Interview: Rory Sutherland, author of Alchemy, on why irrational ideas work

Welcome to a very special episode of Behavioral Science for Brands. In a wide-ranging conversation, Richard and I spent over two hours with Rory Sutherland, vice chairman of Ogilvy UK and founder of its behavioral science practice. Rory is one of our industry's most defining voices on the application of behavioral science in marketing. It was a really great conversation, and we covered a wide range of topics, everything from an exciting new idea from Rory about reverse benchmarking all the way through to the state of our industry and how we should grow brands in the future. We decided to deliver this as a single long-form episode so you can go through it at your own pace. Like always, you can find our show notes for this episode, along with all of our other episodes, online at the consumerbehaviorlab.com, and you can subscribe to our podcast anywhere you listen. We had a great time with this episode, and we hope you all enjoy it too. Happy listening.

Welcome back to Behavioral Science for Brands, a podcast where we bridge academics and practical marketing. Every other week, we sit down and we look at some of the best behavioral science that's powering today's brands. I'm Michael Aaron Flicker. And I'm Richard Shotty. And today, we're very glad to be sitting with Rory Sutherland, behavioral scientist, vice chairman of Ogilvy, and author of Alchemy, one of Richard and I's favorite books, The Magic of Original Thinking in a World of Minding Conformity. Uh, let's get into it. Rory, welcome. Welcome to the show.

Yeah, I'm not really a behavioral scientist. I describe myself as a behavioral science impresario, which is that what I really liked about behavioral science, if I'm being absolutely candid, is not the science bit. It's the mischief-making bit, which is that there's far too much certainty in the world caused by over-reliance on sort of narrow, reductionist models of how things work. People become very content with anything that just seems to make sense. And what I love is the ability to play that gadfly role of going, "Maybe, but maybe not," or "Maybe the opposite is true." And what I loved about behavioral science is there seemed to be so many kind of confident decisions made on the basis of assumptions that weren't really empirically tested, that probably wouldn't have made much sense to people who are of an entrepreneurial or marketing mindset, but were nonetheless confidently asserted simply because they seemed to make sense. And I got a friend actually who worked for Ogilvy PR, brilliant man called Chris Graves, who you may know. Um, and he spent part of his life in journalism. And one of the mantras he adopted in journalism is, "Just because it makes sense doesn't mean it's true." And of course, it's a good mantra for a journalist because someone is coming up with a plausible story to mislead you. And if that story makes sense, you're inclined to put a big tick beside it and walk away. But actually, the sensible explanation isn't necessarily the real explanation. And and that and that insight is to say, "Just because it's easy doesn't make it right." And so to, and to, and so to push to that next level, uh, is really, it's really an exciting part of the field. And you've spent a long time taking this and applying it to marketing specifically.

I think, I think what's really important is that, I mean, the concept of the econ, which I think is Richard Thaler's invention, in other words, this strange species that doesn't exist in the wild but is only found inhabiting economic models. That was a really, really useful concept because you suddenly realize that we're designing the world for econs, not for humans. And that's that involves a massive mis—I mean, at best, maybe, I mean, it can be worse, but at best, it's just a massive misdirection of effort. And it always interests me because actually, really successful technologies really succeed because, uh, someone's managed to find an interface that's designed around human perception and emotion, rather than an interface that is optimal in some—I mean, I don't think anybody's yet been the Steve Jobs of AI. I think a lot of nerdy people have improved it in one dimension in terms of sort of all kinds of artificial metrics, but nobody's asking the—I mean, the lesson of most tech is that loads of nerdy people compete for years and years and years, then someone comes along with a cute user interface and makes all the money. I mean, that was basically, you know, that was Facebook.

Okay, yeah, absolutely. You know, I mean, Facebook bothers me because we in the advertising industry have given literally a trillion to this company, which hasn't had a second idea. Okay? I mean, if you've given me Mark Zuckerberg's money, I think by now I would have launched a decent craft beer brand or, you know, a chain of cafes, just something for crying out loud, have a second idea, Mark. Right? You know, say what you like about Elon, right? You know, he has, you know, there's a hell of a lot you could say about Elon, he has got an approval record of innovating more than once. But actually, you know, quite often, you know, whether this is good or bad is another question. The person who cracks the interface and the experience is the person who, who ultimately cleans up. And we're not spending enough time looking for what do we want to interact with in house? So I got a lot of people with AI saying, "What you'll do is you'll say, 'I want to buy a toaster,' and it'll show you the perfect toaster." Okay? Based on its knowledge of you and its infinite knowledge of the world of toasters, okay? And you go, "But actually, estate agents know you never show people one house, right? Because we can't really choose unless we have a frame of reference or a comparison point." So, what I probably want the AI to do in the world of toasters is show me four toasters with relative strengths and weaknesses and a fifth toaster that's a bit of a wild card. That could be an air fryer. Okay? And then I might be able to make a choice from those five. But dating sites, whatever it is, we fundamentally need a frame of reference before we can actually make a decision. And that's the classic case where I think people who are logical don't really understand human psychology very well.

Yes. And if we are toaster makers, if we are a toaster brand, we want to put an expensive toaster first. So that way, everybody anchors to that more expensive toaster. So also, who's designing the AI? And and is it advertising-funded? Because the nitification of everything. I mean, there is a website I really recommend, which I, I occasionally talk to them, Kagi.com. It's a pay-to-use search engine, meta-search engine. And it's like search used to be 15 years ago, where when you search for a hotel, the first search result is the hotel with its phone number and the address. Okay? Rather than 17 other hotels that are trying to actually attract your business, combined with 15 effectively online travel agents who aren't remotely interested in actually putting you in touch with that hotel directly, right? What they want you to do is book through them. So, you know, we, we've got to be concerned about this, that we could end up basically creating an economy where effectively we just have, uh, AI playing chess with each other. Yes. At an immense energy cost and act, and effectively getting us nowhere.

Is that related to AI ethics in your mind? Meaning, there's big, uh, capital B concerns about AI ethics, but then I would say this is a commercial concern with AI ethics, which is, you could spend a lot of energy cost, you could spend a lot of computing power, and not end with a better product. And also, where you have a problem, which I don't think we've been alert to enough in advertising, because the reputation of media owners previously took care of that, uh, which is that the dishonest actor in a market will have more funds to play with than the honest actor. Mhm. So the story I tell about that is, I, I had, I was stuck in a French hotel room. I wasn't on my A-game, but I had to buy one of those Canadian ESTA equivalents. Okay? Now, you go on Google, sorry, Google, but the top result should be the Canadian government. Okay? The Canadian government charges you $14 Canadian dollars for that kind of, um, it's a visa waiver. Thank you. For I see. Got it. I don't know why we have to, as Brits, we have to pay this. I mean, we gave them the [ __ ] country on a plate. They forgot that. Yeah, they're grateful. But nonetheless, nonetheless, we gave them half a continent on a plate, but nonetheless, they charge us $14. But there are lots of dishonest actors. They're not wholly dishonest. Not a total scam. Uh, if you try and sell Bitcoin, you'll come across total scam merchants. Here, they'll charge you $60 Canadian dollars. You still get your CTA, I think it's called, Canadian Travelers Advisory, or whatever. You still get it, but you've paid $60 rather than $14. And of course, the people making money that way are outbidding the great government of Canada, your 51st state, for my attention. Yes. So you will have a problem unless you have some sort of ethics applied. You'll simply have a problem that in any field, the dodgier actors have more cash to play with than the people who are playing straight, or at least those with the highest margins, whether they're dodgy or not.

Absolutely right. Yeah. So, I mean, this is an interesting problem, which I think besets online advertising. And I keep arguing about this, saying that I barely ever see any advertisements for Unilever or Proctor & Gamble brands. Now, it might be because I'm male, and they're still stuck in the 19th century looking for female audiences, which is not impossible. Okay? But I do all the shopping for that stuff. My wife's stingy. Uh, you know, she buys the actual mid-range dishwasher tablet responsibly. She does that. Yeah. Whereas I go, "Look, it's called Finnish Quantum Uber Pro. I've got to buy those, right?" You know, it's got four compartments in the tablet rather than— So, I'm a sucker to marketing, and my wife is unfortunately, she used to work in procurement. It's tragic. Um, but, um, but anyway, I don't see any ads for those things. And it occurs to me they're low margin, frequent purchase, low attribution. Okay? And also, they're not really an impulse buy. So you can't argue that the advertising is actually driving incremental sales. Right? So you've got those four factors that make it hard to justify advertising. I call this the Walford paradox, which is a bit weird. When my daughters were in school, they had a school uniform policy that required them to wear black tights. And they kept lading the bloody things. And so a friend of my wife said, "Actually, it seems crazy, but expensive tights probably work because they, you know, they cost an insane amount of money, they're £20 a pair, but they do last five times as long. And also because they're expensive, your daughters will probably take a bit better care of them, right?" It's a bit like the psychology of umbrellas. You either buy a £5 umbrella or a £200 umbrella. One, you don't care if you lose it. The other one, you're so nervous about it, you never lose it. Don't buy a £50 umbrella.

Um, uh, this is, by the way, the opposite of a good idea is another good idea, by the way. Now, what I noticed, I, I went online to the Walford site. Now, I don't know what their margins are, but it's going to be whack. It's going to be proper whack, right? Yeah. I mean, a lot of its marketing cost anyway. It's, you know, fantastic brand, very, very good product. I'm not, by the way, this did work. It made sense. It's a good move to buy ladies. Okay. It's a good move to buy expensive hosiery. But what I noticed, I bought direct, direct. I think they send them by FedEx, so presumably they've got a bit of margin, okay, from Austria or somewhere. And what I noticed is for the next few months, I got advertising for nothing else, okay? And then I suddenly realized, okay, I'm in a niche group in that I buy direct. When people buy direct from them, their margins are insane compared to selling through retailers. It's kind of an impulse buy. It's very high attribution. Uh, so all of those things make it very, very easy to justify ad spend for that category versus, say, finished dishwasher tablets, which are my, you know, other extravagance of the month. Um, and so the ease of, so what I'm saying is that people in a, in an ecosystem, an advertising ecosystem which is working, we're obviously going to see more advertising for luxury premium goods than we are for mainstream goods. You know, that's just how it goes. We might see a lot of advertising for things which are, uh, uh, what you might call subscriptions to things because the lifetime value of a customer is there, very, very high. Okay? But in a really good advertising ecosystem, which I think was basically the analog advertising ecosystem, what I saw ads for was vaguely commensurate with where I spent my money. Okay? You know, it was very far from perfect. You know, I saw ads for jewelry, and I never bought any, you know, uh, yet. Um, okay. I'm not saying it was perfect, but I think what we're seeing online now is a complete disconnect between where value lies in the economy and where attention is directed, which is caused by those kind of distorting asymmetries, uh, in, you know, how we justify ad spend effectively.

