The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life

or

The Surprising Power of Ideas That Don’t Make Sense

By: Rory Sutherland

Published: 2019

Read: 2020

Summary

Science and logic are useful. They provide rational solutions and a sense of mastery over a complex world.

But, sticking to conventional logic can be limiting. Especially when it comes to understanding (or influencing) human behavior and decision-making. Many of our problems are “logic-proof”. They are too complex or there is not enough information to find an optimal solution. Also, using conventional logic tends to get you to the same place as everyone else. Your actions or ideas become (too) predictable. You never get to explore solutions that might be better.

Economics in particular suffers from an overly “rational” approach to understanding why people do what they do. Economic science relies on universal, context-free laws of human behavior. In reality, you can’t separate our behavior from its social context. More fundamentally, we may not even know ourselves why we do what we do. We don’t always have access to our genuine (subconscious) motivations.

So what is the alternative to conventional (economic) logic?

This is a book in defense of alchemy. Of doing things that don’t make conventional sense.

Alchemy is about exploring (and exploiting) our subconscious motivations. Asking the real “why”. Finding the underlying drivers of our behavior. Exploring the context of our experience. Understanding how we pay attention and how that affects the nature of our experience.

The alchemy toolkit consists of four S-es. When we Signal, we make costly short-term investments. These investments help us to establish long-term valuable social qualities (trust, commitment, relationships). Subconscious hacks allow us to tinker with the body’s evolved automatic responses. Through Satisficing, we help people make a pretty good decision, rather than the best. Using Psychophsyics, we are aware that what people perceive is sometimes more important than what is really there.

Worth Reading

The most fun a non-fiction book can be. A collection of loosely organized and hugely entertaining riffs, observations anecdotes. Sutherland is as much fun to read as he is to listen to (“EconTalk — Rory Sutherland“). At all times, the tongue is firmly in cheek.

The structure of the book (many short chapters) makes it very easy to read. It can be challenging to follow the book’s broader message. I guess you have to work a bit harder to let it emerge and capture it, and that’s okay.

The book could be more precise in how some of the ideas and thoughts are presented and pursued, but it would likely be far less original and a lot less fun to read if you would “fix” that.

There is no shortage of (minor) things to quibble with, and that’s probably the point. For instance, the argument that Trump’s strategy to be unpredictable makes him a more powerful politician is perhaps half true. Being unpredictable may work to your advantage in the (very) short-term and in an environment where you may only deal with people once (such as the business environment he operated in previously). It is less likely to work well in the long run and in an environment where you deal with the same people all the time (such as politics). Context is important…

The book has much in common with Influence, especially where it discusses (subconscious) motivations, and it shares many of its lessons.

The book is a convincing argument to not take stuff too seriously, have a bit of fun, be humble, flexible, adaptive and open to different ideas.

Key Takeaway

• Economics is a social “science”.
  • Unlike physics, there are no universal laws.
  • Impossible to capture sub-conscious human motivations and social context.
• Free markets are about innovation, not efficiency.
  • They allow for variation of ideas, luck, outliers.
• Instincts are heritable, reason has to be taught.
• Meaning.
  • The things we do that are not in our own short-term interest.
  • Short-term investments that establish long-term social qualities (trust, commitment).

Key Concepts

The limits of rationality.

