Psychology Hacks of the World's Best Advertisers - Rory Sutherland

I'm [ __ ] giving up. It ruined everything. It ruined everything, didn't it? Okay.

The weirdest thing is we're teaching people how to win an argument, not how to solve the problem. That's why I think what's happened with marketing is it's been taken over by consultants and tech people and nerds who've turned it into a narrow incremental improvement game. Okay.

Rory Sutherland is one of the most respected minds in advertising. He's a best-selling author and a pioneer in showing how psychology shaped business, teaching us why people make choices that defy logic but still make perfect sense.

At the moment in marketing, you can come up with a brilliantly rational argument for doing something boring, stupid, utterly pointless, and you'll keep your job. It's kind of pissing in the Pacific. It's improving things a bit. It's justifying your existence. But every now and then, you stumble on something which is of disproportionate and enduring value.

Now, let me tell you a story of this, okay? People have always ridiculed poor old Blockbuster Video for refusing to buy Netflix for $50 million. And my argument is they were right not to buy them for $50 million cuz at the time, Netflix hadn't had the big idea. Sometime after one of the two founders of Netflix said, "Oh [ __ ] if we turn this into a business, suddenly they'd hit the consumer sweet spot. On the basis of that idea, they're worth half a billion."

On the other hand, the honest truth is what actually matters about human behavior is how something makes someone feel. I've got a Japanese toilet. Have you done that? You'd never go back. Okay? I mean, dry wiping is [ __ ] you know, barbaric, right?

The point I'm making is that innovation and marketing are two sides of the same coin or arguably the same thing. But how does young people now structurally teach themselves to think like that? I want to democratize the way of thinking and to do so requires three sources of kind of creative strategizing which are

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Well, welcome to the show. Thanks so much for coming on. I wanted to start by saying in my 20ies, I ran an agency, uh, marketing agency. So we did like marketing uh strategy creative and then we would deliver it for them. And so we always had those moments where we would go into brands and deliver our creative ideas. And I can still remember back in the day when creative was actually treated as a primary

Oh yeah. Cuz what what has happened is the media people have turned this into some sort of totally dreary numbers game which I definitely think I was which has [ __ ] the whole business in my view. Yeah. You were part of that conspiracy where you let's pretend this is a commodity play. Okay.

Now, my point about that is it's a very it's an important business. I mean, continual incremental improvements in uh the optimization of marketing efficiency, it's a billion dollar business. It's totally worthwhile. What you're turning your back on is that 80% of marketing is fat tailed. Right? Let me explain. Okay? That the real value of marketing isn't what you do dayto-day. It's the fact that every sort of 6 months or a year or every 18 months you stumble on something which is of disproportionate and enduring value. It's a discovery if you like. It's a treasure find. Okay. Now the problem is we're no longer trying to do that. We're no longer looking for treasure. We're just mining ore.

Okay. And it's [ __ ] the whole business. To explain the difference between thin tailed and fat tailed. Thin tailed is stuff where you basically improve it a bit on average. Uh there's no big downside. There's no big upside. You can ignore the outliers because nearly everything is within a narrow kind of Gaussian range of expectation. Right? That's like shopping at little. Okay? Which by the way, except for the middle aisle at Aldi. Okay? Right? So, so what I'm saying is that thin tailed things are I need this stuff. Let me procure it as effectively and in as good a combination as I possibly can. Okay? That's grocery shopping, sainsburries. And I would say 70% of the value of marketing isn't like that. It's not like Aldi or Little or or Asda or Sainsbury's. It's like TK Maxx. Right. You go in and some of the time it's a total waste of time. And every now and then you go, "Fuck me. I wasn't expecting that."

Right? So TK Maxx is fat tailed retail. Sainsburries or Asda thin tailed retail. Aldi, interestingly, is thin tailed retail on the edges, but fat tailed in the middle aisle, right? Which is, yeah, I need some milk and you better go and buy. Oh, they got cheddar. That's quite cheap. Oh, we'll buy that. Oh, [ __ ] me. A wet suit. Right. Okay. Right. You didn't know you wanted a wet suit. You hadn't planned to buy a bloody wet suit or, you know, one of those power sprays. Right. And that's the fat tail bit.

And I think what's happened with marketing is it's been taken over by consultants and tech people and nerds who've turned it into a narrow incremental improvement game. Okay, which is missing the point.

Drayton Bird, very hard-headed great guru, you must know him, the great guru of direct marketing in Britain, he actually said something very surprising. He said, "You don't do direct marketing, this is back in the days, you don't do direct marketing to make money. You do it to learn." And what he meant by that was that actually the information you derive from creative testing. That's the really valuable thing because you can then replicate it but you're what you're not trying to do is necessarily make money in the short term. You're trying to make a discovery.

Now let me tell you a story of this okay which is a perfect example. It's always um people have always ridiculed poor old Blockbuster Video for refusing to buy Netflix for $50 million. Famous story. And my argument is they were right not to buy them for $50 million cuz at the time Netflix hadn't had the big idea. Okay. They were DVDs by post. No.

Right. Now, first of all, Blockbuster could have replicated that business in a heartbeat. Okay. it hadn't hit the secret source because secondly, it's actually not that good an idea because generally people don't know on Wednesday what film they want to watch on Saturday.

Right. Anyway, sometime after they'd failed to sell to Blockbuster, they were in a state of some desperation and they were looking around the warehouse. Now, one of the two founders of Netflix was also happened to be the world's leading expert at the time on subscription marketing, right? And they're looking at their warehouse full of DVDs and one of them said, "Isn't it a pity we're paying to store these DVDs in a warehouse when really they should be stored in someone's home?" And the other guy said, "Well, actually, there's a way you could do that. You let people have three DVDs at any time. Instead of paying per rental, they pay a monthly subscription and they can circulate." And that was the promise. 1995 a month. No late fees ever. uh three DVDs at any one time, change them as often as you like. That was the breakthrough idea. That was the discovery. That was that that it wasn't DVDs by post, right? It was, oh [ __ ] if we turn this into a subscription business, suddenly they'd hit the consumer sweet spot.

Now, at that point, they're not worth $30 million as they might have been when they were talking to Blockbuster. Suddenly, on the basis of that idea, they're worth half a billion. Now, risky decision because theoretically people could have decided to watch 20 DVDs a month and it would have cost them a fortune in postal fees and they never would have made money. But they could test that and they tested it. Inertia generally sets in.

Okay. It's a bit like gym membership, you know. Nobody people might have actually I think when I first joined Love Film or Netflix, I probably did watch about seven films in the first month or something, five, but it settles down. Also a brilliant price point because it was about 1995 a month was about the price of buying a DVD.

Yeah. Exactly. See, so you kind of go, well, if I just for the price of buying one DVD a month, I can watch loads of them cuz films aren't like music, you don't really I mean there are there's a proportion of films which we watch again and again, but it's about 1% of all films made.

Interesting about Hitchcock scores very high on rewatchability. Well, just for instance, what are your re I always ask people, what are your rewatchable films? The one, in other words, the film where you basically if it's on the TV, even though you can watch it anytime you like, you still watch it through to the end.

Something like Water World. Oh, that you're totally obsessed with that. Are you? I've watched it a hundred times. I don't know why. Cuz I've got various ones. That's fascinating. But like The Godfather, The Godfather, Ferris Mer's Day Off, you know, the famous ones, probably a third of Hitchcock, the third man, you know, we can imagine. But equally, there are great films. I've never had the urge to watch Citizen Kane a second time, you know. Weirdly, Naros was one of those. So, I w I rewatched Naros to such an extent that Netflix actually started to think I was Spanish speaking and started to serve me up like telly novelas and things.

Breaking Bad maybe. Yeah. No, no. Well, weirdly I haven't I'm saving that up because I enjoyed it so much I hadn't got time to get into it. Yeah. And so weirdly I haven't finished that because I'm actually saving it up to a time when I can really good discipline.

Yeah. Which is a huge self-disipline required. It's fantastic. Um, so you know those are the kind of things. So anyway, but with that that thing that's that's a that's one idea that happens in one moment in time. It's worth $300 million. That's the point about marketing. Okay. Okay. It justifies its continued existence by doing the kind of grind. Okay. But that's not the purpose of marketing. The purpose of marketing is to make a breakthrough which gives you disproportionate return.

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So, how does the Cuz I agree with you like I' I've worked on both sides of that fence that idea generation through to the incremental daily couple of percent improvement. But how does young people now structurally teach themselves to think like that? Because that Netflix example is a great one. Feels like their backs were against the wall a little.

I mean, I hate saying this, but I mean, I wrote a book for this reason. I want people not all the time. I want I want to democratize the way of thinking that is encouraged which is which I would argue is generally suppressed in most areas of business with a few notable exceptions fairly low on the hierarchy. I'd put the advertising industry and I love the advertising industry. Um entrepreneurialism generally thinks that way.

Mhm. So the weirdest thing I got is that entrepreneurs and weirdly people like venture capitalists loved that book. I didn't expect that necessarily. The worst review I got was from a romantic novelist for some weird reason. I mean, the audience for that book and where it's popular has continually surprised me. But then subsequently, it makes sense. Entrepreneurs are always basically thinking like game theorists. In other words, it's not what is commonly known in the sector, what is best practice, what is the benchmark, it's what do I know that nobody else does or what does everybody else think that I can safely ignore. Okay. I call this reverse benchmarking. It's you don't make yourself like your competitors. You find out one thing your competitors are weirdly bad at and you double down on that.

Yeah. Uh and I noticed this pattern. Everything from Apple to Bies, the convenience store gas station chain in Texas to the Moxy Hotel. All of these really successful innovations are a product of reverse benchmarking. We'll take the opposite of what other people are doing and the thing they do badly, we'll do really well and we'll just basically focus all attention on the thing where we're disproportionately good and we'll merely be okay everywhere else.

M And I so I think there's actually a kind of replicable I think there's a replicable series of patterns to be found by reverse engineering successful brands and successful businesses that they tend to break the rules in certain common recurring ways.

What's an example of that? Okay. Uh real apologies to people who've heard this story because I've told it on a few podcasts. So the story I love is a guy called Will Gdara who write writes a fantastic book called unreasonable hospitality. Brilliant book. Fantastic, isn't it? Okay.

And slow builds as well. It's but but what you realize of course is the restaurant business is a fast feedback business. It's like comedy. Okay. And I I would place you know the restaurant business you know I said there are certain industries where this kind of thinking is not suppressed. You know it's highly suppressed. I imagine if you're an actuary, okay, or you're an accountant, uh not always, okay, uh it generally is encouraged, for example, the comedy circuit would be a very high manifestation of think differently.

Um and the advertising industry, creative departments are part of that where it's the kind of place where you get fired for coming up with an obvious logical solution. I mean, you know, you know what I mean? Yeah. Okay. Which is Yeah, that's fine, but it's not what we pay you for.

Exactly. And um entrepreneurs generally won't invest in something unless it contains some aspect. There's a brilliant investor in Silicon Valley who goes, I basically now do not invest in a business unless it contains one component that at first face seems slightly silly.

Um and so anyway, Will Gdara, 11 Madison Park, number 50 restaurant in the world, San Pellegrino Awards, wants to get to number one. Don't know why, to be honest. to our number 50. I'd just go basically that'll do, you know, but there we go. I'm not will. Okay. He takes his whole team out to the number one restaurant in the world. Another Micheland starred restaurant I think also in New York if I remember rightly. And everybody starts making lists of what they do really well so they can copy them. Will go not interested in any of that. Goes they're already doing it. So what's the point? Okay. All we're doing is doing something that nobody will notice cuz they've come across it.

So let's ask a different question. We've just been to the best restaurant in the world. What didn't they do? Well, now obviously it's not very easy to come up with things that are [ __ ] about a really rich restaurant. Yeah. Nim Tiff and I went to a Misheland three star restaurant once and the bread was cold. That was the weirdest thing. Okay. Right.

But I you know that that but I don't think that's normal. Anyway, they come up with two things. Okay. The the coffee was nothing special and because they take a load of chefs along. One thing about chefs, they're totally honest about their preferences. Okay? There's no pretension with chefs. For really good chef, do you remember that chef who said the best pizza you could buy was the American hot at Pizza Express? They get sort of, you know, it's a wonderful thing on YouTube.

Yeah. I always go, I love this guy because it's just everybody else is thinking, I need to come up with a really kind an answer that makes me look really sophisticated. And this guy just tells the [ __ ] truth. It's kind of true. It's a bit like the best cheese cheddar. All right. Okay. Let's not fart around with all this [ __ ] foreign stuff. Okay. Let's be honest. If you're on a desert island, you could only have one type of cheese. Cheddar, right? Okay.

Anyway, so this guy, the chefs, a lot of them drink beer, not wine, cuz being honest people, they think that beer's a great drink and wine's a wank. Not always true, but there's an element to that. Okay. And so the beer was disappointing. Coffee was disappointing. So he goes back to his own restaurant and says, "Right, you guy who's a coffee nut. You're now the coffee smellier, and your job is to make this the best coffee experience." I don't know if he included tea, but it's the United States, so you wouldn't have to. Uh best coffee and tea experience, let's say, uh in any restaurant in the US. Okay.

