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Season 5 Episode 14
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 his TED talks that have been viewed over 7 million times. In the conversation Rory gives me a masterclass in marketing and advertising ,and reveals the marketing secrets brands use to change our perception of products and influence our behaviour. Enjoy 🙂
00:00 Intro
01:52 University and your view on education
10:29 The power of statistics
23:30 You should always ask why
25:09 The doorman fallacy
28:40 Consumer psychology
32:33 Why you should dare to be trivial
43:19 Building talkability into a product
54:48 What got your interested in marketing?
01:03:33 How most businesses are optimised
01:04:06 User imagery vs target audience
01:07:00 How you become the perfect brand
01:08:33 Evolutionary psychology and products
01:16:00 The importance of longitudinal questions
01:18:16 Why new ideas are slow to take off
01:20:53 Rebrands and longevity
01:30:37 Brands lead to better products
01:32:24 What don’t people like about advertising?
01:42:55 Psychological value
01:48:47 Happiness
01:56:44 Book recommendations
🔗 CONNECT WITH RORY
📕 Alchemy: The Surprising Power of Ideas That Don’t Make Sense –
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🔗 CONNECT WITH ALI
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📄SHOW NOTES & TRANSCRIPT
Visit the website for the transcript and highlights from the conversation –
🎙 ABOUT THE PODCAST
Deep Dive is the podcast that delves into the minds of entrepreneurs, creators and other inspiring people to uncover the philosophies, strategies and tools that help us live happier, healthier and more productive lives.
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Averagely good statisticians Particularly if they're confident are Actively damaging and dangerous 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 hey friends and welcome back to Deep dive for 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 the only Way to overcome this is to actually fill Our thank you letters with profanities So thanks very much for the Dinner party it was totally boss Viva Ill 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 On to something the urge to appear Serious is in many ways I think a Disaster in marketing and Rory says 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 at The moment according to the YouTube Analytics 81 of you who are watching This on YouTube have not yet hit the Subscribe button and so if you're for Example in the now 81 of people who are Watching this on YouTube but who are not Subscribed to the channel I would love It if you could do so and would be Awesome to get that number down to 50 And it would be cool to get like 50 50 Sub non-sub ratio just just for fun Rory So you studied Classics at Christ College if your Wikipedia page is to be Believed Um I was just down the road at Emmanuel And I wonder why Classics and what did You learn doing Classics because it Seems seems a bit Rogue to go from Classics to advertising uh 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 Um maths further maths Latin and Greek And it was a total mistake at the time Because the people doing physics Chemistry maths were effectively Um you know doing Interconnectedly the same thing whereas I had to have this slightly skit-side Thing where you had to go from sort of Translating Homer to doing uh you know Some Advanced statistical modeling or Something and it was difficult and at The time I think it was a mistake Um 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 Um for it to be a superpower in the Workplace so I said bizarrely my Brother's an astrophysicist I'm still Very interested in science particularly Uh you know the the both the potential And the ills of quantification Um 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 Songs I read an awful lot of Evolutionary biology as well Um because it's a new way to think Um so but the classic side was to be Honest what Classics is okay is its Modern languages for nerds okay so
There's quite a high correlation between People who are fascinated about class Classics and people who are fascinated By say sci-fi because it is if you like An alternate civilization Um 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 if you're one of those People who are undecided between science And the Arts Um Classics is actually bizarrely a kind Of weird kind of compromise what were You doing in a manual I studied medicine Yeah so kind of six years of medicine Two years of working and then switched Into this kind of YouTuber podcaster of Career what's interesting is that they Limit the number of people who can study Medicine in the UK Well I think that's the BMA which Pretends to be a scientific organization But is really a trade Union for doctors If I'm oh yeah I mean they're going to Be striking in the next few weeks Exactly now interestingly there seems to Be a premise then I I accept the value 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 Um But 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 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 Classics teacher I nearly did but I Didn't in the end Um what happened I actually trained as a Teacher after I've 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 And then I started applying to ad Agencies and where is this conversation In the staff room was kind of nogius Minor has been smoking behind the bike Sheds the conversation in the Ad Agency Was I think I was waiting for my Interview at ogilvue 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 this you Don't get that at the staff room The Sounds have been 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 okay Um but but but I mean it is interesting How there is a kind of shallow logic Which often pervades decisions you know The assumption that you only train as Doctors that number of people you need As doctors uh 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 so There's also like weird 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 right but then as you go Further down the path there are a lot of Specialties that are or most Specialties Are also over subscribed in that Applying for specialty training is Competitive further down the line and Yet there are still loads and loads of Rotor caps in every single medic and Every hospital would say oh like a third
Of our rotor a quarter of our wrote has Not filled so there's some kind of Supply demand mismatch for certain 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 uh you know an average you know a Box ticker wouldn't have and there's all You know there's all kind of value the Idea I think I think we have a very huge Sort of weird utilitarian view of Education which is that everything has To be directly To serve some particular need I Completely disagree with this I mean in In a sense doing maths and Classics were 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 solarism or something but but the Um the fact that you can confidently Write a sentence and go that's okay
Combine that with to be honest okay my If I'm 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 there you know but Actually provided it's a different kind Of maths in particular Um statistical understanding because Even highly educated journalists are Obviously total idiots when it comes to The interpretation of Statistics what do You mean Kathy Newman Um I mean you know okay her argument With Jordan Peterson which is you know In other words you know uni various Analysis of gender of gender Differentials with 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 Um okay it was um Uh it was it was a case where a fairly Eminent medic uh 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 Um accept the fact that both deaths were Male which also increases the