Understood. Uh, how we justify. Does that make sense? Because you're a media guy, Richard. Yeah. I, I think this might be a, it's, it's quantification bias at some level, but it's also high-margin things effectively. They could argue that they could afford to spend £30 on me. Okay? Me as an individual, and if I only bought two extra pairs of Wolford thingamajigs, you know, three months later, they were still quids in. Okay? It's impossible for finished dishwasher tablets to do the same. I think there's always this danger that whenever you're measuring something, you don't measure every element, and therefore the areas that are disproportionately likely to be captured, that can be quantified, then suddenly loom large in people's decisions. And actually, there are certain things which are important which can't be quantified. So, I'll give you a lovely example of this. You can quantify them only in a free market where consumers are free to spend their money as they like. Now, there's a form of transportation. Have either of you used Heathrow Pod Parking? No. No. No. So, you park about a mile from Heathrow Terminal 5. I can't believe you haven't done this. No. Well, that's tragic. Okay. Okay. And you park, and then you park your car, and you wheel your luggage to a little pod, which is personal. You don't share it with, unless there's massive demand. You don't share it. And, uh, you've got car one end of the car park. The other end of the car park is served by effectively separate stations. And then, if you're perverse, you ask to go to the other end of the car park just for the lols. But basically, you ask to go to Terminal 5, and this little pod opens its doors. Uh, they're autonomous electric things that don't run on tracks, but they run on wheels, but there's a kind of specially-made roadway. So there's no driver. No driver. They seat six with a lot of luggage, and it scuttles off on its own. And they do little intelligent things. So when you arrive, the pod will get out of the way, go off and charge itself to free up space for your own pod to dock at Heathrow Terminal 5. And it occurred to me that this is a brilliant form of transportation for all kinds of reasons. In other words, it's not hub and spoke like most mass transit. You could actually create a complex network, and it could take you not from A to B, it could take you from A to B to A to Z, A to Y, A to Z, G, whatever. Okay? So you could literally have a road network replicated in a driverless pod system. Very, very cheap to build the actual infrastructure compared to building rails. Okay? Why hasn't it taken off? And my argument is that probably when procurement set a brief set against a shuttle bus, this thing doesn't score very highly. And they've got in mind a shuttle bus. What procurement wants is three comparable shuttle bus operators to bid for the route so they can compare apples for apples comparison, compare them on price. And that actually is directly inimical to innovation because most innovations, electric cars being an interesting case, are actually worse on one dimension. Okay? But they're a lot better on some existing dimensions, but also on dimensions that you weren't even factoring in. Now, the really interesting thing economically with the Heathrow pod is that the price of parking in the pod parking is usually only a few pounds less than the price of the short stay. And the real reason is people love going on the pod. Okay? But enjoyment, which is, "I hate a shuttle bus, I love the pod," is not a factor in any transport planner's matrix of decision-making. Now, I had a colleague who was creative director of Ogilvy, and he used to drive in his jam and get down to Heathrow Pod Parking. And on a couple of occasions, they said, "I'm terribly sorry, Mr. Smith, but the pod parking is completely full. So we've upgraded you, no extra cost, to the short-stay parking, which is vastly more expensive real estate right next to the terminal." And he just looked childishly downcast and go, "But I wanted to ride." Okay? Now, so I'll give you the classic example where procurement wouldn't have allowed an innovation to happen, which happened in consumer, uh, in, in the B2C world. The original iPhone had the shittiest battery life you can—we've forgotten this. Okay? But the first iteration of the iPhone, basically, you had to take a charger to work with you. Okay? It was never going to make it through the day. Now, anybody who'd set up a standard list of procurement balance scorecards would have made one of the requirements a 20-hour battery life. All right? Okay? That would, you know, because Nokia, you know, Blackberry, they all had 20, 24, 36-hour battery life. And the iPod would have failed at the first procurement hurdle because the battery life of the first iPhone. The battery life of the first iPhone was a [ __ ] abomination, right? People loved all the other facets, basically the usability and the attractiveness, the emotional facets so much they were totally prepared to do a workaround for the, uh, for the battery life. They would forgive. They, they'd buy, they'd buy a case with a huge great charger built in, or they'd carry one of those charging bricks, or they'd just go into the office and as soon as they got in, because you know, the thing was for 30% off your train journey, they'd plug the bloody thing into their desk. You see? And so most innovation involves basically the discovery of value in an area that's been underquantified before. And I've actually got a theory about this, which I think is an exercise that everybody can steal, which I call reverse benchmarking. Now, I've nicked it, I've not the name, I've named it because you've got to name it because otherwise you can't, you know, we all know that if the, the most greatest economic value in the last three years has been created by the person who came up with the phrase "loaded fries." Right? Because everybody loves chips with tasty [ __ ] on top of them. But until they had a name, in Canada, you call them poutine. Right? Yes. And the Canadians eat, they eat nothing else, you know, apart from maple syrup, right? And the thing is, until you had a name for loaded fries, you couldn't sell them. Okay? You can't, you can't have a menu that says "chips with [ __ ] on top of them." People, "What the hell's," you know, "what what's going on there?" They had cheesy fries, admittedly, and you had cheesy jalapeno fries, and then the final flourishing. But the reverse benchmarking, I'm going to tell this story again. Will Guidara, fantastic book from 11 Madison Park. He takes, he goes from 11 Madison Park when they're number 50 in 2011 in the World Restaurant Awards sponsored by San Pellegrino, and he wants to get to number one. Personally, I'm a satisfied sir. I aim to get to number seven, but Will's not like me. He wants to get to number one. And he takes everybody, a cross-section of his team, to the number one restaurant, which is also a three-star Michelin gaff in New York. And all his colleagues are jotting down things they do really well. And at the end of the meal, they're all going, "We ought to copy this thing with the napkins. We ought to do that thing with the bathroom." And he goes, "No, I'm not interested in that stuff because they're already doing it." Well, I want to know, and this requires an act of imagination sometimes, or at least an act of curiosity and imagination. What was a bit disappointing? Two things. Do you remember what it was? I think it was the coffee and the beer. Yeah. So, the beer drinkers got really short shrift compared to the wine drinkers. And the coffee was nothing special. So, he has in his team, there's a coffee obsessive and there's a beer obsessive. I think the beer obsessive was a chef. He says, "From now on, you're the beer sommelier, and you're going to bring out a beer menu, and you're going to suggest food pairings to beer drinkers." Um, and the coffee sommelier is there, presumably talking about single-origin bloody roasts and stuff. That, that whole book to me is an amazing example of someone who isn't a behavioral scientist. He never mentions psych restorators, but, but a behavioral scientist, but well, he's not like the food industry. QSR is the same. It's a fast feedback business. Yes. So you learn it's, you know, you learn really, really quickly. Observing, not from studying papers, do you work in a restaurant shop? It's free MBA, basically. But the one I really liked was he talks about, um, their wine flight. So you go to 11 Madison Park, it's $200, say, for wine pairing. And he would say, "Well, if you're a restaurant, if that's $40 per wine, everyone's paying, they pay a fixed $100 in total, we'd spend about $20 an average per wine." And what he said most, uh, restaurants would do, even Michelin-starred ones, it'd be the first one would cost the restaurant $20, the second wine would cost the restaurant $20, the third, the fourth or fifth. And what he said to his sommelier was, "Look, just shave off a few pounds from that first one. Maybe give them a $15 wine, then another $15, and you've saved enough money that the final one you can spend $50 or $60." So like, Jesus, well, the last, I was thinking more like, Yeah. In a rabbi, the peak-end rule. That's right. Don't do everything quite well. Have one absolute standout moment, a standout moment, and then put that standout moment absolutely at the end. And that whole book is just full of these, uh, descriptions about how he created an amazing experience by taking a principal behavioral science. Don't optimize for average. And that's actually, I don't know if you know Gary Stevenson, Gary's Economics. I've never met him, but one of his really, really, I don't agree with him on everything. And also, he could help the economy by actually spending some [ __ ] money on consumer goods rather than using the wearing the same pair of shoes to work. For Christ's sake, Gary, get down to JD Sports. You know, spruce yourself up, you know, help us out, right? But he's absolutely right in saying that all economic models rely on a single representative agent. So you optimize, you treat the average as if it's representative of the whole. And I think that, I think that idea with the wine flight, you could actually, you could actually end on actually a really cracking dessert wine would be a fantastic thing to end on. He, he says like, you would give someone a Gevrey-Chambertin where they would be absolutely flattered. I'm Brit. Americans live Burgundy, never expect. And it's not costing the business a single penny more. No, but by changing that allocation of funds, you end up getting. If I ran British Airways, I'd shave money off the dinner and the tea. Uh, okay. Off the, off the lunch and the dinner. Okay. We're Brits, right? We're not very good at that. But tea and breakfast, we hit it out of the park. So I'd actually, if I were British Airways, I'd actually have tea in a pot. Okay. In business class. Yeah. Or, or as you said, optimize to something that it's optimizing for a surprise. It's optim—I mean, an ice lolly. I mean, ice lollies, the world's best ice lolly. It probably cost the Virgin, um, did that, didn't they? They handed out, um, chalk ices during the film, and that was what everybody remembers. They were unusual in having in-flight entertainment in seatback in-flight entertainment in in economy class. Okay. And then actually, this is a bit interesting because Americans were completely confused by this because the chalk ice cinema connection. Yes. Is a totally British thing. I wouldn't know it. I don't know it. It's exactly the same thing. We were talking earlier about the Hendrick's cucumber. Yes. Where the Americans are making a joke at our expense, but we're completely blind to it because we don't find cucumbers inherently comedic. Cucumber sandwiches is not funny to you. No, no, no. It's a perfectly good sandwich. You need a bit of pepper and salt, but it's a perfectly serviceable. It is not an object of ridicule. Okay. Here. So, I didn't realize that Hendrick's were basically Britishizing themselves in the United States, but who were putting this slice of cucumber in because of course, to us, it's, it's a cucumber. There's nothing British about cucumbers. But of course, to Americans, it was incredibly. And the chalk ice, of course, was completely confusing to American passengers on Virgin Atlantic. But everybody in Britain at that time who'd gone to the cinema in the 1970s, there people came around selling chalk ices at the cinema. So the idea was popcorn would have been the American, the American equivalent. Okay. Interesting. Which we now have adopted, uh, for no readily apparent reason. Um, yeah, like Halloween and, um, yeah, school shootings. That Hendrick's are trying to play on this. I think that's responsible for its success because with virtually every other gin purchase, the gin, once you've walked away from the bar, is is completely invisible. But if you do a distinctive serve like over cucumber, everyone knows you're drinking Hendrick's, and then you're using social proof. You know, even if 5% of the gin drinkers are having Hendrick's, it looks like that's what's—optimizing for visibility. Guinness know that if there's someone visibly drinking Guinness, and of course, drinking Guinness is very visible because it's black, for God's sake. Um, uh, it was actually invented in Wales, not in Ireland. I'll just make that claim just to really, really annoy everybody. There is actually a Welsh drink. Um, which the Irish stole. It's dangerous. Okay. No, no. Uh, but cider, ice, and cider, it made it obvious you're drinking cider. So it was a visual prompt and a bit of social proof because that was an era when people didn't have branded glasses. And cider, people thought you're drinking lager. And cider, I think, is a problematic drink because, like talking to the Unilever people on ice cream, you've got to recreate your market every year, roughly speaking, because cider is for most—I mean, unless you're a West Country farmer, cider is mostly a summer drink, like Pimm's. Okay? There have been attempts to obviously spice it up and create winter variants, but it's more of a. So actually, you actually need a kind of nudge every May or June in the UK to add, reintroduce cider to your repertoire of alcoholic beverages. Um, and so the interesting thing there is what I think about reverse benchmarking is that we noted, so all these McKinsey people come in and they benchmark you against your competitors. Roger L. Martin, uh, do you know? I think he's the best business writer, best strategy writer going. He's like the heir to Peter Drucker. He's coming to Nudgetock on June the 27th. Tickets now available. Okay. And he, he's written a piece on Medium called "Benchmarking is for Losers." He fundamentally thinks that what you're doing is that you're getting involved in a race to the bottom by comparing yourself, not differentiating yourself from your competition, but by effectively entering red ocean space where you're competing head-to-head. Now, one of the greatest quotes of all time, I think, is, um, uh, the great, um, guy at London Business School whose ridiculous name is Jules Godard, Professor Jules Godard, who said, "Strategy is the art of staying one step ahead of the need to be efficient." That if you're competing on operational efficiency, you're already out of the game. You know, if you've got nothing else, but you're just commoditized as useless. Okay? And so the argument of reverse benchmarking is that don't do what exactly what Will Guidara did. Don't say, "What do they do well? We'll do the same thing." Okay? Instead, say, "What are they doing slightly badly, or where is their effectively unserved space for value creation, and let's go and hit it out of the park?" And I think you could make the case that 90% of innovations emerge from exactly this phenomenon. So Apple is loads of nerds competing for technological superiority. Apple goes, "Yes, but why does it have to be so ugly and and and difficult to use?" So, so that was a non-numerical space is ripe for innovation because nobody's measuring them. So no one's benchmarking them because you can't, you can't put a figure on Apple's loveliness. I mean, I'm an Android user, by the way, but I'm, but I nonetheless acknowledge some of what they do. Okay. Now, you could look at a lot of businesses and say the really disruptive thing they did was to double down on something that was everybody else had neglected. Yeah. Okay. It's effectively a kind of side bet. And I was talking about this last night, and my colleague Antonius Coachellis came up with this fantastic example of reverse benchmarking, which I'm not familiar with stuff. Brazilian jiu-jitsu. Have you come across this? So this Brazilian guy wanted to invent a new martial art. Okay. I don't know anything about this stuff. Okay, but it basically, given that martial arts have been kicking around for thousands of years, most forms of fighting have already been optimized within some sort of martial art or codified to an extent where there isn't much space for a new martial art. He said, "Hold on a second. Every other martial art assumes you're standing up because once you're lying down, it's game over or you've lost. What we need to create is a martial art for how you fight when you're on the ground, not when you're standing up." And that was the unexplored space. That was the reverse benchmark. So smart.

And so it's, Do you know anything about that? That was again, we're not probably the one. I have a very strange image now in my head. Yeah. Yeah. But, but that is how Brazilian jiu-jitsu is, uh, competed and how you watch it on the ground. That is right. Yeah. So it's, it's, and often the unexplored space is unexplored because it's unquantified. Yeah. So you've talked about Apple as an, and Brazilian jiu-jitsu as examples of people who've used that process. Is there a Moxy hotel?

Moxy hotel. I was going to say you optimized for the ground floor, the room. Now, by the way, I'm going to be very clear about this. What, what Will Guidara did not say is, "We'll make everything [ __ ] but we'll have the best beer and coffee in Manhattan." Okay? You've got to be kind of in in the zone in terms of. And the Moxy hotel rooms aren't crap. They've got a very good TV. They've got good Wi-Fi. The bed's comfy. Okay? But there's no room service. There's no laundry service. Um, and and the locations are good, by the way. It's not just the ground floor, but they're in constrained good locations where real estate is a bit more expensive. So, making the rooms all a bit smaller. And let's face it, you're only there one or two nights, okay? But on the ground floor, you have 24-hour barista serving really good coffee. It's a space where you can chill out. You can actually just go and actually, they gave it to me for free. It's a great advantage of being mildly famous, but you can rent a little meeting room. You can do video calls. You can hang out with your laptop. You can meet friends. So, you actually have access to this kind of de facto club for the whole duration of your stay, even after you've checked out. And so Moxy is a really, really good example of effectively, most innovations are actually a sort of appear to the rational mind or the procurement mind as a defamation of what they're looking for. But actually, the reason it's, it's a defamation is because it's effectively flowed into the space that's as yet unoccupied. Yeah. And and almost that would be the ra, that would be the understandable outcome of procurement trying to drive the best price for the outcome that they've identified. And innovation, they, they define room size as a metric. Now, room size is not irrelevant if you're a country house hotel and you're staying for a week, okay, or, you know, or if you've got kids. Y I mean, actually, I, I plug Moxy, and it occurs to me there are people at the Marriott group going, "Jesus, why does this 58-year-old man keep having to praise our hotel, which is targeted at cool young people, you know, why do we have to have this old father sitting around in our Jeremy effect?" It was rather like, I can't remember who it was, but it was someone whose, um, someone in journalism who whose father covered over the Nike logos on his shoes. He got old enough where he had to use, he had to use, um, effectively trainers because his feet hurt. And he actually put tape over the Nike logos because he said, "I don't see why my feet should advertise somebody." And his daughter said, "Dad, you're an 83-year-old academic. Nike would actually pay you to cover up the, please hide it, please, please, please obscure these logos." But, but the Moxy thing, I mean, there's another example, Rush, the hairdressing chain. Um, when they open a new, uh, salon. Actually, the, the toilets thing is really interesting. So there, in, in about three different countries, there are three players who've really succeeded at the gas station market. There's one in Turkey, bizarrely, a Turkish gas station chain founded by a husband and wife who are previously teachers. I have no idea how that pivot happens. Okay. Um, there's another one called, um, uh, I think it's called, is it called Chuck E. Cheese in Texas? Uh, Buc-ee's. Bucky's. Sorry. Thank you. Which has a huge beaver. Bucky's. Bucky the Beaver. I've actually got some of their branded merch, tragically. Yeah. I've got a Bucky's Hawaiian shirt. It's very American of you. No, no, no, no, no. But, but they have, they make this huge feature of selling deer corn. What's all that about? That I don't know. Um, but anyway, but the toilets, uh, they make their toilets the hero. The, the Turkish chain does the same. Okay. And what Rush do is when they open a new hairdresser's salon, they spend £30,000 on the loos. And a lot of people go, "Well, why are you spending all that money? Most people don't even go to the toilet while they're having their haircut. We'll serve them enough free coffee, and you can make sure they go." But they said, "No, no, the point is we're optimizing for surprise. We're not optimizing for predictability because everybody who asks to use the loo, the 10% are expecting mop bucket, storage of cleaning products, you know, a load of hair products stacked up against the wall, and you're pissing somewhere where, you know, which is, you know, that business in five-star hotels where you mistakenly go through the staff-only door, and everything turns into like, you know, a slum, you know, in the space of one door, you know, because this is now where the staff go, not where the guests go. And they deliberately go against that by making it unbelievable. So it's sort of gold taps and so forth. Big shout out actually to, um, uh, Kissa in Sevenoaks, Indian restaurant for doing exactly the same thing. Indian, fantastic Indian restaurant in Sevenoaks, by the way, folks. Qissa. Kissa. I always think I'm starting the principle, by the way, that podcast guests should be allowed to advertise. I Well, we're feeling that because you're going to, you're going to break into a bloody space where you start talking about VPNs any minute now. So I thought I'd preempt you. But, um, but, um, I think this whole, now I think the brain science behind it comes from that book, which you, you must know, which is The Experience Machine by Andy. Oh, most of what we perceive is actually a prediction, and that we only use our limited bandwidth and our optic nerves and our ears to correct for prediction error. So it's exactly the same architecture model as used in MPEG and JPEG. You need very little data when the pixel is basically conforming to the expected value, and you only use the data, uh, where the pixel is unexpected. Either it's different to the preceding pixel in the case of an MPEG, or the adjacent one. And it's a V, that's, that's why I mean, if you ever shoot digitally in RAW mode, okay, every pixel's individually described, very good for photo editing. The files are so ding enormous. Yeah. I mean, I used to have a professional photographer who lived near me in Deal, and he'd have to come and borrow my high-speed broadband when he needed to upload RAW mode photos. And by parking outside the house, because it just took too long to send them over his, and the point is the brain has come up with exactly the same model for understanding and interacting in the world, where we, we direct our attention to what's surprising, not what's expected. And consequently, the way to achieve emotional effects in a customer is the DoubleTree cookie. It's by not by actually matching at people on their, you know, your balance scorecard of, you know, service agreement levels. It's by doing something out there where people go, "What the hell's that about?" Whoa. Okay. And I think that business of designing for pleasant surprise, I mean, I go even further. Actually, I was talking last night to somebody who just read this, the first book by Kurt Vonnegut, which is about a world where everything's perfect, but everybody's miserable. Everybody has everything they want. And I said, "The problem with such a world, actually, is we wouldn't be very happy because there were no pleasant surprises." It's a bit like Singapore, where if their, if their subway train is three minutes late, they all go into a total meltdown state. You know, if you give people something that's too nice, and there are no pleasant surprises, actually, that doesn't get, that's not actually that nice an environment for us. I think that's links back to that idea of the hedonic treadmill. So, I think the original study's been criticized, but it was the Brickman study, where he finds people who've won a reasonably big lottery, or they've been in a car accident, there've been life-changing injuries, and to begin with, their happiness is miles apart. Lottery person much happier, but it keeps on contacting them, and over time, they come almost the same level of happiness because your expectation level, and actually, it's comparison to expectation which is the determin— Yeah, you're you're habituating, you know, however good or bad something is, that, that, um, enjoyment or, or, or dislike of it, uh, eases over time. I mean, Paul Dolan puts it very well, which is he said everything's a bit like heroin in the sense that you need more and more of it to replicate the initial effect. Probably true of wealth to a degree. Yes. So, the clever brand, we've talked about this with, um, pumpkin spice latte, is you, you have it for a time limit. You don't let people habituate to it. You know, pumpkin spice latte. It's available for a month or two, and before people are satiated, before they're bored, you remove it, and then when it comes back next year, there's a genuine leice. Yeah. Whereas if they talk, of course, that's a beautiful counterintuitive thing because no economist would would get the logic of the Cadbury's Creme Egg. Ex. Exactly. No economist. I always remember talking to Jeremy Bullmore about After Eights. Yes. Okay. Which gives them a very specific, I don't, they're an after-dinner thing, which in, in the '70s and '80s, they're still currently, they're still very nice actually, but every, every, every finance person would have wanted the people to call them "all-day mints," right? Because only after eight, whereas the idea was you handed around after dinner, and then you r a lot of empty envelopes from which the mints had already been removed, and eventually you found an envelope with a mint in it, which gave you a pleasant surprise. Um, but no, I think I think that question, by the way, I always recommend, and I'm doing another plug, that's why you should go on holiday to Wales because you don't expect that much from Wales, but actually, it's surprisingly good. That's the slogan for Wales. Is actually what you'll do is you'll be in some fairly unprepossessing place in Wales, and you'll just discover there's a cafe that's fantastic, or a, you know, something just you weren't expecting. That's why I always say, actually, always rent a car when you're on holiday because you, it enables you to have lucky accidents. Yeah. Or do the thing which is you go for a random walk on the basis that you can always Uber at home if it goes wrong. But optimize, and this is actually one of the, I think, one of the greatest problems we're suffering in business is people are optimizing for attribution and efficiency rather than optimizing for opportunity, fundamentally. You know, I genuinely think philosophically, in everything from a business to life, you should, and I'm quoting Nassim Taleb here, increase your surface area exposure to positive upside optionality. Okay? Which is, make it likely that people will bring you opportunities from which you can choose. Okay? I mean, one person said yesterday, they said about fame, brilliant guy called Blair Enns, actually, author of Win Without Pitching and Four Questions, Canadian. And, um, he, he said that fame, actually, the great value of fame is because you're no longer finding your customers, your customers are finding you. And because you're no longer looking for opportunities, opportunities are coming looking for you. It enables you to choose your future because you can decide, okay, I've now got 47 opportunities, which of the seven do I really want to pursue? Whereas if you're searching for opportunities, you're basically, you're trapped in terms of what's actually available to you in the here and now.

