Alchemy
Rory Sutherland
Foreword
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When you demand logic, you pay a hidden price: you destroy magic
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John Maynard Keynes once wrote, 'Wordly wisdom teaches that it is often better for the reputation to fail conventionally than to succeed unconventionally.'
Introduction
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If you want to look like a scientist, it pays to cultivate an air of certainty, but the problem with attachment to certainty is that it causes people completely to misrepresent the nature of the problem being examined, as if it were a simple physics problem rather than a psychological one. There is hence an ever-present temptation to pretend things are more 'logical' than they really are.
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Robert Zion, the social psychologist, once described cognitive psychology as 'social psychology with all the interesting variables set to zero'. The point he was making is that humans are a deeply social species (which may mean that research into human behaviour or choices in artificial experiments where there is no social context isn't really all that useful).
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The trick to being an alchemist lies not in understanding universal laws, but in spotting the many instances where those laws do not apply.
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Similarly, if you expose every one of the world's problems to ostensibly logical solutions, those that can easily be solved by logic will rapidly disappear, and all that will be left are the ones that are logic-proof – those where, for whatever reason, the logical answer does not work. Most political, business, foreign policy and, I strongly suspect, marital problems seem to be of this type.
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The need to rely on data can also blind you to important facts that lie outside your model
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This book is not an attack on the many healthy uses of logic or reason, but it is an attack on a dangerous kind of logical overreach, which demands that every solution should have a convincing rationale before it can even be considered or attempted.
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Irrational people are much more powerful than rational people, because their threats are so much more convincing.
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A rational leader suggests changing course to avoid a storm. An irrational one can change the weather.
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Perhaps a plausible 'why' should not be a pre-requisite in deciding a 'what', and the things we try should not be confined to those things whose future success we can most easily explain in retrospect
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Evolution is like a brilliant uneducated craftsman: what it lacks in intellect it makes up for in experience.
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For instance, there are two equally potent, but completely contradictory, ways to sell a product: 'Not many people own one of these, so it must be good' and 'Lots of people already own one of these, so it must be good.'
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While in physics the opposite of a good idea is generally a bad idea, in psychology the opposite of a good idea can be a very good idea indeed: both opposites often work.
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In fact, we derive pleasure from 'expensive treats' and also enjoy finding 'bargains'. By contrast, the mid-range retailer offers far less of an emotional hit; you don't get a dopamine rush from mid-market purchases.
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'At the federal level I am a Libertarian. At the state level, I am a Republican. At the town level, I am a Democrat. In my family I am a socialist. And with my dog I am a Marxist – from each according to his abilities, to each according to his needs.'
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'What people want is a really cool vacuum cleaner.' (Dyson) '. . . and the best part of all this is that people will write the entire thing for free!' (Wikipedia) '. . . and so I confidently predict that the great enduring fashion of the next century will be a coarse, uncomfortable fabric which fades unpleasantly and which takes ages to dry. To date, it has been largely popular with indigent labourers.' (Jeans) '. . . and people will be forced to choose between three or four items.' (McDonald's) 'And, best of all, the drink has a taste which consumers say they hate.' (Red Bull) '. . . and just watch as perfectly sane people pay $5 for a drink they can make at home for a few pence.' (Starbucks)*
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It is much easier to be fired for being illogical than it is for being unimaginative. The fatal issue is that logic always gets you to exactly the same place as your competitors
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Our mantra is 'Test counterintuitive things, because no one else ever does.' Why is this necessary? In short, the world runs on two operating systems. The much smaller of them runs on conventional logic. If you are building a bridge or building a road, there is a definition of success that is independent of perception. Will it safely take the weight of X vehicles weighing Y kg and travelling at Z mph? Success can be defined entirely in terms of objective scientific units, with no allowance for human subjectivity.
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I did it instinctively, and was only aware of my unconscious reasoning in retrospect. 'The heart has reasons of which reason knows nothing,' as Pascal put it.
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A fascinating theory, first proposed by the evolutionary biologist Robert Trivers and later supported by the evolutionary psychologist Robert Kurzban, explains that we do not have full access to the reasons behind our decision-making because, in evolutionary terms, we are better off not knowing; we have evolved to deceive ourselves, in order that we are better at deceiving others. Just as there are words that are best left unspoken, so there are feelings that are best left unthought.* The theory is that if all our unconscious motivations were to impinge on our consciousness, subtle cues in our behaviour might reveal our true motivation, which would limit our social and reproductive prospects. Robert Trivers gives an extraordinary example of a case where an animal having conscious access to its own actions may be damaging to its evolutionary fitness. When a hare is being chased, it zigzags in a random pattern in an attempt to shake off the pursuer. This technique will be more reliable if it is genuinely random and not conscious, as it is better for the hare to have no foreknowledge of where it is going to jump next: if it knew where it was going to jump next, its posture might reveal clues to its pursuer.
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The late David Ogilvy, one of the greats of the American advertising industry and the founder of the company I work for, apparently once said, 'The trouble with market research is that people don't think what they feel, they don't say what they think, and they don't do what they say.'
Chapter 1
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David Ogilvy's words: 'The trouble with market research is that people don't think what they feel, they don't say what they think, and they don't do what they say.'
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'The economic model told me to do it' is the twenty-first-century equivalent of 'I was only following orders,' an attempt to avoid blame by denying the responsibility for one's actions.
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I am not so sure that Maskelyne was a villain and instead see him as a 'typical intellectual'. I say this because we see the same pattern in a series of significant innovations – science seems to fall short of its ideals whenever the theoretical elegance of the solution or the intellectual credentials of the solver are valued above the practicality of an idea. If a problem is solved using a discipline other than that practised by those who believe themselves the rightful guardians of the solution, you'll face an uphill struggle no matter how much evidence you can amass.
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As the novelist Upton Sinclair once remarked, 'It is difficult to get a man to understand something, when his salary depends on his not understanding it.'
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This innovation came from the founder's flash of insight (while watching a James Bond film, no less*) that, regardless of what we say, we are much bothered by the uncertainty of waiting than by the duration of a wait
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And yet we spend very little money and time looking for psychological solutions, partly because, in attempting to understand why people do things, we have a tendency to default to the rational explanation whenever there is one. As we saw with Maskelyne's response to Harrison's nautical innovation, the people at the top of organisations are largely rational decision makers who are naturally disparaging of psychological solutions. But it also comes from our urge to depict our behaviour in as high-minded a way as we can manage, hiding our unconscious motivations beneath a rational facade.