Probability of God 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 Um with a wrong statistical model to Most likely innocent literally only more Than 50 chance of Innocence once you Compare the two probabilities not Effectively essentially saying uh well If it you know if it isn't accident it's 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 Barrister's judges made that mistake so If if this extra maths is largely around Statistics I mean I've never needed in My entire life to to work out the Surface area of a cone and if I needed To do that I think it is a third Be a third height times pi r squared of The radius of the base I'm guessing this Is about right it's something like that Okay I've never needed to do that and if I did I'd Google it or I'd ring up Somebody who knew okay on the other hand Basic appreciation of statistics Um 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 Um is unbelievably valuable in business Or in virtually any other context how so Like what do you mean that statistics of The superpower Um well well it stops you being stupid Um is one of the things Um it also makes you understand a really Important Concepts like the TR you know The trade-off between well the explore Exploit trade-off it's 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 Um there's a trade-off between Exploration and exploitation which is Um 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 Um knowledge but you're equally foolish All be it 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 uh Improvement or Enhancement or or an adaptation And so understanding a few basic
Mathematical Concepts I think Um you know I'd make algorithms to live By uh you know one of the set texts for Sixth form maths Um is really really useful I don't buy The um Actually the other thing I don't buy is I don't buy the a few creative people in Advertisers got really annoyed at more People being forced to do maths because They say I would have left school Earlier I can't stand maths depends on The maths because I mean it's worth Noting that Um you know solving mathematical Problems by effectively rewriting the Question Or you know redefining the problem yep Okay 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 Um creative teaching yes if you got it Right You mentioned that you wouldn't be Surprised if marketing was uh became Mostly female in the future why why is That um Are you just plotting the direction of Travel okay Um partially that Um Uh generally As of now I'm not suggesting it's innate
Uh women seem to manifest uh a Preference for working in people Businesses slightly more not suggesting It's innate it could be culturally Inculcated but doesn't really matter Because that seems to be happening that Point you know I don't know there we go Jordan Peterson but the weird thing that When you actually make employment uh you Know more and more a matter of choice Weirdly uh in some cases gender Differences actually increase rather Than reducing Um Uh also also I mean for example I think That there'll be a very very substantial Um uh Indian uh contingent in marketing And advertising uh because in India it's It's very high status you have these Extraordinary kind of universities Extraordinary high level of Education Around marketing Um not only in universities but places Like Unilever Hindustan lever which are Kind of almost universities and Themselves and you can simply see the Extraordinary Talent the extraordinary Marketing Talent Um 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 you go on and on and on and Um uh you know it's absolutely clear-cut
That um there's okay okay let's not Let's not neglect the base rate okay 1.5 Billion people like game which kind of Helps yeah uh but but I you know I 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 Some degree of disparity will emerge From preference yeah because preference Emerges from circumstance okay and Therefore if different groups actually Grow up in different circumstances uh 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 you know a lot of this is kind of HR dominated and um Uh you know HR isn't necessarily the Um 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 um with Sally Clark Case you know uh the the cop death case Oh yeah um getting statistics wrong is Really goddamn dangerous Um 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 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 Um 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 maybe a Safe assumption over a decade not so Much okay Um I was talking to someone last night Who had worked for Um a big Dairy company which delivered Milk And um they had things down to an Absolute Fine Art until suddenly the law Changed and it was 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 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 You know is no longer reliable as an Assumption And um the point I'm making there is That Um if you um if you don't actually Understand the limitations of your data Or the biases of your data yeah and Obviously quantification bias uh it's Much easier to get data on things which Happen to be you know numerical or Measurable in terms of Si derived units Yep okay but if I mean if 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 the Quality of people's statistical Understanding is on a bell curve okay Um then you know with you know a little Tale of a very very good statisticians And then then there are people who just Know nothing on the left-hand side They're not too worried about them People who don't know anything don't Possibly let's hope won't pretend to do Anything but what that does mean is that Averagely good statisticians are going To massively out number really good
Statisticians okay well that's true in Lots of fields I'm sure the averagely Good plumbers okay uh massively Outnumbered 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 are actively damaging and Dangerous hmm Yeah and so 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 sugar curve you'll end Up with a very large proportion of very Confident but very uh 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 reality Um 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
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Much trading 212 for sponsoring this Episode in one of your I think was one Of your TED Talks or a talk that you Gave you said uh something interesting You said that Um a lot of In marketing and I guess in in life in General there's Um 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 Um what is marketing Cummings was regarded as being a bit of An ass okay by people on civil service For continually asking why 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 The Um a dominating what you might call Attention At the expense of what is the ultimate Objective okay And so act that business of going why Five times in a row which apparently Within Downing Street the sort of senior Civil servants regarded as you know Practically as if you were banging Knives and forks on the table going me Wanting tins okay
Um it's not it's it looks childish it's Not necessarily a high status Behavior But this is one of the most interesting Things I think I think in complex Systems Um okay uh in 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 itself 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 Dormant fallacy I don't know if you come Across okay So the Dorman fallacy is you get a bunch Of Consultants into your five-star hotel And they go they Define the Dorman's Function as opening the door which is Notionally what a dormant was for uh in The days before automatic doors of Course it's a you know it's it's really Just a you know linguistic convenience Dorman do many many other things quite a