So let's apply that to how brands think about marketing. Because in that, in that, because I think that's a challenger position, an exciting challenger position. What we've never had the courage to say as marketers is that finance people are bad at maths. And they're not bad at maths because they're innumerate. They're bad at maths because they're using the wrong maths. And they're using the maths of certitude and determinism, not probability. And consequently, we've created a world, and this is true if you work in an ad agency, they have this ludicrous mentality where every quantum of time or effort has to be matched to a quantum of revenue. Okay? Now, that is a totally appropriate thing to do if you're doing something very repetitive, very predictable, very deterministic, in a factory. The point about marketing, and this is Nim. It's not me. Nim, you know, I'm not, I'm, I'm a maths groupie. I'm not a, got very little mathematical ability. My brother's very good. But, marketing is fat-tailed. Okay? And the way to look at marketing is the 80/20 rule also applies to your marketing activity. I mean, I worked on American Express for about 10 to 15 years. And looking back on it, five things we did probably delivered five ideas. One of them, by the way, was Ogilvy's single sentence in a direct mail acquisition piece for American Express back in the 1970s or '60s, which said, "Quite frankly, the American Express card is not for everyone." Okay? That made them a billion dollars. Easy. That single insight, which is it's intriguing, it's exclusive, we're going to sell this on scarcity rather than, you know, and, okay, that was worth a billion dollars. We did two or three other things which were probably worth, you know, tens of millions in terms of what you might call 10x moonshots. Okay? But you don't know what those are in advance. Okay? So it's, you know, in a perfect world, you know, you would be able to say, "Let's just concentrate on the three moonshots," and then we'll go home to the pub. But actually, it's probably 3% of what you do in marketing contributes 50% of the value. Okay? And certainly, I'd say that, you know, 20% of

What you do contributes 80% of the value. And it's also, again, Roger Martin, um, it's probabilistic, not deterministic. Overall, the odds in this casino are pretty good, but it's still a casino. And by the way, direct behavioral science improves the odds. That's all we do. That's all we do. That's all that's that's all we can do. Actually, we we do two things. We improve the odds, and we make people test things that they think are irrelevant, but which aren't. That, you know, in terms of the, you know, and so the promotion of testing, exploration, and the consideration of alternative approaches. But what we've never had the courage to do in finance is to say, "Look, guys, you're very good at adding up. I'd probably trust you to work out the surface area of a triangle." But the maths you're using to actually quantify what we're doing, including even ROI, which is the wrong measure for marketing investment, particularly anything that's actually under conditions of compounding growth.

Okay, so it's a dynamic, complex system under what you hope are to be growth conditions. That's not linear maths at all. Okay, and it's certainly not, uh, it's certainly not deterministic maths. So fundamentally, what we've done is we've never fought back and said, "Look, the way you're judging what we do is fundamentally fatuous." The way in which advertising agencies are paid by the hour is fundamentally, uh, leads to massive misdirection of effort because someone there looking at a spreadsheet thinks, "This is where we make money. This is the worst, this is the worst thing about economics. Ergo, this is where we add value." And the, what you might call, the executional phase of an advertising agency, or a media agency for that matter, the actual implementation is more time-consuming. Uh, maybe it shouldn't be, and maybe AI will change that ratio. We can all have a debate about that. Is more time-consuming and actually probably involves less expensive, uh, fungible people compared to the ideation phase, which probably relies on a small number of fairly rare people and, and a group of people who are going to become those people. Okay, that's where the, that's where most of the value is created, but it's not where the money is made. So you have this fundamental misunderstanding. I think, um, I think there was a terrible mistake in offshoring manufacturing because people thought the value was in design and the pro, and, and effectively, so this is the opposite case, and manufacturing is just implementation of our designs. Whereas actually, if you understand how it works, a huge number of innovative ideas emerge from the bottom up.

One thing that comes to mind about the, a third thing we can credit behavioral science with, that that would be instructive for our listeners when they're talking to the boardroom. Our listeners, Rory, are marketers. They're CMOs. They're people that are driving marketing innovation in their organizations, in their brands. In addition to the two you listed, we also are hopefully trying to uncover white space or blue sky areas to add the next level of value because if you only focus on what's currently, you're over-optimized on the past. So, correct. Fundamentally, you end up shrinking and you're completely non-resilient. That's right. So this is the whole explore-exploit trade-off, which I think is a fundamental rule of life, which is what proportion. Now, you'll must know this in media allocations. Did you ever follow the 70-20-10 media allocation model? Is this where you're talking about having 10% of, we don't know, the test? 10% wild card. 20% is, we think this will probably work, but we don't know yet. And 70% is, do what we know works. I would say a remarkable number of media planners suggest doing that, but it's always the 10% that gets, uh, cut. That's the first thing to go. Yes. Because of course, it's, it, what that is, is not, is not that the 10% doesn't pay. It's that the 10% doesn't reliably pay. Yes. Correct. Yeah.

So, we've created a business world where predictability is more important than profit, actually, where people would rather have a constant 3% than have a 50% chance of 30%. Whereas, I've heard you use a lovely analogy about the waggle dance. So, maybe marketers should learn more from bees. Yeah. Apologies to everybody who's watched me before, but it, it's annoying because like the Euroar story, people go, "Can you tell us that story?" And I go, "Oh God." And then I realized that if I don't tell the story, it's like going to see the Eagles and they don't play "Hotel California," and everybody goes, "Oh, that was shit." Right. Okay. Played on his new album. So I display material for my, um, but the waggle dance is this business where bees are 80%. It's a grotesque oversimplification of the bee world. It varies enormously depending on actually, uh, both the environment and the conditions in which they find themselves. Okay. Uh, so they will shift that ratio of explore-exploit quite dynamically and between bee species. And it also varies according to how close you are to the equator because the nature of plant life and pollen and its distribution is different in temperate versus equatorial climates. So without wanting to pretend that I'm a bee expert, I'm not. Um, uh, they, they were surprised at first because a certain number of bees ignored the waggle dance. Okay. And, uh, they thought that, why has 20 million years of bee evolution tolerated this level of inefficiency? And then they modeled it as a complex, dynamic system over time, not a snapshot of, not it didn't assume that the next five seconds is representative of the next five weeks. Okay. They modeled it over time and realized if you didn't have the random bees, the hive got trapped in a local maximum, starved to death. And three things it couldn't do without explore is one, um, adapt to changing envir, to a changing environment. Okay, so update your current map of the world with a new map of the world, heavily weighted towards pollen, nectar, and resin. Okay, possibly water. Do they collect water? I have no do. Okay, anyway. Um, okay, so first of all, you can't update your map of the world. So you can't adapt to changing circumstances. Secondly, you can't grow. Okay? Because your, the entire size of the hive is limited by your existing knowledge of of known pollen reserves. Thirdly, and pro, most importantly, you can't get lucky. And actually, if we look at our own lives, you married? Yes. Yeah. Okay. Basically, you know, how you met your wife, total. Okay. I was very lucky. No, if you had to justify, if you had to justify it to procurement, they'd say you didn't do an adequate kind of, you know, you should have done far more comparison. You didn't get two competing bids, right? You know, you know, but getting lucky. And actually, effectively, that point that I think it was Blair Enser, it might have been David Baker made, which is that fame increases your chance of getting. Now, my daughters understood this. You got teenage daughters, or he has a teenage daughter. I have young kids. Do you have to [ __ ] pick her up on Saturday night 'cause she's going to a [ __ ] party? Okay. So, you want to, I'm, I'm 59, you know. I was at the time, I was like, what, what was, I was in my 40s. Okay. Basically, my idea of a good Saturday night is you sit down in front of YouTube Premium and watch a two-hour documentary on like steam locomotives. Okay. But your daughter would always be at this bloody party, and you had to go and pick her up, so you couldn't drink. Okay. And then I realized what they were doing. Okay. Which is, it's entirely opportunity. FOMO is opportunity maximization. Okay. They don't have a party strategy, right? They don't do a cost-benefit analysis for every party they attend. They do a sort of vague assessment. Okay. What they know is that if you don't go to any parties, you'll never get lucky. Now, when I say get lucky, it could mean sexually, romantically, it could mean getting invited to a better party, could mean getting invited on holiday. It could be meeting somebody whose dad works in a field where you want to work yourself, and so you can milk them for information about where to apply. Okay? It could be anything, right? But if you stay at home, you don't know. When you go to a party, my, my plan from this party is to extract this particular value from it. You simply know that if you stay at home, none of that stuff's going to happen. And so the compulsive networking among teenagers is actually probably a rational evolutionary approach in terms of forging allegiances, forging alliances, sharing information. It's fundamentally that absolutely pathological social ability and extraversion that they have. Yeah. And paradoxically, if they were too task-focused, they'd end up probably having less successful results. It's like that idea of John K and obliquity, that the companies that are solely resolutely focused on share value then end up having problems in the long term. It's the ones who have that general broader aim that end money as a byproduct. Yes. Yes. I think you, not money, I mean, the greater thing is cost reduction is not a strategy. That's the first point. And yet probably what 50% of companies broadly look to operational efficiencies or operational efficiencies empowered by it. Okay, not all of those will deliver the promise. That's just as probabilistic if you're being honest. It looks deterministic, but there are a hell of a lot of IT innovations that have been brought in that haven't delivered. But maybe this is the point for listeners to, to, we can use biomimicry and we can learn from bees. We can learn from teenagers. Do you want the best bit of barbe? So they eventually just mastered some technology where you could spray like a miniature QR code on an ant. So you could actually look at individual ant behavior. And their discovery, at least in the particular colonies they studied, is that 40% of ants do bugger all, right? They just wander around. And the, the theory there is they're in reserve. Okay, which is if there's a disaster, okay, uh, or if the, the high, the, um, nest gets attacked, these people are effectively a reserve army. And they tested that hypothesis by picking out useful, hardworking ants, removing them from the nest. And the lazy ants basically stepped up into the plate. And so, effect, you've got to remember that nature is optimized not just for short-term efficiency, but for long-term resilience and survival. Modern businesses basically fetishize the the short-term optimization at the expense of a whole load of things. In particular, of course, it's much easier to quantify a cost than an opportunity cost. That's right. So, finance basically, um, uh, never, you'll never get sacked as a finance person for killing something because the counterfactual doesn't exist. And I think this is what we want to encourage, uh, our marketers to think about. How can we bring the other side of the rational into the discussions about how do we grow brands and how do we grow businesses? Because otherwise, we're not looking at the opportunity. And, and also, we shouldn't predefine the objective too strictly because we'll undervalue the, the value of fame. Okay? If I said that I want to get famous so I can do X. Okay? Right? That's actually a misrepresentation of, of, uh, what you're trying to do because the whole point of fame is it brings you unexpected opportunities that you yourself were unaware of until people effectively brought them to you. Okay. Now, what I think happens if you look at the value of a brand, what we'll tend to do is we'll value, we'll evaluate brands on things like short-term sales, which are easy to measure. Um, if, if, if you're a business and you've got a great brand, the best definition of this, you know, the guy, I think he's called Michael Johnson, and he wrote a book called Blindsight, and he's written another book called, Oh, Matt Johnson. Matt Johnson. Sorry. Sorry. Yes. Yeah. Yeah. Matt Johnson. He's brilliant. He wrote Blindsight. And he also wrote a book called The Business of Brands, I think it's called. And his great phrase is, "Having a great brand means you get to play the game of capitalism on easy mode." Okay. And I would argue, by the way, that behavioral science is cheat codes if you want to use the same analogy. Okay. Behavioral science is a series of cheat codes. And what he means by that is that loads of things fundamentally become lubricated through fame and familiarity. Okay? When your chief executive rings someone, they'll call you back. Okay? You know, if you're the chief executive of a famous company, you know, I mean, 99% of the people who you want to talk to will return your call. Okay? Um, people work for you for less money, and they stay for longer, and they apply for you, and people come and apply for jobs of whose existence you are otherwise completely unaware. Okay, all of these things, all of these things fundamentally become, you know, five times easier, uh, because fame and familiarity make what was once hard work something that happens automatically. And yet, when we only look for the value of that in the thing we, it's a bit like if you go to, what's that joke about that person who wants to, who goes to a party because they want to, they want to do some fairly trivial thing, and in the end, something lucky happens, they end up winning the lottery, but they regard the day as a failure because they didn't achieve the thing they wanted to achieve. That, that's a bit of what's trying to happen if we overly define success in advance. Yeah. M.

