How To Influence People: Marketing Secrets Behind The World’s Biggest Brands - Rory Sutherland
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Oh, by the way, before we get into this episode, I would love to tell you a little bit about Life Notes. Now, Life Notes is a weekly-ish email that I send completely for free to my subscribers, and it contains my notes from life. So notes from books that I've read, podcasts I'm listening to, conversations I'm having, and experiences I'm having in work and in life. And around once a week, I write these up and share them in an email with my subscribers. So if you would like to get an email from me that contains the stuff that I'm learning, almost in real time as I'm learning it, you might like to subscribe. There is a link down in the show notes or in the video description.

Averagely good statisticians, particularly if they're confident, actively damaging and dangerous. If you fundamentally get it wrong, this is a case where you can be not just a bit wrong, you can be unbelievably orders of magnitude wrong.

about the assumptions you make. - Hey friends and welcome back to Deep Dive, the weekly podcast where every week it's my immense privilege to sit down with academics and authors and creators and entrepreneurs and other inspiring people and we find out how they got to where they are and the strategies and tools we can learn from them to help us build a life that we love. Rory is the vice chairman of Ogilvy UK, which is one of the biggest marketing and advertising companies in the world. He's the author of the book "Alchemy: The Surprising Power of Ideas That Don't Make Sense." And he's got some absolutely sick TED Talks that have been viewed over 7 million times.

There will be so much suspicion that we've got chat GPT to write our thank you letters, that the only way to overcome this is to actually fill our thank you letters with profanities.

So thanks very much for the fucking dinner party. It was totally boss. Viva il Duce. All our personal correspondence will have to become kind of, you know, absolutely profane in order for it to seem sincere. We talk about the psychological value of products and how to create value from thin air and the power of surprising ideas in the world of marketing and advertising. If you can imagine a stand-up comedian doing a routine about your product, then you're onto something. The urge to appear serious

is in many ways, I think, a disaster in marketing. And Rory's just an incredibly interesting and inspirational person with so much life experience and so many stories. So I hope you enjoyed this conversation as much as I did. Rory.

So you studied classics at Christ's College, if your Wikipedia page is to be believed. I was just down the road at Emmanuel. And I wonder why classics and what did you learn doing classics? Because it seems a bit rogue to go from classics to advertising. Well, it was a bit more rogue than that because I made the short-term mistake and...

long-term success, I think, by choosing as A-levels maths, further maths, Latin and Greek. And it was a total mistake at the time because the people doing physics, chemistry, maths,

were effectively doing interconnectedly the same thing, whereas I had to have this slightly schizoid thing where you had to go from sort of translating Homer to doing some advanced statistical modelling or something. And it was difficult. At the time, I think it was a mistake. In the longer term, I think it was a great decision because one of the things is you only have to have fairly good statistical understanding

for it to be a superpower in the workplace. So bizarrely, my brother's an astrophysicist. I'm still very interested in science, particularly both the potential and the ills of quantification. Big book recommendation to start with, Algorithms to Live By and The Alignment Problem, both by Brian Christian. I really highly recommend. So I read a lot of science. I read an awful lot of evolutionary biology as well because it's a new way to think.

So, but the classic side was, to be honest, what classics is, okay, is it's modern languages for nerds. Okay. So there's quite a high correlation between people who are fascinated by classics and people who are fascinated by, say, sci-fi, because it is, if you like, an alternate civilization. And also the fact that you don't actually have to speak to it because everybody involved is dead probably appeals to people who are slightly on the spectrum. So,

So if you're one of those people who are undecided between science and the arts, classics is actually bizarrely a kind of weird kind of compromise. What were you doing at Emanuel? I studied medicine. You did medicine? Yeah. So kind of six years of medicine, two years of working, and then switched into this kind of YouTuber podcaster career. What's interesting is that they limit the number of people who can study medicine in the U.K.,

I think that's the BMA which pretends to be a scientific organization, but it's really a trade union for doctors Oh, yeah, I mean they're gonna be striking in the next few weeks. Yeah Exactly now interestingly there seems to be a premise then I accept that it's very expensive getting a medical qualification because you actually need corpses and stuff which you don't need for classics by and large and

There seems to be an axiomatic assumption there that you only need to train in medicine that number of people you need to be doctors. Now, it strikes me that that's a fundamental assumption.

fundamentally wrong-headed idea that actually having a surplus people with medical qualifications would actually be despite the cost of training would actually be valuable it might be valuable to the pharmaceutical industry it might be valuable to overseas for example but actually having a surplus of trained doctors would actually be valuable in all kinds of unanticipated knock-on ways just as actually you know you don't have to and obviously I didn't become a

What happened I had she trained as a teacher after I finished and then I had a kind of panic attack because I realized if I went straight into teaching my entire life would be school University school and I thought spending your entire life in educational establishments was just a bit too limiting. Mm-hmm

And then I started applying to ad agencies. And whereas the conversation in the staff room was kind of, Nogis Minor has been smoking behind the bike sheds, the conversation in the ad agency was, I think I was waiting for my interview at Ogilvy and someone came in and said, no, it wasn't that great because I had to change planes in Addis Ababa or something. I remember thinking, you don't get that in the staff room. This sounds a bit interesting.

And, you know, it was the late 80s and we were all materialistic as hell. And advertising did have that kind of Venn diagram overlap between pretty interesting, reasonably lucrative. But, I mean, it is interesting how there is a kind of shallow logic there.

which often pervades decisions. You know, the assumption that you only train as doctors that number of people you need as doctors strikes me as a fundamental mistake. There's an opportunity cost there that we're probably not noticing. Yeah. And I think in the medicine path, there's also like weird bottlenecks in the system. So for example...

Last year, there were more people graduating medical school in the UK than there were foundation year junior doctor jobs available. But then as you go further down the path, there are a lot of specialties that are... Or most specialties are also oversubscribed in that applying for specialty training is competitive further down the line. And yet there are still loads and loads of rotor gaps and every single medic in every hospital would say, oh, like...

a third of our rota, a quarter of our rota is not filled. So there's some kind of supply demand mismatch for certain roles that is not being fulfilled while at the same time, the positions and specialty training are still oversubscribed.

Also, having people with the confidence to speak about medicine. You know, you could have a managerial role in the NHS where someone who is medically qualified patently has some sort of credibility that, you know, an average, you know, a box ticker wouldn't have. I mean, there's all, you know, there's all kind of value. The idea, I think, I think we have a very sort of weird utilitarian view of education, which is that everything has to be directly managed.

to serve some particular need. I completely disagree with this. I mean, in a sense, doing maths and classics was a fantastic training for going into direct marketing because you could write. I mean, one thing about classics is it teaches you to write basically because German would be the same. The understanding of grammar means you can look at a sentence and confidently say, that's okay.

Quote of Sir John Plum, I think, nothing blocks the creative mind more than fear of a solacism or something. But the fact that you can confidently write a sentence and go, that's okay.

Combine that with, to be honest, okay, if I were in charge of maths education and Rishi seems to be promoting it into the sixth form, which I don't think is a bad idea. A lot of people in the creative industries are going, oh, dear, you know. But actually, provided it's a different kind of maths, in particular, statistical understanding.

Because even highly educated journalists are obviously total idiots when it comes to the interpretation of statistics. What do you mean? Cathy Newman. I mean, you know, okay, her argument with Jordan Peterson, which is, you know, in other words, you know, univariate analysis of gender differentials, which no one in the social sciences would dream of doing.

Okay. I mean, you know a lot of journalists are obviously statistically completely illiterate if you look at something like the Meadows case Okay, this it was some it was it was a case where a fairly eminent medic Posited that the chance of two cop deaths in a single household Could be determined by multiplying the odds together as though there were no external factors either genetic or environmental failing to actually

Except the fact that both deaths were male which also increases the probability of cot death but also failing to do the elementary thing of comparing the probability of a double cot death with the probability of a double infanticide which is what you actually have to do which changes the odds from something like overwhelmingly guilty with a wrong statistical model to most likely innocent

Literally only more than 50 percent chance of innocence once you compare the two probabilities not effectively essentially saying Well, if it even if it isn't accident its murder, it's completely imbalanced But but but people with literally people with Oxbridge degrees who are eminent in the medical fraternity made that mistake barristers judges made that mistake and

So if this extra maths is largely around statistics, I mean I've never needed in my entire life to Work out the surface area of a cone and if I needed to do that, I think it is a third Pi it will be a third height times pi R squared of the radius of the base. I'm getting something about right Okay, I've never needed to do that. And if I did I'd google it or ring up somebody who knew yeah, okay on the other hand basic appreciation of statistics is

I use pretty much every day to a point where it's a kind of superpower. And so just having done what you might call, you know, statistics to a level standard and having a basic grasp of yes, but actually is unbelievably valuable in business or in virtually any other context. How so? Like, what do you mean that statistics is a superpower?

Well, it stops you being stupid Is one of the things it also makes you understand? really important concepts like the You know the trade-off between well the Explorer exploit trade-off is a really interesting concept which appears in AI But it also appears in things like the studies of animal foraging Okay, so there's a trade-off effectively if you're a foraging animal or for that matter you're an algorithm and

There's a trade-off between exploration and exploitation which is You know, obviously you're a total idiot if you don't exploit what you already know. Okay, if you make no use of pre-existing knowledge

But you're equally foolish, albeit in the slightly longer term, if you don't keep exploring but simply exploit what you know on the assumption that it will never change and your knowledge is utterly complete and incapable of improvement or enhancement or adaptation. And so understanding a few basic mathematical concepts, I think, is...

I'd make algorithms to live by, you know, one of the set texts for sixth form maths is really, really useful. I don't buy the... Actually, the other thing I don't buy is I don't buy the... A few creative people in advertising got really annoyed at more people being forced to do maths because they'd say, I would have left school earlier, I can't stand maths. Depends on the maths. But it's worth noting that, you know, solving mathematical problems by effectively rewriting the question

or redefining the problem, which is what an awful lot of advanced maths is, is actually a highly creative act. And you could actually make maths teaching actually almost a form of creative teaching if you got it right. You mentioned that you wouldn't be surprised if marketing became mostly female in the future. Why is that? No.

Partly just plotting the direction of travel, okay? Partly that generally...

As of now, I'm not suggesting it's innate, women seem to manifest a preference for working in people businesses slightly more. I'm not suggesting it's innate. It could be culturally inculcated, but it doesn't really matter because that seems to be happening. That point, I don't want to go all Jordan Peterson on that, but the weird thing that when you actually make employment...

You know more and more a matter of choice weirdly in some cases gender differences actually increase rather than reducing and

Also, I mean, for example, I think that there'll be a very, very substantial Indian contingent in marketing and advertising. Why? Because in India, it's very high status. You have these extraordinary kind of universities, extraordinary high level of education around marketing, not only in universities, but places like Unilever, Hindustan, Lever, which are kind of almost universities in themselves.

And you can simply see the extraordinary talent, the extraordinary marketing talent that's been produced. I mean, what we have, the head of Ford North America, Indian MasterCard, both, I think, the CEO and the marketing director. You know, you go on and on and on. And it's...

You know, it's absolutely clear-cut that this Okay, okay, let's not let's not neglect the base rate. Okay, the 1.5 billion people I came Which kind of helps? Yeah But but I know I just find it interesting because I think what often happens if you're bad at statistics You're not wrong to be angry about these things But either you get angry about the wrong thing or you have the wrong idea about how to solve the problem. I

Okay, we can see some degree of disparity will emerge from preference because preference emerges from circumstance Okay, and therefore if different groups actually grow up in different circumstances You would expect their preferences to differ and so if you don't account for that and you suggest that every single disparity is the role of either active or unconscious prejudice

I'm not saying you're wrong to discuss prejudice. I'm merely saying that you're miscalibrating it. And that there are other factors going on that we need to take into account. Yeah, and it worries me a bit because, you know, a lot of this is kind of HR dominated. And, you know, HR isn't necessarily the epicenter of sophisticated statistical understanding, if we're to be blunt about it. And so, you know, we've got to be... I mean, as with...