Lot of them tacit you know recognition Security gossiping with other Dorman you Know Um 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 dormant them as the rules Right and what the consulting firm do is They go in they Define the Dorman's role As Um opening the door And then they say well look with our Tech Partners who are probably paying us Some sort of commission will replace Your doorman with an automatic opening Sliding door with an infrared you know Human recognition mechanism and you know 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 okay And then five years later you discover The rack rates now fallen by 50 and Their vagrants asleep in the hotel Entrance because the doorman was doing Lots of other things which weren't Captured by your mod your mechanistic Model of the world yep okay And I see that happening a lot when Tech Replaces Um Generally I'm pretty happy when Tech Augments the options of a consumer you
Know when when pay by 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 okay so you know okay as Option as an alternative that's great Yeah 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 come as Long 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 I Think this is probably Um uh this is probably Um anecdotal but one of the research Mistakes they made with new Coke was They didn't explain to people that this Would replace old Coke so people go oh Do I like this yeah okay I'm all in Favor of having a new variant of Coke It was only when they realized that old Coat classic Coke was being withdrawn That they suddenly went no no I don't Like this at all okay now what you know What you see I've done there is okay is
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 okay and you can apply it To a tax system Okay you can take an Insight from Um well actually okay you can take an Insight from a supermarket loyalty Program yep okay And you can uh you can give advice to The treasury on how they should design Taxation how okay very simple let's take The boots Advantage card you get Marvelous thing by the way I helped Learn Um yeah my mom is a big fan no no Fantastic thing well there's some Fascinating things about them but it's Advantage gun one of which is in Defiance of um logic or economic logic Rather what quite often happens is wife Gets ill typically more more female than Males have an advantage card just Because I'm not being sexist okay wife Gets ill okay says the husband needs Some nurofen and some whatnot okay can You go to Boots and buy me these various Medical provisions Um 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 neurofan and you know whatever else
Goes to the channel hands over the Advantage card at which point the the Person that tells us actually you can Buy these all on the punks you've got on The card and he goes brilliant okay it Goes back to wife says Um I uh I didn't actually pay for any of This I got it all with your points And she's Furious right now you're gonna Go what okay what the hell is going on There because it's immaterial in Economic terms whether you spend the Points on European or whether you spend It on a 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 Um 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 Taylor 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 of internal mental accounting Okay now the other one that's Interesting is that let's imagine that
Instead of launching the advantage card Boots had simply dropped all their Prices by four percent rather than Giving four percent back in the shape of Points okay Um Uh three years three years later Everybody would have forgotten about it Nobody would have noticed much of the Time actually okay except the really Only 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 roughly 15 20 years after that card Was launched Now here okay so here's my suggestion Right we should never ever cut taxes we Should pay people a rebate when it's Possible But there's 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 your outgoings okay Secondly it will retain its salience in Perpetuity thirdly because it's mentally Framed as a bonus not a price cut okay Under exceptional circumstances EG Someone invades a neighboring country Okay 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 painfully much more Painlessly than you can actually Increase taxes okay 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 through a loyalty Program and deploy them 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 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 Um 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 called the most and you got
15 off those calls now stand-up 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 okay but that that Achieved a level of mental saliency now It was 15 off 10 numbers now admittedly If you chose your top 10 moves all 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 core prices across the Board by 15 everybody would have Forgotten about it almost immediately Now here's where 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 yep okay and 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 fed okay And let me explain why a very simple Point okay if you'd gotten 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 and Almost anybody would have looked at this And thought what's that okay however it Was in those telling details you know I Mean you can't get much more anal than You know Finch beak comparison right I Mean I would regard discussing loyalty Programs as you know comparatively High-minded compared to that okay and Yet that's that's where the ship 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 in the real world Because the human brain creative people Okay creative people are annoying to Ordinary People I I suddenly realized my Daughter has um one of my daughters has Sort of ADHD And 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 Respects and then in occurred to me in Complex systems in dealing with complex Systems problems or creative problems Where they're a potential Butterfly Effects you're right 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 proportion 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 things like the Inflation rate the interest rate blah Blah blah blah okay 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 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 one percent that multiplied out Over the 100 people you've got in your Company means that the company will Change direction Um but then you get stories of people Like Steve Jobs getting involved with Like 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 oh 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 All together help me okay But Um Well let me let 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 a you know an Early prototype in his pocket with a Plastic screen And uh he kept his keys on the same Pocket which frankly is stupid about you Know you know get a grip Steve you know T is in the left pocket phone of the Right it's not difficult but anyway for Whatever reason the Steve kept his keys In the same book in his phone and the Screen was scratched And More or less with you know weeks to go He just went okay can the screen we're Going for Gorilla Glass okay Then I think it was actually a bit Unpleasant because the first delivery of Gorilla Glass turned up with Foxconn at Two o'clock in the morning and all the Workers were basically turfed out of Their beds to start assembling iPhones Okay
Um 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 as I think It's me's vanderer 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 um every bit as much as it does In uh you know setting service level Agreements which are because let's face It if if if you're 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 um I think it's All the Magic Castle in Los Angeles days Which is a pretty unprepossessing hotel Which always seems to be in the top 10 Hotels in 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 their ice lollies To a British audience and someone Basically comes out with a tray of ice Lollies for free that costs them almost Nothing but actually directing service Gestures towards people's kids is a