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the fact that sensible people never ask questions of this kind is exactly why you need to ask them
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Jeremy Bullmore recalls a heated debate in the 1960s at the ad agency J. Walter Thompson about the reasons why people bought electric drills. 'Well obviously you need to make a hole in something, to put up some shelves or something, and so you go out and buy a drill to perform the job,' someone said, sensibly. Llewelyn Thomas, the copywriter son of the poet Dylan, was having none of this. 'I don't think it works like that at all. You see an electric drill in a shop and decide you want it. Then you take it home and wander around your house looking for excuses to drill holes in things.'
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But just because there is a rational answer to something, it doesn't mean that there isn't a more interesting, irrational answer to be found in the unconscious.
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In general, people are impressed by any visible extra effort that goes into a product: if you simply say 'this washing powder is better than our old powder', it is a hollow claim. However, if you replace the powder with a gel, a tablet or some other form, the cost and effort which have gone into the change make it more plausible to the purchaser there may have been some real innovation in the new contents.
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However, the problem will never go away, because the number of people who think they understand statistics dangerously dwarfs those who actually do, and maths can cause fundamental problems when badly used.
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And it's a finding that has great implications for the behavioural sciences, because it suggests that many supposed biases which economists wish to correct may not be biases at all – they may simply arise from the fact that a decision which seems irrational when viewed through an ensemble perspective is rational when viewed through the correct time-series perspective, which is how real life is actually lived; what happens on average when a thousand people do something once is not a clue to what will happen when one person does something a thousand times.
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Anyone choosing a group of ten people will instinctively deploy a much wider variance than someone hiring one person. The reason for this is that with one person we look for conformity, but with ten people we look for complementarity.
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When hiring, we should understand that unconscious motivation and rational good sense overlap, but they do not completely coincide. A person engaged in recruitment may think they are trying to hire the best person for the job, but their subconscious motivation is subtly different. Yes, they want to hire a candidate who is likely to be good, but they are also frightened of hiring someone who might turn out to be bad – a low variance will be as appealing to them as a high average performance. If you want low variance, it pays to hire conventionally and adhere to the status quo, while people hiring a group of employees are much more likely to take a risk on some less conventional candidates.
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We can see this diversity mechanism clearly in house hunting. If I were to give you a budget to choose your perfect house, you would have a clear idea of what to buy, but it would typically be a bit boring. That's because when you have one house, it cannot be too weak in any one dimension: it cannot be too small, too far from work, too noisy or too weird, so you'll opt for a conventional house. On the other hand, if I were to double your budget and tell you to buy two houses, your pattern of decision-making would change. You would now be looking to buy two significantly different properties with complementary strengths – perhaps a flat in the city and a house in the countryside.
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The quandary is that you can either create a fairer, more equitable society, with opportunities for all but where luck plays a significant role, or you can create a society which maintains the illusion of complete and non-random fairness, yet where opportunities are open to only a few – the problem is that when 'the rules are the same for everyone' the same boring bastards win every time
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By applying identical criteria to everyone in the name of fairness, you end up recruiting identical people
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Metrics, and especially averages, encourage you to focus on the middle of a market, but innovation happens at the extremes. You are more likely to come up with a good idea focusing on one outlier than on ten average users.
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Weird consumers drive more innovation than normal ones
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It's true that 'what gets measured gets managed', but the concomitant truth is 'what gets mismeasured gets mismanaged'
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One great problem with metrics is that they destroy diversity because they force everybody to pursue the same narrow goal, often in the same narrow way, or to make choices using the exact same criteria
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One of the other problems with a logically consistent system for hiring people is that ambitious middle-class people can exploit it by 'gaming the system'
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Nassim Nicholas Taleb applies this rule to choosing a doctor: you don't want the smooth, silver-haired patrician who looks straight out of central casting – you want his slightly overweight, less patrician but equally senior colleague in the ill-fitting suit. The former has become successful partly as a result of his appearance, the latter despite it.
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It reported on three studies which examined what happens when you change the finalists for a job. The research revealed that: 'When there is only one woman, she does not stand a chance of being hired, but that changes dramatically when there is more than one.
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Estate agents sometimes exploit this effect by showing you a decoy house, to make it easier for you to choose one of the two houses they really want to sell you. They will typically show you a totally inappropriate house and then two comparable houses, of which one is clearly better value than the other. The better value house is the one they want to sell you, while the other one is shown to you for the purpose of making the final house seem really good.
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Usually someone has often already found an answer to your problem – just in a different domain.
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The reason I enjoy this spectacular architecture at no cost at all is because I deployed exactly the same perverse reasoning when buying a house as I did when buying the bread slicer: I rewrote the brief, and tried to make a decision while disposing of the usual assumptions. I wondered what most people do when they move house, aware that if I chose a house the way most people do, I would end up competing with a lot of people for the same houses. On the other hand, I knew that if I bought a house using wildly divergent criteria from everyone else, I should find a place that was relatively undervalued. In competitive markets, it pays to have (and to cultivate) eccentric tastes.
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Firstly, it doesn't always pay to be logical if everyone else is also being logical. Logic may be a good way to defend and explain a decision, but it is not always a good way to reach one. This is because conventional logic is a straightforward mental process that is equally available to all and will therefore get you to the same place as everyone else.
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Geim knows it is far more common for a mixture of luck, experimentation and instinctive guesswork to provide the decisive breakthrough; reason only comes into play afterwards
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Here is the brilliant American physicist Richard Feynman, in a Lecture in 1964, describing his method: 'In general, we look for a new law by the following process. First, we guess it . . . Then we compute the consequences of the guess, to see what, if this law we guess is right, to see what it would imply and then we compare the computation results to . . . experience, compare it directly with observations to see if it works . . . In that simple statement is the key to science. It doesn't make any difference how beautiful your guess is, it doesn't matter how smart you are, who made the guess or what his name is . . . If it disagrees with the experiment, it's wrong. That's all there is to it.'
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A good guess which stands up to observation is still science. So is a lucky accident. Business people and politicians do not quite understand this and tend to evaluate decisions by the rigour of the process that produces them, rather than by the rigour with which you evaluate their consequences.
