it may not be better than the TV alongside, but it's less likely to be awful.

And so that hunch that actually what we're doing when we make decisions is looking for ways to minimize the worst case scenario, reliable signals that the worst case scenario isn't going to be that bad or that likely.

Almost more than we're attempting to maximize our expected outcome.

And that suddenly, once you understand that a lot of human behavior, which economists think is irrational, becomes rational.

So social copying, if you are moving to Jamaica next month, you've never been to Jamaica before.

You don't know anything about cars.

What's the best car for you to buy?

Probably the best selling car in Jamaica, not because it's the perfect car for you, but it won't be terrible.

If you just say what's the best selling car in Jamaica?

If you, for example, habit is also perfectly rational once you understand people are trying to avoid catastrophe rather than attain perfection.

If it's been OK the last 10 times, you know, going on holiday there the 11th time, well it may not be the best holiday I have, but it won't be a part of shit.

I do that all the time.

So when I go to a coffee shop, if I have a particular coffee at the coffee shop, I like, I'll just order that.

I won't even look at anything else.

Quite right. Because the I know what I'm getting with that.

And while I may be positively surprised with something else, I've satisfied on this particular decision.

Here's an interesting question, which if you had a few million quid, you could actually turn into an experiment.

We could make that happen if you can make it.

Well, we'll see how we do.

OK, now, my late mum knew absolutely nothing about cars, but knew a lot about people.

My late mother, she had higher sort of social intelligence than anybody I've ever met.

I mean, she was the kind of person who would go, you know, you'd have a really happily married couple locally, you know, and she'd say something not quite right.

They wouldn't know what you're talking about, Mum, you know, just fine.

They really did it.

And then three months later, they'd be like this massive affair and a divorce.

And my mum had just picked up on the vibes in a way that nobody else had done.

You know, that was the kind of social intelligence thing she'd do.

And I've always thought, OK, you set two people, well, actually you have to have 10 people, 10 people who are high in social intelligence, but know nothing about cars.

Right. And you get 10 people who know a lot about cars, but know nothing about people.

Engineers would probably satisfy that requirement fairly well, just getting engineers.

OK, so you get 10 people to know a hell of a lot about engineering, but know nothing about human psychology.

OK, and you set them off to go and buy 10 cars each.

Right. Now, what my mum would have done is she would have known nothing about the car, but she would have basically detected the person who's selling me this car as an honest person.

What's her algorithm for doing that?

A vicar would be, you know, OK, that even if you don't believe in God, right, a vicar has a lot more to lose.

A vicar could sell you a bad car.

What's a vicar? A priest.

Canadians, you know, have vicars?

God, nothing. I don't know why we bothered.

Anyway, so you have a priest, OK?

Now, even if you don't believe in God, whatever, OK, he had he can't afford to sell a car where he's put sawlocks and sawdust in the gearbox.

Someone who's a friend of a friend.

Now, that's social intelligence because when when I first bought my first shitty second end car I was living in London where certainly cars are cheaper in London than they are anywhere else in the country because there are loads of them.

And all of us, we're all kind of contemporaries, university contemporaries, about simultaneously, we're all buying our first shitty second end cars.

We all do the same thing.

We went back to the small towns where we grown up and we bought a second hand car from someone vaguely known to our dad.

Now, that was like instinctive things.

Salmon returning sport.

What's going on there?

Well, that guy might sell dodgy cars, but he's not going to sell one of his dodgiest cars to the son of someone who drinks in the same pub as all his future customers.

Yeah. So we instinctively did a kind of reputational feedback loop thing and we understood reputational vulnerability instinctively.

So what I'm saying is that if my mom has just said, okay, well, I know Mr.

Johnson, he's lived in the same house for 15 years, duh, duh, duh, duh, duh, duh.

She would probably look at things like whether they wash their milk bottles.

I don't know. You don't have milk bottles in Canada, but in Britain you used to have, obviously in Canada, you have tetra packs that contain eight liters of milk, don't you?

Cause that's the kind of weird North American way.

But anyway, we used to have pint milk bottles, British pint, not your bloody North American nonsense, British pint.