Particularly clever thing to do actually Uh 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 Um great man called Mr srider who ran Ogilvy in India was always you know when You buy a present buy it for the Client's children Um yeah good darwinian stuff Um and um uh but you know I I just Didn't know hotel in Portugal once which Was a pretty good hotel but then when Because we had young children uh every Day we came back to our room the um uh 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 there Are six twenty okay they're absolutely Ecstatic about it okay that sort of Stuff is in many ways it's it's very Different you can't formularize 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 An extremely unsatisfactory Hotel Because they failed to fill 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 and this week's spectator Which is that Um 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 dinner Party okay uh 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 nothing 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 in The on the verge of being lifted and I 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 co-working space than it was just Sitting at home working these days what Me and everyone in 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 co-working spaces around London around the UK and also around the World and one of the things I really Love about the co-working 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've been 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've got 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 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 in there as well and it's just my Absolute favorite co-working 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 they take Zoom calls and meetings Anyway if you're looking for a Co-working space for you or your team That I'd 100 recommend we work like I Said I've been a pain 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.com 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 uh marketing Mastermind conference type thing in Miami last week uh and one of the guys Gave a really good talk about Um Word of Mouth marketing yeah uh and One of his main points was that the Reason 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 there's a book by Seth Godin where he almost suggests I Think purple in purple cow you build Talkability into the product yeah and I Often say that if you can build Something into the product and imagine a Stand-up we've got a funny enough There's a uh a brilliant creative Approach I can't tell you about that Ogilvy's just come up with for the mayor Of 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 Um then you're on to 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 Actually an exploit lens not an explore Lens And everything is an optimization Problem okay we look at things through
The consumer's 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 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 but it took a long time To get off the ground am I used to use In the early years you probably got a Carriage to yourself oh I wonder if you Can give some context on that for the International Grocery Okay so high speed one runs from Kent Which is a count a very big County and Gloriously beautiful Um he says there's a Kent property owner Um uh the um 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 think of it as kind of kinetic 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 out otherwise but since there Was a high speed line going to Paris uh From some pancreas to the coast in Folkestone they decided that the Euro
Started didn't generate enough traffic To justify this line on its own so they Ran uh local effectively commuter Services at very high speed so suddenly You could get from Ashford 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 Um 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 hot 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 and they calculate the value of the Time saving by the Assumption which is Ludicrous by the way that all-time Spends in transit is economically Unproductive in fact anybody who works On a train knows it can be the best Moment of your I fantasize about three Hour train Journeys because you can Actually get your done right the Whole premise is stupid okay but Anyway even on that premise okay it
Doesn't distinguish between one person Saving an hour 200 times a year And 200 people saving an hour once a Year sure 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 okay 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 okay This is a journey which All but of very very few people take Once a year naught times a year maybe in My case four times a year London Manchester London match 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 Well 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 The means hey wow I can now get a job in London or for a Londoner which 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 Walmart sorry I'm just helping out the Local estate okay okay Sandwich okay broadstairs whitstable
Okay now Uh the interesting thing there is I I Think it's absolutely fallacious to Treat those things as if they're Commutative as if one times a hundred 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 2 and Go meh and they might look at high speed One and go actually that's a bit of a Game changer okay 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 be clear Um East Kent was although you know 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 uh a little deprived And therefore uh spending this money was Non-non-intelligent thing to do at all So what I'm saying is that as a marketer You will always be at honest with the Rest of the organization because you're Looking at things at literally Orthogonas no or actually Perpendicularly to them they're looking At Aggregates because they're reporting Up to the shareholders yeah okay 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 Consumer's 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 Um sequential Um what what's the correct term for a Cohort data or longitudinal data okay Tells a very very different story to Comparisons of snapshot data 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 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 Another Point without not 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 and the Poorest deaths out of the population now
Nobody thinks that guy as poor because His prospects are pretty good in fact Banks will lend the guy probably pretty Readily okay but it's it's vitally Important that we the idea that when you Have a charge 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 you know Quite a lot of people by the way I mean You know one facet of wealth inequality Is simply that old people are richer Than poor people because they've bought They've accumulated more over time Okay yeah Now You know now you might argue you could Actually interestingly you could have a Society where everybody was getting poor Which was getting poorer on average over Time but where everybody was getting Richer over the course of their life Okay 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 and 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 in other words you 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 There are other debates which no one can Touch Um statistically which is uh 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 Yeah 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 on Cambodia under Paul pot I'm Guessing Okay but if you have that thing Where you 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 Etc In the interest of fairness okay because Unfortunately your upbringing has some Bearing on your preferences yep you know Uh 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 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 can