Sally Clark case, you know the the cop death case. Oh, yeah Getting statistics wrong is really goddamn dangerous And actually, I mean I was watching I'll just give you an interesting point here, which is that It's worth noting that if the data you collect is unrepresentative then the conclusions you will draw will be similarly biased. Okay, and

And first of all, which is a kind of quote of mine which gets adopted by other people, all big data comes from the same place, the past. Okay? And it's only reliable even if it's representative of what you truly need to know, which is a big if. It's only reliable if you can actually confidently say that the future is going to be very similar to the past. Okay? Which in the short term may be a safe assumption. Over a decade, not so much. Okay?

I was talking to someone last night who had worked for a big dairy company which delivered milk. And they had things down to an absolute fine art until suddenly the law changed and you were now allowed to buy milk from a supermarket. I mean, I think I can dimly remember when that happened, but it might have been earlier, actually. It might have been the early 60s before I was born. Now, you know, at that point, everything you think you know is no longer reliable as an assumption.

And the point I'm making there is that if you don't actually understand the limitations of your data or the biases of your data, obviously quantification bias, it's much easier to get data on things which happen to be numerical or measurable in terms of SI-derived units. Yeah.

Okay, but if I mean if you fundamentally get it wrong This is a case where you you can be not just a bit wrong. You can be unbelievably orders of magnitude wrong about the assumptions you make and one of the things that worries me, okay is let's assume that

that the quality of people's statistical understanding is on a bell curve, okay? Then, you know, with a little tale of very, very good statisticians. And then there are people who just know nothing on the left-hand side. Not to worry about them. People who don't know anything don't possibly, let's hope, won't pretend to know anything.

But what that does mean is that averagely good statisticians are going to massively outnumber really good statisticians. Okay. Well, that's true in lots of fields. I'm sure that averagely good plumbers, okay, massively outnumber really, really good plumbers.

But averagely good plumbers are still useful. They still do a good bit of plumbing from time to time. And assuming the job isn't like, you know, the cooling system for a nuclear power station, they're probably good enough. Okay. Whereas, okay, averagely good statisticians, particularly if they're confident, actively damaging and dangerous. Hmm.

Yeah, and so that you know, there's something we got it's something we've got to be really really alert to because it's like if you if you overlay the bell curve onto the Dining-Zugar curve proportion of very confident but very ill-informed people about statistics. Yeah and almost anything else Yeah, and particularly if they're confident or if they're simply overly preoccupied with the neatness of the model Yep, not with how the model actually differs from reality. I

Because you occasionally get this kind of pure now actually let's be fair a lot of very good statisticians Absolutely ring what they say with qualifications, but then unfortunately they're reporting to people who don't have the same nuanced understanding

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It's available on iPhone and Android, and you can check it out by typing in Trading212 into your respective app store. So thank you so much, Trading212, for sponsoring this episode. In one of your, I think it was one of your TED Talks or a talk that you gave, you said something interesting. You said that a lot of, in marketing, and I guess in life in general, there's...

A lot of stuff that gets missed because people are afraid to ask what seems like a stupid question. And so at the risk of asking what potentially is a stupid question, what is marketing? Dominic Cummings was regarded as being a bit of an arse, okay, by people in the civil service for continually asking why. Mm-hmm.

And it was regarded as childish. It's absolutely not childish. It's actually a very, very intelligent approach. Because generally what happens is that intermediate objectives start dominating what you might call attention at the expense of what is the ultimate objective. And so that business of going why five times in a row, which

Apparently within Downing Street the sort of senior civil servants regarding is you know Practically it was if you were banging knives and forks on the table going me want didn't it was okay It's not it's it looks childish. It's not necessarily a high status behavior This is one of the most interesting things I think I think in complex systems

Okay, in understanding of complex systems, in understanding of Newtonian systems, there's a kind of hierarchy of importance. There's the big stuff which has big effects, and there's the small stuff that has small effects. Okay?

And therefore, you know, if you pretend that the economy or that your business is a sort of Newtonian reductionist model, which I think management consultants do because they come from engineering. And when they want to model anything, they tend to model it as a machine. Okay. Now, in a machine, for example, everything tends to have one function. And therefore, you can define what something is for. This is what I call the Dorman fallacy. I don't know if you can remember. No, what is that? Okay. Okay.

So the doorman fallacy is you get a bunch of consultants into your five-star hotel and they go, they define the doorman's function as opening the door.

which is notionally what a doorman was for in the days before automatic doors. Of course, it's really just a linguistic convenience. Doorman do many, many other things, quite a lot of them tacit, recognition, security, gossiping with other doorman. Actually, just maintaining the status of the hotel, because if you want to charge 400 quid a night, you kind of got to have a doorman. Them's the rules, right? Yeah.

And what the consulting firm do is they go in, they define the doorman's role as opening the door.

And then they say, well, look, with our tech partners, who are probably paying us some sort of commission, we'll replace your doorman with an automatic opening sliding door with an infrared human recognition mechanism. And over the next five years, that's going to save you X. And everybody in the procurement and logistics function all clap and go, marvelous, we've secured this saving. And off the consultants go. And then five years later, you discover the rack rates now fallen by 50%. And they're vagrants asleep in the hotel entrance.

Because the doorman was doing lots of other things which weren't captured by your mechanistic model of the world. Yeah. Okay. And I see that happening a lot when tech replaces – generally, I'm pretty happy when tech augments the options of a consumer, you know.

When pay my smartphone app at car parks came along, I was ecstatically grateful because car parking was now typically costing six quid and having six pound coins or whatever was, you know, bloody painful. So, you know, as an option, as an alternative, that's great. Then what you notice is unless you've got a smartphone, you can't park.

Which effectively means that my dad, who's 92, can't use a car park if we're not careful. Okay? And so one of the things I think we've got to be really careful of is that fur line trap where something comes along as an option.

You know live chat, you know on the screen help whatever it may be comes along as an option We're all unbelievably grateful for it and love it because it's an option and then it's a bit like new coke classic coke You know the the the I think this is probably This is probably anecdotal but one of the research met mistakes they made with new coke is

was they didn't explain to people that this would replace old Coke. So people go, I quite like this. Yeah, okay, I'm all in favor of having a new variant of Coke.

It was only when they realized that old Coke, classic Coke was being withdrawn that they suddenly went, no, no, I don't like this at all. Now, what you see I've done there is okay. I think that in complex systems, it's kind of fractal. There are recurring patterns, and the patterns recur at a small scale and a big scale. So you can take something from the sale of chocolate bars, and you can apply it to a tax system. You can take an insight from...

Well, actually, okay, you can take an insight from a supermarket loyalty program Okay, and you can you can give advice to the Treasury on how they should design taxation? Okay, very simple. Let's take the boots advantage card you get marvelous thing. By the way, I helped launch it. Yeah Fantastic thing. Well, there's some fascinating things about the boots advantage gun one of which is in defiance of logic

Or economic logic rather what quite often happens is wife gets ill typically more more females than males have an advantage card Just because I'm not being sexist. Okay wife gets ill. Okay says the husband who needs some neurofen and some whatnot Okay, can you go to boots and buy me these various medical provisions just as he's leaving? Okay, she's oh by the way take my advantage card. So you'll get the points he goes along picks up the neurofen and you know, whatever else and

Goes to the tell, hands over the advantage card, at which point the person at the tell says, actually, you can buy these all on the points you've got on the card. And he goes, ka-ching, brilliant, okay. And goes back to wife, says, I didn't actually pay for any of this. I got it all with your points. And she's furious, right? Now you're going to go, okay, what the hell is going on there? Because it's immaterial in economic terms, whether you spend the points on Eurofen or whether you spend it on Chanel number 19.

However, we prefer buying indulgences on points than with money because it's less guilt-inducing, okay? It's rather like, you know, it's a lot less painful going business class using your Avios points than it is using your money, okay? Yeah.

And even though the advantage points actually have a cash value, okay, nonetheless, there's a very clear demarcation in the mind, cookie jar accounting, Richard Thaler calls it, between what you, you know, we actually apportion different forms of money towards different ends. And therefore, if you use what's the treat budget for the staples purchases, it violates some basic sense of internal mental accounting. Okay. Now,

Now the other one that's interesting is that let's imagine that instead of launching the advantage card Boots have simply dropped all their prices by 4% rather than giving 4% back in the shape of points. Okay Three years three years later everybody would have forgotten about it. Nobody would have noticed much of the time actually Okay, except the really anally retentive kind of you know value chasers. Okay, and everybody would have forgotten about it six months later Yeah, the points retain their salience

God, what is it? Getting on for, I don't know, it must be 15, 20 years after that card was launched. Now, OK, so here's my suggestion, right? We should never, ever cut taxes. We should pay people a rebate when it's possible. Because a reduction in the tax rate basically loses meaning. It has a half-life of about 12 months in terms of its meaning and significance.

An annual tax rebate, A, a lump sum will be appreciated far more than just a reduction in your outgoings. Okay.

Secondly, it will retain its salience in perpetuity. Thirdly, because it's mentally framed as a bonus, not a price cut, under exceptional circumstances, e.g. someone invades a neighboring country, there's a massive hike in the price of fuel, there's a problem with the tax take for a short term, you can withdraw the rebate much more painlessly than you can actually increase taxes. You can say for this year only,

Okay, whereas we tend to feel I think if tax rates go up that it's a ratchet It's going to be a long long time before they go back down again. So this business where you can literally take Psychological insights from loyalty program and deploy them at in a completely different domain and now what? Militates against it is this status idea in conversation? Okay

where important people talk about big things like interest rates, you know, and the Fed, okay? And you delegate small things down to junior people. Now, I have this mantra which is dare to be trivial because I argue that in complex systems, the interesting pattern is just as likely to reveal itself at the level of chocolate bars and loyalty programs.

Okay. I'll give you another beautiful example of this. Okay. Now, those of you who are older listening will remember a thing called BT friends and family. And that's where you nominated 10 of the people you call the most. And you got 15% off those calls. Now, standup comedians talked about friends and family. People in the pub talked about which 10 numbers. And it was a bit embarrassing because actually one of their friends and family was, you know, I don't know, a sex line or whatever. Okay. But,

That achieved a level of mental saliency. Now, it was 15% off 10 numbers. Now, admittedly, if you chose your top 10 because of the Pareto effect, that was probably like a 10% discount. People were engaged with friends and family over 10 years. If BT had simply dropped their call prices across the board by 15%, everybody would have forgotten about it almost immediately. Now, here's why I say dare to be trivial, right? If you want to understand patterns that are telling...

There is no telling because it's kind of fractal. There's no telling at what scale the pattern is going to be most salient or most visible. Yeah. Okay.

It is absolutely foolish to view the study of supermarket loyalty programs or chocolate bar promotions as being lower status than talking about Janet Yellen and the fucking Fed. Okay. And let me explain why with a very simple point. Okay. If you had gone to the Galapagos Islands in the early 19th century, you would have seen a bearded guy in an enormous hat wandering around measuring the beaks of finches. Okay.

Almost anybody would have looked at this and thought, what? Okay. However, it was in those telling details, you know, I mean, you can't get much more anal than, you know, Finchbeak comparison, right? I mean, I would regard discussing loyalty programs as, you know, comparatively high-minded compared to that. And yet, that's where the shit reveals itself. Yep.

And so I think this business of status where status is appropriate, where big things have big effects and small things. In the real world, because the human brain, creative people are annoying to ordinary people. I suddenly realized my daughter has, one of my daughters has sort of ADHD.