And respectable people would always wash their bottles before leaving them on the step for collection by the milk one.

And dodgy people would always just put the bottles out full of kind of, you know, the dregs of the decomposing milk.

There's a reliable indication of Tory voting, by the way, if you were ever canvassing, that people who wash their milk bottles, you just mark Tory and went on to the next house.

As you're saying that it reminds me, like when you were talking about the businesses investing in something that has a high upfront cost, but pays off over time, is this a form of like individuals engaging in the same behavior and signaling that there's a repeat game?

Daily or middle -class values, if you think about it, for everything like education is very largely a commitment device.

Our preparedness to engage in kind of costly commitment devices or signaling is basically in sort of indication of middle -class probity.

And I think the problem with the shareholder value movement, by the way, and short -term targets in business is you are creating in businesses with a focus on the short term, you're creating psychopathic businesses, you're creating businesses which consumers instinctively don't trust or like very much,

because everything they do seems to be focused only on the immediate transaction.

It's a great statement from America's most successful car salesman, where someone said, what makes you such a good car salesman?

And he said, one very simple thing, a game theorist would like this, every time someone's I sell someone a car, I'm really thinking about the next car I'm going to sell them.

Now, you know, So there's no advantage to short term impact?

In other words, there's no advantage to any short term, because the second he actually misleads them, the second he actually comms them, essentially he's losing that second sale.

So he was, he was successful by playing the long game, not by playing the short game.

Now you might argue, he can only play the long game, he might not be able to play the long game in London.

He could play the long game in a small town, because the same people will come back.

You know, I mean, you know, conditions affect, it's very different.

If you're totally peripatetic or totally mobile, you might argue if you take, I'm getting into real political incorrectness here, if you take communities of people who are hugely move around.

What about the traveling doctors?

Well, I mean, they have doctor they have medical qualification.

Well, I mean, the old ones in the in the early 1900s.

Exactly. They didn't have to stay around.

So it's trying to keep you out of political trouble.

I was trying not to get what I was going to say in terms of people who moved around the stakeholder people.

You essentially trust a kebab shop more than the kebab van.

Because the kebab shop has sunk costs.

Yeah. If he loses his reputation, he'll have to up sticks and start a new kebab shop somewhere else at an ordinary expense.

The kebab van can just go, looks like seven oaks is a bummer.

I think I'll move to oxden, poison a load of people there.

Exactly. Yeah. So that actually gets down to a weird bit of Soviet propaganda with it was actually intended, I think as an antisemitic code word.

But rootless cosmophotus.

Okay, that was a Soviet attack on people who are insufficiently invested in Russia and were therefore to be viewed with suspicion.

Now I don't condone anything about Stalin era propaganda, but it was very clever psychology, the implication that these people, you know, are effectively opportunists who are not invested in a community where they'll suffer the reputational consequences of bad behavior.

They'll simply move somewhere else.

So it's really, really interesting.

You know, when you get into that instinct, I mean, it's probably, I've often wondered how much lies behind both Trump and Brexit, which is that all the people in the chattering classes are basically from a class of people who love moving around.

Okay. Now, one of the things we talked about is the right of movement of labor.

Okay. You know, you talk about all those things.

Now, the only interesting thing when you're always talking about rights of movement, which is easy to forget is that 90 % of people, particularly above a certain age, just want to stay put.

And it's always worth remembering when you're talking about the rights of movement, you never qualify it with what about the rights of people who just want to stay in the same place and not suffer from much change?

Cause that arguably is a right.

I'm not, I'm not, I'm not a Trump apologist here.

I'm just explaining the level of poor understanding.

I think that one particular class of sort of liberal and semi -intelligentsia, you know, their whole world is all about brilliant.

I'm going to spend three years working in London, and then I'm going to go.

Now, generally, once you have kids, you can't bloody go anywhere, right?

What you just want to do is stay in the same house and hope nobody burgles it.

Okay. Now there is an aspect where young university educated people without kids, who are obsessed with the idea of being able to float around, you know, free will forget the fact that I think some of that 80 % of people in the United States live within 30 miles away.

They were born. You know, there are a huge number of people who just don't want to go anywhere.