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And yet, in the search for public policy and business solutions, we are in the grip of an obsession with rational quantification. A nervous and bureaucratic culture is closed-mindedly attaching more importance to the purity of the methodology than to the possible value of the solution, which leads us to ignore possible solutions not because they have been proven to be wrong, but because they have not been reached through an approved process of reasoning.
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We approve reasonable things too quickly, while counterintuitive ideas are frequently treated with suspicion. Suggest cutting the price of a failing product, and your boringly rational suggestion will be approved without question, but suggest renaming it and you'll be put through gruelling PowerPoint presentations, research groups, multivariate analysis and God knows what else* – and all because your idea isn't conventionally logical. However, most valuable discoveries don't make sense at first; if they did, somebody would have discovered them already.
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Cédric Villani is the holder of a Fields Medal, often described as the highest honour a mathematician can receive. He won his medal 'For his proofs of nonlinear Landau damping and convergence to equilibrium for the Boltzmann equation' and says, 'There are two key steps that a mathematician uses. He uses intuition to guess the right problem and the right solution and then logic to prove it.'
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Business, technology and, to a great extent, government have spent the last several decades engaged in an unrelenting quest for measurable gains in efficiency. However, what they have never asked, is whether people like efficiency as much as economic theory believes they do. The 'doorman fallacy', as I call it, is what happens when your strategy becomes synonymous with cost-saving and efficiency; first you define a hotel doorman's role as 'opening the door', then you replace his role with an automatic door-opening mechanism.
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The problem arises because opening the door is only the notional role of a doorman; his other, less definable sources of value lie in a multiplicity of other functions, in addition to door-opening: taxi-hailing, security, vagrant discouragement, customer recognition, as well as in signalling the status of the hotel. The doorman may actually increase what you can charge for a night's stay in your hotel.
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When every function of a business is looked at from the same narrow economic standpoint, the same game is applied endlessly. Define something narrowly, automate or streamline it – or remove it entirely – then regard the savings as profit. Is this, too, explained by argumentative thinking, where we would rather win an argument than be right?
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Today, the principal activity of any publicly held company is rarely the creation of products to satisfy a market need. Management attention is instead largely directed towards the invention of plausible-sounding efficiency narratives to satisfy financial analysts, many of whom know nothing about the businesses they claim to analyse, beyond what they can read on a spreadsheet. There is no need to prove that your cost-saving works empirically, as long as it is consistent with standard economic theory. It is a simple principle of business that, however badly your decision turns out, you will never be fired for following economics, even though its predictive value lies somewhere between water divining and palmistry.
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Take something called 'quad-play'. Economic orthodoxy these days demands that all mobile phone networks must also offer broadband, landlines and pay TV, that all those offering pay TV must likewise offer broadband, mobile telephony and landlines, and so on. The 'economic'* rationale for this is that, by offering all four together, you can enjoy back-office efficiency, economies of scale and price leadership; in economic models, it follows that whoever is the cheapest supplier of all four services will dominate the market. In the real world, however, quad-play is about as popular as a shit sandwich. The human brain has been calibrated by evolution not to pursue economic optimisation and risk systemic disaster. Quad-play places four eggs in one basket, which makes us feel vulnerable: refuse to pay that £250 data-roaming charge from your jaunt to Tenerife and one company can cut off your mobile, television, broadband and landline. And besides, the last thing anyone wants is an aggregated monthly reminder of what all the costs adds up to.
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But no tests were performed, because the purpose of the activity, rather than to improve productivity, was to be able to tell a plausible story to analysts that we were making 'IT savings through back-office consolidation'. In the event, the platform has improved since we adopted it, but the fact that a cost-saving decision could be made without any consideration of the hidden risks to efficiency was nonetheless alarming. Why are large commercial organisations adopting this ideological approach to business? That was supposed to be the weakness of communism.
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It is a never-mentioned, slightly embarrassing but nevertheless essential facet of free market capitalism that it does not care about reasons – in fact it will often reward lucky idiots. You can be a certifiable lunatic with an IQ of 80, but if you stumble blindly on an underserved market niche at the right moment, you will be handsomely rewarded. Equally you can have all the MBAs money can buy and, if you launch your genius idea a year too late (or too early), you will fail.
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Admiring capitalism for its efficiency is like admiring Bob Dylan for his singing voice: it is to hold a healthy opinion for an entirely ridiculous reason. The market mechanism is loosely efficient, but the idea that efficiency is its main virtue is surely wrong, because competition is highly inefficient.
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Over time, she learned something that defied conventional economic rules; it seemed that if you sent out an email promoting a play or musical, you sold fewer tickets if you included an offer for reduced-price tickets with the email. Conversely, offering tickets at the full price seemed to increase demand.
Chapter 2
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The advertising agency J. Walter Thompson used to set a test for aspiring copywriters. One of the questions was simple: 'Here are two identical 25-cent coins. Sell me the one on the right.' One successful candidate understood the idea of alchemy. 'I'll take the right-hand coin and dip it in Marilyn Monroe's bag.* Then I'll sell you a genuine 25-cent coin as owned by Marilyn Monroe.'
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Companies which look for opportunities to make magic, like Apple or Disney, routinely feature in lists of the most valuable and profitable brands in the world; you might think economists would have noticed this by now.
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Wine tastes better when poured from a heavier bottle. Painkillers are more effective when people believe they are expensive. Almost everything becomes more desirable when people believe it is in scarce supply, and possessions become more enjoyable when they have a famous brand name attached.
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Value resides not in the thing itself, but in the minds of those who value it. You can therefore create (or destroy) value it in two ways – either by changing the thing or by changing minds about what it is.
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Preoccupied as they were with the hopeless idea of 'transmutation' – the transformation of one element into another – the alchemists failed to experiment with the rebranding of lead. Perhaps they could have added a mystery ingredient or polishing technique to make it slightly shinier and named the result 'Black Gold'. Or, better still, they might have used the French trick of creating artificial scarcity through topography and provenance* and called their special lead something like 'Or de Sable de Lyon'.