But it also has implications. I think that point of things becoming easier with fame. It shows you how hard it is to predict predict success because you could have a number of people who are all very, very similar in ability. One of them has a random freakish bit of good luck. They edge ahead of the others, and then once they ed. I read a lot of books about economics. If I hadn't got ill sometime in 199 something, no one would know who the [ __ ] I was. I mean, and genuinely, I mean, you know, these extraordinarily freakish things. There's a great book by Brian Class called Fluke, which is all about how, you know, I mean, effectively, the First World War happened because a chauffeur took a wrong turn into a one-way street. Okay. I don't know this. So this guy was trying to kill the Archduke. Yes. Okay. But he failed, and he got pissed, got pissed off because he couldn't kill the Arch. So he goes and sits outside a cafe and orders a coffee instead. And then the chauffeur of the Archduke's car makes a wrong turn and gets stuck in front of the cafe. Worse still, I think the car was incredibly difficult to get into reverse gear. Okay. It's a bit like that joke, which is the terrible thing about the Kennedy family is their taste in cars because the whole of American history would have been different if Jack had had a sedan and Teddy had had a convertible. Right. Yeah. Okay. I'm obligated not to laugh. You're obligated not to laugh. Okay. It is an American comedian who tells that joke. So I, I got to. Okay. Right. But actually, really, really trivial events have extraordinary knock-on effects. Okay. And actually, simply in Nim's great thing, I, I've learned half of what I've learned from Nim. Okay. Let's, let's give the guy, you know, due credit, which is effectively using really quite good maths to look at things differently. And there's the difference between an option and an obligation. Okay. It's the difference being invited to a dinner party and being invited to a drinks party. Drinks party is actually [ __ ] compared to dinner parties with one exception, which is if you don't feel like it, if you don't turn up at a drinks party, no one goes, "Where the hell were you?" Okay. So, I, my wife gets really furious about this because I go, "Let's get, let's leave the car here and I'll leave my car here because now we've got more optionality." Okay. I'm getting cheese. Can't you just make a decision? But, um, but optimizing for optionality rather than optimality is just requires a different approach. And this is why I think the finance is optimizing for certainty and predictability. And actually, the way in which you get lucky. I mean, you know, I believe in being, to be honest, I believe in, you know, 30% of your life should be driven by expediency, to be absolutely honest, you know, just, oh, hello, you know, what's that? What's so fascinating? You talk to entrepreneurs about this. What's very interesting, okay? You talk to someone in a big business about behavioral science, and they go, "I don't like this because it messes with my [ __ ] head. I've got a nice, clear, deterministic, mechanistic view of my world, and I don't want you and your right-brain stuff coming in and [ __ ] it all up." Okay. You talk to an entrepreneur, and you say, "Isn't it weird that people do this instead of that?" And they go, "Arbitrage opportunity. I can make a business out of that." And that's the fundamental difference in mindset between, "I don't like conflicting information," and "Hey, conflicting information." Yeah. And I think that maybe that happens because there's completely different motivations in a big bureaucracy. It's about maintaining the respect. People for the entrepreneur who owns a business, well, it's all about maximizing revenue, and those conflicting stories are great opportunities in their eyes. And I, and they are actually going, effectively, what an entrepreneur wants to know is not how can I be right, just like everybody else. It's what are my competitors wrong about? That's what really excites them. If you can point out something where you go, "Everybody assumes this," you know, the Uber map, you know, everybody assumes people want cabs to turn up quickly. If you have a nice little map, they don't really mind that much because they can see where the cab is. Okay? You know, that's the kind of thing where effectively they go, "Ooh, that's interesting." Everybody is directing effort and attention and investment in the wrong direction. Kaching! Unexplored space, value creation opportunity. Yeah. Meaning that it could take the same amount of time as a yellow cab, or we call them black cabs in London, a black cab as an Uber, but because I have a map that shows the Uber making its way towards me, that's the unexplored space that behavioral science. I think there's also a mindset question because we talked about the divide between an entrepreneurial business and a bureaucratic business. But we've got the worst thing at the moment, which is even in the US, less so in the US than in Europe, but a basically a bureaucratic large business which doesn't really believe in growth or opportunity because they're convinced they're operating in a kind of stagnant market. And markets are only stagnant because people behave as if they were. And so you, in the '80s, in fairness, if you worked in our business in the 1980s, basically everybody believed they were going to take over the world. And that false optimism, which often was completely misplaced if we're being absolutely rigorous about it, nonetheless, it created a mindset where people were going, "Oh, you never know. Maybe, maybe we could." Okay. Whereas now, everything is batten down the hatches and act as though every, everything is a potential threat, and that the only possible way you can survive is by the optimization of your established processes. Yeah, it's tragic. Yes. I thought you were going to go also. It's also really [ __ ] boring as well, working in one of those things. I always remember some Scandinavians going, "Yeah, well, there are two ways." Sorry. Okay. I, I'll get the, uh, you know, I'll get the DEI people to interview for being unkind to Scandinavians. But they said, "There are two ways to run a mobile phone company. You do the whole thing on price, and you compete on price." Said, "We could do that, but we realized that working for those companies is really [ __ ]. So we went and did something else." Perfectly honest description of, you know, there is, by the way, a cost leadership strategy in most categories. You know, Ryanair, etc. It, it's a perfectly valid. And Ryanair is a bit complicated because it flies routes that nobody else flies, and as you said, it gets subsidies from the cities which it serves, which the consumer isn't even aware of. So there's a whole lot of stuff going on there. Um, but nonetheless, there is, you know, that's a perfectly, there's always a group of people who will buy on price in a market. The only problem is, okay, now I've got a little theory here, right? Which is the standard behavioral economics narrative is that econs don't exist. And that in any evolutionary environment, anybody who behaved in a way that was purely economically self-interested and rational wouldn't, well, you certainly wouldn't have any friends. Okay? Right? And so the idea is that econs only populate economic models. I would argue slightly differently. I would say in every category, okay, there are people who are de facto econs. Right? Here's the thing. You don't want them as your customers. Who would you want? Okay. Do you want a Costco's customers, or do you want the customers of people who go and go, "Oh, look, Cheese Whiz is on special." Right? Now, my view is that there are econs in categories, and that you can actually deceive yourself because by attracting econs, you think you're doing really, really well, but actually they're totally unloyal. Yes. They, you know, they're probably not very trustworthy, but they, they have no value because they have no capacity to reciprocate. They have no loyalty. They have no, they won't give you the benefit of the doubt. You know, they're just really, really painful people to serve because they're only, uh, motivated by economic exchange and transaction. It's similar to a point we were talking about before the show started, which is if marketers only look at the average, only look at at the at any demographic or any or any population as down to one set of stats. It misses the point. It's, it's an adjacent concept. I talked to a coach driver once. He said he used to do holiday tours, okay? And he said the worst job you have is the wor, the last week of the season, right? Because there are people who basically can't afford a holiday at all, but they feel they need a holiday, so they buy the cheapest holiday they can. He said, "You drove them to Tinton Abbey." I come from MMA show, okay? You drove them to Tinton Abbey, and they all got off the coach, and half of them got back on again three minutes later, and they go, "This is back in the '70s." Okay, it's 50p to go in, right? And they'd steal all the toast from the hotels in the morning to make sandwiches for lunchtime. Now, I'm not, you know, okay, they haven't got much money. I'm not being mean about them, but he just said the whole experience because they had no discretionary money. Okay. No capacity to kind of, he said, he said the, the, the, the peak time tourists, you know, who actually probably were actually no no richer than the off-peak thing. They were just slightly more extravagant. He said they were delightful. You know, he said the people who were on the edge where basically everything was a kind of cash flow decision. One big reason for redistribution of wealth. By the way, I've never understood this why Unilever and P&G never argue for a more redistributive tax system because what you want if you're a consumer goods business is a lot of people with quite a bit of money, not a few people with too much money, which is what we have, by the way. I mean, I'm politically right of center, but this question of both the property market and the completely unequal distribution of wealth and the creation of an inheritocracy strikes me as a really fundamental problem, and nobody's doing anything about it. And your point is, it's bad for commercial, bad for business. Bad for business. Bad for business. You don't, you don't want to live in the worst place you could live is where a place where you're really rich and everybody else is really poor. I always thought that about Downton Abbey, right? Okay. So, I'm watching Downton Abbey, and I'm a consu, I'm not really a consu, I'm a consumerist. Okay. Actually, somebody met a really eminent historian a few nights ago who said all this stuff about the Industrial Revolution because we've got the kind of mills and the buildings, it's all overplayed. The really great thing the Brits did was invent consumer capitalism and marketing for mass-produced products. In other words, we make things abundantly, and we go and sell them to people who didn't know they needed them. That was the real economic triumph, not the sort of steam engine stuff. Now, obviously, they're interconnected. I'm not suggesting you we could have somehow created mass consumerism out of nowhere, but he always thinks that was the great British thing. Actually, Niall Ferguson says something similar. Consumerism has actually been a pretty good thing. Okay. And when I watched Downton Abbey, I always thought if you just doubled the salaries of your servants, right, a decent cafe, or if you're really lucky, an Indian restaurant would open in your nearby town, okay? And you wouldn't have to eat food cooked by the same woman every single [ __ ] day of the week. Cuz they had Mrs. Whatever her name was, in the kitchen, didn't they, in Downton, right? Who was the cook, okay? And they were hugely rich people, okay? But all the food they ate was cooked by this one person. Okay. Now, you have best will in the world, right? If you just double the salaries of your servants, you would have got a bit of a nightclub in the Yorkshire. You know, you would have had a bit of, you would have had a pub, you know, you might have had an Indian restaurant opening, and you could have got a bit of variety. So actually, inequality of wealth isn't even very good for the very wealthy because you get surrounded by utterly pointless goods and utterly, utterly misdirected forms of expenditure. Yeah.

Well, I think the, the other one that's always struck me in terms of that argument for redistribution is when you see curves of diminishing response. So if you look at any studies by Kahneman and the like, where they try and look at life satisfaction and happiness, yes, it goes up consistently with wealth, but it is on a log scale. It, it bends very quickly. So you can do, you can have a magic by taking a pound off a millionaire and giving it to someone on £10,000, and that pound, so that's everything is a bit like heroin, that actually you need more and more incremental wealth to to retain the same. There was a guy who became a millionaire who remembered thinking that when he was about 15, he bought some fancy silk dressing gown, which he'd saved up with. I know, strange thing for a teenager to buy, but he'd saved up for it for years, and he remembered something like buying a new Rolls-Royce and realizing it didn't give him the same thrill as the dressing gown had given him. Okay. Yeah. So, I think the, it's also different, of course, between country wealth comparisons are totally different to within-country wealth comparisons because we do fundamentally set our expectations to that sort of Lord Leard stuff. Yes. I mean, no one walks into a, a room and then gets excited because the electricity comes on. But if you went back 100 years, it would have been a technical marvel. Again, we have been, my kids find aspects of the internet totally boring, you see. And I find that rather depressing because I must have told the story. So I, I was on this, I was on the tarmac at Sydney airport waiting to take off to fly home. And I just laughed. And I, and my daughter said, "What the hell's so funny, Dan?" I said, "Well, just for 30 seconds about that, I turned on the central heating at home." Okay. Now, bear in mind I was born in 1965. So the idea of being able to make a boiler click into life 25,000 miles away was just childishly enjoyable. My daughter goes, "Dad, you're such an idiot." And I suddenly realized, of course, she's grown up in a world where that's infrastructure. There's a Douglas Adams thing, isn't there, about technology, which is the technology that's invented before you're born or up until the age of 10, 15 is just infrastructure. Okay? Then you have the technology that's invented between your age of 15 and about 40, which is absolutely brilliant. It's like magic. It's fantastic. And then after you're 40, it's all absolutely stupid idea. Why would anybody want to do that? And by the way, there is a lot of, one of the things that I think there's a lot of now is what you might call defensive opinion forming, which is, I don't know if you noticed it when you're a kid, everybody admitted they wanted to own an Aston Martin, but they just acknowledged they couldn't afford one. Okay. And now you get a load of young people in cities who go, "I don't have an Aston Martin, so I'm going to pretend I don't like cars." And there is a bit more of that. Do you think there's a bit more of that going on? You know, what you might call, you form your opinions to suit your circumstances. Okay. Well, I think that certainly happens, but whether it's changed over time, I guess that's the only one that's harder to to quantify. No, maybe people, maybe actually people did it in a totally different way. And people have always done that. It's called. There are two things. The opposite of sour grapes is sweet lemons. Have you heard of that? No, no, I don't know that. So sour grapes is, here's something I can't have, I'll pretend I never wanted it anyway because the grapes were probably Aesop. And I don't think sweet lemons is Aesop. I think that's the corresponding, and that's, um, uh, something bad has happened to me, but I'm going to pretend it was, you know, like, my, my six years I spent in Leavenworth prison were a really formative experience, and I wouldn't be the man because you, you don't want to admit I wasted five years of my life in the chokey. Okay. So you actually say, in the end, it turned out to be really decisive. Okay. So you actually take a bad thing and you reframe it as a positive, or you take, so a bad thing you had to have, you reframe as a positive, and a good thing you couldn't have, you reframe in negative terms. One of those things that we can see in other people but never see in ourselves. No, no, no, absolutely right. Absolutely true. And so, I mean, actually, Aesop, I'm so glad you mentioned him because he was the first behavioral scientist. It's what is it? Seventh, sixth century BC, 7th century BC. I mean, [ __ ] two and a half thousand years ago. Okay. And actually, if you read the whole of Aesop's fables, the. And actually Jesus, I know you're on the other side. That's okay. But we can learn. No, I'm just going to the Bible, bit like The Godfather. You know, the sequel's actually better than the original. Now, we have a, we have a different podcast to do. We got a different podcast. Okay. I, Okay. Yeah. But, um, but the interesting thing there is that, um, you know, Jesus's parables, you know, loss aversion in the parable of the lost sheep. And people were obviously thousands and thousands of years ago, were basically wrestling with what you might call the difference between perception, emotion, and behavior, and objective reality in some sense. Um, and, and doing it in the case of Aesop, really, really well. And I, I, I actually went and dug out Aesop, and there are a whole load of parables there which are, um, really, really interesting nudge experiments. There's the guy who leaves his, the, the farm to his children and tells them that there's treasure buried on the land. So they all dig up the land looking for the treasure, and his actual wording is, you know, "You will find treasure." What he's done is he's encouraged them to plow the farm. Yeah. Okay. So by effectively pretending there's, now that, that's a fail-worthy nudge, isn't it? Okay. So they do get the treasure, but the treasure they get is greater crop productivity rather than, Yeah. Because those fables, the, the Bible, and many others are observations of humanity, are observations of behavior that then can bring to, and in the case of both parables and Aesop's fables, made beautifully illustrated anecdotally. Yes, there's nothing wrong, nothing wrong with anecdotal information. I mean, one of the things I'd argue about the use of data is if you're using aggregate data, you're probably using it for just self-justification. And if you're looking for anomalies, you're probably using it for illumination. Okay? So, in general, when people use big chunky data and they aggregate it, it's usually self-defense. Okay? When people go, "Let's look for a Simpson's paradox," or "Let's look for some unusual outliers in the data," that's when you're actually doing the right job. And I always make this point that cops are better than scientists, okay, in their method because they accept the fact there's an investigative phase, and then there's an evidential phase. And in the investigative phase, you don't demand evidential value, right? You, you, you'll go to the next-door neighbors of someone who's been murdered and go, "Did you notice anything unusual last night?" You're literally you're on the lookout for anything you can use that might help you direct your attention. So I'll, I'll Americanize this for you. I usually use Peter Sutcliffe from the Yorkshire Ripper, but they caught Son of Sam. Yes. You know that. Okay. Um, you're not from Long Island, do you know? No, but I'm from near there. Yes, I know it. So they caught him because someone happened to mention they'd seen a traffic warden, and someone thought, "What if he got a parking ticket? It's an outside chance, but let's just go and look. Let's find out who got a parking ticket on that evening because no one was expecting a traffic warden that late in the evening, I think, 'cause it was definitely a kind of, you know, nighttime operator." Okay. And of course, these two cops are this totally routine thing. We got to check up on this guy who got a parking ticket. Maybe he saw something. And they actually see his car parked outside the flat, and there are a load of sort of guns visible in the back footwell and a load of loony messages. And I think at that point they go, "I think we better call for backup." But that's how actually scientific investigation happens. But what we do is we publish the evidential phase in a paper. But all, there's a podcast called Night Science. Have you ever come across it? And it's by a bunch of scientists who actually argue that the more important bit of science, the penicillin noticing the thing. Yes. Is actually the more important part of science. But instead of optimizing for observation, we're optimizing for evidence. Yeah.