have an awful lot of People could be utterly mobile at that Time unless you actually expand the Middle I would argue the middle class is Already uselessly large Okay but unless you unless you continue To expand the fiddle class to to the Point of absurdity Um you're not going to have that that's Not gonna that's a one-off that's not a You know uh that's not a um an eternal Uh opportunity And actually Uh you might argue that the price in in How far people have to fall in terms of Loss aversion would actually outweigh The pleasure of the people who gained Well what is marketing and like what got You interested in it in the first place Um right well very interestingly I 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 Polaris like um the you know Publishing or something okay so that 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 two Of them just missed out and ended up Getting a job at a play school then Oglevin made the direct Which was a direct marketing agency Which is selling off the page direct Mail Um telemarketing okay okay where you're Sort of that was my graduate training Job and David Ogilvy actually Um recommended that anybody who wanted To be an advertising creative should Spend their first four years in direct Marketing learning what actually worked So so what is direct marketing as the Thing from other forms I think most Digital marketing would probably be Defined as direct marketing by the you Know definition of the time but back Then you didn't have email I suppose you Had fax marketing telephone marketing Because Um or it was anything which effectively Sought to Uh 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 use Direct mail for acquisition or you Um uh you know all you operated at call Centers 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 marketing okay if Dove places an Ad on TV and you walk into Tesco's and Buy some doubts yeah that's not okay Got it so a Facebook ad would be oh well Yeah it probably is because you know who It is who's yeah yeah we never realized We were going to create that monster uh In a way and it's gone from being Um direct marketing has probably gone From being underused to overused okay a Typical neophilia you know when a new Product when a new Um 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 when the Kindle I naively Said oh this is just going to replace Books Their course doesn't replace books Because okay probably about 40 of books Are bought as gifts in by volume by Value okay Um you know Christmas is a huge swans of The publishing game the biggest Categories in books are kind of book Cookery gardening lifestyle architecture That kind of which requires really High quality photography okay
Um so actually you know the Kindle isn't Going to do either of those two jobs Just to just for the off if it's purely Textual Non-fiction 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 and over Wi-Fi can buy a copy of a novel That's miraculous okay I'm don't get me Wrong it's a fantastic advantage over Conventional bugs But equally Uh we're in danger of throwing the baby Out with a bath water 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 Behavioral change as a Result of your particular Um uh your particular piece of stimulus And okay Um Uh 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 is a big Advertiser you've got to proportionately
Much bigger response than if you're Advertising for someone on behalf of Someone they've never heard of so it was A bit of a nonsense to claim that the uh The you know the value of the of the Acquisition was entirely attributable to The letter you sent the customer okay Um but nonetheless unit 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 yeah and actually there are Quite a lot of valuable marketing Activities which I would argue are Actually probabilistic you know 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 yeah okay and it's going Backwards in other words let's not try And find the customers let's make sure The customers know a lot of enough about Us that they'll come and find us and They're complementary by the way you Know you can do both they're not Mutually exclusive But because the one is where it's 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 um Who the hell was the guy who kind of um Was behind the Vietnam War metrics in The Vietnam War which it's occasionally Called I'll remember his name in a Second Um 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 bullmore they said um the Great wonderful advertising Guru who Died earlier this year at 92. they said You know I've just born Aston Martin it Won't surprise you to know I bought the Aston Martin as a 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 oh but 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 be 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 Well I mean yeah Um I appear on the Chris Evans breakfast Show audience around a million people And Chris Evans interviews me about the Book Um uh and you know I've 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 Cairns in 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 can 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 okay Chris had finished the book And 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 outside I outsold JK Rowling For about a week I also I couldn't
Outsell the book of nom Um I answered the highway code and I Sold the hungry little caterpillar for a Day I think okay Um okay uh but what was interesting was That this was internally the results of The radio program reaching audiences you In other words you never would have Defined in advance okay I mean 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 Um 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 Which is interesting because when you Think about it most businesses are Optimized around exploit yeah 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 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 you're Pulling a 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 alrighty so on This point about kind of defining your Audience Um we were having honestly like sort of Before you came here we were having a Bit of a dilemma we're trying to figure Out like who is the target audience for A conversation like this and then that Goes thinking who's a target audience For the podcast because we have like an Average of like who I kind of think is The person who watches watches the Podcast which is probably male probably In the west probably a few years younger Than Mima so maybe in like early to mid 20s probably has like a normal job Normal job uh 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 of 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 Like so any any ideas on 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 Because If you look at ads for small cars they Will almost certainly share the car Being driven around by a sort of 32 year Old 28 year old typically female Person which is the user imagery okay 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. oh wow a new Volkswagen I mean You know I I've only had two new no I Only had one new car in my entire life In fact I'm 57 okay maybe I had two okay Now the difference there is that Um If there are some wealthy uh you know 28 Year old females who are buying brand New Peugeot you know 20 whatevers okay Now the reason you use them as the user Imagery is if you show 27 year old girls Driving the car Um 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 is your user Imagery But that don't let 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 uh If you look at the marketing work of Um uh also probably Mark richson and Other people but also Bennett and field I'm quoting sort of uh pretty good Academics Uh most most brands have 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 of 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 as character okay now because 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 Exactly yeah It's important actually to understand These things I mean one of the things I Don't think is understood as well is That um One thing that's increasingly Interesting me Is what are the products That nobody wants but that once you've Experienced them they fundamentally Um create a convert or a even an Evangelist Japanese toilet seats you've Got an exactly Japanese title to one Airfryers probably another okay where Weirdly nobody wants the thing everybody 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 become swivel evangelize 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 Um on YouTube Little little listener tip YouTube Premium nobody has it but it's the best