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One eighteenth-century monarch, Frederick the Great, used the same magic in the promotion of the potato as a domestic crop, transforming something worthless and unwanted into something valuable through the elixir of psychology. The reason he wanted eighteenth-century Prussian peasants to cultivate and eat the potato was because he hoped that they would be less at risk of famine when bread was in short supply if they had an alternative source of carbohydrate; it would also make food prices less volatile. The problem was that the peasants weren't keen on potatoes; even when Frederick tried coercion and the threat of fines, they simply showed no interest in eating them. Some people objected because the potato was not mentioned in the Bible, while others argued that, since dogs wouldn't eat potatoes, why should humans? So, having given up on compulsion, Frederick tried subtle persuasion. He established a royal potato patch in the grounds of his palace, and declared that it was to be a royal vegetable, that could only be consumed by members of the royal household or with royal permission.
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Well, have you ever eaten Chilean sea bass?* It is the product of a particular sort of alchemy, 'The Alchemy of Semantics'. The $20 slice of fish that graces plates in high-end restaurants under the name 'Chilean sea bass' actually comes from a fish that for many years was known as the Patagonian toothfish. No one is going to pay $20 for a plate of Patagonian toothfish – call it Chilean sea bass, however, and the rules change.
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Cornish sardines are another example of geographical alchemy at work.* Merely adding a geographical or topographical adjective to food – whether on a menu in a restaurant or on packaging in a supermarket – allows you to charge more for it and means you will sell more. According to research from the University of Illinois at Urbana-Champaign, descriptive menu labels raised sales by 27 per cent in restaurants, compared to food items without descriptors.
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On menus, there seems to be more money in adjectives than in nouns. Even adjectives that have no precise definition such as 'succulent' can raise the popularity of items. The Oxford experimental psychologist Charles Spence has published a paper on the effect the name of a dish has on diners. 'Give it an ethnic label such as an Italian name,' he says, 'and people will rate the food as more authentic.'* We make far more positive comments about a dish's appeal and taste when it is garlanded with an evocative description: 'A label directs a person's attention towards a feature in a dish, and hence helps bring out certain flavours and textures.'
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It is easy to disparage alchemy as bullshit. And to be frank, some of what I say will probably later be shown to be bullshit. But much of it – the renaming of fish, the lavish addition of geographical provenance to menu items, the rebranding of iron – can be placed under the category of 'benign bullshit', because the same technique that works for fish can also solve much more significant problems.
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In 2006, Maria Klawe, a computer scientist and mathematician, was appointed president of Harvey Mudd College in California. At the time, only 10 per cent of the college's computer science majors were women. The department devised a plan, aimed at luring in female students and making sure they actually enjoyed their computer science initiation, in the hopes of converting them to majors. A course previously entitled 'Introduction to programming in Java' was renamed 'Creative approaches to problem solving in science and engineering using Python'
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The invention of the 'designated driver' was an even cleverer use of semantics and naming to create a social good. The phrase, meaning the person who is nominated to stay sober in order to drive his friends home safely, was a deliberate coinage that spread with the active support of Hollywood who agreed to use it in selected episodes of popular sitcoms and dramas.
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It is interesting to consider how many more benign behaviours might be made possible through semantic invention. I have always thought, for instance, that the word 'downsizing', which is used not only as a euphemism for redundancies, but in another sense refers to the voluntary decision by 'empty nesters' to move to a smaller and more manageable home, is a very useful coinage. It allows older people in needlessly large homes to portray their move to a smaller house as a choice born out of preference, rather than – as it may otherwise be assumed to be – a compromise born of financial necessity. Create a name, and you've created a norm.*
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By reducing the possible applications of the device to a single use, it clarified what the device was for. The technical design term for this is an 'affordance', a word that deserves to be more widely known. As Don Norman observes: 'The term affordance refers to the perceived and actual properties of the thing, primarily those fundamental properties that determine just how the thing could possibly be used. [. . .] Affordances provide strong clues to the operations of things. Plates are for pushing. Knobs are for turning. Slots are for inserting things into. Balls are for throwing or bouncing. When affordances are taken advantage of, the user knows what to do just by looking: no picture, label, or instruction needed.'
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However, all I can rely on here for evidence is a recurrent pattern of events – it is surprisingly common for significant innovations to emerge from the removal of features rather than the addition. Google is, to put it bluntly, Yahoo without all the extraneous crap cluttering up the search page, while Yahoo was, in its day, AOL without in-built Internet access. In each case, the more successful competitor achieved their dominance by removing something the competitor offered rather than adding to it.
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However, the engineering mentality – as at Sony – runs counter to this; the idea of removing functionality seems completely illogical, and it is extremely hard to make the case for over-riding conventional logic in any business or government setting, unless you are the chairman, chief executive or minister in charge. Although you may think that people instinctively want to make the best possible decision, there is a stronger force that animates business decision-making: the desire not to get blamed or fired. The best insurance against blame is to use conventional logic in every decision.
Chapter 3
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There is the 'tourist restaurant' approach, where you try to make as much money from people in a single visit. And then there is the 'local pub' approach, where you may make less money from people on each visit, but where you will profit more over time by encouraging them to come back.
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Likewise, when your company pays your salary each month, it says you are worth that money for now; when it sends you on an expensive training course, it signals that it is committed to you for at least a few years.
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'Credo quia absurdum est', said Saint Augustine, supposedly – 'I believe it because it is ridiculous.' He was talking about Christianity, but it is equally true of many other facets of life: we attach meaning to things precisely because they deviate from what seems sensible.
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Effective communication will always require some degree of irrationality in its creation because if it's perfectly rational it becomes, like water, entirely lacking in flavour
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Quite simply, all powerful messages must contain an element of absurdity, illogicality, costliness, disproportion, inefficiency, scarcity, difficulty or extravagance – because rational behaviour and talk, for all their strengths, convey no meaning
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One of the most important ideas in this book is that it is only by deviating from a narrow, short-term self-interest that we can generate anything more than cheap talk. It is therefore impossible to generate trust, affection, respect, reputation, status, loyalty, generosity or sexual opportunity by simply pursuing the dictates of rational economic theory. If rationality were valuable in evolutionary terms, accountants would be sexy. Male strippers dress as firemen, not accountants; bravery is sexy, but rationality isn't. Can this theory be extended further? For instance, is poetry more moving than prose because it is more difficult to write?* And is music more emotionally potent than normal speech because it is more difficult to sing than to talk?*
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Information is free, but sincerity is not, and it isn't only humans who attach significance to messages in proportion to the costliness of their creation and transmission; bees also do it.*
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To borrow the language of the Michelin Guide, a flower can be 'vaut l'étape', 'vaut le détour' or 'vaut le voyage'; 'worth stopping at', 'worth going out of your way for' or 'a destination in itself'.