That reminds me of, um, Paul Feldwick, who's written a series of brilliant, brilliant books, Anatomy of Humbug, probably being the best one. He has an issue with, uh, case studies because he says with advertising case studies, what happens is there is this rewriting of the actual experience. So it looks very logical and methodical. Feldwick, who went to my school, by the way. Uh, I'll just plug. Yeah. Yeah. We, we never overlapped quite, but weirdly, we both read the same school library copy of The Hidden Persuaders. Okay. And both of us, so he, Feldwick, back in the, it would have been '73 or something, he lived in Abergavenny. I was in Raglan. Uh, he, um, he took The Hidden Persuaders out of the school library and read it. I then, 1979, '80, read the same copy. Okay. And admittedly, both of us had the same reaction, which is rather than going, "Gosh, this is absolutely scandalous, they must put a stop to this," we read it and thought, "This sounds [ __ ] brilliant." Okay. So both of us reaction reading. No logo. No logo. You have the same reaction. Well, this is great. Right. And actually, I think Robert Cialdini set out intending to effectively aid regulators to say, "These are the tricks." And, and, and something similar happened actually with Thaler and Sunstein to some extent. I think they hoped to inform government regulation, and they really, they found their most enthusiastic adepts amongst car salesmen and people like us. Yeah. Um, but, um, but Feldwick actually writes an accurate story of how the Barclaycard, now the Barclaycard campaign, which features Rowan Atkinson as a secret, as a bumbling secret agent with his trusty sidekick called Both. Okay. This was an ad campaign which gave rise to Johnny English. So actually, some of the royalties for Johnny English should really have been paid to whoever was in the advertising agency, or indeed to Barclay, who probably owned the copyright. Okay. So, it, it actually went into a sort of multi-million dollar film franchise. Eventually, it started as an ad campaign. Um, also true of that case where a football manager, takes American football manager, that started as an ad campaign and was converted into an Emmy-winning, and the poor copywriters behind that got no credit for it. Um, interestingly, okay, so really good copywriters are actually looking for something that has the potential to be a property. Art directors likewise. Okay. And so occasionally you get these things. But what was so fascinating is the whole story was basically it was a series of lucky accidents where at one point they were trying to write funny scripts. And someone in a research group said, "Look, um, um, you're trying to be funny. Look, sometimes you succeed, sometimes you fail. What I do, go and get Rowan Atkinson in because he's funny in everything." And they got Rowan Atkinson. And with Rowan Atkinson came John Lloyd, who I know quite well. Brilliant, brilliant, um, uh, you know, producer and director and fantastic comedy writer. Okay. And once they got that, they had got the ingredients of the whole thing. But the actual thing was a whole series of serendipitous kind of movements, including a hell of a lot of kind of iteration. Okay, we'll go and start, you know, this isn't working in research. We'll go back and start again. Now, the great thing with BMP is they conducted their own research. So they could actually on the fly, rather than just going doing some research, spending a load of money on research and coming back going, "It doesn't work." Very early on, if they found something wasn't working. The Honey Monster, you know, okay. So this enormous. Tell them about the Honey Mummy creature. Okay. When it was originally conceived by the creative team, it was a small, mischievous thing, and the mums hated it because they saw it as a badly behaved type. Now, most research people would go back and say, not all of them. I'm not, I'm not besmirching the entire sector. Go. No, it's not really working. The ch, the mums don't like the fact that the Honey Monster misbehaves. And someone in doing a research, a planner probably at BMP, said, "What if we made the Honey Monster massive?" So it's a bumbling adult. Okay. Um, rather than being a small, mischievous creature. And when they made the Honey Monster massive, every, "Oh, wonderful." Right. And so literally these little executional tweaks, these ad tweaks sometimes totally change the emotional response to an ad and therefore mean the difference. I mean, actually, famously, "Solutions for a Small Planet" for IBM, great endline that Ogilvy gave them, uh, back in, I suppose, the late '90s. Okay. That came out of a research group, and it was actually voiced as a criticism. Okay. So someone said, "All you people are all you're doing is coming up with, okay, solutions for a small planet." Okay. And someone sitting in the went, "Okay." And that's fine, by the way. I mean, actually, listening to things as a creative person, it's not an act of origination. It's an act of observation. A lot of creativity is just an act of inspired observation and nothing more, nothing less. On on that point, I think it's fascinating how many times, um, band names are criticisms. So, uh, Led Zeppelin, someone said "balloon lead," and then Manic Street Preachers, it was, uh, a drunk walked past them when they were busking and shouted out, "You know, you're just Manic Street Preachers," and they took it. The Impressionists, the art group, was a, was a criticism. Daft Punk was a critic. And of course, there's only insult, of course, in things like, well, Welsh rugby fans take inflatable sheep to the matches because you're accused of sheep shagging. Uh, you also get it, you know. So, I mean, funny enough, Tory comes out of that. You, you own the insult. Yeah. Yeah. Which is actually cheeseheads would be your translating for it. It was an insult to Wisconsinites. Okay. But if you go to a Milwaukee Brewers game, people wear enormous wedges of cheese on their heads and take it as a badge of pride. That's right. Um, and Welsh people will do that actually, which is, it's too tedious to deny the fact that you have sex with sheep, so you just pretend it's a. Well, obviously. So, if you wanted to guide marketers on how to best use research, we've talked about observation being a key part, but how else should we think about using research to get to the best outcomes for brands? Research is great because it's a source of information, and I'm in favor of any source of inspiration that you can mine for inspiration. The only thing is it's the old joke about, which isn't David Ogilvy, it's always credited to him. You use research like a drunk uses a lamp post for support rather than illumination. And this is the whole question of modern business, which is to what extent is effort being directed defensively towards self-justification versus being directed offensively in the quest for opportunity and, um, and, and progress and growth. And I would argue that that it's very, very easy in modern business to disguise as covering as rigor. Actually, all this stuff you're doing isn't designed to make a better decision or even a different decision. Okay? It's simply there so that in the event that things go wrong, you've got your workings out. Okay? And actually, I spoke to Ginger Rooms about this and said, if we didn't practice defensive decision-making in organizations, um, what would be the principal effect? He said, "Basically, you could all go home Wednesday afternoon, you know, spend the rest of the week in the pub." Um, now, here's another interesting thing, which is that I think this is actually mathematically important. Okay. The part of the point of a large organization is that under multiplicative growth dynamics, if you share risk and reward, you grow faster than if you apportion risk and reward compartmentally. Okay. If anybody wants to see the maths around this, there's a thing called the Farmer's Fable.org, which is an animation on the web, might be called farmersfable.org or The Farmer's Fable, which shows the whole principle that under ergot, it's about er, it's about non-erotic conditions. Okay. Um, I, I, the second thing is a story which actually comes from Richard Thaler, which I think is hugely important. Thaler, I think, I think it's Thaler talking to the board of a large American company, possibly GE, we're not quite sure, it's never said, okay. And he goes around the boardroom table to the heads of the eight largest GE divisions and said, "I can offer you a decision which has a 50% chance of success where your profits and, and, and, and revenue will go up by 50%. But it also comes with a 30% chance of failure where your profits and revenue will fall by 30%. You're not going to make a loss. Okay, your profits are going to fall. Okay, how many of you would take those odds?" And all but two of the eight said, "No, I wouldn't take those odds." Two of them said they wouldn't. He said, "Well, you're all good enough mathematicians to realize that this is an uneven bet with, you know, a net upside. Why wouldn't you take the odds?" They go, "Because 30% of the time I'd lose my job. I'd only have to take those odds three years in a row, and I'm bound to lose my job because one year in three it's probably not going to happen, right?" And then this is the fascinating bit. The chief executive is sitting at the end of the room. Now, he, he is responsible for the aggregate of all their decisions. Okay? And he goes, "But I want all of you to take those odds because, net net, between the eight of you, we're almost certain to end up on up." Now, what seems to be happening is the cult of accountability, where every single component of a business has to justify itself on its own terms. UK seems to be creating an absolute cult of risk aversion because you want people individually within an organization to be slightly bolder on the assumption that the whole point about risk sharing and risk pooling in an organization allows you to take decisions which no individual would take, but which make perfect sense to the collective. Okay. Right. As long as they're dispersed. Well, that's why people go hunting. Okay. In in hunter-gatherer societies, you have the base level which is taken care of by gathering fruits and berries. And the point about hunting.

Is it has a low probability of success, but massive gains in the event of success. Okay? And you can't be a lone hunter. You'd starve to death. Okay?

But if you're a group of people, particularly when some of the group are involved in gathering rather than hunting, the hunting makes absolute sense. And so hunter-gatherer groups will grow faster than gatherer groups. And yet what we've done is we've created a basically a gatherer culture, which is, "I spent six hours today and look at all the berries." Right? Okay. So that is that is a classic case of what you call the barbell. You know, you basically ensure survival by doing the sensible things. You know, that's exploit. You know, don't, don't, don't stop doing sensible things. Okay? But at the same time, you, you, you, you go to the other extreme and you look for things that have a, you know, a survivable downside. Side survival, worst-case scenario, which I suppose hunting just about comes into, but potentially limitless upside. Okay? And actually, companies aren't doing that anymore. They're just gathering. But that, that, I think that's a critique we'd all agree with. But how do you encourage companies to change that behavior?

Someone left Google and they went into some, did some research, and their whole PhD, they left Google to do a PhD on why big companies no longer innovate once they reach a certain size. And she met Blair Ends, who said, "I've got a single word explanation for this, which is inefficiency." Which is, "The quest for efficiency destroys the ability to innovate." And she said, "I've also got a single word explanation, which is slack." You said, "What happens in a large organization is everybody becomes so defined and optimized for the part, not for the whole." There's a great phrase in which is, "To optimize the whole, you have to sub-optimize the parts." It's W. Edwards Deming, I think his name is. Okay.

And it's known in complex systems that, you know, the reason we have a central nervous system is to stop individual components running away with their own particular metric. Okay? You know, because all, all we'd be is an enormous pair of testicles or something if you didn't have that kind of command and control mechanism. Okay. And so consequently, she said, "When you lose slack, uh, nothing lucky happens." One thing that stops happening. Okay?

If I ran my own business, I'd hire people on the basis of their talent and find a job for them next. Okay? Large companies have a role that's vacant and they hire for the role. Totally the wrong way to hire. Okay? Now, who was the football manager who did that? Was it an American football manager? There was a guy who, probably Vince Lombardi. It always is Vince. Just said, "Hire the best talent. Don't worry about all this running back versus this stuff." I'm not a good guess. You know, as, as Vince Lombardi said, "When are you looking for a good pitcher?" Okay. Okay. Okay. Probably as Vince Lombardi, and he did hire the best talent. You know, you hire the best talent, you find the, you know, you find the role for them later. And actually, so everything becomes effectively a quantum and everything gets siloed into individual things which are optimized in isolation.

Now, the really interesting thing about innovation is if you look at two really great innovations that big companies have managed to succeed. The IBM PC division, Watson, basically placed it a whole sea board away from IBM headquarters, down in Boca Raton, Florida, because he said, "If you're anywhere near to HQ, we'll kill it." Okay? And Nespresso only survived partly. They were actually in a separate office in Lausanne, not in Vervey. It's not that far away, but it's not in the same building. And actually, the guy was involved in a massive internal struggle. I think Nespresso is the Swiss Apple. I think it's a magnificent, magnificent creation of a whole system of things. I know you prefer your Keurig K-cups. Espresso is on the rise. It's on the Okay. Right. But, um, but the other thing is that they had a huge row about whether it was branded Nest Cafe or not. Okay. Which is predominantly an instant coffee brand, which would prevent the premiumization that the guy thought was necessary. But they also survived because they lied about their figures for two years. They basically just, basic, brilliant in my opinion. And I might start doing that actually with my timesheets. Just, just [ __ ] lie.

Uh, this past Saturday from when we're recording was Berkshire Hathaway made the announcement that Warren Buffett is no longer going to be, uh, the chairman. Uh, he's stepping down as chairman. And interestingly, the Wall Street Journal wrote, as you would expect them, dozens of articles about Warren Buffett. But what they said, the reason there will not be another Warren Buffett is because the game that current private equity and investment banks play and not the game that he created when he started when he took over Berkshire Hathaway and grew it to what it was. And, and, and what we're talking about, another angle of what we're talking about is where do you get the biggest reward? Because corporations get the biggest reward through, through quarterly reports, quarterly profit, and sustainable, plannable profit. You could argue that private equity or venture capital in some cases are actually playing the probabilistic game. They're accept the fact that this is fat-tailed. Yeah. Okay. And they're looking for where they're looking for basically 1% you know, 5% of their investments cover, you know, basically all of the losses, 200% all of the other losses. So they're at least, at least thinking in that way as opposed to corporate, uh, culture. He was an investor in David Ogilvy. He meant David Ogilvy. There's a letter from Warren Buffett which includes a check for his investment in the early Ogilvy & Mather, by the way. I did not know that. No, I didn't. Somebody, somebody who's a real sort of, uh, you know, Buffett nerd sent it to me. That's very cool.