Value thing you've ever buy incredible Okay ad free YouTube we didn't 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 Swings of it are now kind of 4K Broadcast quality watch it on their 55-inch Kelly and it's only a year or Two away from becoming Wikipedia with Video 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 Use Wikipedia in fact okay Um but anyway sorry part that Um 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 U.S And 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 a brand Called Hungry House which ended up being Sold to a German company and then sold To to just eat for I think 220 million Pounds okay so missing that was clearly A mistake okay And they were all Heavy arguments this Is this exactly back to this point about
The uh is it a hundred people doing is It 100 people doing something once or is It one person doing something a hundred Times okay And I I kind of went and analyzed this By the way I don't want you want you to Think that I regard you know dragging The stand or The Apprentice as somehow Emblematic of business they're Extraordinary ridiculous I mean I I Worry about it actually the extent to Which most people's view of free market Capitalism must be colored by the Dragons 10 of The Apprentice oh yeah Which are you know absurd I mean in many Ways okay they're wonderful but they're Absurd I mean we uh just on that no um The person we interviewed last week um Made it to the final like 10 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 uh rather than actually Winning the program yeah because because It said to her look we're gonna be Honest the show is entertainment your Business plan is too good uh so just Execute on that and so she wasn't on the Show brilliant now the interesting thing There is that I Look to this look how did you miss it And they were having an argument with Deborah Mead and having an argument with You know
Um I I think it was Valentine about you Know now bear in mind this was in the 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'd 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 But anyway it's something 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 a 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 okay 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 okay now The most extreme case and Russ Roberts Of the utterly brilliant um econ Talk Podcast Okay Russ Roberts talked about this Having children okay from the point of View of a single couple or a single Person 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 you know every time you stay In a hotel you're paying for two rooms Out of one salary when you were paying For one remote or 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 all the 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 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 Alexander slightly banal level a Japanese toilet is the same okay the 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 golf as going through a Western dry wipe toilet to in a Hole in the garden that's that's about Their comparative distance in terms of Perception okay Um 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.com ideas Is ask how frequently will this be used Because those things mobile phone Multi-channel TV electric car air fryer Up Japanese toilet are all things which By definition assuming you've got Reasonable bowel Health you're going to Use every day okay at least every two Days okay all right 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 Um if you only Park once a year I would Argue that you know actually a a parking App 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 Um use now to part there for my dad who Doesn't even have a smartphone it's Actually uh uh 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 Okay we are absolutely Tech should be Enabling people to stay in their homes For longer and if anything it's creating Actually uh you know unbelievable Obstacles remember my dad was selling Books in his mid to late 80s was selling Books on Amazon okay he's not a techno Um lug out 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 it Doesn't say mind but that's what he Means okay And um you know 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.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 Uh 10 000 people doing something once a Week or once a day Because rather like having children Those are the things where once to quote The 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 um 80s and 90s there was a stupid American thing they're 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 and I don't think we asked this question What I might call the the longitudinal Question nearly enough because Everybody's looking at the self the Aggregate sales figures for electric Cars Okay 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 hmm In other words this is 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 Okay okay loads of bridges bollocks no It's the sense of control you know all That sort of stuff now the reason Brits Didn't drive automatics was that Many Americans sorry 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 Good bit of trivia by the way The Morris Minor Um if I've got this right engine the 1200 cc probably engine was also the Starter motor Um for the Centurion tank Okay so It was Sophie it was so fever When he put it in a tank it was merely The starter vote yeah but um But actually Everybody Talks this crap About automatics but everybody who Drives an automatic goes well stop that Manual for a game of soldiers you know Very you know because they know me wrong If I lived in the north of Scotland just Off the A9 okay 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 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 even 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 Now you know I think that's 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 Okay yep 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 uh where you Basically radioed a great big aerial and You said can you please put me through To Raglan201 and someone put but it was a Carphone okay And so those things existed for years And then okay part of it was Technological Improvement part of it was Just people that experienced them people Who a year earlier and said why would I Want to make a phone call in the street 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 1989 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 Oxford Street and they Actually pulled down a taxi window when Wanker okay yeah right now that it was Only okay it was seven years before you Know to take that technology to the Mainstream yep I think they they bailed on Google Glass Much too early for example yeah you know Four years later three years later I Would have been pissed in the airport And I would have just bought bought it You know and I you know I think it's Very important we realized 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 yep Um 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 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 Um I think there's a little bit of a Recognizable line it's like okay I can See that this is this Rebrand or Refreshes uh sort of making everything a Little bit more consistent as previously It was a bit of a hodgepodge of Different things And it kind of got me thinking about Well back when Facebook was a thing 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 yeah which will be Completely you know kai boshed by by too Great a change of color yeah you've got I think you've got to be really God I'm Careful there um particularly given the Kind of choice architecture around which Podcast should I listen to now yep Um so you know you might want to look at A migrate a slower migration and it's Always notable that at no point does Anybody come although I think it's Becoming increasingly a terrible sight 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 That the whole thing has been an