• We can’t solve logic-proof problems.
  • Most logical problems are already solved.
  • What you’re left with are the ones that are “logic-proof”.
    • Too complex, not enough information.
  • Results in logical overreach.
    • “Hyper-rationality”, impotent experts, identity intelligentsia, plausible post-rationalization (explaining things in reverse).
    • The theoretical elegance of the solution or the intellectual credentials of the solver are often valued above the practicality of an idea.
• We become overly predictable.
  • Being rational means that you are predictable.
    • Being predictable makes you weak.
    • Irrational people are much more powerful than rational people.
      • Their threats are more convincing.
      • Being slightly bonkers can be a good negotiating strategy.
  • ‘Test counterintuitive things, because no one else ever does.’
    • It doesn’t always pay to be logical if everyone else is also being logical.
    • Logic always gets you to exactly the same place as your competitors.
    • When choosing things that are scarce, pays to be “eccentric”.
• We can’t separate behavior from social context.
  • Logic demands universally context-free true and applicable laws.
  • General statements without considering the specifics of the situation.
  • Human behavior is evolved, complex.
    • Not consistent enough for laws to hold very broadly.
  • Social context matters.
    • Universal laws force you to pretend that (social) context doesn’t matter.
  • Human behavior can appear to be contradictory.
    • Two contradictory ways of selling a product can be equally potent (scarcity vs ubiquity).
      • You may not want to be in the middle.
      • “You don’t get a dopamine rush from a mid-market purchase.”
  • The situation or place in which we find ourselves may completely change our perception and judgement.
    • ‘At the federal level I am a Libertarian. At the state level, I am a Republican. At the town level, I am a Democrat. In my family I am a socialist. And with my dog I am a Marxist – from each according to his abilities, to each according to his needs.’
    • See also the differences between Western and Eastern political science by Alison Gopnik.
  • What we pay attention to affects our decision making.
    • How we frame things: the same quality can be seen as good and bad.
• We don’t always have access to our genuine motivations.
  • Behavior doesn’t always correspond with conventional ideas of rationality.
    • We know more than we know we know.
    • Conscious brain has not evolved to be aware of many of the instinctive factors that drive our actions.
    • We have evolved to deceive ourselves, in order that we are better at deceiving others.

Limitations of economic theory.

• Many supposed biases which economists wish to correct may not be biases at all.
  • Simply arise from the fact that a decision which seems irrational when viewed through an ensemble perspective is rational when viewed through the correct time-series perspective.
• This is how real life is actually lived.
  • What happens on average when a thousand people do something once is not a clue to what will happen when one person does something a thousand times.
• In this, it seems, evolved human instinct may be a much better at statistics than modern economists.
• Shopping: ten people paying for something once is not the same as one person paying for something ten times.
  • Amazon: 10 people buying one thing (solve: low cost, fast delivery).
  • Walmart: 1 person buying 10 things (solve: low cost, easy car access).
• Hiring: We are much more likely to take risks when hiring ten people than when hiring one.
  • Hiring a single person: a low variance will be as appealing as a high average performance.
  • Inadvertently creates inequality, lack of diversity:
  • When ‘the rules are the same for everyone’ the same boring bastards win every time.
• Misleading averages:
  • Don’t design for averages – averages may not exist in real life.
  • Innovation happens at the extremes.
  • Good ideas are more likely derived from outliers than averages.
• Efficiency versus innovation.
  • The theory is that free markets are principally about maximizing efficiency, but in truth, free markets are not efficient at all.
  • Competition can be highly inefficient.
  • Value lies in innovation through semi-variation and luck.

Be concerned with the “unchanging man”.

• Human nature hasn’t changed for a million years.
  • It won’t even change in the next million years.
  • Only the superficial things have changed.
• We’ve adopted many behaviors without understanding the proper rational for it.
  • Makes evolutionary sense: instincts are heritable, reason has to be taught.
  • What is important is how you behave, not knowing why you do.
  • The best way to encourage a behavior is to attach an emotion to it.
  • If a behavior is beneficial, we can attach any reason to it that we like.
  • We constantly rewrite the past to form a narrative which cuts out the non-critical points – and which replaces luck and random experimentation with conscious intent.
  • Reason is often useful to explain our behavior to others (after the fact).
• Two reasons behind people’s behavior.
  • Logical reason:
    • Assumes optimal decision-making: intelligent, rational or scientific.
    • Temptation to pretend things are more ‘logical’ than they really are.
    • Causes people to misrepresent the nature of the problem being examined.
  • Psycho-logical reason:
    • Useful decision-making: evolved.
    • Operates unconsciously.
    • (Social) context matters.
• Logic vs psycho-logic.
  • We don’t value things; we value their meaning.
    • What they are is determined by the laws of physics.
    • What they mean is determined by the laws of psychology.
  • Nearly all successful businesses owe their success to having stumbled on a psychological magic trick.
• Difficult to uncover psycho-logical reasons.
  • There may not be direct or logical link between reason and action.
    • People don’t think what they feel.
    • They don’t say what they think.
    • They don’t do what they say.
  • People understand how they feel, but are not always clear why they feel.
• The real why: discover what people “really” want.
  • Requires testing, experimentation.
  • Ask basic questions about motivation (why, etc.)
  • What compulsions drive them (feelings, intuitions, etc.).
• Social context: the nature of our attention affects the nature of our experience.
  • Advertising derives its power from directing attention to favorable aspects of an experience, in order to change the experience for the better.
• Can only change behavior if you understand subconscious motivations and social context.
  • Remove unconscious motivational obstacles to a new behavior.
  • Creating a new social context for a decision.