It's mostly hereditary and I suddenly realized when I looked at the diagnosis of it that I'd had it myself And one of the things it creates is a kind of incomprehension With people who don't have it because you don't have a sense of proportion in some some respect and then it occurred to me in complex systems in dealing with complex systems problems or creative problems where there are potential butterfly effects Your rights not to have a sense of proportion

Because the solution is just as likely to lie in something seemingly trivial or tangential as it is in something notionally important Okay, so actually the sense of portion of the status around what you might call the higher twaddle Which is its high status to talk about? Interest rates and then what you end up with then is your insistence on only talking about What you might call high-end thing. It's like the inflation rate the interest rate blah blah blah blah blah, okay, and

What that does is it massively limits your creative solution space because you're left with a tiny little Overton window of a few seemingly big things that you're allowed to tweak. And actually, loads and loads of really interesting solutions that lie elsewhere are totally unexplored because they're beneath your dignity. Yeah.

Okay, where's the balance here? Because traditional business advice is, let's say you're the CEO of the company. You focus on the big picture stuff, the mission, the vision, the values, the stuff where it will, by changing the course 1%, that multiplied out over the 100 people you've got in your company means that the company will change direction. But then you get stories of people like Steve Jobs getting involved with line height and letter spacing and font choice and all that stuff, which is completely counter to what a CEO of a company should be doing. Okay.

Okay. I did go and see a talk by Johnny Ive once, and I must say there was more discussion of bezels than I thought was altogether healthy. But, well, let me tell a story, okay, which is that in, I think, practically, you know, two weeks before the launch of the iPhone, Steve Jobs had an early prototype in his pocket with a plastic screen.

And he kept his keys in the same pocket, which frankly is stupid. Get a grip, Steve. Keys in the left pocket, phone in the right. It's not difficult. But anyway, for whatever reason, Steve kept his keys in the same pocket as his phone. And the screen was scratched. And more or less with weeks to go, he just went, okay, can this screen? We're going for Gorilla Glass. Okay.

Now, I think it was actually a bit unpleasant because the first delivery of Gorilla Glass turned up with Foxconn at 2 o'clock in the morning and all the workers were basically turfed out of their beds to start assembling iPhones, okay? But nonetheless, okay, very, very few people would have done that, would have had that perfectionistic urge. And actually, you know, art, artistry, craftsmanship is to some extent about a lot of proportion. In other words, you know, God is in the details, right?

as I think Mies van der Rohe, isn't it? You know, the fact that, I mean, service to some extent, okay, any service business to some extent achieves its distinctiveness in trivial details every bit as much as it does in, you know,

setting service level agreements which are because let's face it if your table stakes are the same as everybody else's table stakes no one's really going to comment or notice whereas you have that extraordinary place the I think it's called the Magic Castle in Los Angeles which is a pretty unprepossessing hotel which always seems to be in the top 10 hotels on TripAdvisor and one of the reasons is not the only reason I'm sure the staff are pretty great as well they have this popsicle hotline which is

Your kids are by the pool, they pick up this red phone and go, "Popsicles, please," and someone comes out, they're ice lollies to a British audience, and someone basically comes out with a tray of ice lollies for free. Now, it costs them almost nothing, but actually directing service gestures towards people's kids is a particularly clever thing to do, actually.

You know a good bit of evolutionary psychology here But making a fuss of people's kids actually gratifies the parents more than if you make a fuss of them great bit of advice from Great man called. Mr. Sridhar who ran Ogilvy in India was always, you know, when you buy a present buy it for the clients children Good Darwinian stuff

But, you know, I stayed in a hotel in Portugal once, which was a pretty good hotel. But then because we had young children, every day we came back to our room, the people doing the room had turned the towels into an elephant or a swan or something like this, which my children at the time, you know, were absolutely ecstatic. They were six, I'm 20. They were absolutely ecstatic about it. That sort of stuff is, in many ways, it's...

It's very different. You can't formalize it because the very fact that you're doing something Personalized and discretionary is what gives it all the meaning, you know the degree of personalization and the degree of discretion No one would ever say I thought that was extremely unsatisfactory hotel because they failed to fold my towels into strange animals Okay, that's exactly the point. That's why it seems amazing because Politeness good manners are to some extent discretionary efforts

You know holding a door for someone writing a thank-you letter, etc I do have an interesting debate about that in this week's spectator, which is that There will be so much suspicion that we've got chat GPT to write our thank-you letters that the only way to overcome this is to actually fill our thank-you letters with profanities and

So thanks very much for the fucking dinner party. Okay. It was totally boss, you know, Viva Il Duce. Because, of course, chat GPT can't say anything right wing and it can't say anything rude. Okay. And it can't say anything opinionated. So what we'll have to do is all our personal correspondence will have to become kind of, you know, absolutely profane in order for it to seem sincere.

This episode is very kindly brought to you by WeWork. Now, this is particularly exciting for me because I have been a full paying customer of WeWork for the last two years now. I discovered it during, you know, when the pandemic was on the verge of being lifted. And I'd spent like the whole year just sort of sitting in my room making YouTube videos. But then I discovered WeWork and

I was a member, me and Angus, my team members, we were members of the WeWork in Cambridge and they have like hundreds of other locations worldwide as well. And it was incredible because we had this fantastic, beautifully designed office space to go to, to work. And we found ourselves like every day, just at nine o'clock in the morning, just going to WeWork because it was a way nicer experience working from the coworking space than it was just sitting at home working. These days, what me and everyone on my team has is the all access pass, which means you're not tied to a specific WeWork location, but it means you can use any of their several hundred coworking spaces around London, around the UK, and also around the world.

And one of the things I really love about the coworking setup is that it's fantastic as a bit of a change of scenery. So these days I work from home, I've got the studio at home, but if I need to get some focused writing work done and I'm feeling a bit drained just sitting at my desk all day, I'll just pop over to the local WeWork, which is about a 10 minute walk from where I am. I'll take my laptop with me, I'll get some free coffee from there, I'll get a few snacks. And it's just such a great vibe and you get to meet cool people. I've made a few friends through meeting them at WeWork and it's just really nice being in an environment almost like a library, but kind of nicer because there's like

a little bit of soft music in the background and there's other kind of startup bros and creators and stuff in there as well. And it's just my absolute favorite coworking space of all time. It's super easy to book a desk or book a conference room using the app. And it's a great place to meet up with team members if you're going to collaborate and you'll live in different places. They've got unlimited tea and coffee and herbal teas and drinks on tap. And they've got soundproof booths in which to take Zoom calls and meetings. Anyway, if you're looking for a coworking space for you or your team, then I'd 100% recommend WeWork. Like I said, I've been a paying customer for theirs for the last two years.

which is why it's particularly exciting that they're now sponsoring this episode. And if you want to get 50% off your first booking, then do head over to we.co forward slash Ali. And you can use the coupon code Ali at checkout ALI to get 50% off your first booking. So thank you so much WeWork for sponsoring this episode. I was at this marketing mastermind conference type thing in Miami last week. And one of the guys gave a really good talk about word of mouth marketing. Yeah.

And one of his main points was that the way you get word of mouth is by having these kind of talk triggers, having certain things about the service or something that are remarkable and therefore worth remarking on. Purple Cow, I think, is a book by Seth Godin where he almost suggests, I think, in Purple Cow, you build talkability into the product. Yeah.

I often say that if you can build something into the product and imagine a stand-up, we've got, funnily enough, there's a brilliant creative approach I can't tell you about that Ogilvy's just come up with for the Mayor of London, okay? And it meets this perfectly, which is if you can imagine a stand-up comedian doing a routine about your product, okay, then you're onto something.

You know, you know in other words if it almost requires you to You know sacrifice your own, you know some of your own seriousness. This is what I mean about status Okay, the urge to appear serious is in many ways I think a disaster in marketing because marketing marketing looks at the world from at a 90-degree angle to the rest of the organization the rest of the organization looks at it through an efficiency lens and

Actually an exploit lens not an explore lens and everything is an optimization problem Okay, we look at things through the consumers own eyes over time They look at things as a snapshot aggregate. Okay as a result their view of the world is when it comes to customers very stupid and

Because the snapshot aggregate doesn't tell you anything about your customers. In fact, it's woefully misleading because the average customer probably doesn't even exist. Okay?

And so I'll give you a perfect example of that, which I've been ranting about repeatedly, which is high-speed one is a fantastic idea. By the way, it took a long time to get off the ground. I mean, I used to use it in the early years, and you probably got a carriage to yourself. Oh, I wonder if you can give some context on that for the international. Oh, gosh, international. My goodness. Okay. So high-speed one runs from Kent, which is a very big county and gloriously beautiful, he says, as a Kent property owner. Yeah.

The but it's adjacent to London, but it's it at its furthest point. It's about 60 to 70 miles from Central London. Okay, and

Think of it as kind of Connecticut plus the southern bit of what is it Massachusetts? I don't know something like that. What that is they built on the back of the Eurostar They wouldn't have built it and otherwise but since there was a high-speed line going to Paris From some pancreas to the coast in Folkestone They decided that the Eurostar didn't generate enough traffic to justify this line on its own. So they ran local effectively commuter services at very high speed so suddenly you could get from Ashford to

To London in 37 minutes or 30 minutes to Stratford. Would you believe it? Whereas previously it had taken I think 90 if I'm right, it might have been slightly less It was certainly over an hour Okay. Now if you think about that what that means is that someone in Ashford who decides to work in London? Effectively saves an hour a day 200 times a year probably a bit less with flexible working, but you get my point. Okay, so

Now, what the people who design railways do when they make a justification for the investment in time saving is they basically give an economic opportunity cost to all time spent on a train. Okay.

They calculate the value of the time saving by the assumption which is ludicrous by the way that all time spent in transit is economically unproductive In fact, as anybody who works on a train knows it could be the best moment of your I fantasize about three-hour train journey The whole premise is fucking stupid to begin with okay, but anyway even on that premise, okay, it doesn't distinguish between one person saving an hour 200 times a year and

And 200 people saving an hour once a year. Now, High Speed 2, which runs from London to Manchester, we're not going to get not many people can afford to commute from Manchester to London. And so it's not the same as Canterbury, Ashford, Folkestone, Ramsgate. It's not the same as those places where you could conceivably work in London at least three days a week, maybe five, and pay the commuting cost. This is a journey which...

All but a very, very few people take once a year, nought times a year, maybe in my case, four times a year. London, Manchester. London, Manchester. Okay. Now, saving a lot of people an hour infrequently looks the same to the statistical model as saving a few people an hour every day or very frequently. Okay.

I would argue that in psychological and behavioral terms these things although mathematically identical in the aggregate are totally different One of them means hey Wow, I can now get a job in London or for Londoner wouldn't be a bad move by the way Hey, wow, I can move to Canterbury right? All right or the seaside deal, you know, Walma. So I'm just helping out the local state sandwich, okay broad stairs Whitstable, okay now

The interesting thing there is I think it's absolutely fallacious to treat those things as if they're commutative, as if one times 100 is the same as 100 times one. And what a marketer would do is a marketer would say, well, how is this going to change behavior looked at through the eyes of 20 different people?

And they might look at high speed two and go, meh. And they might look at high speed one and go, actually, that's a bit of a game changer. OK, it's a niche audience, but it's a hell of a game changer. This will actually change. Bear in mind, by the way, when it was built, just to be clear, East Kent was, although one of the home counties, it was the only part of the Southeast England where average property prices were less than five times average income. It was, to some extent, economically a little deprived.

And therefore, spending this money was not an intelligent thing to do at all. So what I'm saying is that as a marketer, you will always be at odds with the rest of the organization because you're looking at things literally or actually perpendicularly to them. They're looking at aggregates because they're reporting up to the shareholders. And they're interested in just aggregate figures. How does this all add up? And where necessary, we'll take an average.

What we're doing is actually taking the consumers eye view which is literally at 90 degrees So this idea by the way that data is objective is absolutely untrue What data tells you entirely depends on the context and the angle at which you look at it. So quite often sequential What's the correct term for a cohort data or? longitudinal data, okay

Tells a very very different story to comparisons of snapshot data. Yeah, so now just be clear about this Okay, I'm not saying that in wealth inequality isn't a problem Okay, but I'm saying that if you want to solve the problem, you've got to actually define it properly and

And one of the interesting things is that actually quite a few people will go from the poorest quartile to the richest quartile of the population in the course of their lifetime. Most data on wealth inequality, on widening wealth inequality, just compares the top and bottom quartile at one point

To the top and bottom quartile at another point, without acknowledging that they're not the same people. So, for example, a newly qualified barrister, probably very heavily in debt, probably qualifies as being notionally in the poorest decile of the population. Now, nobody thinks of that guy as poor because his prospects are pretty good. In fact, banks will lend to the guy probably pretty readily. Okay?