So, you know, you actually go, you know, I'd like coffee, please. Do you any roast preference, you know, etc. And the other guy who's a thick guy from the kitchens, who's a total craft IPA or craft ale nut, is the beer smellier. M And so not many people in a Mishan three star restaurant for beer but they're just expecting nothing. They expect, "Yeah, we got this on draft and we got this in a cap." And instead, they get this guy coming over with suggested food pairings going, "Look, if you're having the halibet, you know, the this particularly grapefruit flavored IPA from the Moscow River or whatever, he's utterly fantastic." Right?

Yeah. Now, okay, it's only 20% of people, but mind [ __ ] blown, right? It's true. Right. Now, I think that's reverse benchmarking. I think that's what the Moxy does. Have you ever stayed in a Moxy hotel? Yeah. What do you think? Yeah. I feel like I I feel like there were no staff in the one I stayed in.

Well, downstairs, no, there's no room service. Yeah, there's no laundry service. The rooms are small. They're good rooms. They got a good telly. They got good Wi-Fi. The ground floor, on the other hand, you have a 24-hour barista there. You check in at the bar, there's a whole load of, you know, there whole load of board games kicking around. Even after you've checked out, you basically feel you can hang out there and get on with a bit of work or even hold a meeting without feeling like a dick. M So, it's a reversal of the hotel which is let's ignore the rooms downsize the rooms don't stay there for a week by the way the moxy wouldn't suggest you stay there for a week okay but if you're only staying for one or two nights in can this year I went and stayed in the moxy above cuz it was €250 a night which by the way sounds a lot but compared to the price down in can was a [ __ ] bargain and I spent the money on hiring a Cadillac lyric electric Cadillac which you can't get in the UK anymore well yet they're planning to introduce And I cuz American car is the only way you can get decent air conditioning in France. Cuz I don't know what it is about the French, but they suck at air con. I mean, they really [ __ ] suck ass when it comes to HVAC. Okay. I think it's partly because they're cheap and partly because they're frightened of drafts. The French are brought up to go if you sit in a cold breeze, you're going to die or get a crease devoir, something like this. Bollocks. Anyway, but um anyway, but but the Moxy is great because actually the people there are genuinely cool and French because it's out of town and uh the vibe is just really pleasant because you can hang out there even after you've checked out and you you you're made to feel completely at home. The ground floor is like a kind of cooler we work basically uh solvent we work and um

So anyway that's reverse benchmarking. Apple's reverse benchmarking, right? Everybody was concentrating on technological capability of the devices. And Steve said, "Okay, we need to be up there, but what you've all completely ignored is aesthetics and usability." So, we're going to actually basically sort of submatch you on all the things all you nerds have been competing for, like RAM and processing speed and [ __ ] like that, and we're going to we're going to basically knock you out of the park on the aesthetics and the um usability. And I think the really decisive products there were things like the iMac and the and actually the iPod.

iPod. Yeah. Were the actual game changers. It was that was the second coming really. I mean the iPod versus at the time the Walkman. It just was the sexiest experience ever, wasn't it?

Here's an idea. Right. Okay. Someone can nick this. I want to rent car rental company at big airports. Don't care about small airports cuz renting a car from a small airport is fine. Car rental company, big airport. The deal is I pay you an extra. Don't rip me off on all the [ __ ] collision damage waiver and the things. I want to pay you an extra 60 quid and someone meets me at the [ __ ] arrivals gate with the key. Walks me to the car, tells me how it works. Okay, this is 10 minutes. I'll happily pay, you know, 10 15 minutes. I'll happily pay 60 quid for that because that's the worst part of [ __ ] car hire, right? It's finding your car. uh you know, standing at a [ __ ] desk while someone types war and peace despite the fact that you've input all your [ __ ] license plate details in advance, okay? And then walking in baking heat with heavy luggage through a completely unnavigable car park.

Often, by the way, not their fault, which is the airport determines the signage, not the car hire company. And so quite often the car hire company is driven practically insane because they go, "Can you please put up a sign here that says Avis?" And it takes like 2 years for them to get it through airport [ __ ] bureaucracy. So, but anyway, my point is I would willingly pay for that service because that takes the worst part of cara. Now, you you pay for a 60 quid taxi from Gatwick. Someone meets you at the [ __ ] gate and walks you to the car. Yeah. Okay. If I'm hiring a car for 10 days and paying you 700 quid, why don't I at least get that level of service?

M And it's partly the reason you don't get that level of service to [ __ ] tech people who regard it as absolutely unthinkable to develop a product or service which actually involves carbon-based life forms adding value in any shape or form. Yeah. Now if I if I went to [ __ ] load of investors and said I've got this car hire robot which meets you at the gate and you follow it to the [ __ ] car, right? I'm sure I get a load of investors if I suggested a business that actually involved employing human beings and the performance of a useful function. Forget about it because the whole investment world has been captured by human hating autistic nerds. But there we go.

My parents have like decent money as they're like retiring and they hate not it's not that they hate technology, they hate the idea that the human experience has been taken out of hotels and taken out so much. No. And actually I think by the way I think there are two the weird thing about hotels is I think the opposite of a good idea is another good idea. There are two ways you can run a hotel. Totally no touch which is you use your mobile phone to open the door. Yeah. Okay. And very frequent users like that. Okay. Because if you stay in a hotel 50 times a year, the last thing you want is to cue cue a checkin for the 17th time. The alternative is very hightouch where they take you to the room and explain how the bloody TV works. But I completely agree with you by the way, which is the wealthiest segment of the population. Whether they deserve to be the wealthiest segment of the population is a different question. But the wealthiest segment of the population, which is the pension owning, property owning, paid off a mortgage, kids left home, parents just died segment of the population, right? Um, is very underserved by all this.

Totally. Uh, now fairness, I'll give my dad a lot of credit. He died last year. He was 93. And up until his 80s he was selling books on Amazon. He be he became actually uh you know, basically an extraordinarily enthusiastic internet user. Amazing. Um in his 80s he was the person who first told me about Google. You believe it? Okay. So you he was at the time I suppose he would have been in his late 70s early 80. Yeah, mid7 innovator but he was absolutely fantastic. But by the time he got to about 88 he said I can't cope with this [ __ ] anymore. It wants this two-factor authentication. I'm [ __ ] giving up.

It ruined everything. It ruined everything, didn't it? Okay. And that's one of those cases which we have to be really alert to this business of of two-factor authentication. I like to when I get home, I put my mobile phone in a different room. I don't want any of that [ __ ] [ __ ] coming in and beeping at me, right? I'm home now. Okay? I grew up in the 80s where when you left the office, no one could [ __ ] get hold of you at all. Right? And now I have to move to this, you know, in later in life when I should be taking it easy. I have things going beep and ping 24 hours a day. [ __ ] that. Right? So I leave my phone in a different room. Every time I then go online and want to accomplish anything, I've got to wander back into the room where my phone is charging and bloody well put in octaverify or some goddamn text code. Okay, I'm [ __ ] sick of it.

Yeah. Can nobody come up with a better solution to [ __ ] authentication for [ __ ] sake. Um, you know, for crying out loud. Okay.

Um, but also it's a problem because at the level of the individual actor, the individual online retailer, it or the individual card payer, it's a rational security procedure, which makes sense. At the category level, it's actually making just like those cookies. It's making the By the way, after Brexit, Dominic Cummings made the point that the whole cookie click thing. Yeah. Okay. Is European Union legislation. Mhm. We've been out of the [ __ ] European Union since 2016. Okay. Can we not at least get rid of that [ __ ] [ __ ] right? Okay. Where every website is rendered basically. Now, what I like to do is I delete all my cookies about every two months. I go, "Okay, the short-term ones are useful. I don't want any long." Every time I do that, the web becomes unusable for 2 weeks cuz every goddamn site demands that I click the same authorization thing all over again. Okay. Um I mean can no I mean Cummings himself was rendered absolutely speechless at this because he said if there's you know I mean this is an extraordinary across the entire category of use of the platform the level of the individual actor what they're doing is legally necessary or in the case of authentication it makes rational sense. The problem they're not spotting is that it's one of those things that when everybody does it, okay, nobody, you know, you've created actually a fundamental sludge in the entire experience of the whole medium. It's a bit like I'm very very conscious of the fact that we should legislate much more for dodgy subscriptions which are difficult to cancel because my argument is there are legitimate actors in the spec in the subscription space who will now find it impossible to sell subscriptions because the consumer is one spit and twice shy. There's actually a whole academic paper about this which is I'm going to assume the worst here and assume this is one of those subscriptions which is easy to sign up to but an absolute toss to actually cancel.

And uh I I the reason you actually need regulation in those fields it's very similar to London taxis okay you would only need 4% of London taxi drivers to be dodgy for for the entire business to collapse. M Okay. If you imagine okay if you imagine that you shopped on Amazon and one in 20 things didn't arrive. Now if you're being completely economically rational you'd say well if Amazon was 7% cheaper but 5% of the things didn't arrive. I'm still quit. No human trust does not work like that. It isn't it's it's much much more binary. Okay. There's wonderful Caribbean proverb that says trust grows at the speed of a coconut tree and falls at the speed of a coconut. Okay. And the point I'm making there is there are lots and lots of markets where you only need a percentage of bad actors or a percentage of bad experiences. And you don't just kill the individual brand, you kill the whole category.

That's why you need regulation of black cab drivers uh to a very high degree because the system only works if the consumer can basically assume as I did, you know, when I was like a dad. I'm still a dad, but you know, when my kids were 10, I could put both of them into a car driven by a total stranger and say, "Take these small sprogs to this place." And I wouldn't have to give it a second thought. That's, you know, you you only need, you know, tiny percentage of bad apples and you can destroy the whole category.

I want to go back to that example you gave of the I don't know if you just came up with that but it's quite I I had a really bad rental car experience recently and so I want to come back to that thinking of how an entrepreneur or a marketer tries intentionally to think nonrationally about the improvement of their business. It's often can be postrationalized but it can't be pre-rationalized. In other words, it isn't the product of a rational sequential datadriven set of information.

M And this is uh Roger El Martin, my own personal Svengalian guru uh who's a Canadian uh business writer. He was the dean of the Rottman School in Toronto, big adviser to Proctor and Gamble. In my opinion, he's the heir to the pupil of and the heir to Peter Ducker in marketing speak. And uh I think if we made reading Roger Martin compulsory in the UK uh in the UK business community, we put 5% on GDP. Go on everyone, get the book. Uh and there, you know, one of his books is, by the way, you know, a new way to think, overcoming America's obsession with economic efficiency, because he argues that the pursuit of efficiency is very rarely argued against because it seems so logical. Yeah. But it often actually is driven by informationational asymmetries. So, you're optimizing for the past rather than for the future. you're underinvesting in exploration and overinvesting in ex in exploitation and so on and so forth.

Um, but um, uh the interesting thing there is that when I'm talking about being nonrational, you can't be completely rational about the future as Martin says because there's no data about the future. All big data comes from the same place, the past. Okay. Consequently, there are cases where you can extrapolate or you may be able to make some sort of forward predictions, although those are dangerous actually uh in many cases. At some point, at some level, your approach to the future has to be experimental. And he sees three things. I would argue argue that humor is a fourth, by the way. The comedy and humor are fourth. Three sources of kind of creative strategizing, which are uh anomalies, analogies, and contradiction and um uh trade-offs.

Okay. So you either spot an anomaly and it's not normally a rigor not normally a kind of robust data thing. It's just an anomaly. You spot something that's unusual. Mhm. Uh then there's analogy which is you look at a different category and transfer what they do into your category. It's a bit like the film the famous uh elevator pitch for Alien which was Jaws in space. Okay. Yeah. You know, in other words, you take something from one setting. You take something, by the way, you could take something quite easily from the uh hotel the hotel industry and apply it to the airline industry or the or the rail industry. Now, you'd think that the rail industry and the air industry both in the transportation sector, but there are an awful lot of things they've discovered in one that took them years to translate or they've never translated to the other. Okay. Uh you know, you could you know there there are usually things. So, that's analogy. M And then the third one is take something that everybody assumes is a trade-off and prove that it isn't.

What does that mean? So we tend to assume that you can have either or. And sometimes there's an ingenious way of having both. Mhm. And to do so requires a kind of creative mindset or an at least an abundance mindset, not a scarcity mindset. Now, I've just come up with one of those things which it occurs to me that you could uh reduce the accident rate in London. Uh reduce the maximum speed of cars traveling in London without any significant increase in journey time. Now, you're going impossible, right? If cars are going slower, journeys going to take longer. Yeah. Actually, a bit, right? But here's the thing. The reason your journeys through London in a car are so [ __ ] slow is only a tiny bit to do with whether you're going at 20 or 30 miles an hour. Mhm. Traffic lights and traffic jams are actually the main source of delay. What's weird about this psychologically is I've been guilty of this myself. I sit at a traffic light for 4 minutes and I go, "Well, this is fine. I'm just at a traffic light. It's red. I'm used to this. I've been doing this for 30 years of 35 years of driving." Right? No particular surprise here. Sit at a traffic light. I'm not angry, am I? I'm not. This is [ __ ] state intervention, right?