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Why don't flowers cheat, by devising an alluring advertisement of huge petals, and then delivering no costly nectar? Well, sometimes they do – false advertising is common in orchids, which often seem to be the scam artists of the plant kingdom. At least one orchid species mimics the appearance (and smell) of female insect genitalia; many mimic food sources and some mimic other plants. But this can only work on a small scale* – play that trick too often and insects will just learn to avoid you.
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However, orchids are the tourist restaurants of the floral world – they rely on people visiting only once so are less worried about ripping off visitors, because they know they are never going to come back anyway.
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To quote a Caribbean proverb, 'Trust grows at the speed of a coconut tree and falls at the speed of a coconut.'
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However, for this to work, you need stable distinctive identities, as well as laws to prevent manufacturers pretending their goods are those of someone else (this is called 'passing off' in commerce; in biology it is known as 'Batesian mimicry').
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Costly signalling theory, which was first proposed by the evolutionary biologist Amotz Zahavi, is, I believe, one of the most important theories in the social sciences.
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It might be a good rule of thumb for animals to avoid eating brightly coloured animals, since something that doesn't need to adopt camouflage has clearly survived through some strategy other than concealment, and hence it might be best avoided. Here again, we have a case where doing something ostensibly irrational conveys more meaning than something that makes sense. It has meaning precisely because it is difficult to do. It is not impossible to fake, but it is risky to do so – being highly visible but not poisonous is a mimicry strategy adopted by certain non-venomous snakes, for instance. What makes it risky is that, if any predator learns to tell you apart from the dangerous species you are imitating, he stands to make a killing – at your expense.
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Bullfrogs advertise their size and health by croaking, the deepness of the croak indicating size and its duration indicating fitness.
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There is a problem, however: what starts off as a reliable indicator of fitness can turn into an arms race. If you are a fit bullfrog, how long should you keep up your mating call? The only safe answer to this question is 'for a bit longer than any other bullfrog nearby'. As a result, a quality that starts off being prized as a useful proxy for fitness becomes exaggerated to an absurd degree, a process sometimes known as Fisherian runaway selection
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In 1759 Adam Smith made the following observation, in The Theory of Moral Sentiments: 'A watch, in the same manner, that falls behind above two minutes in a day, is despised by one curious in watches. He sells it perhaps for a couple of guineas, and purchases another at 50, which will not lose above a minute in a fortnight. The sole use of watches, however, is to tell us what o'clock it is, and to hinder us from breaking any engagement, or suffering any other inconveniency by our ignorance in that particular point. But the person so nice with regard to this machine, will not always be found either more scrupulously punctual than other men, or more anxiously concerned . . . to know precisely what time of day it is. What interests him is not so much the attainment of this piece of knowledge, as the perfection of the machine which serves to attain it.'
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Yet the status markers for which we compete don't have to be environmentally damaging; people can derive status from philanthropy as well as through selfish consumption
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For instance, as Geoffrey Miller notes, a tribe where males advertised their hunting prowess by conspicuously sharing meat from their kills would prosper, as a result of economically irrational behaviour. On the other hand, an otherwise identical tribe whose males signalled their strength by violently fighting each other would suffer as a consequence: even the eventual winners of these contests might end up badly wounded and with a lower life expectancy.
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In the early stages of any significant innovation, there may be an awkward stage where the new product is no better than what it is seeking to replace. For instance, early cars were in most respect worse than horses. Early aircraft were insanely dangerous. Early washing machines were unreliable. The appeal of these products was based on their status as much as their utility.
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Yes, costly signalling can lead to economic inefficiency, but at the same time this inefficiency establishes valuable social qualities such as trustworthiness and commitment – politeness and good manners are costly signalling in a face-to-face form
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Secondly, we felt uneasy buying something that cost a few hundred pounds without the reassurance of a recognisable name. British ad-man Robin Wight calls this instinct 'the Reputation Reflex' – although instinctive and largely unconscious, it is perfectly rational, because we intuitively understand that someone with a reputable brand identity has more to lose from selling a bad product than someone with no reputation at risk
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In many ways, expensive advertising and brands arise as a solution to a problem identified by George Akerlof in his 1970 paper 'The Market for Lemons' in the Quarterly Journal of Economics. The problem is known as 'information asymmetry', whereby the seller knows more about what he is selling than the buyer knows about what he is buying. This lesson was learned the hard way in Eastern Bloc countries under communism; brands were considered un-Marxist, so bread was simply labelled 'bread'. Customers had no idea who had made it or whom to blame if it arrived full of maggots, and couldn't avoid that make in future if it did, because all bread packaging looked the same. Unhappy customers had no threat of sanction; happy customers had no prospect of rewarding producers through repeat custom. And so the bread was rubbish.
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My analogy between signalling in the biological world and advertising in the commercial world may explain something I have noticed for years: if you talk to economists, they tend to hate advertising and barely understand it at all, while if you talk to biologists they understand it perfectly.
Chapter 4
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I'm not being entirely frivolous: research into the placebo effect shows that branded analgesics are more effective. Furthermore, promoting a drug as a cure for a narrowly defined condition, as Nurofen did, also increases placebo power, as does raising its price or changing the colour: everything the company was doing added to the efficacy of the product.
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The psychologist Nicholas Humphrey argues that placebos work by prompting the body to invest more resources in its recovery.* He believes that evolution has calibrated our immune system to suit a harsher environment than the current one, so we need to convince our unconscious that the conditions for recovery are especially favourable in order for our immune system to work at full tilt.
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In the words of Jonathan Haidt,* 'The conscious mind thinks it's the Oval Office, when in reality it's the press office.' By this he means that we believe we are issuing executive orders, while most of the time we are actually engaged in hastily constructing plausible post-rationalisations to explain decisions taken somewhere else, for reasons we do not understand
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Humphrey argues that people subconsciously respond to a sham treatment because it assures us that it will weaken the infection without overburdening the body's resources.