And so what we want to ask in corporations or in all brands for people that are listening is, what are the incentives that we're setting up and how do we define success? The large arc of our conversation is defining success by finding the next opportunity, not only optimizing efficiency, but looking for the, the next. I mean, you know, you got to ask, do you think Apple will come up with another innovation? Or do you, do you think that when the CFO takes over from the CEO? This is the whole thing. You have someone from a very, very deterministic mindset taking over a job that requires a very probabilistic mindset. I'm nicking this from Roger Martin. What is interesting, by the way, is what's interesting about this, and I feel sometimes I'm totally straying out of my tram lines by talking about wider business questions. But I think the problems we have in marketing are actually a microcosm example of wider problems in business, which is the whole question of accountability versus ultimate value creation. That's right. And so I think that marketing is merely a pinch point where this problem has become particularly visible. And, and it's a little easy to blame CFO versus CMO when the bigger issue is deterministic or probabilistic.

The only thing is, are investors actually more intelligent than the people who are presenting to them give them credit for? Because you can tell a story to an investor which is, "We're basically going to do this thing because we believe it will pay in the long term." Investors, and you know, many of them are running pension funds or something. It's not a, you know, okay, there's trading algorithms that are holding a stock for 16 seconds. And there is a problem that in the 1950s, the vast majority of American stock was held by individuals, and now, and it's now it's held by institutions. Therefore, the need to justify your existence repeatedly, almost certainly leads to overtrading and, and short-term time horizons. Yeah.

Um, I mean, the book to read on that is John Kay's, "The Corporation in the 21st Century," which is really interesting. But he argues that actually the shareholder value movement isn't actually even true. Okay? I mean, other people have argued that it's deleterious to the practice of good long-term business, and particularly because everybody can always game the system to maximize, uh, the rewards of the senior management by, you know, share buybacks or whatever [ __ ] you choose to be careful here, whatever [ __ ] you choose to engage in. Okay. Um, when you haven't got a better idea. But he, what's interesting about Kay's book is he goes, "The whole idea that this is fiduciary responsibility and that it's your obligation, uh, uh, uh, that the principal obligation of an of an organization is to its stockholders isn't even legally true. It's just a Milton Friedman convenience."

Now, interestingly, um, what this has led to is literally boards of directors where there isn't a marketing person on the board and there isn't an innovation person on the board. So Peter Drucker's two sources of value, marketing and innovation, and your customers as a group. I would also argue that HR does not represent the employees. It's a total fiction. Okay. So your customers and your employees are totally unrepresented on the typical board of directors. Pretty weird, isn't it? I mean, when you think about it, that you have this body of opinion discussing strategy for an organization, and the people who are actually at the co, at the shelf, the p, the the place where people give you money are not represented in that room. It's quite a weird state of affairs. I mean, what I'm saying is it's emblematic of a, you know, I worry about the advertising industry because I go, "Look, we haven't got any offices in Austin. We haven't got any offices in [ __ ] San Francisco. Everything's in New York or Chicago, which is great if we're in the 19th century, but where's the, you know, where's the Texan office? Where's the Dallas office?" And that just seems the point I'm making is it just seems emblematic of something which is a problem. Yeah.

Well, you've got some of the most prominent like intellectuals in, uh, business like Scott Galloway talking about this myth, well, I wouldn't say it's a myth, but of the, of the death of, of, of branding. There's an increasing argument that marketing is a nice to have, not an essential. You could argue, um, I mean, okay, let's take a small microcosm of that, which is the death of jingles, right? I don't think jingles ever stopped working. Okay? I don't think long copy press ads ever stopped working. I don't think physical direct mail ever stopped working. Okay? I don't think the BMP press ad of the 1970s, which was a really goddamn funny, brilliant concept, followed by 200 years of 200 words of immortal prose, you know, I don't think that ever stopped working. And all that happens is it's it's fashion. It gets out and no one, no one tries to do, no one tries to do it because either because it's unfashionable or because they've stopped believing in it. There's no empirical evidence to suggest that. In fact, there's a lot of empirical evidence to suggest the absolute [ __ ] opposite, which is what happened to Nike when they suddenly started to try and optimize for efficiency by selling direct to the consumer. A decision which could only be taken by someone who had literally never bought a pair of their own [ __ ] shoes in their life, right? Because that's not how we buy shoes. You want to try them on. And also, they had all these independent retailers who are kind of part of their ecosystem. You know, that'll be like Coke trying to get rid of the bottlers, right? Yeah. Okay.

Hey, at one level, they're taking some share of your [ __ ] revenue. But then the other thing is, I think you guys in the media world who stole all the bloody money basically from the creative agencies, which is where it properly belongs. Okay. Um, uh, and you became the first port of call. Okay. Right. That's, that's sometimes good and sometimes bad, but they should, there, they need to be considered in parallel. So the separation of media and creative was an act of total self-harm on the part of the advertising industry. Never mind. Okay.

Um, I, I mean, the advertising industry is a bit like Megan and Harry, which is every time they have a choice, right? They make the wrong decision. Okay. You know, it is the, the Megan and Harry of the business world in that, you know, you had, you had Megan Markle who they literally had the opportunity to be the royal family's diffusion brand, right? DKNY to the main machine's Donna or Ralph Lauren Purple Label, right? It was the Polo, right? Actually, that's even better analogy, right? And they had that opportunity and they like threw it away by getting really angry about random [ __ ] that was made up like saying you couldn't buy avocados in the UK. Now, what was that all about? Right. Do you hear that? I'd never heard that. She was complaining she couldn't be. I think it was the royal servants who didn't like her persistently just feeding her complete [ __ ]. Terribly sorry. No, we don't have avocados and there's no demand for them. Okay. I don't know. There's something weird going on there. Anyway, but, um, but anyway, you look at media, one of the things I think that's happening, right, is we're starting to def, if you, the great thing about fame is you discover customers you didn't know you could have. Okay? You know, a whole load of people, okay, I bought this thing. Okay, now you can't market it this way.

Samsung Galaxy Fold [ __ ] fantastic. It's turned off because I'm on a podcast. Okay, now I'll be absolutely honest with you, right? Okay, the whole thing is all about productivity and this that I bought because I'm [ __ ] old and I can't see anymore. And I keep going, "I'm on this phone. [ __ ] hell does that say?" "Oh, I know. I'll open it up. Oh, it's nice and big." Okay, now you can't market it to old people. Okay, but if lots of old people have heard about it, they'll go, "Ooh, that's just what I've been looking for." Okay, I can finally do. Now, what I think is happening in media is you're now, let's imagine if McDonald's, well, I think they've done this a bit, started saying, "It's cheaper to serve people on a screen than it is to serve people face to face. So in future, we're only interested in people who will order on a screen." Okay, you're losing a whole load of custom. Okay, slightly less efficient, slightly as profitable custom, but who knows? Okay, buy and shop. Okay, you want to sell to as many people as you possibly can. That's how big brands grow, right? And your occasional customers are really valuable. And your occasional customers will go, "What the [ __ ] this screen? Can I have a Big Mac, please?" Okay.

Now, what's happened in the media world is you're you're defining your customer, your customer base by who will click with ads in low-cost channels. You're not actually saying who could potentially benefit from having this product or service. Let's go out and use whatever media is available to go and find them. And in some cases, it'll be a bit expensive. American Express was built on direct mail, right? Okay. Not a cheap medium, but you know, I mean, most charities actually exist because of physical direct mail. Instead, people are optimizing for efficiency, not for opportunity. And they're going, "We're only really interested in these customers we can get really cheaply." Now, it's hardly surprising that marketing's in crisis if people think that the main function of marketing is to be as inexpensive as it possibly can be rather than to be as effective as it can be. But that is literally strikes me as being a self-fulfilling prophecy. You'll start to define your customer base by the people who will click on your ads in, you know, in inexpensive ways rather than those people with whom you can embark on a profitable relationship over time by becoming part of their solution set. Yeah.

And it's often a misquantification like the often the media that looks like it's performing best in a really simple analysis, let's say, is is is branded search. You know, or you're on Amazon and it's someone who puts in "Alchemy" or "The Choice Factory." What they, what that measurement doesn't do is net out who was going to buy it anyway. It's it's often a very expensive tactic if it was measured properly. No. No. Because of course, I mean, the the famous thing, I think, I'm just trying to remember who said this, but the most cost-effective form of marketing is to wait until there's a queue outside your restaurant, hand everybody a 50% off voucher, okay? Because you get 100% redemption rate, okay? But the, now, you know, if you're advertising for, let's say, yeah, let's say you're the Marriott group, okay? Well, there are people who would have otherwise stayed in another Marriott hotel and you're accounting them as just as valuable as someone who was going to stay in an Airbnb, but they saw your hotel ad. Okay. Well, patently, both in the short term and in the long term, those two forms of behavioral change are not equivalent in their value, especially not in the long term, actually. But you're treating them as though they're completely, you know, the same. Yeah.

And it leads to all these these, and actually one of the causes, one of the consequences of this is that, um, you probably know John Sills and his work and the, the foundation and all their work on customer service being in crisis. That's because it's very hard to quantify quickly the value of customer service improvements, whereas it's very easy to quantify bottom-of-the-funnel intervention. Well, like your, uh, analogy of the, well, you call it the doorman fallacy, which is the where you, you define the value of the doorman as someone opening opening the door, okay? And you bring in McKinsey or something and they go, "Well, you pay your doorman X thousand dollars a year. We can, we've defined his role as opening the door. We'll replace him with an automatic door opener, uh, with an infrared device where the door slides open when people walk up." And we've just, and then by the way, did you know consultancy firms engage in something called a gain share agreement where they are entitled to a percentage of identifiable cost savings?"

Now, as Roger Martin, I know I quote him a lot, but he's the heir to Peter Drucker. He's, he's a guy who's a strategy guy who fundamentally believes that value is created on the shelf, not in the factory. Okay? That's the way to describe him. He's brilliant and proven and and done a lot of work with A.J. Lafley at P&G. I mean, fantastic guy. But the doorman fallacy, what you're doing there is the consultancy then comes in and claims 8% of the identifiable cost savings and then six months later, basically your rack rates fallen off a cliff and their vagrants asleep in your hotel entrance because the doorman wasn't just about opening the door. Okay? That was how you defined it for the purposes of automating the role. But actually, people aren't just their role. People have all kinds of values. So a doorman is part security, part recognition, part status, part cat taxi hailing, part "good to see you again, Mr. Jay," you know, all that stuff. Okay, all of which people value. And actually opening the door is merely the official. I mean, the great phrase from cybernetics, I, I'll plug Dan Davis's book, "The Accountability Machine." Was it "The Unaccountability Machine?" Okay. Um, which is, uh, it comes from cybernetics and Stafford Beer, which is, "The purpose of the system is what it does." And what tends to happen in business is you have an an organization which is intended to do something, and everybody assumes it does, and nobody looks at the second-order effects and realizes that actually the problem with your finance department is it's actually killing off more opportunities than it is reducing costs, which seems entirely plausible looking at most, most organizations. And the purpose of your procurement department is to prevent you buying anything innovative because they need to actually have a like-for-like comparison between three identical bidders before they can appoint anybody. You must have heard this with PCOM, right? They come to you and go, "How much does it cost to do six press ads and two TV ads?" And you go, "Well, it's pretty stupid question to begin with." Okay, but, okay, let, but let's look at your problem because maybe that's not what you need. So, you go in and you say, "Actually, you can put a sticker on this hat and it will solve the problem at a tenth the cost." They go, "We're not interested. We want you to quote for the more expensive solution so we can compare it with everybody else's." Now that's just [ __ ] because we mentioned this about innovation. Nearly all innovation is a reverse benchmarking thing where at some, usually at some cost to the status quo evaluation of a category, uh, you're dramatically better in another category which has been hitherto overlooked.

So, and by the way, sometimes it's, it sometimes I think there's a cycle. So when I went to school, um, the rich kids would come back after the school holidays and go, "Oh, I went to Skipple Airport. It's amazing. I bought a Walkman. It was fantastic. They've got shops and everything." And then it was Changi in Singapore. Then it was Dubai. You know, I went, "Oh, it's amazing. There's shops. It's brilliant. You can do this." You know, no, no, no. Frankfurt Airport. There's a sex shop. Okay. There is actually Dr. Müller's. The Germans, the Germans respect qualifications so much that they even require their sex shop operators to have qualifications. Yeah. No one in Britain cares whether Anna Summers has got a PhD. Right. Okay. But no, Dr. Müller. Okay. Right. Anyway, um, actually Bata Uza, the other German sex shop operator, was actually a Luftwaffe pilot. Quite interesting. That's a pivot, isn't it? Right. Wasn't expecting it. Anyway. And, um, the, um, uh, but the interesting thing, I've completely lost where I was going now. Okay. And they come back. Oh, it's amazing. All these, and then gradually over time, every [ __ ] airport in the world became a shopping center with some planes. And then you've got people going to London City Airport, "It's brilliant there. Only five shops. You get through it in 10 minutes." And so literally, one of the things you can do is probably accept the fact that for every trend, there's going to be a counter-trend. And actually swimming against the tide, uh, if, if you've got the resources to survive, can be a really, really good strategy. Because I will always fly through London City. I'm going a couple of weeks time. I got, I got to fly down. I've actually got to fly to Portugal and I'm actually flying to Malaga and driving because I'd rather go through London City Airport. I don't mind going to Heathrow for a long-haul flight, right? You know, you're going to be on a plane for 10 hours, being at an airport for two and a half, that's not totally wacko. But if you're only going to be on the plane for half an hour, you know, an hour and a half navigating those bloody great airports is a massive total misdirection of kind of effort. And so, so, so I mean, that that question where actually nearly all innovation is effectively is unappealing to procurement because it will involve a, it will involve a worse dimension on some component that people are currently measuring and comparing you on, and a vastly better component in something that the procurement person hasn't even factored in. Okay.

So we said this about the first iPhone, the [ __ ] battery life. Okay. Electric cars, by the way. I mean, have you gone, have you gone electric in here? Not yet. You're not one of those [ __ ] Londoners with your [ __ ] bicycle. You fixie cuz we're in shortage. You probably got one of those bloody. Anyway, but you got electric. What? What you got? We have a Tesla. Brilliant. Brilliant. Yeah. Now, the thing is, it's just a better car. Okay. I mean, okay. In nearly every dimension, performance, quietness, comfort, drivability, etc. So you've managed to achieve in a reasonably affordable car what you might call that synthesis of performance and comfort, which previously you could get in a petrol car, but you had to buy a Bentley or an Aston Martin or something. Okay, you had to spend, you know, you had to spend big money to get a comfortable, quiet, but nippy vehicle. And the electric vehicle, because the electric motor is inordinately more efficient than the internal combustion engine. Internal combustion engines about 25% efficient. Electric motor about 80% uh efficient. And also the electric motor's invented here in London by Michael Faraday. It's a proper British thing. Whereas the, the internal combustion engine is an infernal German contraption with needless complexity in my opinion. Okay. Anyway, but there's this one thing, which is [ __ ] range anxiety and recharging time. Now factored against all the other things of how nice it is to drive, etc., etc., etc. Okay. So I've just written a piece for Evening Standard where let's imagine this in reverse, right? Where all cars are electric and we're all nipping around in little electric cars and recharging. And this rogue Volkswagen engineer comes up with, "I've got a better idea." Okay, it's massively complicated. You put a huge tank of an inflammable liquid in your car, right? And then it feeds into these cylinders where we engineer an explosion, a series of explosions. Now, unfortunately, it only produces torque in a limited range of of the revolutionary cycles. So we'll need a thing called a gearbox, which we'll need oil for, and then we'll need an air filter, and then we'll need a water filter, and then we'll need all this stuff. And, and it's going to be vastly more complic. Okay. Is it quieter? No. No. Quite the opposite. It's [ __ ] noisy as hell. Um, is it cleaner? No. No. It's farting stuff out of the back. Right. Okay. So, um, Right. Okay. So, um, okay. Is it simpler to make? No. No. No. There are 250 moving parts in the drivetrain. I know electric cars only have seven, but this needs 250. Um, right. Okay. So, um, what's the upside? Well, you can refill it really quickly. Uh, can you refill it at home? No, obviously you can't refill it at home, right? You're not going to have a [ __ ] petrol. Are you [ __ ] insane? You're not going to be able to refill this thing at home, right? No. No. You'll have to go to a special place, which, by the way, won't just be a little thing on the side of the road with a rapid charger. It'll be a massive thing selling Ginsters and Marks and Spencer's. Basically, that guy's career is over, right? Okay. You go. Okay. So, the 0.05% of the population who routinely drive 350 miles a day and have such enormous bladders that they never need to stop. They're going to benefit slightly from this insanely complicated engine, but the rest of us are going to have a horrible time. No, I don't really see this is going to fly. Okay.