But it's vitally important that we, the idea that when you have a chart or when you have data, that it will deliver objective information regardless of how you actually interrogate it is complete nonsense.

You can take exactly the same data, and if you want to, you can use it to tell two completely different stories. Quite a lot of people... By the way, one facet of wealth inequality is simply that old people are richer than poor people because they've accumulated more shit over time. Okay? Yeah. Now...

Now, you might argue, you could actually, interestingly, you could have a society which was getting poorer on average over time, but where everybody was getting richer over the course of their life. Now, that actually might be a weirdly relatively contented society, whereas a society which was getting richer on average, but where everybody was getting poorer over the course of their life, psychologically would be a completely different thing. They're both possible, by the way.

They're both unusual. Yeah, but they're both theoretic both both situations of theory. I'm struggling to imagine this in my mind Yeah, so you just have young people who are getting much much richer all the time And then just going into sort of total decline. Okay over life, but nonetheless the aggregate population is getting richer and

There are other debates which no one can touch statistically which is Everybody treats equal opportunity as though it's one generation at a time Okay, in other words that you in other words your Prospects should be independent of your parents wealth means okay And it's axiomatic that equality of opportunity means that okay. Yeah, however

I think we would find such a society almost intolerable. Oh, how so? Well, if in other words, you could go from, you know, very rich parents, this must have happened in Cambodia under Pol Pot, I'm guessing, okay?

But if you had that thing where, you know, literally people with, you know, wealthy middle-class parents were forced to work in a lathe factory, regardless of what they wanted to do, et cetera, in the interest of fairness, okay? Because undoubtedly your upbringing has some bearing on your preferences. Yep. You know, and actually this is an interesting case because what we regard as statistically desirable might actually not be very pleasant in reality, simply because you could fall to... You've got to remember that for people to rise fast...

Okay, different in the 1960s, you had massive expansion of the middle class, right? So you have an awful lot of people could be upwardly mobile at that time, unless you actually expand the middle. I would argue the middle class is already uselessly large. Okay, but unless you continue to expand the middle class to the point of absurdity, you're not going to have that. That's a one-off. That's not an eternal opportunity.

And actually, you might argue that the price in how far people have to fall in terms of loss aversion would actually outweigh the pleasure of the people who gained. What is marketing? And like, what got you interested in it in the first place?

Right. Well, very interestingly, as I said, there was this slightly banal end of the 80s. Here's a job which isn't boring like banking. And yet it's reasonably lucrative. It's not totally, you know, penurious like, you know, publishing or something. OK, so that drew me in. And then by very, very happy accident.

I didn't get a job in a conventional ad agency. I nearly did at two of them. Just missed out and ended up getting a job at a place called then Ogilvy May the Direct, which was a direct marketing agency, which is selling off the page, direct mail, telemarketing. Okay. That was my graduate training job. And David Ogilvy actually recommended that anybody who wanted to be an advertising creative should spend their first four years in direct marketing learning what actually works.

So what is direct marketing as distinct from other forms of marketing?

Build a relationship with the person you're selling to. So you found their name and address at the time, which meant you could send them direct mail. Or you mailed them for acquisition. You used direct mail for acquisition. Or you...

You know or you operated a call center there was anything where there was a one-to-one contact direct because as Distinct from marketing products which are sold through intermediaries like supermarkets. Okay. Okay, so If dove writes to a consumer that's direct mark. Yeah Okay, if dove places an ad on TV and you walk into Tesco's and buy some down. Yeah, that's not oh fine Got it

So a Facebook ad would be... Yes, it probably is because you know who it is. We never realized we were going to create that monster in a way. And it's gone from being... Direct marketing has probably gone from being underused to overused. Okay, how so? Typical neophilia. When a new medium comes along, we tend to overweight the things the new medium allows you to do that the old one didn't.

Okay, and we underweight things that the old one did that the new one doesn't do very well It's rather like the Kindle, you know when I when the Kindle first came on I naively said oh, this is just gonna replace books. Mm-hmm

Of course doesn't replace books because okay probably about 40% of books are bought as gifts in by volume about by value Okay, you know Christmas is a huge swan of the publishing game The biggest categories in books are kind of book cookery gardening lifestyle Architecture that kind of shit which requires really high quality photography. Okay, and

So actually, you know the kindle isn't going to do either of those two jobs just to just from the off. It's purely textual nonfiction reference huge advantages there if the person buying the book travels a lot and loves the fact they can be sitting at 35,000 feet Nova Wi-Fi can buy a copy of a novel that's miraculous Okay, don't get me wrong. It's a fantastic advantage over conventional books but equally

We're in danger of throwing the baby out with the bathwater, which I think we're doing with marketing as well to the same extent. We're forgetting what... In other words, being able to measure and to quantify and to justify your spend in direct media, which was always what made them different to some extent, there was a direct attributable measurement of behavioural change as a result of your particular piece of stimulus, ad, OK? Yeah.

Actually, by the way, it was not nearly as direct and attributable because obviously if you're doing direct marketing for a strong brand like American Express, which was a big advertiser, you've got a proportionally much bigger response than if you're advertising for someone on behalf of someone they'd never heard of. So it was a bit of a nonsense to claim that the value of the acquisition was entirely attributable to the letter you sent the customer. Okay.

But nonetheless, that measurability was valuable. But unfortunately, people have got so obsessed with it that they're now unable to do anything that you can't perfectly quantify. And actually, there are quite a lot of valuable marketing activities, which I would argue are actually probabilistic. You just make a load of noise because I can't tell to a great degree of exactitude who my customers are going to be in five years' time.

So the best thing I can do is make sure they've heard of me so that should they enter the market for the product I sell, they at least consider what I have to provide. And it's doing it backwards. In other words, let's not try and find the customers. Let's make sure the customers know enough about us that they'll come and find us. And they're complementary, by the way. You can do both. They're not mutually exclusive.

But because the one is both harder to measure and slower to reveal its results than the other, we've disproportionately favored what's quantifiable over what's important. Because it's quantification bias again. It's that same thing all over again. Sometimes called the...

Who the hell was the guy who kind of was behind the Vietnam War, metrics in the Vietnam War? Which it's occasionally called, I'll remember his name in a second. The problem it creates, there are many, many long-term things which will never be measurable or attributable simply because in between the initial stimulus and the eventual purchase,

too much happens. I mean, famously, someone said to Jeremy Bulmore, they said, the great, wonderful advertising guru who died earlier this year at 92, they said, you know, I've just bought an Aston Martin. It won't surprise you to know I bought the Aston Martin as the result of an advertisement I saw. What may surprise you is I saw that advertisement when I was 12 years old. Okay. And so, you know, a large part of this stuff is probabilistic. Well, the perfect demonstration of this to me

was if I'd sat down and said, who is the target audience for my book, Alchemy? I would have defined it in terms of people interested in marketing, people interested in psychology, people interested in behavioral science. And those people, it's true, are disproportionately interested in this kind of thing.

But outside those areas of interest, there are probably another million people who would quite enjoy reading the book out of curiosity. And one day, it was June, I think, in about 2018, if I got this right. I appear on the Chris Evans Breakfast Show, audience of about a million people.

And Chris Evans interviews me about the book. And, you know, I give a reasonably good account of things. What I didn't know is that Chris then went to the beach because it was being broadcast from Cannes, the advertising festival. And one of Chris's assistants had just read the book and said, Chris, you'll like this. And this guy's probably in Cannes because he works in advertising. The following day, which I didn't know because I was pottering around, obviously not listening to Virgin because I was in France. OK, Chris had finished the book. He was raving about it, quoting from it and everything else.

The first I got to know about this was I went on to Amazon to look at the sales ranking Okay, and I was out said I outsold JK Rowling for about a week. I out so I couldn't outsell the book of nom and

I outsold the Highway Code and I outsold the Hungry Little Caterpillar for a day, I think. But what was interesting was that this was entirely the result of the radio program reaching audiences you, in other words, you never would have defined in advance. I think I was number eight on Amazon overall for a few days.

And I suddenly realized, okay, you know, there are two directions. This is what bees do. You know, there's exploit, explore. There's we know where the pollen is. Let's go and get more of it. And there's this supply of pollen is not...

The sum total of available resources we need to explore elsewhere partly to future-proof the hive against you know a sudden depletion of your existing Supply okay and partly by the way just for the chance of getting lucky You know if you don't actually invest a certain amount in explore rather than exploit You'll never have a kind of big bonanza upside discovery. You'll never have a pleasant surprise. You'll only have nasty surprises. Yeah, I

Which is interesting because when you think about it, most businesses are optimized around exploit. Once they pass the entrepreneurial phase, it's okay. We know what we're doing now. Let's just do more of it more efficiently. Mm-hmm.

And in the short term, of course, it's great. But, you know, if you got rid of the random bees who troll around looking for pollen at random, yep, in the short term, your pollen and nectar collection figures would look more impressive. The problem is, is that it's downhill from there on. You can't cost cut your way to growth, putting it another way. All righty. So on this point about kind of defining your audience, we were having, honestly, like sort of before you came here, we were having a bit of a dilemma, trying to figure out like,

who is the target audience for a conversation like this? And then that got us thinking, who's the target audience for the podcast? Because we have like an average of like who I kind of think is the person who watches the podcast, which is probably male, probably in the West, probably a few years younger than me. So maybe in like early to mid 20s, probably has like a normal job, normal job, probably is keen to start some kind of side hustle because they like the idea of financial independence. But that's like, we have a huge audience on the YouTube channel, on the podcast, which is all over the world.

Around about 60, 40, male, female, like all sorts of age groups, people from, you know, I get emails from people who are in their 60s who listen to the podcast. Oh, absolutely. Yeah. So any ideas on how to strike this balance between it's worth defining a target audience versus it's not worth defining a target audience? One thing that people get muddled up with is user imagery versus target audience. Okay.

If you look at ads for small cars, they will almost certainly show the car being driven around by a sort of 32-year-old, 28-year-old, typically female person, which is the user imagery. Overwhelmingly, all new cars are bought by the relatively elderly. All cars bought from new. I think the average age of a Volkswagen buyer is probably about 54. New. Oh, wow. A new Volkswagen. I mean...

I've only had one new car in my entire life. In fact, I'm 57. Maybe I had two. Now, the difference there is that there are some wealthy 28-year-old females who are buying brand new Peugeot 20-whatever's.

Now, the reason you use them as the user imagery is if you show 27-year-old girls driving the car, 58-year-old or 64-year-old retirees don't mind buying it. But if you show the car being driven by 65-year-olds, you'll entirely lose your 28-year-old audience. So there's a kind of interesting idea of who you're talking to, okay, or who you feature as your user imagery. But don't ever get confused that that's actually your target audience.

Ah, okay. Okay. And actually, by the way, if you look at the work of Byron Sharp, if you look at the marketing work of also probably Mark Ritson and other people, also Binette and Field, I'm quoting sort of pretty good academics, most brands are actually bought as part of a repertoire. And what distinguishes leading brands is that more people buy them sometimes, and the people who buy them sometimes tend to buy them more often.

Sorry, more people buy them sometimes. Yeah. So, okay. I've got a perfect expression for this, which is my favorite end line of all time in advertising, which is the most interesting man in the world for Dos Equis, who says, I do not always drink beer, but when I do, I prefer Dos Equis.