Yeah. Actually, if we're all driving at 20 mph and not 30 m hour, you can replace a lot of traffic lights with mini roundabouts. And mini roundabouts, this is a Woodrow Wilson quote, the highest form of efficiency is the voluntary cooperation of free people. A mini roundabout has what you might call um I think it's is it not called homeostasis? Maybe it is. I don't. But it's a self-regulating mechanism. You never have to stop at a mini roundabout unless there's a reason, which is another car using the mini roundabout first. Quite frequently, you have to stop at traffic lights for no reason at all because they're red and then nobody goes through or the [ __ ] you press the pedestrian crossing button has already crossed, leaving you to sit there like a [ __ ] Right? By the way, someone ought to really punish that. You know, you know, I think if you're going to press the [ __ ] button, okay, you wait for the green man, right? Anyway, the point I'm making is it is actually possible. Now, just to be clear, it drives me nuts driving at 20 because I'm going I'm used to waking at traffic lights. I've been doing that for 35 years. Driving down the South Circuit at 20, you must do the same thing cuz you're you're you're that part of London, right? And there's stretches of the South Circular, you go, this is [ __ ] ferial. This is just so tedious. Like, it's 11 at night.

Yeah. Now, just a few caveats. We should not give taxi drivers penalty points on their license for going 25 and a 20 limit. Okay? They're professional drivers. They drive all the time. They're driving on unfamiliar routes all the time. That isn't fair. And particularly because it's a total [ __ ] mind [ __ ] as to whether it's 20 or 30 anyway. Okay. So, we should not use this. Secondly, I'm not sure you should actually get three penalty points for driving at [ __ ] 24 at 11:00 at night. I think we should mediate this. Maybe the limit should be 25. We can debate all those things, but nonetheless, it's worth noting that this should bring a sizable reduction in both road accidents involving pedestrians and cyclists and and and um uh and significant injury to pedestrians. Okay, we'd always assume that the downside is but journey time is going to become longer. Well, actually, if you use the reduced speed to increase the homeostasis solution through many roundabouts and reduce the number of extremely costly durig, I teased Richard Phthalo who's got the Nobel Prize for economics about this cuz Americans can't really cope with roundabouts. And I said, I don't want to be rude, Mr. Thaylor, but America is supposed to be the land of the free, but you have the state telling you when you can drive or when you have to stop. Yeah. We have the roundabout which is a beautiful self-regulating self-organizing emergent system.

I was just just in the states and my with my brother who lives there and all we kept saying is this should be a roundabout. Yeah. I know. No, no, no, I know. I think there's one state where they have a lot of them. Is it Massachusetts? I don't know. I can't remember. I'm not sure. Yeah, but no, no. I mean, no. I mean, you're looking What the [ __ ] is this? They do have one good thing which is that thing late at night where you have the flashing amber versus flashing red. Yeah. And you can turn right on red. you can turn right on red except in New York City, I think. Yeah. Yeah. Is that right? Yeah, it is. I think. Yeah. But um it's um you know that you might actually be able to achieve a trade-off there.

Yeah. And so in other words, we tend to assume tradeoffs because it it's a nice either or solution and creates a simple mathematical optimization problem between the two extremes. Okay. But actually creatively you can the perfect okay I'll give you the perfect example of this okay of of reframing the value of something psychologically psychologically a lot of advertising takes a trade-off and redeems it number two so we try harder that's a okay reassuringly expensive stellar art you take a negative and explain it's actually a benefit right expensive but good okay small but cares right and psychologically You can resolve trade-offs like that in advertising slogans. Guinness, good things come to those who wait. You know, it's a much better slogan than it's bastard slow to poor, right? And I think, you know, there's a beautiful example which just astounded me cuz I was on the plane and it happened and it's happened to me once since. So, I don't know whether this has gone a bit viral. So, I'm on an easy jet plane. It lands at Gatwick and it's about 11:00 at night and the engines wind down and there's no air bridge. We're like parked on the apron somewhere and you can see some sort of fairly shitty little steps being prepared and everybody on the plane has the same thought. A [ __ ] it's going to be a bus. And the pilot comes on over the air and says, "I've got some bad news and some good news. The bad news is I haven't been able to get you an airbridge uh today. Um, but the good news is the bus will take you all the way to passport control, so you won't have far to walk with your bags."

Perfect. Now, that's that doesn't work at London City Airport. Okay. Really? because obviously London city here but at a large airport what happened is we went from going [ __ ] hell we're on a bus this is so [ __ ] to think of all the distance I don't have to walk and when we were dropped off by right by passport control we didn't just go oh that's a bit of luck we went oh that's actually a benefit of the bus because you'd moved our attention so we saw the bus we'd previously seen the bus as an inconvenience and now we saw it as a conveyance it was actually removing a whole heap of schle eping, you know, cuz you've been on a plane, it's 11:00 at night, the last thing you want is a 2-m walk. And so, we were almost grateful for the bus because its function had been reframed in our minds.

Yeah. And my point of view is you can't generally resolve trade-offs in physics or chemistry, although you can sometimes. I mean, catalysts and things like that are an example of that. But mental catalysts, i.e. things which make you go, I used to hate this, but now I now I think about it differently. I think it's great. M Okay. You can do those all over the place. Well, since they create huge value at minimal cost, why aren't we trying to do it more often?

Yeah. I think that entrepreneurship these days is so competitive in its it's when I first started entrepreneurship I feel like a good idea was kind of enough whereas now everything moves so quick that I feel like when I rewatched your talk on perception versus you know the value I remember thinking I wonder how many products and services nowadays are competing for the 1 or 2% but are just forgetting that you can present the same information in a different way.

I think there are I I mean personally okay first of all innovation and marketing to me are actually the same thing. I think it's an unhelpful distinction. I think you should judge the efficacy of your marketing the same way you measure the efficacy of your innovation. I don't think you should do this stupid [ __ ] performance marketing thing of going okay you this quarter you spend X and you brought in X plus 7% whoopde [ __ ] do. Okay. Because that's setting the ambition bar far too low. M What you should be doing is with innovation. Imagine a pharmaceutical company which went around its labs going which blockbuster drugs did you invent this month? None. Oh, you're fired. Right? I think we should look at marketing in the same way we look at innovation which is every now and then it produces something of enduring recurring value. Okay? And you should be able to claim the credit for inventions you had in the previous quarter. Okay. We had an idea for an airline early in the days of the behavioral science practice which to this day makes them£10 million a year in incremental

high margin revenue. It was a UX idea, the web design idea. I later went into the airline and said the UX people should be the highest paid people in the building, which I still believe because they can make you 10 million in an afternoon, which lasts forever, right? And they're going to be making that 10 million as long as they continue with this new year.

"What is that?" I can't tell you now. Do you know what we got paid for that? £25,000 quid. Okay. It cost them £25,000. Do the following year. Do they say, "Well, we're going to put a million pounds into you to thank you for the good idea." That is still... This is like saying to J.K. Rowling, "Yeah, you can have royalties, but only on the first edition, right?" And so marketing is treated in this unbelievable penny-pinching way, which if you applied that same approach to R&D, you'd never do, okay? The majority of people working in pharmaceutical research spend their entire working lives without ever working on a drug that makes it into market.

Okay. Now, I'm not suggesting marketing should be given those long-time horizons, but I'm saying somewhere between that and a quarter would be nice, right?

Yeah. But it's but it's also why small companies can beat big companies. Yes, that's absolutely true because they're willing to do things that you could never get approved by a big company's general finance function, and the culture of innovation isn't that... Very good question for an entrepreneur. "Could I get this approved in a large company?" "No, let's do it." Exactly.

Okay. Yeah. And actually, what you can get approved in a large company... Family-owned companies are totally different here because they have a different time frame, and they're because they don't have shareholders, they're focused on the customer, not on the shareholder. The shareholder is a complete distraction in the pursuance of a reasonable business. And the shareholder value movement, by the way, which... shareholder over what time frame, right? Secondly, do you mean the shareholder or do you mean the share owner? Because the share owner probably has a reasonably long time frame. The share... the shareholder is desperate to justify their own investment strategy week by week.

Yeah. Okay. Back in the 1960s, the reason America grew well in the 1960s is the majority of shares were owned by private individuals who just thought IBM looks a reasonably good company. Albert, they didn't have to present to their family every quarter as to why they were keeping the shares, right? And so, family-owned companies innovate. Four out of the five gold winners at the IPA advertising effectiveness awards. I'll... I'll list them. Role of Honor: McCain, family-owned Canadian company. Laithweights, British family-owned wine company. Okay. Specsavers, family-owned uh franchise, but chain of opticians, family-owned. Uh, the fourth one was Yorkshire Tea, family-owned, branch of Betty's Tea Rooms, right? Yeah. Fifth one was Guinness. Okay. Those are the five advertising effects award winners. Four of them are family-owned businesses.

Wow. And you know, if you go to the... you go to the... you go to Texas, and I kept coming across things. Have you ever been to Texas?

I haven't.

Okay. Go. It's like California was in the '90s. It's just basically the most dynamic, inventive, fantastic economy.

Okay. Everything's just happening, but it's happening fast. That's the difference. Okay.

Um, and you keep coming across these places. There's a place called H-E-B, retail chain, so good that Walmart didn't bother to compete with them. Okay. Family-owned. Buc-ee's, extraordinarily eccentric chain of monster gas stations, which have turned gas stations into a destination. The psychology behind it is absolutely ingenious. Their entire business model was basically based on the human bladder. Okay. So, the logic is, why do people stop at a gas station? Well, actually, it's not really to get gas. It's 'cause someone needs... Yeah.

They then made the decision that that decision was probably female-driven as more often than male. They said the only way we can um, the only way we can actually get more customers than any other gas station rather than just... is to make people hold on longer because they're willing to hold on for an extra few miles to go to a better gas station.

The way we do this, if it's a female target audience, is... I'm totally oversimplifying. The guy called Beaver. Can't remember his Christian name. It is actually Beaver, and the logo of Buc-ee's. It's real. Christian name isn't Beaver, but he's always known as Beaver. But the logo of Buc-ee's is a massive great beaver. It's fantastic. Okay. So, okay. How do we get women to prefer... to our gas station to other gas stations? Well, we're going to have the best restrooms in the business 'cause everybody else's restrooms are disgusting. So, the female person in the car, more likely than the male, but possibly the male, will hold on for an extra 20, 30 miles if there's a better, if there's a better gas station restroom ahead. In order to have 24-hour cleaning in the gas station, we've got to be really big 'cause we can't afford the... the otherwise the economics don't make sense. So, we're going to have barbecue. We're going to sell this. We're going to sell deer corn. We're going to have uh, you know, absolutely massive, you know, retail thing. And then they did a really radical thing, which is everybody else was obsessed with selling gas to trucks. They basically don't allow trucks to... to use Buc-ee's. Uh, because they said, "Actually, the presence of massive great trucks creates a kind of family-unfriendly, female-unfriendly environment."

So, we're just going to sell to people in cars.

They're literally 100 gas stations and like 25 rapid electric car charging stations. That everyone... the posters will say, "Buc-ee's, 126 miles. You can hold on."

Okay. So, it's basically the complete... it's a perfect piece of reverse benchmarking.

Yeah. There's a thing called TRIZ, which is in the field of engineering, which is a Russian Soviet era uh, kind of what you might call a categorization for innovation. They looked at Brit... sorry, British and American and Western patents and they reverse-engineered them and said there are these common characteristics.

I think it's possible. I don't think I'm up to it on my own, but I think as a collective effort, we could produce a TRIZ for marketing psychology. Here are 27 things which basically are common shared characteristics of 90% of really innovative marketing ideas. I think I genuinely, I think that's possible. I don't think it'll cover the whole waterfront. I don't think TRIZ... I think TRIZ said the same thing. Guy called Alula, I think... who basically then said to Stalin, "I've got this great idea. We could be better at innovating." And his reward was like five years in the Gulag. Okay. Um, but I think, I think it's possible to do a kind of marketing TRIZ.

Yeah. And I think, I think if you look at Buc-ee's, you look at those family-owned companies, McCain, what a brilliant advertiser, right?

Uh, there's no way they do those. So, they had some wanking shareholder... analyst meeting every quarter.

They have to present on their numbers and as a result, they'll never... they'll never tear up existing profits for...

All the really smart people think the shareholder value movement is utterly... stupid. Right. Okay. You got John K. You got Roger L. Martin, who I mentioned. Most people in business think it's... it's also turned businesses into basically, you know, the most prized skill in a business is like your ability at quarterly forecasting or some... like that. Okay. And it's distracted businesses from their customers, which are the one proper focus of a business because those are the people who give you... money. Yeah.

Right. Okay. The other people are just basically lending you money with menaces. Right.

And it's a completely moronic, utterly moronic business doctrine which has done almost unimaginable harm. And by the way, one of the reasons why I think innovation is so important and why family-owned businesses are so important, and a few other businesses like purpose-driven or possibly what are they called? B Corp businesses are vitally important is actually because the shareholder value movement has created companies that are so moronic that it has left the field open. Exactly.

But anybody else?

It's like, it's a really great time to be alive as an entrepreneur.

Come think of it. Actually, Tata is family-owned, isn't it? So, Jaguar Land Rover.

Yeah.

Brave marketing move. I heartily approve. I know I'm in a minority.

Very much a minority.