So this is literally now the other thing is that the really exciting thing about electric cars at the moment, we're at the intermediate stage where electric cars look like cars, but actually things like the Citroën Ami or the or or the electric cargo bike or my real fantasy, the electric jet ski. Okay? Because actually the dirty secret of powerboats is that the difference between a boat and a and a and a car is that you run it on max revs. Okay. So when you drive around a puppet, it's more efficient to run it. Re. As a consequence, unless you have a sort of oligarch's yacht, it's unbelievably noisy, okay, as a mode of transportation. It really is. You know, there's just this scream of the engine all the time. Imagine if you, you know, you're in a Ferrari and you're running it at like 8,000 or whatever. Okay. Awful. Okay. So, all these things are going to be electrified and we're going to get like little micro pods. We're going to get the Heathrow pod. We're going to get all these wonderful things. That's the really exciting thing. At the moment, we're just electrifying what we've already got. But there's the opportunity for a kind of Cambrian explosion in innovation if we just shift this thing, which won't happen with with internal combustion engines. I mean, you know, if you think about it, apart from maybe a lawn mower, you now don't own anything with a combustion engine. Any electric toothbrush, etc., etc., right? The reason is the electric motor is an unbelievably fabulous, brilliant thing, and the internal combustion. Now, I will on aesthetic grounds defend steam locomotives just in terms of sheer beauty. Okay, if you're going to be a purist about this, but then you realize that car people, I mean, you have the, I love Top Gear. I thought it was a fantastic program. I thought it was brilliant. It was as much about friendship as it was about cars. The whole thing was magnificent. Okay, but the one thing that really drove me crazy is when they test electric cars and they drive them till they ran out of power. And you're kind of going, you could have done that with any of the petrol cars you had for the last [ __ ] 25 years, right? You, "Oh, this new Aston Martin DB9 Volante, it's not very good because we kept on driving it and we refused to stop at a petrol station and now look, we're stuck by the side of the road." Well, we've all had actually range anxiety in a petrol car once or twice, simply. Okay, it's not unknown. Okay. And I would, I, I've, we've run two electric cars for three and a half years. Uh, I've had range anxiety of any significant extent once. Okay. And I suddenly realized, well, actually with petrol, that happened once every three years. And you can charge it at home, right? I mean, that's the other point. If you wouldn't need that many petrol stations if everybody had a little hose pipe at home that produced like three pints of really cheap petrol every hour. Okay. Not that many people would be charging up a petrol station. That's right.

Well, your thought experiment for the Evening Standard article is is a fascinating one of, you know, how much of what we do is about path dependency and the status quo bias. And if you look to many areas with with fresh eyes, as if if the current way of doing the story I tell is a great one. I'm not saying I know the right answer. I'm saying you don't always invert, right? Because you're a big Warren and Charlie fan. Um, I was intrigued. Charlie, I, I suspect that Charlie was every bit as decisive as Warren was because I think Warren would say that even, I think he would say that somebody I know also met Warren and Warren gave, you know, we were talking about luck earlier and Warren said, "Before I met Charlie, the really decisive person was my first wife who got me to get my [ __ ] together." Um, no. So, so, you know, that kind of lucky, you know, that, you know, you know, you can imagine if Warren had married someone different, the whole thing would have been, you know, actually no, he'd still be living in a really boring house driving a 10-year-old car, I think. So, but he wouldn't have had the net jet, right?

So Rory, we were having a very interesting discussion about how behavioral science can be scalable for people at any level, size, business to use. You want to share some thoughts on that? Effectively, because it concerns decisions. Anybody who's in a position to make a decision, whether you're designing an application form or developing a strategy, it's completely scalable, which is one of the things I love about it. It's a game everybody can play. Uh, it's not one of those things where it can only be deployed by a certain proportion of people within the organization. Anybody who has the power to make a well, uh, anybody who has the power to make a sometimes counterintuitive decision, or at least the power to consider an alternative explanation, has the power to use behavioral science. So ideally, you know, what I'd like to see is rather than being a practitioner, I'd much rather see it infuse general decision-making within organizations, where people are both more content to consider the opposite or the alternative or the less conventionally rational solution or explanation, and where they're also prepared to test things which may seem utterly trivial, uh, to, uh, someone who has a kind of, uh, mechanistic mind, if you like, you know, someone who has a mechanical view of the world would regard a variable as beneath their consideration, but it might well be the variable that's actually decisive.

So what I mean, one of the things I always noticed about creative people in advertising is they don't have a sense of proportion. Mhm. Okay. And it's actually a feature, not a bug, because they're aware of the fact that, you know, a precise human expression or a phrase or a word added to a sentence can make the difference between significant success and meh. And so having a sense of proportion, going, "This is the important stuff. This is merely executional," I think is a, is a natural tendency in hierarchical organizations. But actually, I think behavioral science needs to fight against that. What's important isn't necessarily what's expensive. One of the examples I love of that is some of the work you've published on trying to generate donations for Christian Aid. Can you just talk about the, the stuff we tested? The door drop volunteers, door drop envelopes, people with money in the envelope during Christian Aid week, and then the volunteers come around and collect the donations either by credit card or or cash. And we tested six things. And we quite often run this as a test with a with a live audience, as it were, which is, which of these changes, including orienting the envelope from, uh, uh, landscape to portrait, uh, using a higher quality paper, um, using the labor illusion effect, saying "delivered by hand," you know, in other words, establishing a personal message. Uh, and we tested six different variants. And what's interesting is the only one which was mentioning Gift Aid, which is that the government actually boosts your contribution so that for every pound you give, you're actually giving £1.30 or whatever, that was the only rational, economically rational motivator. Fascinatingly, that actually depressed response and depressed the overall donation level. By, by contrast, two or three of the entirely trivial-seeming things, uh, including the reorientation of the envelope, by the way, uh, that increased donations by about 14%. Using higher quality paper. Now, you can imagine in a charity, it's really, really hard to make the case without an A/B test for using better quality paper, but it communicates to people at the tacit level of, you know, what, what, what's basically what's felt without being thought. Okay. And one of the things I think we noticed, now, for goodness sake, one of my colleagues may tell me I'm wrong here, is that the higher quality paper attracted significantly more higher donations. And maybe there's just something slightly incongruous about putting £50 quid in cash in a really cheap envelope. Okay? It could be literally as bananas as that. What's certainly true is that that experiment more than paid for the cost of the paper. And so there's a tendency to engage in, because economics is effectively Newtonian, and therefore there are single right answers in economics. It's often very convenient for any group of decision-makers in business to pretend that eons exist and pretend that the world is Newtonian because it's very, very quick to get instant, uh, acquiescence and agreement because everybody's singing from the same rather boring song sheet. Okay, it's not a very harmonious song sheet, you know, but it's nonetheless the same song sheet. And consequently, I think, you know, quite often there's this sort of thing you might call sort of fictive rationality. Let's pretend that everybody's economically rational because it makes life so much easier for us when deciding what to do. And, uh, what's so fascinating about that is we tested things which in some cases people go, "Well, that's, you know, you're you're effectively adding irrelevant information to this envelope. My propensity to give to someone in Africa should not be affected by the fact that the envelope was delivered by a volunteer by hand." Okay? But it is. Okay? And that's because the amazing thing about the human brain is that it can effectively absorb information from lots of different sources. Sometimes consciously, sometimes unconsciously. And in many cases, the information is in a completely incommensurable form. Okay? And yet we somehow resolve this into either action or inaction, or in some cases, a perverse reaction. Um, and fundamentally, because the brain does not really work through additively. Okay. Um, you know, multiplicative math is much more helpful here because there are there are tiny little things which seem as though they should be actually utterly irrelevant, which turn out to be weirdly decisive.

Beautiful idea of this. There's a very, very good marketer in the, he's actually currently the marketing director of Pret A Manger, who is the, uh, Mark McCulloch. And we were talking to a chain called Chai Wallah. And one of the things we both said is, "Obvious, Adam, people will look at that name and assume you only sell chai. A lot of people don't like chai or aren't in market for chai. One thing you need to do if you're any kind of food restaurant that isn't McDonald's is you need to make explicit on the awning or on the outside what it is you sell. If you sell burgers, say burgers. If you sell pizza, say pizza." And so the guy, very good guy, very good, uh, younger client said, "Uh, we're already changing that. We're going to put 'Indian Street Food Cafe' on the front." And Mark McCulloch, this is this is why it's a joy working with the kind of people you sometimes get to meet, said, "Actually, I'd put 'Indian Street Food and Cafe'." Because he said, "Now you've got two things. People who like Indian street food and people who like cafes." Okay? Whereas if you're an Indian street food cafe, people, "I don't like Indian street food, so I'm not going to go into that cafe." Now, that addition of a monosyllabic word, you know, multiplied across their hundred locations is going to make a difference. And, and it, it's one of those things where, you know, it's always joyous when somebody basically makes a point where for the first 10 seconds when he first said it, "Oh, you see what I mean?" Yeah. It's that wonderful discovery of things which I can only describe as obvious in retrospect. And by the way, with all those Christian Aid experiments, we can all post-rationalize why they were okay. Actually, they may not even be the real reasons. But I don't think there's an ultimately the value of behavioral science is it gets people to consider alternative explanations, alternative courses of action, and to test things they otherwise wouldn't have bothered testing. And that's the principal economic value of all this is that it's healthy mischief-making in in an empirical form.

Well, that point of, uh, post-rationalization, you mentioned something right at the beginning, which I didn't realize. You said you'd often done presentations where you show people the six options and you ask them to predict what will best boost donations. What do most people claim and which one do they most? Something we've very rarely had. I mean, actually, in that case, it's quite interesting because, uh, what I occasionally say is, "Actually, in this case, most of you are right, because all of them work better than the control." Okay? So actually, there's another, there are other examples we occasionally share where people get it diametrically wrong. Um, and, and by the way, you know, even having studied a lot of behavioral science and having worked in direct marketing for 20 years, all it's done is really, I think, it's improved my hit rate. But I will still get things hopelessly wrong. I mean, you, there are occasions where, um, uh, again, we've got to be very careful because we can always post-rationalize every result and we tend to assume that the result, the explanation that makes the most sense is the one that's therefore true. But we've got to be very careful about that. Um, because, you know, in terms of the, in terms of the orientation of the envelope, was it that people were frightened if there's a long flap that the money might fall out? You know, or is it just that it resembles a pay packet, so it seems more natural? But what's fascinating is that what's also fascinating about those findings is that most, actually all of them are not mutually exclusive. So next time round, you can actually enjoy what Charlie Munger used to call a "la palooza effect," which is you combine various behavioral things in combination where they might well be, they won't be wholly multiplicative. I'm not, I'm not going to suggest if you combine all of them will double the donations, but you would reasonably expect that using the, the ones in combination would work even better still.

I'm going to move us to another topic because I want to try to hit a few interesting things before we run out of time. Um, before the show started, we started to get into artificial intelligence. It's a hot topic amongst all of business, but especially among marketers. Richard and I were talking about how do you see behavioral science evolving because of AI? And let's start with that. In an increasingly AI-driven world, algorithmic world, you can emphatically train, uh, AI models to understand and make allowance for behavioral science. I would argue that it isn't yet anywhere near, um, uh, uh, the the level of human creativity. Mhm. So we always call lunch a festival of behavioral science and creativity and other like Indian street food and cafe. Right. Okay. Um, and the reason we always call it that is because we regard the two as not inseparable, okay? But that they work best in combination. They're effectively a hot dog and a hot dog roll. They're complimentary goods. And that what often AI will do, I'm, I don't believe in process. I believe in checklists. And AI will sometimes remind me of things that I, I would otherwise have overlooked. Generally, it tells you what to do, not how to do it. Now, I know there's a whole load of AI which will be able to produce, you know, fantastic imagery, but a really, really creative leap into the unknown. Now, we got to remember, most of it's trained on the past. Okay, all AI data, training data comes from the same place, the past. And therefore, if your aim is to do something significantly original, um, then that particularly Bayesian approach can make progress, but it can't make a leap, I think. And sometimes the answer is to take a fairly banal thing. Let's take the Prattfall effect. Yes, I think it could understand the Prattfall effect. Would it necessarily come up with "reassuringly expensive"? Well, it wouldn't now because "reassuringly expensive" already exists. Okay. It could well do it now. Could it have come up with it had such a thing existed in 1974? Not sure. Genuinely not sure. Yeah.

But of course, I suppose there's another way of looking at it. We, we're talking about, uh, how AI can help behavioral science, but you could do it the other way around. How behavioral science can help AI. Yeah. And you mentioned in that previous Christian Aid discussion, the labor illusion. And there's an amazing 2023 study from Coobe Miller at VU, where he shows people posters and he gets them to say how much they're prepared to pay for them. And what he does is show people the same poster, but he changes the labeling. So sometimes he says it's hand-drawn, sometimes generated by AI. And it's a phenomenal switch in valuation. It's about 60 odd percent. The effort, the human effort is put into the creation of something hand-drawn is perceived as more valuable than AI-generated. And he says this is due to the labor, labor illusion. You know, people assume, well, their experience with the ChatGPT, it spits out blog posts, it spits out ideas all the time because it's created so quickly. They rate exactly the same thing as lower value. So you could take that behavioral science principle and say to Bill, look, if you're going to use AI, if you're going to speed up your product delivery, what you've got to keep on doing is reminding your audience of the effort that went into the creation of the AI systems, or or or the protocols. So actually, you will probably have AI artists who do put in a huge amount of work to generate what they generate, uh, in the same way that, you know, uh, there are the tools and there's the talent and there's the effort. I mean, there's some very strange things about the valuation of art. There's a brilliant thing on YouTube which is a discussion between Mark Carney, now of course Premier of Canada, formerly Governor of the Bank of England, and Damien Hirst. And Damien Hirst makes this really interesting observation about art, which is he said, "When I produce a crystal skull coated in diamonds, okay, and I tell people this is what it costs, they all want to know what the diamonds cost. And yet they'll pay 150 million for a Leonardo, and they know it's just made of worthless canvas and."

Paint and they don't care. No one asks with a painting. It maybe with sculpture, okay? You know, maybe people go, "What sort of marble is it made of?" But with art, it's accepted that the value is entirely separate from its raw materials. Whereas in, for example, a diamond-studded skull, uh, people go, "Yeah, but how much do you pay for the diamonds?" It's kind of weird, isn't it? In a sense.