Now, you know, the college people would just say though they're ignorant or whatever, but it's a perfectly fundamental human right.

Surely the urge just to stay in the same place, the urge not to have to move around doesn't, you know, that seems to be a right as well, somehow.

There is, I think, you know, there is this sort of mutual incomprehension and I think there is a whole weird class of people who don't understand the conservative mindset very well.

I would say that, I mean, it was a surprise that Trump won.

It was a surprise for most people that pre -exit won.

In part, I think, I mean, I would argue that - On Farnham Street, my guess is it was, there were quite a few people predicting a Trump win, were there?

Well, I think part of it is just the nature of prediction, right?

Like we're surrounded by expert opinions that don't necessarily ever come true.

There's no scorekeeping in them and it's just, you know, we've so centered our lanes of media to only hear, you could study the US political campaigns ad nauseam and you still wouldn't have a full view of all of the, everything that was going on because the way that we consume media is actually shaping

- That's becoming a bubble.

I actually do break out of that quite a lot.

Partly, I think, you know, I have to thank people like, you know, John Heights created this thing, the heterodox Academy.

And it's by the way, it's a serious issue.

You know, David Ogley said the consumers, I mean, different era, different language, but he said the consumer is not a moron, she's your wife.

And equally the Brexit voters not a moron, he's your dad.

You know, and I think it is a serious challenge to advertising agencies if you generally have an advertising agency in a huge metropolitan city, which completely fails to understand 50 % of the population of the country which it serves.

That may seem a strange language to say an advertising agency serves a country, but it can do it.

It's best. Okay. That is something, I mean, it's a very interesting case of a wrong turn, which Jeff Miller pointed out within seconds, coke around a Super Bowl, the verse of it, which showed people singing America from sea to shining sea is America, the beautiful, isn't it or something I can never

remember. I don't remember the question.

The people were from a huge mixture of ethnic backgrounds.

Yeah. Now, actually, if I'd left it at that, that would have been fine.

But they were singing it in their own languages, not in English.

Now, that was an interesting case where I think the people in the big city didn't understand, well, 70 % of America, a lot of people went bananas going singing in English.

Now, that was an interesting case, which was you pushed it a little bit too far.

If you think about coke hilltop, that was a multi -ethnic scene.

They were all singing, I'd like to teach the world to sing.

But they weren't all singing in sort of Gujarat, Spanish, Brazilian, Portuguese.

And so it was an interesting case of what he said, I think, was Madison Avenue not understanding Main Street.

And the slightly obsessive signaling of openness among young college -educated people is a bit pathological, to be absolutely honest, because it's not even as if the American cities, which are the greatest sort of proponents of like Toronto's actually a lot of those American cities, they're not actually

that well integrated.

Strangely, you go to cities in the south, and there are a whole lot of people of different ethnic groups all necking bears together.

You don't see in New York very much.

I don't know what Toronto is like, or I don't know what Ottawa's ethnic composition is, but it's not as if necessarily the people who manifest the opinions most strongly necessarily also manifest the behavior.

I think Nassim Taleb said in this piece intellectually, I'm an idiot, there are massive proponents of integration, but they've never got drunk with a minority cab driver.

There is an element to that, which is that these people live in very, very strange, rarefied bubbles.

Yeah. I think that explains a lot of the surprise.

Whatever your political affiliation is, if you were surprised by the outcome and you were liberal, I think that a lot of that has to do with losing touch with a lot of what's going on, which was how a large swath of people were feeling, right?

They were feeling out of touch and out of sync with.

And if you read on a John Tooby piece on what you might call that actually we choose our opinions tribally.

And he applies this to science that actually scientists would rather believe something that was wrong than believe something that got them disinvited from conferences.

Yeah. Okay. Yeah. In the same way, you disproportionately focus on the things which annoy the out group.

So I think there are loads of actually quite liberal ideas, which would achieve fairly widespread conservative acceptance, or which we really worth pursuing.

So if you take the United States, number one, as I said, vacation allowance, come on, you know, you're the richest country in the world, take some fucking time off because I mean, let's face it, you all venerate in the US, you venerate retirement, standing around for 15 years of your productive life

wearing ridiculous clothes on a Florida golf course is considered totally virtuous, right?