Uh, my argument there is that uh, this... it's all very well saying this is classic brand management, which I approve of a lot of the time. If you're an established and successful brand, okay, Louis Vuitton or something, okay, you don't suddenly reinvent yourself around something totally different.

Mhm.

This is actually what you might call uh, electrification has created total... total disruption and disturbance kind of, you know, in the entire brand hierarchy of the automotive industry.

All right. So, have you gone electric yourself?

Mhm.

Okay. Let's talk actually... this about cars for a bit, you know.

Well, I work... I worked for Aston Martin, Bugatti as my agency.

Interesting.

Yeah. And Louis Vuitton.

So, actually Aston Martin, I think uh, the what you might call the British Bentley, Aston Martin, Jaguar GT car.

Yeah.

Can actually electrify much more easily, I suspect, than something like Ferrari, can't it?

Yeah, it can. Because it was always about something which electric cars do really quite well, which is the grand tourer thing.

Okay. There are certain car brands, you know, where it's more problematic, I think, probably.

Yeah.

But I mean, you probably contemplated buying a um, uh, you might have contemplated buying a Korean car, right? Which you wouldn't have done 10 years ago.

Exactly. Yeah.

Okay. So, you... there are people who are trading from a Skoda, from an Audi to a Skoda Enyaq.

Okay. So, what I'm saying is that the normal, what you might call, I mean, if you think about it, it's particularly terrifying for the German car industry whose great moat was always their ability in powertrain.

Okay. I would argue that the... the great Jaguar Land Rover thing, inarguably, is their uh, interiors.

Uh, you know, I... I think their design and aesthetic of those of those things is is frankly superior to anything else out there. Okay. Um, uh, you know, in that it, you know, it actually, you know, seeing one, you know, the new Defender, for example, just brings joy to your heart, doesn't it? Even if it's some other bastard's.

Yeah.

Uh, you know, they're actually a contribution to the beautification of the environment.

And um, so actually, it's really, really interesting that you can't afford then effectively as Jaguar to say, "We're going to have the same target audience." By the way, it's not like all these people who claim to love the brand were buying the thing beforehand, is it? Okay. Right.

I think it's brave of them in a... in a world where things are changing so rapidly as an existing company to make a change.

I feel like technology enables new businesses. You can't build certain businesses now which you will be able to build in five years. And five years ago, you couldn't build the businesses you're building now. And so it's amazing that an existing brand...

But the heritage, if you think about it, of that brand is obviously superb, you know, superb engineering breakthrough cars like the XK120, the E-Type, etc. Actually, I include the XJS in that, you know, sympathetically. Um, and of course, and of course the XJ. Okay. It was also aesthetics. I mean, you know, what was it? Enzo Ferrari said the E-Type was the most beautiful car ever designed. You know, that's pretty high praise from...

Uh, Enzo. Um, and by the way, I think that's okay because if you think about it, we we're entering this very strange world where uh, you know, and I've often wondered, should somebody buy something like Gordon Keeble or one of those kind of great car brands? Because will we be braver in terms of the brands we buy simply because reliability and performance are now a given?

So, what did you go for or do you not want to tell the...

Oh, no. I bought... I got a Tesla in the end. So, which one?

I got the... the X, the bigger one. And...

With the Gold Wings?

Yeah.

No, no, I didn't get the S. The S.

Yes. The...

So, the S. Yeah.

And it's the best technology I've ever used. I mean, I don't know why... I completely agree.

Don't know what I think about the brand or the...

That's a really interesting thing. The psychology of technological adoption. You... you young people forget this. Virtually every single... So, I... I've told this story before, but in 1989, I used a mobile phone in Oxford Street. Two people shouted abuse at me from passing cars. Okay. Now, it was a massive great brick. I hadn't instigated the call 'cause it was actually embarrassing to use a mobile phone in public in 1989, but when someone bloody rang me and I had to answer, two people in taxis pushed down... because they weren't electric then... pushed down the rear window, went "Wanker." Right. Okay. And there was a whole... we forget this because when we concertina past history, we tend to think they weren't mobile phones, then they were invented and everybody bought one.

Okay? Uh, you know, actually flat-screen TVs, there's a 10-year thing. Actually, the iPhone didn't sell spectacularly to begin with. It's called the Bass Diffusion Curve. It's a sigmoid adoption curve. It applies to everything. And what's so funny about humans is that they don't like being told that something new is better than something they've already done. Okay? So, you get people who go, you know, air fryers. What's... you know, look, the air fryer is just a brilliant thing. Stop, you know, stop pushing back. Okay. The classic one with Brits, which I always give as an example, is literally Germans as well, okay? The hostility to automatic transmission. Okay, which is back in my childhood. "I couldn't possibly have an automatic. I lose the sense of control." You know, all that sort of stuff, right? First of all, actually, when you drive an automatic, weirdly, you learn to control the gear it's in because you develop this intimate bond with the accelerator pedal, and you can get it to kick down and, you know, do all the other things by actually, you know, by sort of seductive maneuvers with your right foot. But nobody who bought an automatic ever went back.

Yeah.

Nobody who got an air fryer ever ever abandoned it. No one who... no one who got, you know, mattress toppers. I've got this whole list of things. And electric cars are the same. I... I don't think anybody... It's ultimately the marketing challenge is one of speed of adoption, not adoption. And that's simply because it's one of those things which is uh, once you go there, I've got a Japanese toilet. Have you done that?

You never go back. Okay. I mean, dry wiping is barbaric, right? And there are these various technologies. Yeah. I don't know. I mean, ridiculous. Okay. I mean, the whole of the Middle Eastern world has a bum gun. You know, the Japanese have a proper, you know, bidet toilet. It was actually invented by the Swiss by Geberit, by the way. Not by the Japanese, but we always call them Japanese toilets. Uh, 'cause Toto seemed to dominate the whole thing. But the fact that wealthy... a friend of mine sent me the prospectus to One Hyde Park where the apartments cost 120 million or something.

Right.

And he pointed out, he said, "You still have to wipe your own ass."

Now, given that it's probably not going to be a British buyer for that apartment.

Yeah.

How on earth could you put bathrooms into a $120 million apartment where you still have to wipe your own ass? I mean, what sort of nonsensical... 19th-century crap is that?

Are the Japanese toilets marketed well?

I don't know about the... Okay. Well, um, I've actually got the Geberit um, the fairly basic. I didn't go for the front bottom attachment um, which is optional, and I didn't go for the heated seat. I went for something pretty basic, but it's basically a... a proboscis comes out and cleans your ass for you with water that's pleasantly at kind of body temperature, and you just remain seated after you've done your business and press the button to the side, or you can use the remote control if you put on your phone.

God, I'm missing out.

Oh, no, no, no. You know, now interestingly, there's a technology which I'm really intrigued by. Eight Sleep. By the way, I'm not being paid to plug this, although they want to send me one for free. Of course, I'm perfectly happy. Have you come across this Eight Sleep thing? So, it's a thing you put over your mattress in your bed.

And the most sophisticated one, it basically monitors your sleep. The more sophisticated one, if you start snoring, will lift you up a bit to stop you snoring. And it keeps you cool if you're hot and warms you up if you're... So, it's basically, if you think it, it's an electric blanket that went to university, basically, is the way to think about it. Now, I don't know, it's a few thousand quid. It strikes me as pretty wacko expensive.

Premium. Yeah.

But A, it occurred to me, it's cheaper than air conditioning in your bedroom.

Right. Yeah.

Okay. Two, it might pay for itself because I don't need to heat the bedroom very much anymore. I can just buy the thing that heats the bed. I don't know if you know this. Germans tend to sleep in very cold rooms. They wrap up warm, but they leave the windows open 'cause they believe it's healthy.

Is it healthy?

I... I don't know to be honest. It... it might be conceivably better for you to sleep in a cool room in a warm bed. I... I'm intrigued. I don't know the answer to that, actually.

But all I know about this Eight Sleep thing is Chris Williamson, Jimmy Carr, everybody you speak to. And it's one of those things, a bit like the air fryer five years ago, where if you mentioned it, people go all swivel-eyed and evangelical. And that might be one of those things which is, once you have it, you don't go back. Right.

Um, and by the way, I'm not being paid to say this. Another one, Quooker Tap. Have you got one of those?

I do have one of those.

[ __ ]

But I have it 'cause I wanted cold sparkling water the whole time.

It pays for itself, actually, doesn't it?

And it's a kettle.

And it's a kettle.

And filtered water.

And it's... and it's cold filtered water. So, I... I always fill my espresso machine from the... the filtered water.

It is a ridiculous purchase. However,

after a while, you think to yourself, I don't know if I could go back.

No, I agree. Be like the stone age.

I would need a kettle. I would need some sort of cooling device for my filtered water and then I would need B sparkling water.

So, no, I mean, I think by the way also they're interesting because I think they're a family-owned company.

Really?

Okay. Uh, actually, I'm going to create a directory of family-owned companies so people can just patronize them.

It's... it's something that I think that...

You can... you can live entirely off family-owned companies. I... I think that more entrepreneurs should study companies that don't have to report on profits so rigorously.

What is it that every entrepreneur says? The best moment of their life is when they finally pay off their debts, isn't it? So they don't have to... they don't have to justify themselves to anybody else anymore.

Yeah.

And since the reason you became an entrepreneur was presumably because of some sense of autonomy. But the great advantage of an entrepreneur is you can... because you don't have to justify every decision to somebody else using faux rationality or big data or some other... Okay? You are free to use tools of the human mind which evolution has gifted to us, like intuition. Okay? And you're also free to experiment. Uh, where you... you reasonably get to capture the gains of success without being punitively judged for the cost of failure.

Whereas in most large organizations, failure is punished. And actually... So, just to be clear, okay, there's an idea which I loved because I discovered it by accident. I'm booking a room at the Inter... I'm a big fan of the InterContinental because it's always an AI. Yeah. No, you know, I... I don't want like weird... going on, but it always does what it does pretty well. See, I'm staying for two nights. Anyway, I'm booking a room at the InterContinental in Houston. And um, good tip, by the way, to avoid this car hassle. What you try and do is when you arrive at a place, particularly in the US, get a taxi to your hotel and then book a rental car the next day from a downtown location.

Which is actually a vastly better experience than trying to pick up the car at the airport when you've just spent an hour and a half going through Homeland Security. Don't tip them, by the way. I know you should tip everybody in America, but not them. I... I was trying to start a rumor that you should tip Homeland Security. You see, you see what I mean? Just to get a load of people arrested, but I realized it would be malicious.

Um, but anyway, that's good. But anyway, I'm staying there and I'm choosing the room and normally the room is like basic, you know, whatever it is. In America, you often get a room with two double beds or two queen beds. What is it?

Deluxe junior suite.

And they have these two other categories of room, which are pool access and gym access.

They're just rooms that are really close to the pool or rooms that... Now, those rooms always existed. All they've done is given them a new designator, which means I'll pay $20 a night more for them. The pool, not the gym, on holiday, for crying out loud, right? But... but I'll pay $20, $30 to be either with a terrace facing the pool or a short walk from the pool 'cause I don't want to wander through the bloody hotel with a toweling robe on, as I said, looking like Jeffrey Epstein, you know, right? And so, so what's genius about that is someone has had that idea. Now, that's worth, that's worth, I don't know, 100 million a year to the hotel industry. 200 million a year.

In terms of just going, "Hold on a second. Rather than describing rooms by the rooms, let's get people to pay a premium for a location." Okay.

Now, that's money from nowhere. It's brilliant. Now, the person who had that idea, are we paying them a million a year? No.

It's a brilliant idea. It's literally a perfect case of alchemy where you're basically constructing value not by what something is, but how you describe it.

Okay. Now, my point is that in a family-owned company, you get to keep the gains and you... you're held responsible for the losses, but quite a lot of this stuff is very asymmetrical because you make three losses, they cost you 10, you know, 10 units each. Maybe your fourth success, it's a bit like the drug industry or the film industry. Maybe you hit 400.

You know, on your 10th experiment. Okay? And if that 400, like that idea, is a recurring idea, you need to be given credit for the recurring lifetime value of that idea. You don't need... whereas at the moment, in marketing, all it means is you get to keep your job for the next quarter. Now, that is not a symmetrical risk and reward model for marketers. Okay? Where basically, if you do anything different or experimental, uh, if it fails, you get all the blame. If it succeeds, you get to claim a small amount of credit over a very short time period. That's not a realistic way to actually assess the value of marketing. Bearing that in mind, you obviously have been in the marketing agency space, as have I. Where do you think that space is going now?

Oh, Christ. Um, I think it's actually, unless it can find a new way to charge for what it does.

Okay. Uh, I think it's doomed. And the reason is, I think any business is... I think it all went wrong. Um, I think it's been disguising its bad business model for 20 years. Uh, longer, actually, probably ever since they separated media from creative. Okay. Uh, a certain part of the rationale for the business, i.e., gains to scale, got lost, and the relative importance of media versus creative has become skewed. It was skewed in one direction to begin with. It's now skewed to the other direction. Okay. Um, fundamentally, however, I think the problem is that if you're paid by the hour, but you're a fat-tailed business, by which I mean 10% of what you do delivers 90% of the value, which is basically true of most... you only realize this if you've been marketing for six years, you basically realize that all this other stuff is just, yeah, it's it's kind of pissing in the Pacific. It's improving things a bit. It's justifying your existence. But every now and then, there was a guy on American Express, and I can't remember his name except it was Paul, and he moved down to Devon. And I realized years later that this guy had come up with an idea. He was a client, had come up with basically a direct marketing idea which was like three times as effective in terms of acquiring new car members than anything they'd done for the previous five years. And that's the kind of way marketing works that somebody has one idea.