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To recalibrate our immune response to levels appropriate to the more benign conditions we experience in everyday modern life, it may be necessary to deploy some benign bullshit.* This, I suppose, was what my grandfather was doing in the days before antibiotics, when he cheered up his patients with banter and encouraged them to wrap up warmly, stay in bed, feed themselves well and drink medicinal whiskies – perhaps prescribing for good measure some ineffectual pills that nonetheless created enough of an illusion of optimism for the patient's body to enter 'healing mode'.
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So, as Humphrey explained, much of the paraphernalia and practice of the military – flags, drums, uniforms, square-bashing, regalia, mascots and so forth – might be effectively bravery placebos, environmental cues designed to foster bravery and solidarity.
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One problem (of many) with Soviet-style command economies is that they can only work if people know what they want and need, and can define and express their wants adequately. But this is impossible, because not only do people not know what they want, they don't even know why they like the things they buy.
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Take the control panels in elevators. One of the buttons found on them, the 'door close' button, is quite interesting, because on many (and perhaps most) elevators, it is actually a placebo button – it is connected to nothing at all. It is there simply to make impatient people feel better by giving them something to do and the illusion of control. It is, in effect, a civilised alternative to a punchbag.
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The use of placebo buttons is more common than we realise. Many pedestrian crossings have buttons that also have no effect at all – the traffic lights are set to a timed sequence.* However, here the presence of the button is a rather more benign lie: how many fewer people would wait for the green man if there were no button to press?
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The single best investment ever made by the London Underground in terms of increasing passenger satisfaction was not to do with money spent on faster, more frequent trains – it was the addition of dot matrix displays on platforms to inform travellers of the time outstanding before the next train arrived.
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Once you understand the placebo, I think you'll agree that a large part of the two trillion dollars spent on female self-beautification is not spent in order to appeal to the opposite sex; to put it bluntly, as a woman, it simply isn't that difficult to dress in a way that appeals to men – you just have to wear very little.* There are also some trends in female fashion, high-waisted trousers, for instance, which men find fairly repellent.* It seems likely that a significant part of what you're doing when you spend two hours on self-grooming is self-administering a confidence placebo to produce emotions that you can't generate through a conscious act of will.*
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One of Nicholas Humphrey's rules about what makes an effective placebo is that there must be some effort, scarcity or expense involved
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Red Bull is among the most successful commercial placebos ever produced – its powers at hacking the unconscious are so great that it is repeatedly studied by psychologists and behavioural economists all over the world, including the great Pierre Chandon at INSEAD, one of the top business schools in Europe
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The most plausible explanation for the incredible success of Red Bull lies in a kind of placebo effect. After all, it shares many of the features of a great placebo: it's expensive, it tastes weird and it comes in a 'restricted dose'. In its early days, Red Bull also benefited from repeated rumours that its active ingredient, taurine, was about to be banned
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The qualities we notice, and the things which often affect us most, are the things that make no sense – at some level, perhaps it is necessary to deviate from standard rationality and do something apparently illogical to attract the attention of the subconscious and create meaning. Cathedrals are an over-elaborate way of keeping rain off your head. Opera is an inefficient way of telling a story. Even politeness is effectively a mode of interaction that involves an amount of unnecessary effort. And advertising is a hugely expensive way of conveying that you are trustworthy.
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If you look at behaviours to hack the unconscious, they all seem to have an element that is wasteful, unpleasant or downright silly.
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It seems rather like the lesson that is taught to aspiring journalists: 'Dog Bites Man' is not news, but 'Man Bites Dog' is. Meaning is disproportionately conveyed by things that are unexpected or illogical, while narrowly logical things convey no information at all. And this brings us full circle, to the explanation of costly signalling.
4.2: Why Aspirin Should Be Reassuringly Expensive
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The placebo effect, like many other forms of alchemy, is an attempt to influence the mind or body's automatic processes. Our unconscious, specifically our 'adaptive unconscious' as psychologist Timothy Wilson calls it in Strangers to Ourselves (2002), does not notice or process information in the same way we do consciously, and does not speak the same language that our consciousness does, but it holds the reins when it comes to much of our behaviour. This means that we often cannot alter subconscious processes through a direct logical act of will – we instead have to tinker with those things we can control to influence those things we can't or manipulate our environment to create conditions conducive to an emotional state which we cannot will into being
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There is a good evolutionary reason why we are imbued with these strong, involuntary feelings: feelings can be inherited, whereas reasons have to be taught, which means that evolution can select for emotions much more reliably than for reasons.
Chapter 5
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Blurry 'pretty good' decision-making has simply proven more useful than precise logic
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The problems occur when people try to solve 'wide' problems using 'narrow' thinking. Keynes once said, 'It is better to be vaguely right than precisely wrong', and evolution seems to be on his side. The risk with the growing use of cheap computational power is that it encourages us to take a simple, mathematically expressible part of a complicated question, solve it to a high degree of mathematical precision, and assume we have solved the whole problem.
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In the same way, companies can, for instance, optimise their digital advertising spend to a huge degree of precision, but this does not necessarily mean that they have answered the wider marketing questions, such as 'Why should people trust me enough to buy what I sell?'
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But the real genius of humanity lies in being vaguely right – the reason that we do not follow the assumptions of economists about what is rational behaviour is not necessarily because we are stupid. It may be because part of our brain has evolved to ignore the map, or to replace the initial question with another one – not so much to find a right answer as to avoid a disastrously wrong one.
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In the 1950s, the economist and political scientist Herbert Simon coined the term 'satisficing', combining as it does the words 'satisfy' and 'suffice'. It is often used in contrast with the word 'maximising', which is an approach to problem-solving where you obtain, or pretend to obtain, a single optimally right answer to a particular question.
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"decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world. Neither approach, in general, dominates the other, and both have continued to co-exist in the world of management science."
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If you optimise something in one direction, you may be creating a weakness somewhere else.