But well, why don't you work a bit later?

Yeah, and have a bit more holiday throughout your life, you know, because you know, that downtime makes you more productive.

Anyway, second thing I you know, I'd look at if I were in American politics is the ridiculous rate of incarceration.

I'm not sure I look at gun control simply because I don't think there's anything you do that's not because I don't necessarily believe it there might have been a better path for the United States in terms of gun control.

I'm just not sure there's anything, anything you could do now, given the proliferation of guns, actually, Canada has similar levels of gun ownership to the US doesn't it?

Or they're not small, not handguns?

Oh, I don't I guess Canadians pack some feral heat, seriously out of the cities.

Have you got bears some new and fettest?

I wouldn't know. I mean, anecdotally, I would say it's much harder to get a gun in Canada than it would be in the US.

And there's much tighter regulations around that.

And most of the people that do have them on a farm or something.

I mean, it's not a semi automatic weapon.

But the interesting thing is that you could pursue things like, you know, the incarceration rate, particularly for minor drugs offenses in the US.

Now, I don't know that it's wrong, right?

What I would say is it's patently worth experimenting with.

Maybe if we can find a better way of achieving this end, rather than banging people up for very long periods for relatively trivial bits of self harm, really.

Okay, now, I might be on there.

By the way, I'm not totally dissing the conservative, you know, hardcore viewpoint.

There has been a significant crime reduction in the US.

But it's certainly worth it.

But what tends to happen is the left disproportionately focuses on things which excessively annoy people on the right.

Because the tribal thing is if you want to signal your membership of the in group, the best way to do that is by focusing on those things which are disproportionately annoying to the group that don't agree with you.

And so there's probably an element where political consensus becomes harder and harder, simply because of the urge people have to signal their loyalty to one particular group by driving the other group practically insane.

So how do you how do you take people one step away from that tribal loyalty and more towards a middle?

Well, there's an interesting one for a start, which is that if you take the protests, there's a total asymmetry to the business of protest, isn't that, which is that basically, right wing people don't do the demo thing, do we?

I mean, the only reason a right wing person would stand on the street holding a placard will be to advertise a golf sale, right?

We're not gonna, you know, we're never going to write weird messages like stop the Tory cuts on it, or whatever it might be.

And just mark when I don't know why conservatives don't do that.

Pite may say it's deference to authority.

Okay, we've chosen the damn government, we've had the decision.

That's it. It's all systems go.

It's why in some ways conservative right wing political parties, certainly the British Conservative Party, one of the magic ingredients it has is that it falls in line.

So there are a lot of people who have a huge disagreement with the leader of the party, but there's a conservative kind of deference to arbitrary, I mean, we are Canadian, okay, you've got this, both of us have this totally arbitrary head of state, right?

It's absurd. I mean, no one would have designed it that way.

Actually having an arbitrary head of state is actually really good, because it means that if the election doesn't go your way, it doesn't force you to reassess your loyalty to the country.

The fact that I mean, the beautiful phrase also used by I think it's one of the hitchens is is that the monarch plays exactly the same role in a state as the king does on a chessboard, not very powerful in itself, the purposes in the spaces it denies to the other players, which is that it prevents your

prime minister from living in a bloody great palace and getting delusions.

It effectively says that, you know, the person who's the most powerful person in the country still has to defer to someone else.

You know, I mean, actually, if you look at monarchy in terms of preventing catastrophe, rather than being an attempt at optimization, there are probably quite a few, that, you know, there are quite a few valuable roles that a decent monarch can fulfil.

So, well, that's an Anglo Canadian thing.

The Americans listening to this will be completely deranged at this point.

But they would have, if they stuck with George the Third, I mean, you know, they would have been locked.

Yeah, yeah. We exactly.

But but no, I think the value of this thing is the decision sciences in just question, it just causes you to lose a little bit.

Now, you know, a lot of what I've said, by the way, you know, I'm not confident of, but I think it's worth considering.

And I think the great value of what you do in Farnham Street, the value of decision sciences, the value of people who, you know, that whole work on super forecasters, for example, it's just great.