And of course, the curse of the advertising industry is we've always been paid on labor, on essentially on what it costs you to do this, not what the value of what you did. Yes. And one of the uh stories we came across writing "The Hack in the Human Mind" was a great example of that and a creative getting around it. So it's the famous example of City Bank. So City Bank briefed Pentagram to come up with a new logo because they've just merged. Yeah. And in the briefing meeting, Paula Scher sketches out the umbrella logo. And uh, eventually, you know, this is what they hand back to City Bank as the, um, the, the finished goods. And they're like furious, like, you know, "How can you charge us a million and a half pounds for something that you knocked out in 30 seconds?" And her her later response was, "Yeah, it was 30 seconds delivered in 30 years." Yes. And I think it's that shift from not how long did the actual work take, how long did it get me, how long has it taken for me to be in a position to do it in in 30 seconds. Yeah.

There's a famous thing, isn't there, about the chap who repairs the production line and he sends in the invoice and it's for marking one chalk cross, $1. For knowing where to put it, $9,999. And there's a similar case. I think the guy who designed the Fendi logo did it on a napkin and handed it over to, I'm assuming it's Mr. Fendi, and invoiced him a million dollars, and he paid. Yeah. Because Mr. Fendi knows value rather than cost. Yeah. And also the person's talent and so forth. Um, there's also a case, a famous case, David Ogilvy heard that a client had spent thousands and thousands of dollars designing a new logo and said, "Well, we would have done it for you for like, you know, 25. We've done it for you for a few hundred dollars." The guy said, "I know, but we would have argued it to death." But there, I think management consultancy works the same way. That it's a massive commitment device. It's like an engagement ring. We've spent so much on these wankers. We really have to follow through on what they recommended, even when, to be honest, most of it is information they derived from us. Okay. It's a kind of, you, it's a kind of burning your boat strategy in a sense. It's equivalent to Odysseus tying himself to the mast. Yeah.

Um, yeah. Two more areas we want to hit quickly. Uh, area number one, uh, are there new frontiers or areas of behavioral science that you feel haven't been fully explored yet, haven't been applied fully yet? Massive, massive areas in terms of the application of technology in line with things like human fairness. Now, let me give you an example of this. At the moment, if my car overstays its welcome, it'll have a fine of £100. Okay? And, um, I would argue that to a, a human, okay, the concept of what is a fair fine for a parking infringement is highly variable. Right? So overstaying, if you paid for four hours and you overstay by 10 minutes, £100 is not fair. If the cost of parking there legally would have been £3.50 and you're fined £100, that is not fair. Okay? If you repeatedly park in the same place without paying, £100 is totally fair. If you pay regularly and legally to park in the same place, but one day in a hundred you forget, £100 is not fair. Yeah.

Now, it is possible to use all the data, okay, that you have with a parking app to actually be reasonable with what the actual infringement charge is. But what we've done is we've made the thing entirely black and white and context-free, which is, if you break the rules, you're liable to pay 100 quid. And I, and I think that's it. It. No human being would enact uh rules with that degree of lack of nuance, context, and flexibility. And so what we're often doing with technology is we're creating, I don't think speed cameras are fair in the sense that the, you cannot genuinely say someone's guilty of an infringement without some wider contextual information. Okay? I mean, it's 3:00 in the morning. It's a dual carriageway. The speed limit's 35, 40. Okay? And you go at 48. Okay? There are no pedestrians because it's a dual carriageway and no, there's no traffic on the road. That is not a particular, you know, that does not deserve three penalty points, okay? And so the extent to which we're creating a world where we are powerless to resist decisions taken effectively where no human being is accountable for the consequences of the decision that is terrifying.

I mentioned earlier this thing about AI, which is that people don't necessarily want to be told the perfect thing to do. They want to be given a selection to choose from. People don't necessarily want an answer instantaneously. If I'm planning a holiday in Greece in 2026, I actually want, I might want the process to extend over three months. What I call slow AI. Okay, there's a potential application for AI which is just a turbocharged concierge service where I go, "I'm 59 years old. Is it worth me spending the next 20 years of my life, if I live that long, you know, endlessly trying to master new prompts and codes and new, new models? Or should I employ a 120th the time of a guy who's really good at this stuff, who really likes kite surfing, to go and live in the Canary Islands and answer the phone to me?" So, is there actually a way in which what you should do is create a turbo butler rather than creating a robot? Don't know. But it, I mean, this is the great point, which is that one of the things we know is, and this is the whole thing on which AKQA was based, the interface determines the behavior. What is the interface, you know, or choice of interfaces? Um, and we still don't know that for AI. We don't, you know, is it, is it a mixture of voice and visual? Is it, you know, do I chat to something and then it shows me pictures of the hotels in Greece? Do I go, "Actually, I quite like that one. Could you look for a few more like that?" But then it will always have the, the nouse to bring in a few wild cards.

If you talk to, okay, this is the really interesting thing. You talk to human estate agents, real estate agents, uh, they always say people come along with a list of criteria for their house, they end up buying a house that meets some, few, or sometimes none of those criteria. It's very, very rare that they have no wiggle room in making a trade-off between one thing and another thing. And that's, if you like, the miracle of human psychology, which is that we can compare things that aren't, you know, does it have a balcony? Does it have a garden? Does it have a garage? You know, is it next to a pub? Okay, we can compare those things and trade them off in a way that no mathematical model can actually do. It's very interesting. I always regard an interesting sort of, what you might call, a test case of AI as being the satnav or the GPS, which is sometimes it's very creative. It suggests routes I never would have thought of. I don't necessarily literally follow its instructions unless I'm in a position of total ignorance. Okay? If you put in the wrong prompt, it can get things catastrophically wrong. You know, you end up, as one friend of mine did, in Cambridge, Gloustershire, not Cambridge, England. Okay? Um, and I also occasionally like to look for alternative suggestions because it may be considering things like speed, time, distance, and ecological efficiency, but not considering things like scenicness or the fact that there's a KFC on the route. Okay. So, occasionally I'll go and look at the, the two or three next best routes and go, "Will I trade off seven minutes of journey time for the fact that you keep moving rather than you get stuck in traffic?" Yeah, I'd rather drive at 30 mph constantly for seven minutes longer than be in stop-go traffic. It's not factoring that in. Okay.

So at some level, this is this comes down to the Ian McGilchrist master in his emissary, left brain, right brain, um, hemispheric hypothesis, which is the human brain is divided into two for very good reasons. And that part of the brain is designed to deal with the specific and the quantifiable and the actual. And the other part of the brain is designed to deal with the possible and the contextual and the, uh, and I suppose the, the world wider possibilities. And effectively, what we have created is, is I asked Ian, I said, "Why is it that this left-brain dominance happens?" And one of the sort of theories, you know, he has is that it's the need to win arguments. That in an institutional setting, you've always got to win arguments and pretend you're right in order to get anything done. And that one thing I really hate about rationality, okay, is in the construction of a rational argument for a course of action. Implicit within your argumentation is the idea that not only is this a good idea, an interesting idea, and something worth testing, implicit is the idea that anything else is wrong and suboptimal. So what you're saying when you're rational is not, "This is a really interesting idea which is worthy of exploration." You're saying, "Anybody who disagrees with me is fundamentally wrong." And you then end up with that sort of James O'Brienism where you construct a rational sequence of arguments, you arrive at the conclusion you desired to begin with, and then you declare that everybody else is an idiot simply because you're able to find a rational path, a rational-sounding pathway to the destination you wanted to reach. Okay. Um, and it's, it's very dubious because is that the destination you wanted to get to? If you'd started somewhere else, would you have gone somewhere different?

And actually, you know, the best we can probably do in decision-making, I, it's very interesting that people like Jeff Bezos have a very interesting decision-making style with things like the two-way door idea. Yeah. That there are many things that it's cheaper to test them than it is to argue about them. Um, and actually, everybody hated Amazon Prime. Brilliant, brilliant psychological idea. Everybody except Jeff hated the idea. Absolutely hated it. Okay. Luckily, he was in a position to override them. I, I've often asked the question, why do so few other companies copy the idea? Okay. I mean, it's kind of interesting, isn't it? Because it's a proven model that people seem to really like, pay one's benefit many times. Okay. You know, you know, it's a, it's a really, I mean, Amazon call me back that button, if you've got a problem. I don't know a single bank or institution that's copied that. Yeah. Okay. Now, and I actually asked someone, they said, "Oh, we couldn't really do the cost-benefit analysis." I said, "You've done that already. You've proved it already because Amazon does it. Amazon tests everything. Amazon is a fast feedback business. If it works for Amazon, the odds are massively stacked that it'll work for you. Why do you have to prove everything?" And the burden of proof that's being imposed by finance is becoming an absurd obstacle to doing anything because you, you know, you can't, there's no proof about the future. Okay, by definition. And people are literally demanding sort of a level of granularity of kind of, uh, you know, of of proof, a level of specificity that's simply ridiculous.

I mean, there'll be some great marketing ideas which you can basically say, yes, it worked. Now, you mentioned interestingly that with one bank you work for, the advertising campaign worked fantastically for the whole bank, but it didn't look that great at the level of the individual bank department. Yeah. And it was those individual bank departments who held the funds, so that the overall optimum approach incurred far less than it should. So it's the, the whole difference between the whole and the sum of its parts. Effectively, you created a corporate structure where the parts were more interested in the part loans, only cared about their direct loan sales. So doing any activity that benefited everyone in quite a small way was off the, was off the table. You also get that, apparently, there are companies that should advertise much more than they do, like Starbucks, apparently. And the reason is, of course, because you've got a franchise model, it's impossible to apportion where the costs come and everybody would much rather spend the money on themselves than on the collective good. And so this is the whole thing about the central nervous system. You know, part of the role of running a business is effectively to overcome those silo effects so that people are prepared to subsume their own narrow, short-term self-interest for the benefit of the whole, which is kind of why I think, and actually, that's a great book, by the way, Gillian Tett's book, "The Silo Effect." Really, really interesting book. She's an FT journalist and anthropologist. So, the combination of the two is fascinating.

I thought you might have mentioned Yori, who's written this amazing book. We're interviewing in a couple of weeks, "Mixed Signals," and it's a whole book around how incentives are phenomenal things when used, right? But so often they backfire because they're, they're poorly thought through. No, I mean, actually, I think that a lot of the, a lot of the ways in which people are incentivized to work, it creates absolutely perverse effects because people will game the system to an extraordinary extent. For example, we all know the examples of sort of cobra farms in India. Um, uh, and actually, the mixed signal thing is very, very interesting indeed. Also, it fails to signal any kind of relationship between the employer and the employee because it's effectively saying, "You're only as good as your last quarter. We have no interest in you other than at the transactional level," which is completely contrary to the kind of culture you'd want to foster if you wanted your employees to go the extra mile or put in. And of course, it, it needs, I mean, it's very interesting that Goldman Sachs, within Goldman Sachs, is a highly socialistic organization. Uh, my friend who worked there said that what impressed him is that you got a request from the guy in Goldman Sachs Bogotá and you were in Goldman Sachs London, and nobody said, "Okay, who's paying for this?" You just put in the work. Yeah. Very, very high levels of reciprocation. Um, and, um, now, obviously, you know, outside Goldman Sachs, different story, but within the actual organization, it operates at a highly collaborative level without, you know, the demand for the apportionment. Now, it probably helps that the guy who runs Goldman Sachs in Bogotá in four years' time is going to be the president of bloody Colombia. Okay. So it probably pays to make a bit of extra effort for that reason. But nonetheless, it's, it's very interesting that they had a very, very strong culture that nobody asked, "Who's paying for this?" You automatically helped each other out.

Bringing us to the final question. We always like to end, Rory, with, uh, with a question that hopefully gets us thinking and gets our listeners thinking. If you had to think about all the mistakes you've seen over your years and made? I've got no, no. I mean, one of the things is that you, there's a value to getting things wrong, so long as it's survivable and manageable. Okay? Yes. There's a brilliant case in one of our clients where they'd spent a load of money trying to launch a premium cider and it had all failed, and everybody was getting into the sort of blame game. And they finally report to the CEO who goes, "Actually, what we've learned in this failure is easily worth £5 million. You know, we've actually learned a hell of a lot of, you know, to quote Edison, we've learned 20,000 ways not to make a light bulb." Um, actually, you know, next time round, if, if, now this is the important thing, by the way, the rogue bees, the, the scout bees have to report back. If they keep their find secret, it's no good. If you share the information and it feeds back into the waggle dance, that's no longer actually, we call it a trade-off. It isn't a trade-off. It's two complimentary parts of the same system working harmoniously together. It's a Western mindset that sees any entity doing two apparently different modes of behavior as being necessarily a trade-off or a conflict. It's not. I mean, I think Asian, the Asian mindset would grasp that much more quickly. I've got a Hindu friend who accuses the Westerners of monotheorism. You have to have one theory to explain everything. As he said, he said, "My mom goes to a temple in India and there's an altar there, and on the altar there's an elephant, there's a monkey, there's Jesus." And there's no conflict or contradiction in this at all. Okay? Part of the same. Yeah. And what we've done is we've created this sort of faux rationalism where there actually has to be a right way and it has to be one way. It's rather what I say about the modern office. Okay. Everybody tries to optimize for the average, and you end up with an open-plan office. What you actually need in an office is half library, half pub. Yeah. Okay, half of it look should look like a studio, you know, horses being ridden by naked people, and the other half should be a place of extraordinary, you know, quiet and, uh, solitude.

I, I, uh, heard you say once before about a decision-making approach of like the Romans or the Greeks where they would decide on something sober and then they'd get really drunk in Persia. And according to them, they'd debate the same thing twice, once while sober and once while drunk, and they'd only go ahead if they approved of it in both states. So that, I mean, that's an interesting case. There's also an argument someone at King's College London I spoke to that human neurodiversity is part of the explore-exploit trade-off. That if you have a group of 150 people and you're done bar number, okay, and they all think the same way, it's fundamentally dangerous. It absolutely pays to have, you know, the Asperger's guy and the ADHD guy who are, and actually, I would argue the funny guy. Okay, I'd actually argue that humor probably plays a role in some sense. It could be error correction. It could be alternative framings, but humor is an incentive to look at things differently. And so, so, so, I, I, I, I, you know, I'd make a very, very strong case that actually neurodiverse teams will probably, they may be a pain in the ass to work within, but they probably produce better results ultimately.

With that, we want to say thank you for joining us. Pleasure for us as well. Thank you. And for everyone listening. Uh, we'll drop all of our show notes. All the book references will be in our podcast. Oh, I love you do that. Oh, absolutely. And for people, a long list. It's a long list. And also the website of Kissa and Seven Oaks. Yes. Yes. Of course. My new principle of the guest gets to advertise. That's right. We come wearing a shirt. Yes. Exactly. Various, various different brands. Thank you, everybody. And, uh, until next time, I'm Michael Aaron Flicker, and I'm Richard Chen. Thanks for joining us. It's been an absolute joy.

[Music]

Behavioral Science for Brands is brought to you by Method 1. Recognized as one of the fastest-growing companies in America for the third year in a row, featured on Inc's 5000 list, Method 1 is a proudly independent creative and media agency grounded in behavioral science. They exist to make brands irresistible, helping people discover products, services, and experiences that bring moments of joy to their lives. As behavior change experts, Method 1 creates emotional connections that drive true brand value for their clients, focusing primarily with indulgence brands in the CPG space. Find out more at methodone.com.