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Cancer cells mutate, and therefore evolve, quickly. Trying to kill them with a single poison tends to create new mutations which are highly resistant it. The solution being developed is to target cancer cells with a chemical that causes them to be to develop immunity to it, at the expense of their immunity to other things; at that point you hit them with a different chemical, designed to attack the Achilles heel that you have created, wiping them out second rather than first time around. There is a lesson here
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In any complex system, an overemphasis on the importance of some metrics will lead to weaknesses developing in other overlooked ones
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Remember, making decisions under uncertainty is like travelling to Gatwick Airport: you have to consider two things – not only the expected average outcome, but also the worst-case scenario
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all glider pilots learn a simple instinctive rule which enables them to tell whether a possible landing site on the ground is within their reach. They simply place the glider in the shallowest possible rate of descent and look through the windshield: any place which appears to be moving downwards in the field of view is somewhere they can safely land, while anywhere on the ground that appears to be moving upwards is too far away
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The system of watertight games and sets means that there is no difference between winning a game to love or after several deuces. A 6–0 set counts as a set, just as a 7–5 win does. This means that the losing player is never faced with an insurmountable mountain to climb. The scoring system also ensures variation in how much is at stake throughout the game; someone serving at 30–0 is a relatively low-engagement moment, while a crucial break point has everyone on the edge of their seats. This varies the pitch of excitement, and consequently makes the game more enjoyable for players and spectators alike.*
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Habit, which can often appear irrational, is perfectly sensible if your purpose is to avoid unpleasant surprises.
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Social copying – buying products or adopting behaviours and fashions that are popular with others – is another safe behavioural approach. After all, the bestselling car in Britain is unlikely to be terrible. Another reliable risk reduction strategy when making decisions under uncertainty is simply to substitute a different question from the one that conventional logic assumes you should be asking. So you would not ask 'What car should I buy?', but 'Whom can I trust to sell me a car?' Not 'What's the best television?', but 'Who has most to lose from selling a bad television?' Or not 'What should I wear to look great?', but 'What's everyone else going to be wearing?'
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I once asked, over Twitter, whether there were any clear advantages to flying to JFK Airport in New York rather than Newark.* Other than a string of replies from New Yorkers with an inbuilt disdain for anything in New Jersey* there seemed to be few arguments for using JFK: Newark is closer to Manhattan, and risks fewer roadworks or delays on the journey. Richard Thaler, one of the world's most eminent decision scientists, tweeted me with strong support for Newark.* If it were only informed consumers making the choice, Newark would surely be the more successful airport, yet JFK is the more common choice.
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The great thing about making the 'default' choice is that it feels like not making a decision at all, which is what businesspeople and public sector employees tend to really like doing – because every time you don't visibly make a decision, you've ducked a bullet.
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But flights are delayed or cancelled – and the reason that you would need to keep your fingers crossed after choosing option 2 is that, when things do go wrong, as they sometimes will, the difference between choosing options 1 and 2 becomes more stark. If the flight from JFK is delayed by three hours, your boss will blame the airline, but if the flight from Newark is, your boss will probably blame you, because with option 2 you made a noticeable decision – you deviated from the default.
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Blame, unlike credit, always finds a home, and no one ever got fired for booking JFK. By going with the default, you are making a worse decision overall, but also insuring yourself against a catastrophically bad personal outcome.
Chapter 6
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A few years ago, the British chocolate manufacturer Cadbury's received a large number of customer complaints, claiming that they had changed the taste of their Dairy Milk brand. They were at first baffled, because the formulation hadn't been altered for years. However, what they had done was change the shapes of the blocks you would break off a bar, rounding their corners. And smoother shapes taste sweeter. Truly.
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Moreover, visual illusions – in particular a spacious entranceway – create an impression of spaciousness; it is actually 16 inches narrower than a Boeing 777, but to many passengers it feels significantly wider. Adding a little space when people enter the aircraft creates an impression of airiness that carries through into the main cabin, even though the main cabin is no less densely packed than usual
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Engineers and accountants are prone to ignore the human side of their creations
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But yellow on television is a big fat lie. It may look yellow, but it isn't really – it's a mixture of red and green light, which hacks our optical apparatus to make us think we are looking at something genuinely yellow. The yellow is created in our brains, not on the screen. Colour mixing is a biological, not a physical phenomenon – you can't mix green and red photons to make yellow photons, but by sending an image of a mixture of red and green photons to the brain in the right ratio, the resulting stimulus is indistinguishable from that of yellow photons, and you see yellow as a result.
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No one advertises televisions as being 'designed for higher primates', but it would be perfectly accurate to do so. The lesson to take from this is that it is possible for something to be objectively wrong but subjectively right. TVs are designed around how we see, not what they show.
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There is no point in struggling to create changes in objective reality if human perception can't see it, so all these things need to be perception optimised for humans
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The job of a designer is hence that of a translator. To play with the source material of objective reality in order to create the right perceptual and emotional outcome.
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WHAT THE BRITISH SAY WHAT FOREIGNERS UNDERSTAND WHAT THE BRITISH MEAN I hear what you say He accepts my point of view I disagree and do not want to discuss it further With the greatest respect He is listening to me You are an idiot That's not bad That's poor That's good That is a very brave proposal He thinks I have courage You are insane Quite good Quite good A bit disappointing I would suggest Think about his idea, but I should do what I like Do it or be prepared to justify yourself Oh, incidentally/ by the way That is not very important The primary purpose of our discussion is I was a bit disappointed that It doesn't really matter I am annoyed that Very interesting They are impressed That is clearly nonsense I'll bear it in mind They will probably do it I've forgotten it already I'm sure it's my fault Why do they think it was their fault? It's your fault You must come for dinner I will get an invitation soon It's not an invitation, I'm just being polite I almost agree He's not far from agreement I don't agree at all I only have a few minor comments He has found a few typos Please rewrite completely Could we consider some other options? They have not yet decided I don't like your idea
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A large tech company recently developed an AI system to sift applications for jobs, but it rapidly developed extreme gender prejudices – marking people down if their CV mentioned, say, participation in women's basketball. With AI, of course, you cannot always be sure of its reasoning: it may have noticed that more senior employees were men, and so taken maleness as a predictor of success.
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Two major US retailers, JCPenney and Macy's, both fell foul of this misunderstanding when they tried to reduce their reliance on couponing and sales, and instead simply reduced their permanent prices. In both cases, the strategy was a commercial disaster. People didn't want low prices – they wanted concrete savings.