First of all, there's a huge tendency for people to crave artificial certainty.

And a lot of the reasons for that are entirely defensive, that within an institutional framework, the urge not to break ranks and not to be considered possibly wrong, you know, it's much easier to get fired for being illogical than it is for being unimaginative.

And I think what the decision sciences started to do is to say, well, the very least, okay, actually, let's just set aside a bit of budget to test something a bit weird.

What of the opposites true?

Now, the perfect example of that is, of course, that hugely questioned experiment on the the paradox of choice.

And yes, the jam experiment didn't always replicate, and I said, look, I wouldn't expect the jam, nothing in marketing always replicates because context always matters.

Patently, if you've just driven 50 miles to visit a vast superstore called World of Jam, okay, you're not going to be put off by the large amount of choice.

You know, you got the car today, we're going to World of Jam, you're not going to get into World of Jam, you go, Oh, shit, there's just too much jam.

I just can't cope with a choice.

Oh, let's go home, right?

You'll, you'll persevere, you'll buy some jam.

But if you're time pressed shopper, who's just about to think, oh, God, have we run out of toilet paper?

And there's someone there trying to sell you jam?

Well, patently, if they're only five, it might be a, you know, a less cognitively demanding decision to choose the apricot than if you have to choose between 76 different variants.

That doesn't strike me as crazy.

Now, all you need as a business person, and as a practical person in policymaking, is you don't have to be right all the time.

That's academics are quit trying to do that to pretend it's like physics, right?

All you got to do is a, you know, is actually have enough things to test that you can actually make some progress.

Secondly, if you test counterintuitive things, it's much more valuable when they pay off, because as I always say, test counterintuitive things, because your competitors won't.

Yeah. And people expect it's a much more valuable discovery.

Now, so to take that jam experiment, one of our clients holds a sale of, this is a few years ago, of flights.

Sadly, we don't have absolutely robust data on this.

But we said don't promote all 29 destinations, it'll do people's head in when you email people just mentioned five, okay, so just focus on five.

So if I said to you, okay, I'll take five European cities just to be realistic, you know, if I said you Porto, Madrid, Budapest, Stockholm, Dublin, okay, probably one of those would just sing out a bit more.

Now, maybe you wanted to go with your wife or girlfriend, or, and then between the two of you, you could decide which of the five you go to.

If I gave you a list of all 29, the chance of both of you being on bloody night, you know, so, and sure enough, we tested this, and it seemed to work gangbusters.

Now, as I said, I don't have the data that's robust enough to go and say, but look, but what happened is the paradox of choice, and the jam experiment encouraged us to try something, which we wouldn't otherwise have tried.

Exactly. And that's, you know, if you if the cost of testing is low, okay, in other words, if you can either retrench quickly, if it appears not to be working, if, if, for example, we send out those first emails, and the first 1000 had got a dismal response, we have said, right, abandon this immediately,

mention all 29, the cost of failure is small, the cost of the potential upside is spectacular.

But importantly, the cost to test is really low.

So actually, what you artificial certainty is less valuable in the in the modern digital age, that it was historically, and yet, weirdly, people are cleaving to it more.

I think that is a great point to wrap this up, Rory.

Delighted. It's always a pleasure.

Thank you so much. This has been phenomenal.

And we will have to do this again, because there's so many more things that I want to talk to you about.

Always a pleasure. It was a joy.

Thank you very much, Shane.

Brilliant. Hey, guys, this is Shane again, just a few more things before we wrap up.

You can find show notes at fernamstreetblog .com slash podcast.

That's f a r n a m s t r e e t bl o g .com slash podcast.

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[The Alchemy of Intangible Value: A Conversation with Rory Sutherland]-[#19 Rory Sutherland: The Psychology of Advertising]

📋 Summary

The Alchemy of Intangible Value: Redefining Strategy and Perception

Beyond Engineering: The Power of Subjective Value

The Logic of Signaling and Commitment Devices

The Danger of Bogus Rationality

Rethinking Innovation and the 'Repeat Game'

Conclusion: Embracing Ambiguity

🎯Key Sentences

📝Key Phrases

📖 Transcript