Evolution very slow changes over time I Think 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 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 uh That Shopify hasn't created a search Engine Yeah they really should it's not weird Isn't it yeah I did ask the guy once They said oh we 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 with them to stay along in This kind of you know in what you might Call egalitarian obscurity like it's so Nice when something is on Shopify and Has shop pay as an option card details Say oh it's almost you it's almost Easier than Amazon at that point but Also also the ability to select by Um 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 uh 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 that Right Well an example would be Um 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 he went I'd like something about Five feet by three feet Um featuring two goats and a cow uh Mostly blue but with a smattering of Pinks okay between these two price Points yeah okay In that world Picasso's will be really Cheap because they'd hardly ever show up Yeah okay and 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 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 two Through bathrooms uh you know and
Instead of having whatever he has needs Actually is one really big room okay Right Instead of that you know you have 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 meter Ridge But then okay what if you what if you Changed things now okay there's a Website that does this the modern House.net okay and the modern house.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 Place actually at the isocon up in Hampstead I think it's one bedroom flat Uh absolute you know kind of a modernist Masterpiece okay uh there's a place near Tunbridge for sale which is actually by Gropius and Frye no premium as far as I Can see over any House nearby now you Know that's weird right okay I don't 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 a Robert Adam House my next door neighbor in the flat Next door is an economist I said how Much do we actually pay as a premium for The fact that this is a Robert Adam House uh rather than just some random Piece of of the same location he Said I wondered about that he said Somewhere between naught 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 yeah We'd much rather own a house or you Could argue by the way the right the Best measure on right move would be how Attractive the house opposite is because That's what you're looking at yeah okay I lived in Westbourne Park Villas when I First moved to London in a place back Backing onto the Paddington railway Tracks which was to be honest a bit of a but we woke up in the morning And looked at a sort of one million Pound house on Westbourne Park Villas And I always felt sorry for them because They'd paid 1.4 million pounds to look At us Um but what I'm saying is that in many Cases the way we choose is based on kind
Of arbitrary Um you know I mean one of the most peculiar things That's happening in property at the Moment by the way Uh is that you must never ever try and Sell a house for 675 000 pounds because All the property websites have at that Price point it's 650 700 000 I think it Might be six hundred thousand I I 700 000 but I think they stop at fifty Thousand increments if you price your House at 25 you're in between two and so The people searching uh 600 and up or The people searching 650 and down are Less likely to find you yeah 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 Okay the Reason by the way these Amazon Brands are all called Lulu Amazon Marketplace Brands right do you know why No why that because okay 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 you actually have Something that's memorable and suggests You're actually on the business of Building a brand reputation rather than Just using random vowels and consonants
Like a really bad round of countdown Okay you know our vowel please Carol Another vowel and another vowel okay Okay Carol I said Carol oh my God Okay it's Rachel's no sorry Um 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 U.S it's Much easier and much faster to trademark A random collection of consonants and Vowels than it is to Trump 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 Wyoming going there's a Mr Sutherland here who runs a tent Shop you know you know you 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 game the Algorithm it's not in the interest of The consumer at all right what's in the Interest of the consumers recognizable Brand names like you know even if They're Amazon 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 okay if That promise is attached to you right You won't because you've got no Investment in that you 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 yeah 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 Run Curry doctor calls the Insidification You know various people started writing
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 okay have started to get worse Yep Google started to get worse because uh Patently the ads used to be on the right And the 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 evenly advertisers and you just Start serving yourself Uh Amazon I think you know if I search For Samsung televisions mate okay Imagine a human being I go into couriers Right now I'd like to look at Samsung Televisions please now here's perfect 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 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 there it gets the hackles up Because it feels sales mini and even the Word sales feels like evil in some way How like as someone who's worked in Marketing for the last like 40 years or so like what's what's your Take on why that is the funny thing is What's going on there the bits of Advertising that really annoy people Mostly are produced by advertising Agencies so if you get the accusation it Makes people want things they don't need Well that's a bit of a complex Point Anyway because on an average day a human Being needs about 1500 calories okay Um you know I don't know 120 liters of Air and a warp dry place okay everything Else is a want at some level okay so the Whole thing about one I mean it's very Interesting by the way to read Um there was a left-wing Anti-advertising pamphlet from 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 okay like washing machines Okay let me hold on a second okay if You're a working class family of 1960 Your mum would have had some sort of tub
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 a you Know I mean It's worth noting that what you know What you know 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 I mean how 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 good 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 that all kinds of Other things going on for example the Vast majority of my time which hasn't Been in B2B marketing some of some of it Has the vast majority of my time spent In advertising has been Um uh uh okay promoting Broadband for BT Promoting the American Express card Early on Um uh promoting vaping or alternatives To smoking okay so any form of Behavioral change whether for good or