Stay thirsty, my friend. He's got a Hemingway-esque character, okay? Now, of course, the most interesting man in the world wouldn't only drink beer, okay? And he wouldn't even stick to one brand of beer. But what he does is he doesn't always drink beer, but when he does drink beer, he tends to drink Dos Equis. And if you have more of those people than your competitors, then you're the leading brand. It's not a matter of perfect loyalty. So it's like the hypey two. Exactly, yeah.

So it's important, actually, to understand these things. I mean, one of the things I don't think is understood as well is that one thing that's increasingly interesting me is what are the products that nobody wants, but that once you've experienced them, they fundamentally create...

create a convert or a Even an evangelist Japanese toilet seats. You've got it exactly Japanese time to one air fryers probably another Okay, where weirdly nobody wants the thing everything is what the hell are you talking about? And then anybody who owns one of the people who own them about 50% of people effectively becomes That's why I bought an air fryer

And it occurred to me that one of the important roles of advertising, and by the way, this is much, much easier for products you use frequently than products you use infrequently. One of the things I was watching on YouTube,

Little listener tip, YouTube Premium. Nobody has it, but it's the best value thing you'll ever buy. Absolutely incredible. Okay, ad-free YouTube. We didn't buy it when YouTube first came out because YouTube was full of slightly grainy, shot on a wobbly phone, you know, kind of low-resolution stuff. I mean, huge swathes of it are now kind of 4K broadcast quality, watch it on your 55-inch Kelly. And it's only a year or two away from becoming Wikipedia with video. Hmm.

Because the volume of what's on YouTube is now so unbelievably kind of comprehensive that actually you can use YouTube pretty much in the way that you'd use Wikipedia, in fact. But anyway, sorry, part of that. I was watching a YouTube video which was a kind of cut down of the Dragon's Den, which for American listeners is known as Shark Tank in the US. It featured the...

The worst mistakes that the Dragons had made, okay? The trunky suitcase, the ride-on suitcase was one, okay? I can't remember the other one. But the most egregious one was effectively a brand called Hungry House, which ended up being sold to a German company and then sold to Just Eat for, I think, £220 million, okay? So missing that was clearly a mistake, okay?

And they're all having arguments. This is this exactly back to this point about the is it a hundred people doing is it a hundred people doing something once or is it one person doing something a hundred times? Okay

I kind of went and analysed this. By the way, I don't want you to think that I regard, you know, Dragon's Den or The Apprentice as somehow emblematic of business. They're extraordinarily ridiculous. I mean, I worry about it, actually, the extent to which most people's view of free market capitalism must be coloured by the Dragon's Den or The Apprentice. Oh, yeah. Which are absurd, I mean, in many ways. OK, they're wonderful, but they're absurd. I mean, just on that note, the person we interviewed last week made it to the final, like, ten for The Apprentice.

But they said her business plan was too good and she should just get investment and start a business, which she did, rather than actually go on the show. Rather than actually winning the program. Yeah, because they said to her, look, we're going to be honest. The show is entertainment. Your business plan is too good. So just execute on that. And so she wasn't on the show. Now, the interesting thing there is that I looked at this and thought, how did you miss it? And they were having an argument with Deborah Meaden, having an argument with...

You know, I think it was bannatyne about you know, how no bear my this was in the either late 90s early 2000s There was an argument about whether people would actually order takeaway food for delivery or collection over the web at all Okay

Sounds ridiculous now, but there was an early attempt to do pizza ordering online in the late 90s Which failed because people said well I just pick up the phone because their level of confidence in it was so low that you typically order your pizzas Online and then ring up the pizza place to go. Did you get my internet order? Okay. Well, that's clearly not a benefit to anybody. Okay, so

But anyway, it suddenly occurred to me that the question they failed to ask the people who are running Hungry House, which was the only question that mattered, was this. When people use your product or service once, do they go on using it? Or a secondary question, which may be a catch, you know, kind of safety net. When people use your product three times, do they go on using it? In other words, now...

This comes to a fairly philosophical point in both economics and anything else, which is that there are certain things which it is pointless to speculate about in advance because the act of owning them or using them fundamentally changes your utility function and your preferences. Now, the most extreme case, and Russ Roberts of the utterly brilliant EconTalk podcast

Okay, Russ Roberts talks about this having children. Okay from the point of view of a single couple or a single person it

It's an utterly stupid decision having children, okay? Because all the things you enjoy as a single person become either impossible or really expensive. Every time you stay in a hotel, you're paying for two rooms out of one salary when you were paying for one room out of two salaries. So now staying at the travel lodge is probably more expensive than staying at the Intercontinental before. You can't go out to nightclubs without getting babysitting or...

All the shit you really enjoy is more or less destroyed and the buggers are really really expensive. Okay, it's a terrible decision having children Except for the fact that once you have children Thanks to evolutionary psychology all your preferences your priorities and your idea of utility completely changes. Yeah, okay so that those things become comparatively much less important and the you know the well-being and happiness of your children become correspondingly more important now

Kind of slightly banal level a Japanese toilet is the same. Okay, but until you've actually tried it Once you've tried a Japanese toilet Okay going back to a basic Western toilet is as yawning a Gulf as going through a Western dry wipe toilet - shitting in a hole in the garden That's that's about their comparative distance in terms of perception. Okay, so

Now, similarly, an air fryer, once you've had it, no going. Multi-channel TV, mobile phone. Probably the electric car, interestingly. Now, it strikes me that one of the things we fail to do with a lot of dot-com ideas

is ask how frequently will this be used? Because those things, mobile phone, multi-channel TV, electric car, air fryer, Japanese toilet, are all things which, by definition, assuming you've got reasonable bowel health, you're going to use every day, okay? Or at least every two days, okay? Yeah.

Alright? Now, those things change your fundamentally... If you do something differently frequently, I park a lot at the station. So the parking app kind of changes my whole view of parking, okay?

If you only park once a year, I would argue that you know actually a parking up is a pain in the ass Okay, yes, if you only if you only actually park in a station car park once a year the fact that you now have to Use that to park there for my dad who doesn't even have a smartphone. It's actually a Complete obstacle for other people. It's a monstrous pain. Yeah, by the way, we're not treating the elderly very well with tech. Mm-hmm

Okay, we are up tech should be enabling people to stay in their homes for longer and if anything it's creating actually, you know Unbelievable obstacles my dad was selling books in his mid to late 80s was selling books on Amazon Okay, he's not a techno Luddite by any means but he says at the age of 92 he said I've just got to a point where Resetting my password is means it doesn't say mind fuck, but that's what he means. Okay, and um

We haven't we haven't thought those things through adequately at all But that frequency thing really interests me because I see a lot of dot-com ideas and I go this is a great idea in theory But actually it's a it's it's a hundred thousand people doing something once. Yep What you really need is actually to get something started. It's ten thousand people doing something once a week or once a day and

Because rather like having children, those are the things where once, to quote the Vauxhall end line of the 2000s, once driven, forever smitten.

That the act of owning it, of doing it. Nobody in Britain wanted multi-channel TV back in the 80s and 90s. They were a stupid American thing. There's just a load of rubbish on, you know, what's wrong with four channels? Yeah. Okay. But nobody who had multi-channel TV ever went back. I don't think we asked this question, what I might call the longitudinal question, nearly enough. Because everybody's looking at the sales, the aggregate sales figures for electric cars. Okay. Yeah.

The real question you need to ask if you want to predict where the market's going is, of the people who buy electric cars, how many of them revert?

In other words, is this a one-way street where once owned, your fundamental preferences are so changed by the experience of the alternative? One thing I always thought was a bit like that, if I'm being absolutely candid about it, which had a lot of resistance but nobody ever went back, was driving an automatic. Loads of Brits used to talk about it as bollocks, like, no, it's the sense of control, all that sort of stuff. Now, the reason Brits didn't drive automatics was that

Many American so many British cars of the 50s and 60s were so bloody weedy Okay, you needed a manual transmission just to get up a bloody hill Okay, and also automatics only had typically three speeds now big American v8 had no trouble handling that but a Morris minor would have basically ground to a halt a Good bit of trivia by the way the Morris minor if I've got this right engine the 1200 CC probably engine

was also the starter motor for the Centurion tank. Oh, okay. So, okay, that's a good bit of trivia. So it was so feeble in a sense that it was actually... When you put it in a tank, it was merely the starter motor. But...

Actually, everybody talks this crap about automatics, but everybody who drives an automatic goes, well, sod that manual for a game of soldiers. You know, because... Now, don't get me wrong. If I lived in the north of Scotland, just off the A9, OK, and I had long, glorious, winding, open roads, I'd probably revert to a manual for the pleasure of kind of, you know...

You know gear changing and control. Yeah, most of my driving is either on a motorway where you just drive along at a constant speed Or I'm stuck in traffic. Yeah now in both those situations or actually more extreme I'm maneuvering in a car park where I much prefer the creep that you enjoy through an automatic because you can maneuver at very slow speeds without running over dogs and things okay, yeah

Now, I think that's a typical case where nobody wants it, but once you've experienced it, what you want fundamentally changes. So there's probably an important role for advertising in just generating trial and accelerating take-up because the two big forces in human instinct are social copying, do what everybody else does, and habit, do what I've done before. And as a result, behavior change tends to take on a sigmoid curve shape.

And it occurred to me that people who don't know this

May have been writing off lots of products too early Because they failed to realize that most new significant ideas are very slow to take off at the beginning And there were mobile phones in Britain in the 1970s my father's business partner had one Where you basically radioed a great big aerial and you said can you please put me through to Raglan 201 and someone put but it was a car phone. Okay, and

And so those things existed for years. And then, okay, part of it was technological improvement. Part of it was just people then experienced them.

People who a year earlier and said why would I want to make a phone call in the street? Hmm. I used a mobile phone in Oxford Street 1989 two people rolled down the windows of taxis and shouted abuse at me. Oh, well, okay, but yeah Someone's visibly using a mobile phone on Oxford Street You know this wasn't in the depths of the countryside where they thought it was witchcraft the opposite street And they actually pulled down a taxi window went wanker. Okay. Yeah, right that

It was only, okay, it was seven years before, you know, to take that technology to the mainstream. But it always occurred to me, I think they bailed on Google Glass much too early, for example. You know, four years later, three years later, I would have been pissed at an airport and I would have just bought it.

You know, I think it's very important we realize this because if you think that adoption of things is linear, you will often give up too soon. The question you need to ask is not how fast are we growing? It's how sticky is this product? Yeah. What are your thoughts on brand redesigns?

Because we're having this issue. Well, yeah, a bit of an issue right now in that for the YouTube channel and for the podcast and stuff, we've done a bit of a rebrand. And I think the new one looks pretty sick. But there's a lot of people on our team being like, oh, it doesn't look as friendly or as nice as like the old one did.

And it strikes me that I remember... Is there a recognizable line from one to the other? Is this a refresh or a complete rebrand? I think there's a little bit of a recognizable line. It's like, okay, I can see that this rebrand or refresh is sort of making everything a little bit more consistent. Whereas previously it was a bit of a hodgepodge of different things.

And it kind of got me thinking about back when Facebook was a thing. Be really, really careful, by the way, because the extent to which we select icons, and often we select a podcast through a kind of icon, okay? The extent to which that's an unconscious thing, which will be completely, you know, kiboshed by too great a change of colour. Yeah. I think you've got to be really goddamn careful there. Hmm.

particularly given the kind of choice architecture around which podcast should I listen to now. So, you know, you might want to look at a slower migration approach

It's always notable that at no point does anybody come, although I think it's becoming increasingly a terrible site, by the way. No one's ever turned up at the Amazon website and thought, what the hell's going on here? Yeah. Okay. You know, the whole thing has been an evolution. Very slow changes over time. I think if I'm right, they basically allow, which is a mistake, by the way, they allow algorithms pretty much to determine the site now. So there's continuous testing on the background of small things.

That does mean that there is ultimately the opportunity for someone to come along and completely wrong-foot them. I mean, it always baffles me, by the way, that Shopify hasn't created a search engine.