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It is worth remembering that costly signalling may also play a role in this: certain things need to be expensive for symbolic reasons. A £200 dress reduced to £75 is fine, but women may not feel happy wearing a £75 dress to a wedding. TK Maxx,* a psychologically ingenious retailer, is a brilliant place to buy a present for your wife, provided that under no circumstances you reveal to her that you bought it from TK Maxx.*
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Economic logic is an attempt to create a psychology-free model of human behaviour based on presumptions of rationality, but it can be a very costly mistake. Not only can a rational approach to pricing be very destructive of perceived savings, but it also assumes that everyone reacts to savings the same way. They don't, and context and framing matter
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One day, Korzybski offered to share a packet of biscuits, which were wrapped in plain paper, with the front row of his lecture audience. 'Nice biscuit, don't you think?' said Korzybski, while the students tucked in happily. Then he tore the white paper and revealed the original wrapper – on it was a picture of a dog's head and the words 'Dog Cookies'. Two students began to retch, while the rest put their hands in front of their mouths or in some cases ran out of the lecture hall and to the toilet. 'You see,' Korzybski said, 'I have just demonstrated that people don't just eat food, but also words, and that the taste of the former is often outdone by the taste of the latter.'
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This effect is not confined to edible products; in cleaning products, adding the words 'now kinder to the environment' to packaging may lead people to instinctively believe the contents are less effective.
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Recreated by Greg Stevenson. From https://sixtysomething.co.uk/compare-breakdown-cover/ Emphasise the differences, not the similarities.
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Change the format: it is hard to believe that a lower amount of powder or liquid will do the same job as before, but if the formulation is changed to a gel or tablets we are more likely to believe it. And if you produce the product in tablet form, consider packaging them in a thin, wide and high packet, so their visibility on the shelf is not reduced.
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There is a name for the addition of consumer effort to increase someone's estimation of value. It should perhaps be called the Betty Crocker effect, since they spotted it first, but it's instead known as the IKEA effect, because the furniture chain's eccentric billionaire founder Ingvar Kamprad was convinced that the effort invested in buying and assembling his company's furniture added to its perceived value.
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The error of the environmental movement seems to me to be assuming that it is not only necessary for people to do the right thing, but that they must do the right thing for the right reasons.
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shouldn't really care what their motives are. Demanding people do the right thing and for the right reason is setting the bar rather too high. When Ogilvy was asked to increase the level of waste recycling in British homes we made the suggestion of shelving all discussion of what a household thinks about the growth of landfill or the loss of polar bears; instead we suggested that the principal behavioural driver of recycling is to do with circumstances rather than attitude. Put bluntly, if you have two bins in your kitchen, you'll separate your recyclable rubbish and recycle quite a lot, but if you have only one bin you probably won't. Under the slogan 'One bin is rubbish' we focused our campaign entirely around encouraging people to have more than one bin in their household – avoiding the issue of how to convert people to be card-carrying members of the green movement.*
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Conventional wisdom about human decision-making has always held that our attitudes drive our behaviour, but evidence strongly suggests that the process mostly works in reverse: the behaviours we adopt shape our attitudes. Perhaps someone who separates their rubbish into waste and recyclables will become more environmentally conscious as a result of having adopted the behaviour, just as Tesla drivers will wax enthusiastically about the environmental purity of their vehicles, regardless of their initial reasons for buying the car.*
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We have adopted a similarly pragmatic approach in proposals to reduce the amount of uneaten supermarket food thrown out by consumers once it passes a best-before date. Again, we didn't concentrate on the reasons people shouldn't waste food, but instead on ways to make unwasteful behaviour easier to adopt. Our suggestions have included such childishly simple solutions as including the day of the week on 'Use By' and 'Best Before' dates on packaging. 'Use by Friday, 12/11/17' is a much more useful reminder than a numerical date.*
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Give people a reason and they may not supply the behaviour; but give people a behaviour and they'll have no problem supplying the reasons themselves.
Chapter 7
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One characteristic of humans is that we naturally direct our attention to the upside of any situation if an alternative narrative is available, minimising the downside. By giving people good news and bad news at the same time, you can make them much happier than they would be if left with only one interpretation
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When you think about it, it is rather strange how explicit low-cost airlines are about what their ticket prices don't include: a pre-allocated seat, a meal, free drinks, free checked luggage – such deficiencies help to explain and destigmatise the low prices. 'Oh, I see,' you can say, when you see a flight to Budapest advertised for £37, 'the reason that low price is possible is because I won't be paying for a lot of expensive fripperies that I probably don't want anyway.' It's an explicit, well-defined trade-off, and one that we feel happy to accept. Imagine if cheap airlines instead claimed: 'We're just as good as British Airways, but at a third of the price.' Either nobody would believe them, or else such a claim would raise instant doubts: 'Maybe the only reason they're cheaper is because they don't bother servicing the engines or training the pilots, or because the planes are scarcely airworthy.'
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Why don't we take the insight gained from our experiences of easyJet and parking tickets and apply it to something larger? Public services are sometimes disliked by the people who use them not because they are worse than private sector services, but because the link between what you pay and what you gain is so opaque that it prevents people from creating a positive narrative about the taxes they pay.*
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One problem with governments is that they generally hate hypothecation, the system whereby taxes are ring-fenced and spent on a pre-defined area of activity. Instead, taxation tends to go into one pot, before being spent wherever it is needed. As a result, we end up resenting taxation more than expenditure that goes towards something we can see, feel or even imagine.
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Control Tower: 'Maybe we ought to turn on the search lights now?' Kramer: 'No . . . that's just what they'll be expecting us to do.'
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The above joke from Airplane! (1980) appears when the air traffic controller is trying to follow protocol, by turning on the lights on the runway for the approaching plane; Kramer, a war veteran, is frightened of being too predictable.* It underlines a serious point.
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Typically, most of a company's management will have the mentality of the air traffic controller, with a love of the obvious, whereas the marketer needs to be more like Kramer, with a fear of the obvious.
Conclusion
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Or, as Niels Bohr* apparently once told Einstein, 'You are not thinking; you are merely being logical.'
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It seems safer to create an artificial model that allows one logical solution and to claim that the decision was driven by 'facts' rather than opinion: remember that what often matters most to those making a decision in business or government is not a successful outcome, but their ability to defend their decision, whatever the outcome may be.
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If we are in denial about unconscious motivation, we forget to scent the soap. If we adopt a narrow view of human motivation, we regard any suggestion of scenting the soap as silly. But, like petals on a flower, it is the apparently pointless thing that makes the system work
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I would like just 20 per cent of conversational time to be reserved for the consideration of alternative explanations, acknowledging the possibility that the real 'why' differs from the official 'why', and that our evolved rationality is very different from the economic idea of rationality.