Yeah.

And it's... Bezos says this. He says, "In baseball, the most you can hit in a single shot is a four. In business, you can hit 120."

Okay?

And the problem with the advertising business is we're being paid by the hour and judged by the hour. And every unit of cost that we incur, we're held responsible for, but we can't claim credit or any kind of value from what you might call the times you hit...

27.

Yeah. From the enduring value.

The enduring value of an extraordinary idea which may have only taken someone 10 minutes to actually conceive.

It's why I didn't like running an agency.

That's what you hated. That a friend of mine said, "That's why I got out of the agency business and got into venture capital."

Yeah.

Because he said, "You basically, if you do something amazing now, if you're paid by the hour, right?"

Fundamentally, what that means is that the thing that makes you money is totally misaligned with the thing that actually creates value.

Yeah. And any business where your incentives are fundamentally misaligned with your uh form of value creation, okay, uh is ultimately a business which is doomed to be incentivized into irrelevance.

And so, my argument would be in... now, previously we had that system. We're paid on commission. You had media and creative in the same shop, right? If you came up with a really good long-running campaign, okay, you got 15% of of the media spend on that campaign for as long as you were the agency of record.

Okay. So, doing those big out-of-the-park home runs... was was commensurately rewarded.

Yeah.

Okay. I mean, there were cases where, you know, being honest, it was money for old rope because you come up with a pretty good idea and it ran for seven years and um, uh, you know, they'd bring up and say, "We want to run the campaign again next year." And I don't want to... I'm not suggesting that media buying is merely making some phone calls, but you got paid a seven-figure sum.

For... but that was recompense for coming up with the idea in the first place and making it a long-running idea. Okay. Once you're paid by the hour and you can only... you are held responsible for every quantum unit of cost, but you can't lay claim to the value of anything you've done beyond a very narrow time frame.

Okay. It's... it's just a badly incentivized business.

I remember always by... the way, management consultants and lawyers make it work by a form of... which is the person's really paying for the partner. M. Okay. The partner is probably only 20% billable, but his seven-figure salary is justified by having a load of drones working at 96 hours a week. Okay. Being billed out at sort of, you know, £600 an hour, okay? And effectively, it's a leverage game, you know. So, effectively, what you do is that's why everything management consultancies do turns into a 700-page deck.

To be honest, they'd be pretty happy if they could just buy the partner and two sidekicks. Okay. Just to justify.

But actually, procurement would never allow you to pay £70,000 to chat to someone for a day. So, what you do is you create it into this massive heap of basically, you know, uh, um, of PowerPoint-led...

Uh, in order to effectively, uh, ramp up what the most senior person could earn, which they couldn't charge individually. I think that that became a lot of the problem with a lot of the agencies my friends and I ran is that we were delivering amazing ideas every now and again. Yeah. That were changing businesses completely. We had obviously like our whole teams behind us. And then procurement got in and you couldn't make money out of the other stuff to to make it all worthwhile. Next year, that's pretty much true.

Next year, they're going, "Where is the next business-changing idea?" It's like, "Well, I haven't had one for three or four months, but the last one is still really going."

Well, just to give you an idea of how fat-tailed this is. David Ogilvy himself, in his autobiography, on one of his books, said, "In my entire working career, I only had four or five really big ideas." Now, I think he's doing himself down there, okay? And one of his big ideas was the culture he created at Ogilvy. One of the other big ideas were the books he wrote, okay? I think he had about 10 or 15. But the stuff you do that really makes a difference is, as I said, this is what's called a fat-tail distribution where you can't discount the outliers. Okay? A thin-tail distribution, you can discount the outliers because they're rare and don't make that much difference. In a fat-tail distribution, it's the outliers that carry most of the freight. And so, I mean, procurement's also a problem, by the way. Uh, which I genuinely think... done well, it's just to be clear, I've got to be clear 'cause my wife used to work in procurement. Just to be clear, done well, procurement is a strategic, highly creative, and very, very valuable discipline.

If done well.

If done well, which is a very, very big if. Okay. I have a fundamental problem with it, which is that it effectively makes it very difficult for a B2B company to be innovative because a genuinely innovative company will generally be spiky in terms of how it compares as to its competition.

And therefore, by procurement turning something into a benchmarking exercise. Okay, they'll say, "We're not interested in your interesting idea because your interesting idea makes it difficult to compare your costs with the other four people bidding. And therefore, can you please, uh, merely put in a proposal for the same boring idea we've all had in advance?"

Now, I'll give you an idea of something which I think is killed by by the procurement mentality. It's one of my favorite things. The Heathrow Pod. Have you ever been on it? Pod Parking, Terminal 5.

It's quite good, isn't it?

It's fantastic. Right.

But I've never been to it. No.

Okay. So, next time you go to Heathrow, Terminal 5. Okay. Book yourself into Pod Parking.

Yeah. My brother's done this. Yeah.

Yeah. Okay. You park your car. There are two little ends to the car park, A and B. And there's a pod waiting for you 'cause it's got a bit of a predictive algorithm. And you press the button, open the door, get in with your luggage, and basically it drives you to Terminal 5 over a kind of little elevated concrete track. And they're really cute. Okay. Now, there's one really important discovery about the pod which I don't think anybody's clocked adequately, and it's this. The Heathrow Pod parking car park is about a mile from Terminal 5.

The price of parking in Pod Parking is practically adjacent to the price of parking in the short-stay car park.

Similar car parks which are a mile away but connected by bus shuttle are charging half the money. The conclusion you can draw from that is people hate buses and love pods. Right. Now, I know this because I had a colleague, serious guy, he was the creative director of Ogilvy Europe. He was about 63 at the time, and he turned up at Pod Parking in his Jag.

Okay. And um, they said, "I'm terribly sorry, Mr. Smith. Uh, I'm terribly sorry, but I'm afraid the pod parking is actually full, but we've upgraded you to the short stay at no extra cost." As Rex was, but I wanted to ride on the pod. He... he felt actually bereft. Okay. Now...

Here's the important thing, right?

I think there's an amazing discovery in the Heathrow Pod, which is that literally, if you're a railway station, let's say you wanted to create a parkway station. Okay? Let's say you wanted to create a shopping center. I think you could actually put the car park two miles away in an area which is less ugly. Okay? And you could connect the various car parks to various parts of, let's say, Bluewater, okay? By pod, and people would deliberately park further away to ride the pod because they love it. Okay? I got upgraded to first class on British Airways, I think the last two, three times when I flew, and you know, I was treated to fine wines and Belgian chocolates and all that... but still, the best part of the journey is actually the bit on the pod, to be absolutely honest. Okay.

Right. It's that enjoyable. Okay.

Right.

Now, here's the interesting thing. Okay. I think there's a really important discovery there, but it's not a numerical discovery. It's an emotional discovery, which is that for some reason, people regard a shuttle bus as being fundamentally ghastly, whereas the pod is being... is fundamentally...

Cool. Yeah.

Okay. And I think it could transform urban infrastructure. I think the idea because it's not a... it's not a centripetal thing. You... you can technically go use the pod system, go from anywhere to anywhere because you travel as an individual in your own pod. At the moment, you can only go from Terminal 5 to A or B. There are two ends of the car park. Or if you're being perverse, you can travel from one end of the car park to the other just for the lobs. Now, if you tried to pitch for any urban transit project as Heathrow Pod, you'd go, "Look, people love the pod." And they'd go, "That isn't on our key performance indicator balance scorecard wanky procurement shit." Right?

Yeah. Likability doesn't count. We notice that you actually carry less capacity than a shuttle bus. Okay. And your journey time is slightly slower than a shuttle bus. Therefore, there's no way we can possibly actually allow you to pitch for this project 'cause you lie out of our current metrics. But then we go back to how innovation really happens, which is Apple, which is reverse benchmarking.

Yeah.

Which is don't do the thing that everybody else is doing a little bit better. Do those things a tiny bit worse, find something else and be brilliant at it. Okay, that's how... Now, procurement couldn't cope with that because as soon as you're incomparable, they can't compare you.

Yeah.

So, there are literary cases, I'm sure in the NHS. I... I came across a guy who basically said, "We can solve a lot of problems with the NHS with A&E or something else with basically massive great trucks that turn up and do something." I can't remember what it was. And of course, the RFP when it goes out will be for a building project. So, you come along and say, "You don't need to build anything. My huge trucks can park in your car park and we can sort the whole thing, you know, straight off the bat. And incidentally, be you ready next Thursday." Okay? And they'll go, "Well, I'm afraid we can't compare you to the seven building contractors who are building this new, you know, wing of whatever it is." Okay? So, therefore, uh, anybody innovative tends to be one of a kind. One of a kind doesn't satisfy procurement's need for justifying their own existence by claiming fairly meager cost savings by treating suppliers like... and so procurement is probably what they call, I think, commissioning or something in the NHS, probably a massive obstacle to innovation and improvement.

The biggest pitch I ever lost was uh for Rolls-Royce and the cars.

For the cars. And I had been talking to Rolls-Royce, the marketing team for six months, had created this incredible creative campaign. And they put the pitch on because they wanted to work with us. But because they put the pitch on, they had to compare us. And so we got downsized from creative agency to media agency. And then we went up against the biggest media agencies in the world and lost. And the team was like,

"Whoa, whoa, whoa, whoa, whoa. So, you're just a pure creative agency at this point, right?"

This before we went media. Yeah.

And then effectively, the entire pitch became about your media buying chops and your media costs and probably whether you take 180-day payment terms.

Exactly. So, it didn't matter. Your creative idea could have been the cure for cancer and the, you know, and the uh, the holy grail of creativity.

You would have lost because you couldn't buy media. So, the team, the team said, "We put on the pitch to work with Verb." And then... procurement, which by the way, why can't you allow people to apply? The whole point of being in a high-trust economy like the UK is that people can make subjective decisions without treating them to the kind of scrutiny that you'd have to apply if you're in a really corrupt economy. Okay?

I mean, corruption in this country, for all its faults. Okay. Everybody laughs at this. What was our biggest corruption scandal in politics in the last 10 years? Someone bought a motorhome, right? If you went to 70% of the countries in the world, okay, and say, "This politician might have claimed for a motorhome."

Um,

They're probably okay with that.

You know, people would have gone, "That's not really corruption. That's just, you know, getting a bit of value for money out of your government job, right?"

And so, it's genuinely a country with fairly high levels of probity, and yet we behave with all these weird checks and balances and the cost of them. I wrote about this in The Spectator. I call it the tantric sector. Okay? There's the public sector, there's the private sector, and then procurement and compliance and HR are the tantric sector, which is it's not that they're not worth it, by which I'm not saying they don't justify their salaries, but if you're to calculate the cost of those entities, the real cost isn't in how much you pay them or the office space they occupy. It's the effect they have in slowing down almost everything. It's the tantric sector because the purpose is to make everything go on for ages and ages without actually reaching a climax. Okay. Right. And this is this is a fundamental problem with British industry, which is that it's not that the economy is inefficient. It's too slow.

Yeah.

Right. What they did when they when they actually renovated Norwich Cathedral, they realized this is going to take ages. Right. They said, "Okay, we're going to get rid of all the regulations around renovating a cathedral with one exception, which is which is health and safety." And by the way, I'm going to make a brief defense of health and safety here, which is for some weird reason, of all the bureaucratic functions of business, health and safety gets the most grief, doesn't it? "Oh, it's health and safety gone mad," right?

But health and safety is health and safety. Right. Now, you know, I think it's pretty important to renovate the cathedral, but I don't want people to die in the process, right? Trying to put on a bloody flying buttress or, you know, get a gargoyle replaced. I don't want people to die doing that, you know, right? And so, all the things I'll kind of defend a bit. It is health and safety, which is people not dying is generally a reasonable aspiration for any corporation.

But we're... but this tantric sector, you know, what was it? I mean, I don't know, something like X billion has been spent on High Speed 2 before a mile of track is laid. And it's it's come about because we've effectively tried to reduce everything to a process because we have a pathological fear of anybody using common sense, intuition, or instinctive thinking.

And the reason you can't use those things isn't because they don't lead to good outcomes. Is because they put you at risk of blame.

Yeah.

Okay. Which is, you can come up with a brilliantly rational argument for doing something boring, stupid, utterly pointless, and you'll keep your job. Okay.

If you do something imaginative and it goes slightly wrong, you're exposed. You put your head above the parapet, and it's a massive asymmetry in business decision-making, which is we judge things not by the quality of outcome, but by the quality of reasoning which arrived at the decision. It's uh...

It's fundamentally undar... Darwinian because Darwin doesn't give a... Darwinism doesn't give a... about why the mutation occurred.

Okay? It only judges by the consequence.

But it's... it crushes. Like I have ADHD and and was diagnosed at a very young age, and so my whole life I have known and so...