Yeah, they really should. It's all weird, isn't it? Yeah. I did ask the guy once. They said, oh, it would be unfair because it would mean we're discriminating between our customers. And I thought, well, the customers would much prefer to get five times the business and for a competitor to get seven times the business than to stay along in this kind of, you know, in what you might call egalitarian obscurity.

It's so nice when something is on Shopify and has shop pay as an option. Yes, isn't it just? It's almost easier than Amazon at that point. But also the ability to select by, I mean, this is something that's really fascinating. The whole question of choice architecture is one of the really, really robust findings of behavioral science.

And the way you present a choice to people, okay, will... And the order in which they're asked to eliminate things by attribute, okay, will have an enormous effect on what they end up choosing. Okay. What do you mean the order in which they... Right. Well, an example would be...

Let's imagine okay. We bought art the way we bought property So alongside say prime location or right move there was a thing called right art Okay, and you went I like something about five feet by three feet Featuring two goats and a cow mostly blue but with a smattering of pinks. Okay between these two price points Yeah, okay in that world Picasso's are we really cheap because they'd hardly ever show up. Yeah, okay, so

Now, obviously, we don't buy art like that. But is it right that we buy property with aesthetics and design because they're harder to quantify so far down the decision tree that all you end up doing is you go location, price, number of bedrooms. Number of bedrooms is a terrible metric, by the way, because it means that every single person dealing property has an incentive to provide lots of totally...

tiny bedrooms, okay? And as a result, we have too few toilets, too few bathrooms, you know, and instead of having what every house needs actually is one really big room, okay? Right? Instead of that, you know, you have too many rooms that are too small and too few rooms that aren't bedrooms, arguably, okay? And so that's a distortion. I mean, in Europe, in the US, they tend to do it by square footage or square meterage.

But then, okay, what if you change things? Now, okay, there's a website that does this, themodernhouse.net, okay? And themodernhouse.net basically makes some sort of architectural distinction a prerequisite for appearing on the site. Yeah.

Now if you had a Parker score for this is my weird observation that architecture is the cheapest way to buy art Because really good architecture for a given location and size of property only adds about one or two percent to the price of a house. Mm-hmm

Place actually at the Isocon up in Hampstead. I think it's one bedroom flat. Absolute, you know, kind of a modernist masterpiece. OK, there's a place near Tunbridge for sale, which is actually by Gropius and Fry. No premium as far as I can see over any house nearby. Now, you know, that's weird, right? OK.

It seems weird to me that you know people will pay an enormous amount of money to own a painting by a great artist Compared to an indifferent artist. I live in the roof of Robert Adam House my next-door neighbor in the flat next door is an economist I said how much we actually pay is a premium for the fact that this is a Robert Adam House Rather than just some random piece of shit of the same location. He said I wondered about that He said somewhere between nought and two percent now. That's crazy, right?

Because presumably aesthetics, you know, unless I'm wrong about everything, aesthetics and design can contribute quite significantly to happiness. We'd much rather own a house. Or you could argue, by the way, the best measure on right move would be how attractive the house opposite is.

Because that's what you're looking at. I lived in Westbourne Park Villas when I first moved to London in a place backing onto the Paddington railway tracks, which was, to be honest, a bit of a shithole. But we woke up in the morning and looked at a sort of £1 million house on Westbourne Park Villas. And I always felt sorry for them because they'd paid £1.4 million to look at us. What I'm saying is that in many cases, the way we choose is based on kind of arbitrary, you know,

I mean, one of the most peculiar things that's happening in property at the moment, by the way, is that you must never, ever try and sell a house for £675,000. Because all the property websites have, at that price point, it's £650,000, £700,000, I think. It might be £600,000.

700,000 but I think they stop at 50,000 increments if you price your house at 25 You're in between two and so the people searching 600 up or the people searching 650 and down are less likely to find you and so your house won't sell So now you don't have a price-demand curve. You have a price-demand ziggurat. Yeah, okay That's the example of how how you present choice will distort a market. I

The reason, by the way, these Amazon brands are all called Amazon marketplace brands, right? Do you know why? No. Because I was going, geez, I'm thinking I'm going to emigrate to Shanghai and just become a branding expert by saying next time, rather than using a set of Scrabble tiles to name your brand, why don't you actually have something that's memorable and suggests you're actually on the business of building a brand reputation, right?

Rather than just using random vowels and consonants like a really bad round of countdown Okay, you know our foul please put Carol and another vowel and it's not a problem. Okay, but okay Carol I said Carol Okay, Rachel's that sorry Now here's what's really weird about this. Okay, which is that the algorithm gives priority to brands inverted commas

Which are trademarked in the US. It's much easier and much faster to trademark a random collection of consonants and vowels than it is to try. If I tried to trademark, you know, Sutherland camping equipment, okay, it would probably take me ages. And then some lawyer would pitch up from fucking Wyoming going, there's a Mr. Sutherland here who runs a fucking tent shop. You know, you can just imagine the whole thing.

Okay, whereas if it's extremely unlikely anybody's going to challenge your right to call yourself Right. Yeah, so all they're doing is creating a name that's really easy to legally trademark so they can gain the algorithm It's not in the interest of the consumer at all, right? What's in the interest of the consumer is recognizable brand names like, you know, even if they're Amazon own brands like anchor or whatever or green

which we can buy more of if we like what we buy and buy less of if we don't like it. Brands are basically the units of selection in the evolutionary marketplace, which is consumer capitalism, okay? And a brand name allows you, collectively and individually, to reward a good experience with future business.

And to punish a bad experience with a future boycott. So anybody who's interested in the longevity of their business will try and live up to their promises if that promise is attached to a brand. If that promise is attached to Yugu, right, you won't because you've got no investment in that. It's just one of 47 other Scrabble tiles that you've got. Now, this fact that brands are actually essential to the workings of consumer capitalism because they're the units of selection.

is totally overlooked as far as I can see. Brands actually lead to better products. The absence of brands often destroys markets because nobody can confidently make a decision within them. Okay? And...

It strikes me that Amazon by making that thing. Is it a registered trademark rather than is it actually a pronounceable word? Okay is doing a complete disservice It's it's it's contributing to the I think I think if I runs Cory doctorate calls the in the shit if acation and

Various people have started writing in The Atlantic about something I noticed about a year and a half ago, which is that quite a lot of mainstream massive things, Google, Facebook, Amazon, which for the first 15 years were extremely admirable, have started to get worse. Yeah.

Google started to get worse because patently the ads used to be on the right and the native search used to be on the left. Now, if you try and find out the phone number of a hotel, it's a living bloody nightmare, right? Because 76 competing hotels will start appearing all over the place, right? That's in shitification because it's moved from serving the consumer to serving the advertiser. And then eventually you stop serving even the advertiser and you just start serving yourself.

Amazon I think you know if I search for Samsung televisions mate, okay Imagine a human being I get into Curry's right now. I'd like to look at Samsung televisions, please Now he is perfectly at liberty to say well if I were you I'd have a deco at LG as well Okay, that's within his rights as an expert salesman, perhaps

But, okay, if I search for Samsung televisions, I expect my search to include some Samsung televisions. How fucking ridiculous. It's hardly, you know, too much to ask, is it, right? I feel like when a lot of people hear the word marketing or advertising, they're immediately, it gets the hackles up. Because it feels salesman-y and even the word sales feels like evil in some way. How, like, as someone who's worked in marketing for the last, like, I don't know.

40 years or so. Like, what's your take on why that is? And the funny thing is, the bits of advertising that really annoy people mostly aren't produced by advertising agencies. So if you get the accusation, it makes people want things they don't need.

That's a bit of a complex point anyway, because on an average day a human being needs about 1500 calories Okay, you know, I don't know 120 liters of air and a warm dry place. Okay, everything else is a want at some level Okay, so the whole thing about what I mean, it's very interesting by the way to read There was a left-wing anti-advertising pamphlet for the 1960s

And it said, you know, in many ways, advertising has obviated many of the great achievements that we've had in enriching the working class, because it turns out that the working class just spend their money on pointless luxuries. Wait for this. OK, like washing machines. OK, hold on a second. OK, if you're a working class family in 1960, your mum would have had some sort of tub business.

mechanism with a mangle and a whole day of her life would have been spent doing the household laundry and yet you're referring to a washing machine as a pointless luxury. You know, this is, you know, I mean...

It's worth noting that in the 1960s, a washing machine was seen as a massive extravagance, you see. And therefore, for some reason, the working classes weren't supposed to buy them. Outrageous kind of nonsense. So anyway, never mind. We've got to ask this question of what's a want and what's a need. Most of the luxury goods stuff is done in-house.

And quite a bit of it is done to keep luxury goods publications happy. It's not only to reach the consumer. It's also to ensure if you advertise extensively in fashion publications, you'll get featured a bit more. Okay? So there are all kinds of other things going on. For example, the vast majority of my time, which hasn't been in B2B marketing, some of it has, the vast majority of my time spent in advertising has been advertising

Okay, promoting broadband for BT promoting the American Express card early on Promoting vaping or alternatives to smoking. Okay, so any form of behavioral change whether for good or bad does require Communication. Yeah. Okay, it's you know At the very least it might happen anyway, but it'll happen more slowly if you don't advertise it. Yep, for example, I

And, you know, actually most advertising now is compare the meerkat. You know, okay, there's a certain amount for alcohol. There's a certain amount for, you know, luxury goods. What advertising agencies are mostly doing is, by the way, most people in ad agencies lean left wing, by the way. You wouldn't expect this in drama in kind of, you know, in the kind of what you might call the dramatic depiction of an ad agency. It's a load of cynical right wing bastards. Most people are pink. I mean, most people...

You know most of my young colleagues away to the left of me and generally they don't have a problem with what they're selling I know even Gen Z go, okay, you know, okay electric cars another thing I've been engaged in, you know, so that now that's interesting because in the electric car world for example Let's look at it as a category not just as individual brands. Mm-hmm

To an enormous extent. Okay range anxiety Which is the big obstacle and the thing now individual brands are always talking about range because that's the thing They've got to actually convince the consumer about and that's how they compete with other electric car brands the only problem is that the universal conversation about range is actually in a sense creating a fear of

Yeah, or magnifying a fear that doesn't need to be that present. Okay. Now, let me explain why okay So I don't have car charging at home. I'm going to get it, but I haven't got round to it My wife has a mini electric which has about a hundred miles range I've got the Ford Mustang Mach-E which has about 250 the extended range. Okay, and

What I suddenly realized once you own an electric car and once you actually overcome this anxiety is that now this wouldn't be true Okay, just be just to caveat it if you lived in an obscure part of North Wales or somewhere weird in Scotland This may not be true. But for most Brits most of the time range anxiety is a perfectly rational American fear Which doesn't apply to the UK really? Okay, not a very big country Okay, yeah

In America, it's not uncommon for your parents to live 400 miles away Okay, and you've got to go and visit them over a weekend because that's facing you get no bloody vacation. Yeah, okay, right That's by the way, if I'm American, okay My plan to stand for president United States is slightly kibosh, but I wasn't born there Well, they funny enough Woodrow Wilson is something like my second cousin His mum was born in in England is actually my second cousin three times removed or something as a bit of a freak and

But all I stand on is the platform of four weeks paid vacation wouldn't bother with any of the other stuff We're talking electric cars range anxiety electric cars So we've got trains as an alternative. I had to go to manchester for the day. I wouldn't drive anyway I've had to go to manchester overnight. I probably wouldn't drive. Okay, but I go to manchester for five days I won't drive but then it's a leisurely trip up and i'm going to stop somewhere, you know Go and visit a country house or something, you know, whatever okay, and i'm going to find somewhere to charge and also

I can't in the UK driving traffic density being such you can't really drive for three hours without taking a break Anyway, it's not healthy or sensible to do it You can on an interstate in the US because it's just such a chilled experience by contrast Secondly when I get to my dad's house, he's got 240 volts now. It's not seven kilowatts, but it's three three and a half and

And actually, if I arrive with a 50% tank and I plug in to his ordinary outdoor socket, I'll be up to about 85% by the time I leave in the morning. Okay? Well, that's way more than enough to get me to the next rapid charger should I need one.