Four unconscious motivations.

• Signaling.
• Subconscious hacking.
• Satisficing.
• Psychophysics.

Signaling.

• We need to send reliable indications of commitment and intent.
  • Inspire confidence and trust.
• Cooperation is impossible unless a mechanism is in place to prevent deception and cheating.
  • Some degree of efficiency needs to be sacrificed in order to convey trustworthiness or to build a reputation.
• Build trust.
  • Through reciprocation, reputation and pre-commitment.
• Build long-term relationships.
  • Exhibit behavior that is costly in the short-term and will only pay off in the long run.
• Prospect of repeated interactions.
  • The shadow of the future.
  • Prospect of cooperation is much higher.
• Has to be costly.
  • Potency and meaning of a communication is in direct proportion to the costliness of its creation.
    • By the costs we incur and the risks we take.
  • Meaning is conveyed by the things that we do that are not in our own short-term interest.
    • Only by deviating from a narrow, short-term self-interest we can generate anything more than cheap talk.
  • Rational talk conveys little meaning…
    • Statements of fact get lost (become noise).
  • It is impossible to generate trust, affection, respect, reputation, status, loyalty, generosity or sexual opportunity by simply pursuing the dictates of rational economic theory.
    • Brands, advertising, marketing.
    • Inefficiencies that help establish valuable social qualities (trust, commitment).
• Requires feedback loops.
  • Incentivize differentiation, branding.

Subconscious hacks.

• Influence the mind or the body’s evolved automatic processes.
• We can’t influence subconscious process through direct logical acts of will.
• Tinker with things we can control to influence those we can’t.
  • Oblique methods to generate bodily states and emotions that we can’t consciously will into action.
  • Creating the conditions conducive to the desired state (sleep, bravery, healing).
• “Self-placeboing”.
  • Mood altering behaviors.
    • Often deals with human deep-set preference for control and certainty.
  • Try to create conditions for increased confidence in self.
  • Try to create conditions for increased trust in others.
• Tinkering requires deviant signal in order to be noticed by subconscious.
  • Subconscious is programmed to respond to deviations.
  • See above: to avoid being noise, signal needs to deviate.

Satisficing.

• Evolved due to the need for decision making in an uncertain world.
  • Humans are mostly faced with wide context, complex problems.
  • Vaguely defined problems that allow for multiple right answers.
• We are good at “blurry” decision making.
  • Problems that are too complex and/or not enough information available.
  • Can’t maximize to find single optimally right answer.
  • A “pretty good” is more useful than using precise logic.
• Satisficing.
  • Find optimal solution for a simplified world (model).
  • Find satisfactory solution for a realistic world.
• Example: branding.
  • We don’t optimize for buying the best product.
  • We buy a product that is reliably good = brand.
    • You are paying for “the name”.

Psychophysics.

• How what we see, hear, taste and feel differs from ‘objective’ reality.
• We don’t process information in an objective way.
  • What we see affects what we hear.
  • What we feel affects what we taste.
• Perception, rather than reality, determines our experience.
  • What determines behavior is what (they think) they perceive, not what’s actually there.
  • Importance of context, framing, etc.

Alchemy lessons.

• Give people the chance to be optimistic.
  • Communicate the good and the bad.
    • The good: leverage human inclination for optimism.
    • The bad: minimize potential down-side, avoid worrying about uncertainty.
  • Sour grapes and sweet lemons.
    • Sour grapes: downplay what is beyond your reach.
    • Sweet lemons: put a positive spin on a negative experience.
• Leverage herd mentality.
  • Rather make a sub-optimal decision in company than a perfect solution alone.
  • Comfortable in company and like to buy things in packs.
• Re-frame.
• Create (gratuitous) choice.
• Be unpredictable (avoid the obvious – in marketing…).
• Dare to be trivial.
• Small details can be important.
• Logical thinking may limit creativity.
• Avoid an overly simplified view of complex reality.
• Especially, a too narrow view of human motivation and unconscious motivations.