I... I was undiagnosed. I almost certainly have it. My daughter has it.

Um...

Yeah.

Uh, it's... it's both a bit of a pest and a bit of a superpower.

Well, totally. And so the superpower would be if I have something to do, it's probably going to happen in the last few hours before that thing needs to be done.

But your powers of concentration in those last few hours are super.

You know, like superhuman. And so when it came to a creative pitch, if I... if I knew that the creative was worth doing, it would come out of me. I would... I would like...

What was your Rolls-Royce idea? I'd love to know what the idea was.

It's so long ago now. I can't... I couldn't even. But it was to do with interiors. It was to do with trying to make a greater sense of the push button for the umbrella to come out, and there was like a lot more to do with making it more lifestyle, but I can't exactly remember. But my creativeness would have come out. I would have lying on the floor, I would have sat there, I would have drunk a hundred Diet Cokes, but the creativity would have come out. But as time went along, people just didn't value that. You know, the... the creative became a, you know, "I want incremental gain on my PPC or my..."

Absolutely. Pay social media.

So, that was what you were reduced to, which is as a consequence. You see what you're doing is you're shopping at at Asda. You're not shopping at TK Maxx. See, procurement are always shopping at Asda. They're not... they don't understand TK Maxx.

That's the fundamental truth of it. TK Maxx is a fat-tailed retail experience. Okay. You go in, you don't really know what you want to begin with. Okay. You go, "I love..." Are you a TK Maxx fan?

I've loved TK Maxx.

Yeah. Exactly. Yeah. Very weird bow. A very weird bow.

Because it's surprising.

You got it. Exactly. So you go, "Fuck me." Right. That's how that's how it basically.

But you might buy a suit occasionally.

Yeah. Yeah.

And you come.

Out of it with nothing you ever envisioned. And I've got friends who don't understand TK Maxx and they go, "I can never find anything I want there." That's not the [ __ ] point. You don't go into TK Maxx wanting something specific. Okay? You go in like a shark and you basically kind of cruise. It's the game right now. I would argue that marketing is much more should be correctly done is probably what what ratio maybe 50/50 Asda 50% TK man right and what's happened is these tragic [ __ ] nerds both from tech consulting and everybody else have come in and said no it's got to be treated like it's all Asda and you go well you'll never find a bloody pair of Versace underpants for £12.50 will you and they go we don't care about the Versace underpants. We're only interested in buying Cathedral Cheddar at 3% off. And then we wonder why we got no economic growth.

>> But why? My wife, for example, treats TK Maxx as an activity.

>> It is. It's a sport.

>> It's a sport. It's not.

>> Do you remember this? What What was it? This country, that fantastic comedy series set in the West Country. Yes. Where he was obsessed with getting the vicer to drive into TK Max on Thursday. That's when all the best stuff comes in. All the new stuff comes in on Thursday. You don't fantastic. It's an interesting thing when you think about marketing nowadays. I I saw you talk about once um

>> that Red Bull despite tasting like [ __ ] is the best marketing tool ever or that Sam Palagrino is fundamentally just a lemonade but it looks fancy.

>> Well, no. The the the foil lid which I think they're bringing back I hope at my behest. But

>> how's it gone? Uh they they've taken it off some of the cans almost certainly because of procurement uh or finance or some other cleaner.

>> Tragic but a there is there is a

>> usually for these things there's a kind of what you might call vestigial rational reason it was always the case there's an Italian drink called something chinato I think it's called which the cans always had the foil lid and there is an argument that it it's hygienic and which I think is what you might call the vestigial rational rationalization for the foil lid.

>> The foil lid really acts as an access all areas pass for the drink.

>> In that if you've got cans with a foil lid on, you can serve them at a wedding. You can serve them at a board meeting. You can ser you see what I mean? Whereas, you know, with the best will in the world and I love the stuff, you know, you wouldn't serve um uh tango, okay, at your wedding, cans of tango. Whereas cans of No, don't get me wrong, it's high quality water. And I'm not suggesting that it's all smoke and mirrors,

>> but it nonetheless that foil lid serves a function, okay? Which is it changes the it changes the context within which the drink can be displayed and consumed.

>> And indeed the price at which it can be sold.

>> But no one's measuring that. They're just measuring the cost of the file.

>> Is the price I can't even Is the price of some San Pellegrino?

>> I think one might say that it probably commands a price pre and and and

>> I certainly would pay more for it.

>> Yeah. Yeah. And and the lid the lid was I mean it's uh as someone said it's you know it's kind of um uh you know it's tango went to college. You know.

>> It fundamentally changes the um uh the milieu within which that can is comfortable.

Can't even believe I said that before. Obviously, right now, if you're in marketing, you are exposed to an insane movement of AI. Yeah. And I suppose being someone that's been in marketing for a while as as you have, what are your? Well, first of all, we better stop charging by the hour, hadn't we? Because something that makes a lot of things that were slow quite fast isn't necessarily fantastic news for a business that uh uh charges by the hour. Uh secondly, I would like to see AI deployed primarily not to reduce the headcount of the people who actually produce the valuable work but to reduce the size of the administrative body which leeches off it.

Um, and so but thirdly there are two ways in which I think you can use it and I think this is always true. Okay, there's the replication of mediocrity or the amplification of brilliance. Okay. Now if it's used, if we still seek breakthroughs and then wish to amplify them rapidly, um I think AI can do that job very, very well. I think can the interesting thing with AI is it can explain jokes very well but it can't come up with a joke on its own. Now if you regard the joke as somehow emblematic of a really big creative idea,

>> um as of now, and I'm willing to be proved wrong, I've tried to get AI to come up with a joke and they're appalling. They're they're nonsensical.

>> Okay. So, I asked AI to explain a joke which I'd come up with. It's not a very good joke. I'm not going to take it on the northern club circuit or anything, but the joke was, "What do you call it? Joke I used to tell my kids when they were young." Okay. What do you call a pub with no toilets? The turtle's head. Okay.

>> Now, what's amusing is I ask it to explain that joke and it understands the joke completely. See?

>> And it it describes the joke in slightly plipped Californian pressures. You know, it is extremely vulgar joke reliant on toilet humor. Well, whoop-de-doo. Okay, but it does understand the joke. And then I say, can you come up with a similar joke? And he goes, what do you call a Japanese restaurant with no toilets? The standing eel.

>> What? Absolutely no [ __ ] sense at all. Right.

>> That it's just utter garbage. It's just randomly taken a kind of Bayesian approach to the structure of a joke. Inserted random words.

>> Okay. So my contention is if you can't come up with a really good joke, you can't probably come up with. You might be able to help people come up with.

>> Well, you might be able to act as a sidekick for uh someone who can come up with that kind of idea but I don't think you can do it on your own. Okay.

>> On the other hand the capacity perhaps once it's grasped the core concept of the idea its ability then to amplify that might be really rather spectacular. Okay. So, you know, this is a really important distinction, I think, between the the amount of business we devote to explore and the amount of business we devote to exploit. And I think we can use AI to exploit what we've already discovered fairly well.

There's an interesting question which I'd ask too about um now in defense of AI, right? A lot of people criticizing it. Someone rang LBC the other morning and said, "Well, it kind of saved my daughter's life." That they'd had a daughter who'd been they failed to diagnose. I think she was always tired, there were a few other symptoms and I think they'd failed to look to leukemia.

>> Oh wow.

>> They would have found leukemia eventually but they were exploring other things first and of course it's all a bit of a now he goes home and he types in the symptoms and like number three comes up as leukemia and he rings up the doctor and says did you test? No, I haven't tested for that. I was thinking of doing that a bit later but first we're testing for this. He goes I'd like you to test for this. They test for it. That's what she's got. As a result, the intervention is probably six months or a year earlier than it would have been otherwise. Uh, you know, so

>> Amazing.

>> I'm not going to listen to stories like this and be wholly negative about something because patently um as a checklist, by the way, uh I think it's it's really, really useful at preventing you from overlooking things you can easily forget.

So I think it has lots and lots of really useful functions. I think I think it's kind of interesting in that will we allow people to make subjective decisions for which they can't provide a rationale in business? No. Will we allow a computer to do it? Apparently yes.

Okay. So we are according AI a kind of decision-making magic which we wouldn't accord even to a really experienced human being.

Okay. We demand that human beings provide their reasonings and workings out along with their answer. But weirdly we don't seem to demand this although it can provide them if if asked in its weird kind of way. I feel the problems we were talking about earlier are compounded by the the AI in that I do a lot of work with uh you newish entrepreneurs and their lack of creativity because they do all of their rational thinking they do their thinking within the AI and so they do their brainstorming within the the context window and so sometimes they really struggle to have any form of new idea because everything follows the same.

>> That's interesting because you are Okay, there's a really interesting analogy I use which is in a any process of decision making which is don't be like a scientist be like a cop. Let me explain. The police when they're investigating a crime they're dealing with imperfect information of all kinds. They don't know what they really need to know who did it.

>> And uh some of the people who are going to be providing the information are going to be lying. Okay? Now the police operate effectively on a two-stage process which is investigative and then evidential which is find out who did it, prove they did. Okay. What we are doing if we're not careful is we're not allowing the investigative phase to make use of any information which doesn't have evidential value. Now in solving major crimes, what you notice is that quite often it's what Roger L. Martin calls an anomaly. What's the typical cop question? Someone gets murdered. Someone goes missing, they go around the neighbor's house and they go, "Did you notice anything unusual between 8:00 p.m. and 10:00 p.m. on the evening of so and so?" Now, that's totally open-ended question. The answer to that question will have no evidential value, but it helps them know where to focus their attention next. So, it might be a man in a white van drove past suspiciously five times,

>> something of that kind. Case of the Yorkshire hippos, he parked the the wrong way round. Okay, he had fake plates, etc. Now eventually you got to get to the evidential phase but you don't make evidence a prerequisite of the information you use while you're investigating something. In fact you might investigate something which was purely anecdotal. Um, uh you might investigate uh something which was um purely for example speculative. Okay. Uh son of Sam got a parking ticket on the evening he committed one of his crimes. Now, you can't imprison someone for life for getting uh a parking ticket in close proximity to a major crime scene, but it does suggest maybe it's worth having a look at this bloke to see if there's anything more.

>> And I think what we're doing, and this is something if you look at his nudgetock speech, Roger Martin in Vegas, is we're teaching everybody at Harvard Business School that every decision you make has to be based on data. And the more of it, the better.

>> And it's an inappropriate use of data because the data is not representative because it all comes from the past. It's also not representative because you usually have a ton of data about certain aspects of a problem. I typically the what you might call the numerical or the physical. Okay, but you have no data about the emotional.

>> And actually research data is absolutely very valuable in some cases but you should never take it literally. Best one of the best researchers I ever knew said the fact what they're saying is irrelevant but the fact they're saying it is important.

>> I can imagine a cop saying the same thing. I'm going to ignore what this person is saying but I'm really intrigued as to why they think they have to say it.

>> And um consequently, okay, we're making decisions on the basis of a completely biased data set. Now in physics you have all the information you need in numerical form to solve the problem you need to solve. Which is why things like rocketry uh tend to be quite successful at deploying the scientific method.

>> In making a decision where you have imperfect and unrepresentative data and where the future is no is not necessarily the same as the past.

>> The laws of gravity are going to be the same tomorrow, right? We can reasonably assume that. Okay? If not, we've got bigger problems than worrying. Okay. Worrying about measurement and quantification. Okay? Uh the laws of human behavior are not the same. How many smartphones were there in 2001? Zero. Okay. Right. That changes everything.

>> Uh consequently, I think this idea that what we're doing is we're teaching people how to win an argument, not how to solve a problem. And the skills you need, the skill set you deploy for solving a problem is very, very different and much more multifarious and much less seemingly scientific than the skill set you you use if you want to win an argument. That's why economics has a completely distorted influence in political decision-making not because it's very good at solving problems. It's very good at helping you win an argument by reducing the number of variables to a small enough number that you can construct some sort of stupid model from which you can then turn it into an optimization problem and claim that the optima the optimum

>> or the optimand uh is, you know, therefore your right answer.

>> Okay. But I'll give you an example of that. One thing I like about the United States, they have two temperatures. Okay? There's the temperature, the weather, and the feels like temperature.

>> Right?

>> And that the feels like temperature is how hot a day it really feels like.

>> Now, 77° is the temperature of, you know, let's say a thermometer sitting in a funny little case somewhere. That is the temperature as far as a physicist is concerned. Far as a human being is concerned, it's affected by the breeze, the level of humidity. Okay? So, I don't know. I'm a fat Celt, so I find hot, humid weather I find intolerable. Okay. But I wander around Phoenix, Arizona when it's 105° and I'm as happy as Larry because the levels of humidity are so low.

>> And if there's a bit of a breeze, I'm even happier still.

>> And there are a few other factors, by the way, on the feels like temperature. I think it's also the temperature a certain distance from the ground is upweighted. So heat rising off the I can't remember but it it's fundamentally, you know, it's a formula that's derived which is much more accurate to you know whether I need to wear a coat or not uh or, you know, whether I need to actually, you know, turn the air con on on the feels like temperature is a much better guide than the actual ambient temperature.

>> And generally though we don't have much data around how things feel.