We don't have really extreme cold very often. Okay. As I said, we've got three kilowatts at home. We have the alternative of a train. We don't do very long drives. And also, this is a very high density country. So in the US, you need gas stations to serve a geography, not just a population.

Okay, because if you're halfway between say Taos, New Mexico and Farmington if you don't have a gas station somewhere on route Nobody can actually make the journey. Yeah. Okay now in the UK I went to check this out. Okay, the UK is about 8,500 petrol stations in the US They got about a hundred and sixteen thousand and the reason they need a multiplier more proportionate to the population is because of the geographical coverage. Yep, and

Now, in the UK, it's not like, oh, shit, we're on the I-40 between so and so and so and so. And if the next charge is out of action, we're basically going to have to spend the night in an Idaho truck. It's not an I-40, is it? OK. I don't know what that is. I-something else. 80. I don't know.

OK, well, you know, get out, spend the night in an Idaho truck stop in the freezing cold while the radio tells us that a serial killers just escaped the local penitentiary. OK, in Britain, it would be, oh, dear, this charger is broken. Oh, look, there's another one two miles down the road next to a tea shop. So we'll stock up on scones and buns. OK, while the car's charging. It's a different kind of thing. OK, you're not in the middle of nowhere in Britain.

Okay, and so actually what we've done is we've imported a fear into the Netherlands and the UK in particular Which is perfectly relevant to Americans. I get it. Okay, actually in the UK

Now Okay, I've got I've got a cafe with a charger 50 feet away rapid charger I've got a waitrose with a couple of them. I've got a Tesco with a couple of slow charges I've got an Indian restaurant with a rapid. Well, actually that's all you need actually an Indian restaurant rapid charge a job done Yeah

How do we get to this? We were talking cars. I think I was talking about that ratchet effect where, you know, one important thing is that there are products which actually change your whole outlook. So once experienced, actually, your entire kind of preferences and utility function gets reset. Yep.

Because the experience effectively rejigs in your mind what's important. Yeah. Yeah. Yeah. And we were also talking about kind of advertising and marketing being seen as bad. Oh, yes. Yeah. Yeah. And so you said that. Yeah. I mean, I've spent most of my, you know, I don't really, I'm very, very proud of the work on vaping, by the way.

That was probably the most you know most valuable thing I did in my life was going to the government's behavioral insights team and saying There are these things coming along called electronic cigarettes one Because they mimic the habit and experience of smoking. They're probably a major gateway off cigarettes, okay -

Three and this was actually the more important psychological insight my hunch is that almost everybody in the health In what you might call the the health industry is going to try and ban them. Okay. Yeah, okay What I would say is go to the guy and they did this David Halpern went to what was then the Cameron government and said we think these electronic cigarettes are going to be useful rather than you know, Or at least it's harm reduction whose benefits outweigh the costs. Let's get it like that. Okay. Yeah, and

Okay, it's not perfect. Perfect is everybody going cold turkey. I get that. But the perfect is often the enemy of the good. And actually, the UK and Sweden, which have the lightest touch regulation on

Alternatives in Sweden, of course, it's the pouches that nicotine pouches they put in there, which to be honest give me the shits But I mean there they're pretty potent but but in the UK it tends to be very liberal approach to e-cigarettes and vaping Yeah, and those two countries seem to have the lowest rate of smoking in Europe. I

So, you know, there is, you know, okay, correlation is not at all that. But that was the one thing where, you know, of all the things I did in my life, which was probably valuable, I think it was that. How do you feel about the sort of, you've talked, I think, in alchemy and in some other things around psychological value. And it almost strikes me that psychological value is,

The fact that we're calling it psychological almost makes it distinct from actual value. What's your take on it? It's completely wrong because if you're an Austrian school economist, value is all psychological. The only definition of value they accept is your willingness to pay for something.

They also argue that interestingly this is why Austrian school economics never got mathematical because just as a detail they also argue that Actually preference is ordinal not cardinal. Okay. What's that? Well, okay So they would they would look at a choice in the Austrian school and say you prefer an iPhone over an Android phone. Okay, and

Now, economics, in order to have this idea of utility, has to have the idea that you actually value the iPhone at 1.374 times more highly than the equivalently priced other phone. Now, Austrian school economics, or at least Ludwig von Mises says, you either prefer it or you don't. That's what determines your behavior. It's a nonsense to actually suggest that we're going around optimizing phones

all the time for our utility function. Like the sorts of people that would spend 18 hours researching a phone might care about the Snapdragon processor, but most people don't. No, no, absolutely. That's an interesting question, which is the misalignment often

between the metrics which phone developers or technologists pursue, which tend to be SI-derived units like speed, time, process of power, what is it, flops or something, is it? Yeah, teraflops, whatever. Okay, and the actual consumer experience, what the consumer wants. Yep.

I'm sorry to bore people who've heard me before, but I always cite the Uber map as a work of psychological genius, which is that, yes, we prefer taxis to turn up earlier rather than later. I buy that. But within a reasonable margin of error, like the difference between five minutes or 10 minutes or the difference between seven minutes and 12 minutes, what we actually care about much more than punctuality is actually uncertainty.

What the map does is it doesn't necessarily reduce the quantity of wait time. It transforms the quality of wait time because we're no longer in a state of not knowing, a state of panic, a state of what if he's already left? I bet they were lying. They always lie. Oh, they probably haven't sent a taxi at all. And it replaces it with, oh, look, there he is. I guess he'll be here in another three minutes. I'll have another pint. That's probably half, another half. Okay.

And so that's a beautiful, beautiful case of literally conjuring up emotional value out of nowhere. Now, you could do a predictive algorithm which routes cars to where you anticipate high demand and da-da-da. But there are downsides to that. It's expensive to do. It requires a large amount of scale to do it. And also, what I suspect would happen if you did that is every time you got it wrong and you sent a driver to a place where there was no demand,

They'd get really pissed off. Your algorithm would say, oh, there's a fantastic nightclub there and there's always a lot of demand at 2 o'clock in the morning, right? But they're closed for repairs, right? And so suddenly 17 taxis are sent to some weird alley in Shoreditch at 2 o'clock in the morning and there's nobody there, okay? They're not going to be happy. The map's perfect because actually the one thing they don't have is people ringing them up going, where the hell are you? Yeah.

Yeah, it's like when you order from Domino's. I don't know if you've seen that thing where it's like your pizza's in the oven and we're now doing the thing. And it probably bears no resemblance to reality. But I've heard contrary views about that. Some people say that actually, no, the Domino's thing is quite honest. Other people have said that actually it's kind of – there are things which hack it. A lot of door-close buttons on elevators.

And I think a lot of buttons on Pelican Crossings are actually kind of placebo buttons. They're there to give you something to do if you're impatient for the elevator to leave. But they're not actually connected to anything at all. Yeah, I find that when I order from Deliveroo or Uber Eats, the fact that like, oh, your rider has arrived at the restaurant. Oh, your rider's waiting. It's just sort of those extra touch points make me look forward and anticipate. Like, yeah, food's on the way. I don't need to worry. I always confess this. Yeah.

There's a wonderful model by David Rock, a neuroscientist, called the SCARF model. It stands for status, certainty, autonomy, relatedness, call it reciprocality, probably better, and fairness. And there are five things which matter hugely to humans on an emotional level, but which economics doesn't understand and which we can't really quantify. And I always joke that the Uber map also has a small status dimension.

which is that I like to time my departure from the building onto the sidewalk to coincide exactly, particularly if it's Uber Lux, by the way.

to coincide exactly with the car drawing up because it makes me feel like Kaiser Soze at the end of The Usual Suspects. It makes you feel like Louis XIV. It makes you feel... Walking out of a building and having a car draw up feels really cool. Standing in the rain going, I wonder which of these is my car or maybe none of them. You wouldn't get Snoop doing that, would you? No.

Right. So there are other details. And I think there's a little bit of a fillip when you just get out of the car without having to do any transactions. Thanks very much. Feels like a chauffeur rather than a taxi. Changing gears a little bit. One thing that I heard you briefly mention in one of your talks is kind of the psychology of happiness.

And it strikes me that you come across, at least, as a very kind of fee-cheery kind of guy. Not always. But at least in the public perception. What are your thoughts on, I guess, how the lessons from the world of advertising and marketing can be applied to something like happiness? I think, by the way, when you first start seeing the world as a complex system rather than a kind of deterministic, mechanistic thing, I think it makes you happier in the long term but sad in the short term. Okay. Because...

You know, I was cast into a kind of depression when I first read things like The Selfish Gene. Yeah. Shit, this is actually plausible. It really is just that fucking random. Okay. You know, there is no particular narrative arc that's actually, you know, or as someone said, you know, a very, very profound but seemingly banal statement about evolutionary biology, which is things are the way they are because they got that way. Yep.

There isn't necessarily a plan and actually the needs to see everything as purposeful Okay, probably messes up economics actually, you know Because a very large part of economics is probably driven by luck happenstance serendipity fluke I'll give you an example penicillin. Okay, the whole of medicine will probably be different if

By the way, if you're in real worry, on the day the discovery of penicillin was made, Fleming was kind of working from home. He had a cottage somewhere in Suffolk and wasn't supposed to come into London that day, but happened to go into London and noticed that all the bacteria surrounding this patch of random mould that had blown through the window had actually died. Hmm.

My guess would have been that he did briefly consider just chucking it in the bin and starting again. Now, okay, you're saying, oh, well, we would have discovered penicillin anyway. Possibly. But there was work at the time on a thing called, I think, super sulfides or something, which were an alternative kind of antibacterial agent. Without penicillin, you know, you would have possibly made enough progress with those super sulfides, okay, to stop looking elsewhere. Yeah.

So, you know, I mean, an awful lot of this shit really is that goddamn random. I mean, you know, Mick and Keef meeting on a train. And what was it? I think Mick happened to have a load of blues records, which got Keef the other way around, got one of them talking to the other. Okay.

You know, the great bands, you know, what is it? I mean, Roxy Music and Brian Eno. I think it was a tubes platform, wasn't it? Was it? Okay. I mean, what the hell were the Beatles doing going to the same school? You know, all that stuff, right? I mean, a huge amount of this stuff is spectacularly random and very, very path dependent. You know, I mean, one of the most interesting things reading that book by,

in Noah Harari, you know, is the view, which I'm not sure about, but that actually the invention of agriculture was kind of a disaster because it forced everybody either get overrun by your agricultural neighbors who can basically outpopulate you by a factor of about 20 or

or give up a... Or effectively get with the agriculture program and engage in suddenly hierarchical societies or a matter of kind of oppression and control. You know, I mean... Yeah, I kind of... Yeah, I mean...

I mean, it's that fantastic thing is that you know It was an arbitrary thing in the initial evolution of the eye whether it was convex or concave Okay, and insects like flies have a convex Shape the eye to give it some sort of resolution and directional imaging and it so happened that you know Our ancestors had a concave shape the concave shape can involve into a lens. Okay, the convex shape never can yeah, and

So yeah, I mean, you know when you when you realize that it is kind of depressing because you realize there isn't a kind of You know wig theory of history where everything gets better and better and better and actually there's a whole load of random shit going on You know, I was amazed by the way at the I voted remain But the confidence of remainers in pronouncing it a bad decision struck me as well I mean you really know enough about the future to confidently pronounce this a bad decision. Yeah, I

You know, I mean, you also look at it, by the way, I also made the point. OK, let's say you thought the EU was pretty good as it currently stands. OK.

But you thought that in the next 20 years, bear in mind, older people are slightly more conscious of the direction of travel of the EU, okay? Because they've been around for longer. They've got more chronological context. Let's say you thought there was a 20% chance that the EU would morph into something highly unattractive or inescapable or whatever, you know, or just, you know... And actually, or just a kind of bureaucratic, you know, nightmare, because...

You don't have enough cohesion between the 27 countries for them ever to get rid of the governmental class simultaneously. Yeah. Okay. In the UK, every 10, 15, 20 years, there's kind of political earthquake. Same in the US. Okay. And the entire government class gets replaced. Yeah.

run out of ideas, become corrupt, whatever it may be. Now, that's impossible in the EU, particularly with 27 countries. And so, you know, there's the possibility. By the way, the idea that groups of people make better decisions is...

Very very unsafe. Okay. Okay There are all sorts of things like the Abilene effect where you can get collective insanity Where all 27 people go along with something they don't really agree with for fear of looking like a party pooper, for example That's called the Abilene effect. You can look it up on Wikipedia So if you thought okay I just think the use of it dangerous because everybody in the governmental class is far too committed to this idea of you know gains to scale and

They're far too committed, often for status reasons, to the idea of general cosmopolitanism and the eradication of national boundaries and differences. Then you have to ask the problem, OK, I think there's a 20% risk. This would bother me normally. But when ever again will we get a chance to leave? Yeah.

And the likelihood would have been this was your, if you believe that the EU is risky and might head off somewhere dangerous, you had to ask, you know, if you're looking at this decision objectively, I don't really want to leave now. I know that it's only a matter of time before you get a Europhile government which wants to join the Euro. Then, you know, then you can never leave. Then da-da-da-da-da-da-da-da.

I don't really want to leave now, but I have to leave now because I have no idea of the direction of travel of this vehicle But all I know is this is the last this is the last station at which I can get off. Yeah Okay, now to make that decision is not irrational. Okay, it's absolutely nonsensical to say that's irrational You may disagree with it. By the way, I'm totally happy listening to both sides of opinion who acknowledged You know that you know, there is a trade-off involved. Yeah, I

But this idea that you were mad racist and horrible and there was no other possible reason why you do this. Yeah. Those people, I mean, have you genuinely thought, you know, have these people genuinely, are they incapable of thinking in things in more than one way? In other words, are they so infected by the kind of Davos group think that they genuinely can envisage no other alternative future? Because if that's the case, then I want these people gone, you know. I think

I think that's a great place to wrap this up. Final thing I'd love to ask, any book recommendations? Lots. We've talked about a few already throughout this conversation, but yeah, what are some books that you find yourself... Anything by Richard Shotton is pretty good. He's written lots of books about behavioural science. If you want to become a rapid practitioner, Richard Shotton is the first place. Okay.

Obviously, Cialdini, Kahneman, Thaler, etc., what you might call the canon of behavioral science. Also, Dan Ariely. A lot of these people hate each other, but that's because they're academics and they're weird. Okay? You know, the whole thing's whack. The...

Great book I read recently. I mean, Algorithms to Live By, Seeing Like a State, which, by the way, I think is also a warning not only to government that their weird average-y way of making the populace comprehensible actually destroys understanding in the process. I think it has enormous implications for large dot-com entities, which is that what happens when the person...

Has the problem the customer who has the problem? Fundamentally cannot get in touch with anybody who has the power to solve it. Hmm Okay, which you could argue is a little bit of an argument for brexit, but it's certainly an argument for localism Yeah, okay, which is actually let's keep that, you know Let's maintain this principle of kind of subsidiarity where decision-making is devolved as low down the organization as is possible and as close to the consumer as possible. Yeah, I

Okay. So that's Seeing Like a State by James C. Scott. This is going to be a slight cross-section of interesting books. What I'm currently listening to is Drayton Byrd's book, You Did What?, which is his life in direct marketing, which is fantastic. He's now in his 80s. But he was, when I joined Ogilvy & May, the direct, one of the decisive people in my life, other than my parents, a guy I knew at university who was a mature student called Ray Fowke, who

who was studying architecture at Christ's in the 80s, but had previously been the... He and his brothers had organized the Isle of Wight festivals in the, what, 68, 69, 70. So when he was in his early 20s, he was kind of negotiating with Dylan and, you know, the Doors and everybody else, that utterly fascinating guy, entrepreneur,

Huge influence but Drake bird was the third great influence I suppose along with a few of the other people who are if you like acolytes of Drayton bird But he was an extraordinary man who was the chairman of Ogilvy made the direct when I first joined and was utterly really fantastic influence and so I'm just reading his memoirs at the moment and

I mentioned algorithms to live by and the alignment problem. Those are two interesting books I've read recently. There's a great book called Unreasonable Hospitality, which has just come out, which is a restaurateur from New York with a very interesting philosophy on hospitality and or service. Mm-hmm.

You know, I'm a big fan, by the way, of effectively, as I said, the recurring fractal patterns model of how life works. Reading about a completely unrelated business and saying what is, you know, I'll give you an example of this, okay? Airlines have spotted the fact with loyalty programs that if you're a frequent flyer, you're...

utility function, if you like, your preferences are different to infrequent flyers. If you're an infrequent flyer, you fly once a year, actually queuing for eight minutes to check in isn't that much of a burden. If you fly every week, it drives you insane. Okay? And so they spot frequent flyers and they treat them differently. No railway's done this.

Hmm. What do you think about it? Okay. Now what if you actually made a third of the carriages on a typical train or 40% first-class

And the people who could use the first-class passengers were people who bought a first-class ticket one People who had a season ticket who have more rights to a seat than an occasional traveler Okay, because having to stand once every three months is a bit of a bummer, but it's no big deal having to stand every day for three months is Intolerable you feel totally, you know robbed really? Okay, anybody with an old person's rail card is

And anybody who's a frequent traveler just gets a slightly better class of seat. Okay now The airlines have been doing that. Okay, so even if you're flying in economy if you're a frequent flyer you get the business class Experience at check-in you get the business class experience of boarding, you know The airport and the lounge the airport experience is business class. It's only in the plane. You're in economy. Okay, and

That's what they've done for ages with them. Now, nobody, now they're not exactly wildly different industries, right? They're both in transportation. But nobody has asked the question, well, what if we could take that and transplant it? I think there are probably, you know, I don't know, 10% of businesses out there that could steal the idea of Amazon Prime, for example.

Yeah, I recently signed up to the Pret coffee subscription. It's so good. So tell me how it works. How much a month is it? So it's £12.50 for the first month, £25 a month thereafter, and you get up to five free coffees every day. And can that be obviously for your friends? Because five for yourself might be a bit excessive, is it? It can also be for your friends, but there's got to be at least 30 minutes between each order. Got it. And so what that means practically... Oh, I see. So you can't get five all in one go.

Can you get two in a go? No, just one. No, just the one. But you can go five times a day if you really want to. So now part of my routine is, well, there's like loads of Pret's nearby. Instead of making a coffee at home, I'll just walk to the nearest Pret. I get some fresh air. I go to Pret. And usually while I'm there, ask the team, hey, anyone want anything? I end up buying a bit more. Maybe I'll get a box of fruit. And now I do not go to any coffee shop other than Pret purely because they've got the Amazon Prime model. Exactly. Exactly.

I've always wondered why no hotel chain has done it where I live in seven eggs or just outside and Basically a taxi home from London to seven X to about a hundred it used to be famously seven pounds an oak to seven eggs That's what the black cab drivers would always quote, but it's now more like 120. Yeah, maybe a bit more actually and I mean uber would be a bit less but

The interesting thing to me was why isn't there a deal where I can pay like Marriott or Intercontinental Hotel Group and I go look here's the deal I pay you 100 quid a year. Okay after 10:00 p.m. I I've missed my train Okay, I can check into any hotel where you have a vacancy and pay 50% of the thing Okay now, you know

Interestingly, I was talking to someone who worked front of front desk at one of the most expensive hotels in London who said funnily enough we always used to give the upgrades to the Business travelers because two things they only stayed for one night So you're only giving away the upgrade for that night, but also they didn't hang around all day demanding ancillary butler services So they're actually comparatively cheap to serve you see. Yeah, so

Now that arrangement would seem to be obviously sensible because you know, what's the worst that will happen? Well, okay, you've got the I suppose you've got the okay You have to change the bedding and stuff, but that's probably 20 quid 30 quid room turnover cost at the max Okay, now that would strike me as an obvious kind of symbiotic relationship between hotel chains and people who live in You know, Tunbridge Wells

And particularly, you know, if people are moving out to, if you think about it with flexible working, if people are moving out to York, well, there's no way you can get a taxi home to York. That would be a pretty damn good deal, wouldn't it? Okay, you've got your crash pad. And yet nobody's done it.

Costco's done it. Amazon's done it. Ocado's done it. Okay. It seems weird to me that, you know, too few people have done it. Why don't you... Now, actually, Tesco is now doing it with Clubcard, I think, aren't they? Where you pay a bit extra, but you get either discounts or perks on top. Yeah. Yeah, like the Waitrose card. I mean, the only reason I got that was because you get like 30% off the fresh produce or fresh thingy. And it was like...

It immediately pays for itself. Of course, of course like that train rail card or anything like that But again, it's back to that psychology of you know Friends and family that I've been mentioned at the very beginning of the talk as well You could make the same discount seem very very different. Even if it's identical Economically, you can make it very very different emotionally and that's that's all that's all I'm saying really is that the the economics of

That economic well-being does not translate into emotional well-being very well, especially if we insist on using numerical metrics, okay, in order to construct some model, okay? Okay, what you gain is an artificial kind of certainty, and what you lose is the fact that in many cases the model barely has any resemblance to what's really going on in real life. Nice.

Rory, I think that's a fantastic place to end this. Thank you so much. Absolute pleasure. Where can people learn more about you? We'll obviously put links to everything down below. My Twitter feed's at Rory Sutherland, all one word.

The books are now I can actually say a thank you to Amazon because although the book sold about 70,000 WH Smith's have never stocked it even as a penguin paperback And so loads of people go who did Amazon are killing the bookshops? Well, yes, but equally bookshops weren't doing any favors to anybody other than the most mainstream authors So, you know, I'm always very very keen by the way, and

in taking an opposite side of what you might call the middle class default position. Because middle class people are basically sheep, okay? In other words, they're so status conscious that actually they say things for what they imply, not for actual validity, okay? And one of the things I often do is defend chains. So I'll launch into a passionate defense of things like Holiday Inn Express, Premier Inn, and Travel Lodge. Let me explain why, okay?

Those things did a fantastic favor to the UK hotel industry by setting a floor, okay? They're basically pretty good or better. If you want to open a hotel, you've got to be at least that good or you go out of business. Therefore, I can confidently book a hotel, whether it's a travel lodge or a non-travel lodge, and know it's going to be at least about as good as a travel lodge, okay? Now, in the age before you had chains like that, the same goes for coffee, okay? Yeah.

every time you bought a coffee, every time you checked into a hotel, you're basically, you know, it was a massive gamble with a fairly high chance that it was absolute shite. And so it's worth noting, okay, that actually there's a value, a huge value, not just to raising the ceiling. There's a huge value to raising the floor. Love it.

Yeah. There was a great guy who was an independent coffee shop owner who said, I'm not going to diss Starbucks. He said, it was those guys who made it possible for me to charge three pounds for a coffee in the first place. You know, he said, if it weren't for Starbucks, I wouldn't have a bigger business. I wouldn't have a business at all.

Fair way of looking at it. Absolutely. Right, Rory, thank you so much. Absolute pleasure. All right, so that's it for this week's episode of Deep Dive. Thank you so much for watching or listening. All the links and resources that we mentioned in the podcast are going to be linked down in the video description or in the show notes, depending on where you're watching or listening to this. If you're listening to this on a podcast platform, then do please leave us a review on the iTunes store. It really helps other people discover the podcast. Or if you're watching this in full HD or 4K on YouTube, then you can leave a comment down below and ask any questions or any insights or any thoughts about the episode that

That'd be awesome. And if you enjoyed this episode, you might like to check out this episode here as well, which links in with some of the stuff that we talked about in the episode. So thanks for watching. Do hit the subscribe button if you aren't already, and I'll see you next time. Bye-bye.