>> Um, only two SI units I think the lumen and there's one other one there's an SI derived unit. Well, I suppose I suppose the se the severt would be another one really consider humans in the actual measurement.

>> Human perception is is considered, you know, as important. Uh the rest of them are just objective measures for the purpose of performing physic, you know, activities in physics and chemistry. And yet what actually matters about human behavior is how something makes someone feel. Not what the objective characteristics are of the product at all. It's how the product makes them feel.

I thought a really good example of this in I mean you've said it before, but in day-to-day business is that rationally you're told to or you think to compete on price, but often by increasing your price and focusing on other elements of your business, you immediately are perceived a different way. If you underprice something, uh it's a doubly catastrophic uh activity rather than overpricing something.

>> Yeah.

>> Cuz you sell less and you make less margin on the things you do sell.

>> Yeah.

>> And there are there are significant products. I'll tell you a lovely story about this. Okay. There's a brand called Someone told me this story. I I'll need to verify it, but nonetheless, bloody good story. There's a brand you probably know called Yeti. Uh-huh.

>> What happened with Yeti is that they there were I think there were a bunch of fishing enthusiasts or outdoor enthusiasts who thought that coolers were a bit [ __ ] and they wanted to make a cooler that was strong enough to sit on, stand on that could take some really hardware.

So they eventually find this Chinese manufacturer that will produce unbelievably high quality coolers and and other accoutrements, okay, like cups and so forth. And then the manufacturer gets into trouble with somebody or other in the Chinese administration and is forced into administration or goes out. So they have this problem. It's going to take them six months to find another manufacturer who can replicate the same quality. Meanwhile, all they've got is a warehouse full of [ __ ] No, high quality extreme. When I said [ __ ] I mean a warehouse full of high quality um product. Okay. And they go, "Well, we don't want this to sell too fast or it'll sell out, so let's ramp the price up." And they put the price up intending to actually slow the outflow of goods from the warehouse, and demand went up massive.

>> Cuz it turns out there are a load of people who don't want to pay £20 for a water bottle, but they do want to pay

>> £45. Yeah.

>> Okay.

>> And by the way, all of us do that sometimes. We think you when we buy a car, there's a car that's commensurate with how much you care about cars. There's one exception to that which is property which is a market which is totally [ __ ] And the reason the property market is totally [ __ ] is everybody has the mentality spend as much as you can possibly afford.

>> Yeah. Bankrupt yourself.

>> So basically every single person approaches the property market.

>> Why is that?

>> Uh it's because we've been taught that it's the only tax-efficient form of leverage investment we can make in our lives and therefore it's the only chance of a significant lottery win. So go in for now. Imagine if we went if we bought cars like that. Okay. I go down the car dealership and go, "Right, I reckon I can scrape together £150 as a deposit."

And I reckon if I didn't actually eat much in the way of food, you know, for the next, you know, 15 years, I could probably get I actually did do this for the LOLs, by the way. I went into the business leasing section of the website for the Rolls-Royce Spectre, right,

>> which is the new electric Rolls-Royce, which looks, by the way, like a work of art. It looks absolutely fantastic. And what's quite amusing about that, of course, is everything's priced by the month, which is kind of strange. So, you find yourself adding something like an optional extra. And I don't know, I I'm just trying to think what some of the extras are. They are quite bizarre. I think there's some sort of, you know, chrome chamfer for the indoor umbrellas or something.

>> Exactly. Yeah.

>> And you go £1995 a month.

>> I know expressed maybe expressed as £800 quid. You go, "Yeah, go on. I'll have the chamfer." You say when it's expressed as a monthly recurring payment on a lease car, you kind of go,

>> "Yeah, it's kind of Netflix, right?" I mean, you know, one of them is a panoply of extraordinary entertainment, which might entertain me, and the other one is some things around the umbrella and the doors.

>> Yeah.

>> Um, but I mean, we'd all be driving a Bugatti Veyron, wouldn't we, if we actually bought property the way we bought bloody houses, bought cars the way we bought houses, you know, but that's how everybody buys them. Will young people eventually gain the system and go off-grid? So I've always wondered, you know, eventually there comes a point where you would be materially much better off if you said, I'm going to put £1,000 a year into, you know, £1,000 a month or £2,000 a month into a pension. Then I'm going to buy a large American motor home, park it in a, you know, park it effectively in a wood in Kent. Okay. Rig up me Elon thing on the roof, you know, cuz the electric motor home.

>> People are doing it. Yeah. I mean, the electric motor home. Have you bought one of those thousand um uh 1 kilowatt hour massive batteries that DJI make £500 quid? You got a whole kilowatt hour in the thing right now. I keep it in the back of my car. I've got a load of solar panels. Okay. Come the zombie apocalypse, I'm going to be [ __ ] laughing because but I can actually run a fridge off it. I can run. So, I read a lorry driver, right? Always if you want to innovate the great book by a woman called Helen Edwards and it's basically called I think it's called something like start at the edges which if you want to understand innovation look for extreme use cases and this truck driver goes this is [ __ ] brilliant I got it in my cab okay every time I stop the truck I put my Starlink Mini on the roof of the truck so I've got high-speed internet.

>> And I can run an air fryer off it. Okay. And I'm kind of going picnics are never going to be the same.

>> Yeah. Right.

>> Because if I've got a kilowatt hour in this thing with two two 240 volt outlets, uh, solar in, you have to pay extra for that.

>> Yeah.

>> Okay. And I've got 160 W solar panel. I think I'll buy another one as well, you know, in case the zombie apocalypse happens. And I suddenly go, we can actually have a picnic with a [ __ ] espresso machine.

>> Yeah. Now, I don't know why the car manufacturers haven't played with this quite enough, which is if you have 120 bloody kilowatt hours underneath your motor home, okay? You can live off the grid with that, particularly if you don't need heating.

>> Okay.

>> Uh you can live off the grid off that for a few weeks. You know, your flat screen TV doesn't use that much. You'd have a projector anyway, probably, wouldn't you? Because then you could watch out of doors. Yeah. Uh you know, you got your espresso machine, you got your uh you know, you know, you so if you've got a big battery, you got some solar, uh, you've got um effectively, mobile internet. My advice to young people would be actually investigate investing in something other than property. Now the only problem is you probably can't pull if those are your living arrangements because anybody saying come back to my woodland abode, okay, is going to go [ __ ] hell, this guy's a nutter. Okay, he's probably a serial killer. You know, look at my collection of surgical gloves, you know, bottle of bleach on the side for the DNA, you know, that's not a good look.

>> But we I've debated this by the way which I was talking absolutely to Russell this morning, Russell Howard about this, which is young people could get on the property ladder either by not living in London.

>> Okay.

>> Or by being prepared to do something which nobody's prepared to do which is to live outside London in a flat.

>> Because those that's the one category of property which a isn't going up, it's actually fallen, it's actually underpriced relative to utility compared because everybody who leaves London has this fantasy about living in a detached house, therefore nobody leaves London with the aim of living in a flat. I own two flats outside London and the reason I've live I that's what I own is because I think I want property for utility not for investment value.

I saw a long time ago now you talked about you wouldn't mind this is when I think I first started liking you said I wouldn't mind living next to a pub garden. No, no. Well, this is this is another tip which a lot of people have come up to me since and said, "You help me find a house." Which is don't ask for what you want because if it's what everybody else wants, that's expensive. You're competing for the same thing. Instead, ask what you either want or don't care about that other people really don't like. And so, next to a railway track, a lot of people hate it. Okay.

>> Yeah. There's actually a section in Nick in Horn Nick Horn's uh Fever Pitch where he has this plan to move next to the Arsenal stadium because you know he goes most people would really hate being next to a football stadium but I can't think of anything better. I mean if you're a plane spotter right go and live in the Heathrow flight path.

>> Cuz the houses are really cheap. Everybody else hates the fact there are planes going over, but you'll be there with your nerdy little radio tuning into the bloody, you know, tuning into the control tower. And you'll be like a pig in [ __ ] won't you? Going, "Oh, Speedbird 450's got rather a lot of flap down." Right.

>> Okay. Find out what makes you different from other people.

>> And use that in your property hunt. And one of my great complaints about the property market is that Rightmove doesn't have space for negatives. So, you know, if I My kids are 20, what are they? 23 or something. I don't know. What are they? 23 going on 24.

>> Yeah.

>> Okay. Well, they've left. I'm not planning to have any more kids. Okay. So, if I'm in the catchment area for St. Crackheads Academy, that's fine with me, right? Because

>> school district, why on earth would I pay for that?

>> God, negatives is an interesting way of thinking about that. Well, there's a there was an estate agent. I write about this guy called Roy Brooks 1960s and '70s who only advertised in the Sunday Times and the Observer and his whole shtick was he was unbelievably rude about the properties he was selling.

>> And it was all a list of the negatives,

>> but it actually became a badge of honor that you'd bought a Roy Brooks property. Okay.

>> And there are books of his ads. You can actually go and buy them on Amazon for a few quid. Roy Brooks. One of them is called I think uh former brothel in Pimlico or something like that. Okay, this is literally how he describes the properties. And it occurred to me that there's a valuable service to be done which is you can't even use Rightmove to search for a fixer-upper.

>> Yeah.

>> Now I've got a friend very very clever very clever woman I worked with for a few years and they bought this place with a pool in the Surrey Hills. Okay. And they bought it for the same price they sold an apartment in Croydon, I think it was. And I said, "Look, I got to ask, why do you think you got it so cheap?" It's very simple. Okay. When um in a way you should ignore the photographs of interior decor when you look at a property.

>> Because what you're doing is you're trying to effectively imagine the previous occupant and deciding whether they're similar to you in taste and discernment.

>> It's irrelevant.

>> Well, it's not totally irrelevant in a sense that I suppose you see what I mean.

>> Yeah.

>> Okay. If if you knew that Rick Rubin had lived in a house, you'd probably buy it sight unseen. So, the previous occupant isn't totally irrelevant, right? I have actually been to Rick's house, and as you might imagine, it's just insanely perfect to a point of view where um I felt I was defiling the place by my very presence. A gorgeous place, absolutely lovely. Um, but um you can't even look for a fixer-upper. Now, this place, they said it had a few things like it's lots of they said basically was full of old lady furniture cuz the previous occupant had been quite elderly, as is generally the case with five-bedroomed homes in Britain. They're usually occupied by a single geriatric.

>> And then we wonder why we've got a property problem. But anyway, let's let's not go there. Um, but um actually you're probably over-influenced by the decor even if you're planning to redecorate yourself anyway. Okay, you're over-influenced by something like that. Um, and actually you you know, the interior is largely irrelevant. You should consider wet location. I'm not suggesting that's irrelevant,

>> but again you can game location. Okay, you know there are plenty of ways in which you can game that by going well look actually to me, there was a pub, a house next to a pub in Deal which came on the market very cheaply because right outside is a massive beer garden which is heaving in the sun.

>> Now two things I don't care about noise at all. Noise of people getting drunk or drinking is to me music. It's now 90% of people would find it intolerable.

>> And to me this was either neutral or a benefit. It and being next to the pub was a benefit. Okay. And it occurred to me there would there was an upside and there was a risk. Okay? So my plan was I never got around to it cuz it sold quite quickly. My plan was to go to the landlord and go, "Okay, here's the deal. I will never complain about anything you do. Late opening, noise, whatever." Okay? You can actually build a massive extension. You know, you can you know, you can do anything you like. Okay? On two conditions. One, you deliver beer to the house. And two, no techno. Okay, that was going to be my one condition. Okay, because there's a measure of radiation exposure called the I think it's called the severt. Okay, which is the amount of radiation you can get exposed to as a human being before it becomes dangerous, life-threatening, etc. And I think there's a similar unit for techno. You can only be exposed to so much bleepy music before you basically go insane. So those are my two conditions. You deliver beer to the house and maybe I would have pushed for food as well. So basically, you got room service in your own house, right? I mean, who can beat that?

>> And then the other condition was no techno, which I think is do you think that's reasonable? Are you one of these young people who likes nothing more than standing in a [ __ ] field or something?

>> Repetitive bleeps.

>> Delivery beer.

>> And uh, you know, normal music sounds pretty great to me.

>> I think when I first saw the clip, I was like, I like this guy cuz he likes beer and normal music.

>> No, no, no, no. I It was weird. My techno thing is a bit weird, which is I wouldn't mind Norwegian death metal. You know, that'll be fine. You know that. Okay. I can cope with any music.

>> That guy, by the way, you you know you go guy who's that submarine sank. Okay. Going to the Titanic.

>> Didn't want to explode.

>> The one imploded. Yeah. Yeah.

>> Um, he you you had you brought your own soundtrack along in exchange for £100,000 quid, but his condition was no country.

>> Now, I think that's a red flag right there. I'm not I'm not taking massive risks with someone who doesn't like country music. Okay. Sorry. Okay. Think about it. Okay. Which which pilot do you really want if the engine catches fire? You want a guy who's actually quite into a bit of country.

>> I agree. But I want I have two two questions while I have you. That the other day I was sitting there thinking, how is my dad ever going to interface with AI? And I kind of came to the conclusion that he probably won't. And so I I then started on this like almost reverse technological advancement where I reckon they're going to be communities of people where you just don't have AI and tech in the same way. You have a community that sort of looks like it's from the '80s and people live incredible simple lives but you almost have to sort of buy into this community and then people take care of you from the outside.

>> I so I would sit in this community and I go I think I quite fancy so and so so and so tomorrow.

>> Yeah.

>> And then basically they would use the someone out of sight would use the hour to prepare the recipe and to cook the bloody thing.

>> And you just live in this beautiful village that felt like it was from pre-AI era.

>> Or even the pre-web era.

>> Yeah, exactly. I'm sort of imagining a

>> No, no, no, no. So, actually, this is quite interesting. I mean, I always find it interesting that Simon Cowell doesn't have a mobile phone.

>> He has people around him who carry mobile phones, who relay the necessary information, but that actually what you created is effectively a filter. And you so you could create a kind of interesting one-way filter where effectively you gained all the benefits of this technology without and you'd simply pay to buy off the downside.

>> Exactly.

>> Cuz there is danger that all I mean there is danger that this creates actually woeful distortions in decision-making. Um, equally there's the possibility that it makes people it actually amplifies people's imaginations. I I think I think there are two ways you can use this and it's true of quite a lot of technologies which promise efficiency gains in one shape or other. You can either use them to kind of amplify brilliance or you can use them just to replicate mediocrity.

>> Yeah, I do I do worry about the fact that you have a lot of people right now saying AI is going to bring about, you know, best standard of living ever etc. But all the AI companies are private companies and so I've never really seen that many companies go about their business to optimize towards ordinary people's better welfare. I've normally seen private.

>> But they do to begin with. So I think this is what initification is about. You start off by desperately needing to acquire customers. Then network effects kick in. So you can basically take your customers for granted a bit like Facebook or WhatsApp or anything else because you simply have this network effect which is that you know eBay effect, you know the place with the most buyers attracts the most sellers. So what you do is you start off by focusing on the consumer.

>> Right.

>> Then you then you next move to the person who pays you money.

>> Okay.

>> Which you know in the case of in if eBay would be vendors. Okay. And in the and and then the third phase is where you can afford to neglect both of them because you're a two-way business and you entirely focus on your own self-interest to the detriment of both. So the vague pattern would be you start off by building houses which attract people.

>> And then you get Waitrose in and you get Marks and Spencer's in and so on which attracts more people and and of course the people shop at those stores. Okay. And then you effectively can rip off both of them. So you move from property, you move from house builder to property developer to slum landlord.

>> Effectively in in those three stages and it's unusual because of course network effects effectively absolve you from the normal competitive threats that bedevil most organizations. You know if you look at Unilever or Nestle or Coca-Cola or whatever they are, you know they have certain entrenched advantages in terms of distribution and scale and everything. But they are permanently at risk of being um uh, you know, effectively deposed or um, you know, outcompeted.

>> Mhm.

>> Uh and it generally keeps them, you know, fairly rooted in the real world and and uh, you know, it helps them focus on the important question of of what other people actually want, what the customer actually wants.

>> And the extent to which there are I think there are by the way, I think you know, a very large part of social media is is either benign or beneficial.

>> But I think there is a component of it which is slightly terrifying. I I'd say the same with the AI businesses because I think that's fair.

>> People are starting to rely on them so heavily and then companies are building on top of them and so there's probably only going to be

>> maybe 10 incredible models.

>> Or or is it a business where you can't make any money out of it? Because Scott Galloway believes that it may be one of those things like Wi-Fi which is very important but nobody can actually monopolize it sufficiently.

>> I mean, you could argue then it's the hardware. It's Nvidia or whatever who who monopolizes.

>> Um,

>> Even then, you know, that's probably true in the medium term.

>> Uh, but but you there is the perfect possibility. This is the weird thing, by the way, that there are the difference between being a billionaire and being mildly just mildly wealthy isn't really the economic value of your invention. It's the extent to which you create a defensive moat around it.

>> Um, or the the extent to which you choose to. Okay.

>> So I I was having this debate earlier this morning.

>> Um, and my debate was that one of the reasons I support wealth taxes on the super wealthy is that you should take a certain proportion of their wealth and then 10% of that you should give out in the shape of prizes to people who've done something astoundingly valuable which you can't monetize. Now let me just give an example of that.

>> Um, Tim Berners-Lee.

>> Yeah.

>> Logically, okay, his idea.

>> Chose not to patent it because of course if you patented it, it wouldn't have worked. Okay.

>> But there's no possible just universe in which he isn't richer than Mark Zuckerberg who built what he did on the back of it. Okay.

>> Take a more extreme example. The person who uh I met I met the daughter of one of the three FY Chain and Heatley who basically enabled it, made it possible to manufacture penicillin.

>> Okay. So those three people combined with Fleming were basically the parents of antibiotics. Yeah. Okay. Now

>> you know, she she was patently not bankrupt and lived in the Cotswolds. Okay. But equally she wasn't nor was she her father was dead. Okay. Nor was she living on a 900 ft yacht kind of cruising the Caribbean.

>> Which by all reason I think I've got a vague idea that Chain or Floria, I can't probably Chain did want to patent the drug, but the rest of them thought that it was basically immoral to make to seek to make money out of a life-saving medication at the time. That's how that's how it worked back then.

>> Okay. Um, I've got a funny story which I told this morning which is in 1981, uh, we got the first school computer which I think was a research machine Z8 ZX something rather 5,000.

>> 1981.

>> Yeah, it was I think '82 it might have been. Okay.

>> And being a bit of a nerd, you know, every single break time I was one of the 10 people hanging around this thing generally nerding out on the whole thing.

>> And three of us back in '82 invented the game Snake.

>> Right? Which you may remember was on every single Nokia. Effect. Now, by the way, just to be absolutely clear, I'm sure other people invented this game as well because if you're [ __ ] around with cursor controls, it didn't require spectacular machine, you know, coding skills to do. And I'm sure other people had the idea. Okay.

>> What was funny about it looking back was not for one microsecond did any we did it to impress our friends.

>> And because it was a laugh. Not for one microsecond did it occur to any of us that we could make any money.

>> Yeah. Okay. Now, given that it ended up, you know, had we managed to somehow get a lawyer involved looking back, well, probably the school would have claimed the bloody royalties then, but but nonetheless, you know, that that would have been a that would have been a multi-million dollar idea, undoubtedly. Okay. Just didn't occur to us. Okay. And so, and I always joke about the guy who um uh invented nachos, who's actually a guy called Ignathio Flores, I think it is, uh running a me running a restaurant in Mexico, just south of the the the border with Texas, uh who gets four American servicemen's wives in sometime in I think the 1950s and he's run out of food.

>> Right. Now, Nacho is the shortened Italian shortened Spanish, sorry, shortened Spanish form for Ignathio. Okay. So, I think his restaurant was called Nacho's Cafe, right? And so, he cuts bits of bread into triangles and chucks a load of stuff on top and heats them in the oven with a bit of cheese and a bit of this and that and probably a bit of guacamole and invents nachos.

>> Right.

>> Now again in a just world I'm not saying he'd well he'd be of Zuckerberg levels of wealth if you consider the value that his invention contributed to Mexican restaurants everywhere combined with a load of other restaurants.

>> Okay. That's a billion-dollar idea. Now I think he ended up okay, you know, he's famous. I don't think they ended up skint. One of the arguments I'd make for a wealth tax is that I think 10 to 20% of the money raised from basically people who've bought a house and enjoyed capital gains on it.

>> Should be redirected to extremely lavish prizes towards people who've had a brilliant and significant idea but failed to see any of the economic gains. And the reason I make that point is there is that argument that like Wi-Fi I think it was invented by some Australians if I got that right.

>> Vague idea they were Australian physicists or something.

>> Uses it.

>> Now that's more valuable than Facebook, let's be absolutely honest. Okay? It's proven vastly more valuable and important than

>> being able to look at someone's cake.

>> Okay. And yet I don't think they made any money. At least I've you know, I've never been in like Monaco or Pontoise and like, you know, 600 people come in slugging Krug out of the bottle and they go [ __ ] Australian physicist.

>> And so so you know, let's be honest about this. We're fetishizing a system uh where the incentives for value creation are far from perfect.

>> And, you know, I mean, I mean, in a way, if one's being really picky about Warren Buffett, Warren Buffett, who I absolutely venerate, by the way, I mean, what he spotted was not that you need to own a particularly valuable business. It's you need to own a pretty valuable business with a moat.

>> Yeah.

>> Of some kind.

>> Well, that's the challenge, isn't it? Create the value and then protect your value from. But under my system, you see, you would you would have an incentive to create really useful ideas and give them away.

>> Because you would have the reasonable prospect of, you know, a few million quid reward just for just for having a really good idea.

>> Do you think more millionaires than today would leave?

>> Uh oh. Bollocks to that. I mean, first first of all, there is a proportion of very rich people who are just spectacularly stingy. There's nothing you can do to attract them because they will always move to the lowest tax jurisdiction they can find and on all kinds of levels the UK cannot compete with Dubai.

>> M.

>> For those people.

>> Um, the answer of course is actually a land value tax because uh that's a tax that's inescapable. If you want to loan land in this country that's what you you pay for that.

>> M.

>> I won't go into this cuz I go into the geologist thing quite a lot.

>> But um uh the great thing about that is it's not it's a beautifully inescapable tax because you're owning something which is both scarce and which you can't disguise.

>> Um, but um I I broadly speaking there there are philosophical reasons to support wealth taxes. Uh one of which is simply of course that an incremental dollar makes much more difference to the happiness of someone uh poor than it does to someone rich. And so there's simply a utilitarian argument for redistribution. But I also think there's an economic one as well which is at the moment we have a younger generation of people who pay tax twice. They pay income tax on what they do and then they go home and they pay a second tranche of

tax to their berlet landlord, who has basically by dent of uh of of living in an older generation has bought the right to extract wealth from the young through the ownership of property.

Okay. They haven't done anything particularly creative. All they've done is gain control of a scarce resource.

Yeah. And my argument is, and I don't understand this, while I hold a co a bottle of Coke, I don't understand why Coke and Unilver and Proctor and Gamble and BT and other organizations don't campaign for a more equitable distribution of wealth, which I mean lower income taxes, higher wealth taxes.

There isn't that much income inequality, right? I know that sounds a ridiculous thing to say, but between minimum wage and people at Goldman Sachs, it's a factor of 100 or so. Granted, okay, but there are very few people who earn such a high income they could walk into a football stadium and significantly raise the average income of everybody in the stadium. In terms of wealth, that's a completely uh different level of variance. So, you know, there are people who can walk into a football stadium and everybody immediately becomes a multi-millionaire within that stadium.

Okay, on average. And that's a single individual. Now we already quite rightly uh compensate for income inequality. We do absolutely nothing to compensate for wealth inequality.

Now when that wealth is actually earned as the product of taxed income, well you could argue you already paid tax on that. It's a spirious argument because we pay tax on our income and then we pay tax when we buy something through VAT. M so the perfectly healthy economic activity of going out doing something useful earning money and buying stuff which is how an economy works is tax to buggery whereas buying a house in 1985 and sitting on it okay which is a completely worthless indeed worse than worthless it's an extractive rentseeking activity okay we don't tax that at all.

Now this doesn't make any sense. I don't know what I don't now what what I don't understand is why consumer goods companies who, let's face it, what Coke need is quite a lot of people, okay, who can afford to buy a Coke when they feel like it, okay? It's absolutely no use having super wealthy people if you're Coca-Cola cuz Jeff Bezos, you know, uh, doesn't buy any more Coke than the next guy.

Yeah.

There are very large parts of the economy which would benefit significantly from a more equitable distribution of wealth. And strangely, the companies that operate in those sectors of the economy never make this case. And I don't understand why not. By the way, the place you want to live is not a place where you're vastly richer than everybody else.

Okay? Um there's no point. What you want is a place where you are comfortably above the median income for the surrounding area. In other words, you can do a you can do the things you like a bit more than your neighbors can, but your neighbors are not so significantly poor that you find that there are no decent restaurants, coffee shops, or anything else. Okay? So, a large part of what you might call the public realm is co-funded.

Pubs are co-unded, coffee shops are co-unded. Okay? We don't think of it like that because we think of it at the level of an individual transaction. But, okay, this is the way I look at it. Okay? Very simple analogy. I don't know if you watch Downtown Abbey, right? But it did occur to me that the the Marquis of Downtown and his family, the very very rich, but 90% of the time they ate food cooked by the same woman in the kitchen downstairs, right? They had a cook, wonderful, not much variety. And it occurred to me if I'd be the marketers of Downtown, I would triple the salaries of everybody working in the abbey, okay? All the servants and the various people. That way a nice Indian restaurant would have opened in the nearby town and when you felt like a decent Ruby Murray, you could probably get one delivered which would have made a change from Mrs. Miggins or whatever her name was who operated in the kitchen.

So you know a large part of what makes us happy in life is actually co-unded by our neighbors or by you know other other members of the same interest group. M

Okay cars are massively co-unded by other car enthusiasts.

And consequently being inordinately richer than other people in your group uh is actually uh basically bad news for your quality of consumption.

Yeah. Thank you very much for coming on.

Huge pleasure. Absolute delight. Fantastic.

Thank you so much.