Bad does require Um 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 for example And um uh 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 From you know luxury goods what Advertising agencies are mostly doing is By the way most people in our agencies Lean left wing by the way you wouldn't Expect this in drama in kind of you know In in the kind of what you might call The dramatic depiction of an ad agency It's not a cynical right-wing bastards Most people are pink I mean most people You know most of my young colleagues are Way to the left of me and generally they Don't have a problem with what they're Selling you 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 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 or magnifying Affair 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 around to it my wife has a mini Electric which has about 100 miles range I've got the Ford Mustang Mackie which Has about 250 the extended range okay 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 Care about 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 Fare which doesn't apply to the UK Really okay not a very big country okay You know In 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 let's face it you get no Bloody vacation okay right that that's Better if I'm an American okay my plan To stand for president United States Islamic benefit I wasn't born there Although funnily enough Woodrow Wilson Is something like my second cousin his
Mum was born in in England he's actually My second cousin three times removed or Something as bit of a freak Um but all I stand on is a platform of Four weeks paid vacation I 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 okay I had to go to Manchester overnight I Probably wouldn't drive okay you've got To go to Manchester for five days I Wouldn't drive but then it's a leisurely Trip up and I'm going to stop somewhere And you know go and visit a country House or something or you know whatever Okay And I'm going to find somewhere to Charge and also uh I can't in the UK Driving traffic density being sounds 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 The interstate in the US because it's Just such a chill 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 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 uh 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 at geography not Just a population Okay because if you're halfway between Say teos New Mexico and Farmington if You don't have a gas station somewhere On Route nobody can actually make the Journey okay now in the UK I went to Check this out okay the UK has about 8 500 petrol stations in the US they've Got about 116 000. and the reason they Need a multiplier more proportional to The population is because of the Geographical coverage yep Now in the UK it's not like oh 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 Normal I-40 is it okay I don't want Those I buy something else 80 I don't Know okay you know I'm gonna have to Spend the night in an Idaho truck stop In the freezing cold while the radio Tells the sort of serial killers just Escape the local Penitentiary okay 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 Bums okay uh while the car's charging Yeah It's a different kind of thing okay You're not in the middle of nowhere in Britain Um okay and so actually what we've done Is we've imported Affair into the Netherlands and the UK in particular Which is perfectly relevant to Americans And I I get it okay actually in the UK Down that 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 Chargers I've got an Indian restaurant with a rapid actually That's all you need actually an Indian Restaurant a rapid charge a job done Yeah How do we get to this Um we were talking cars I was talking About that ratchet effect where you know One important thing is there are Products which actually change your Whole yes your whole outlook so once Experienced actually your entire kind of Preferences and utility function gets Reset yep because they experience Effectively rage eggs in your mind What's important yeah yeah yeah and We're also talking about kind of
Advertising and marketing being seen in Back oh yes yeah yeah and and so you've Said that Yeah I've spent most of my you know I I Don't really I'm I'm very very proud of The work on vaping by the way Oh 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 they're 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 two 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 Garden They did this David Halpin 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 put it Like that okay yep 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 they're they're Pretty potent uh but but in 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 So you know there is you know okay Correlation is not all that but Um 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 how do you feel about the sort Of you've talked I think in alchemy and Some other things around psychological Value Um and almost drives me like Psychological value The fact that we're calling it Psychological almost makes it distinct From actual value Um what's your what's your technology It's completely wrong because if you're 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 And they also argue that um Interestingly this is why Austrian School economics never got mathematical Because just for As a detail they also Argue that
Um actually preference is ordinal not Cardinal okay what does that mean well Okay So They would they would look at a choice In the oxygen school and say you prefer An iPhone over an Android phone okay Um they would now economics in order to Have this idea of utility has to have The idea that you actually value the uh The the iPhone at 1.374 times more Highly than the equivalently priced Other phone okay okay now Austrian School economics at least Ludwig Van me As it says it's a nonsense 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 all the time uh for Um uh you know our utility function sure 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 and And that those are 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 okay whatever Okay and the actual consumer experience What the consumer wants yeah 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 marginal era like the Difference in five minutes or ten Minutes or the difference between 7 Minutes and 12 minutes what we actually Care about much more than punctuality is Actually uncertainty yep And what the map does is it doesn't Necessarily it doesn't reduce the Quantity of wait time it transforms the Quality of wait time but as 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 you'll be here in Another three minutes I'll have another Pint that's probably another half okay And so you know 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 Roots cars to where you Anticipate high demand 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 you know your Algorithm would say oh there's a Fantastic nightclub there and there's Always a lot of demand at two o'clock in The morning right but you know they're Closed for repairs right and so suddenly 17 taxis are sent some weird alien Shore Ditch at two 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 you can't I don't even think You get that thing where it's like your Pizzas in the oven when we're now doing The thing and it probably Bears no Resemblance to reality but I've learned contrary views about that Some people say that they actually know The Domino's thing is quite honest right Other people have said that actually It's kind of I'm there are there are Things which hack a lot of door closed Buttons on elevators Um and I think a lot of buttons on Pelican Crossings are actually kind of Um placebo buttons yeah they're there to Give you something to do if you're Impatient for the elevator to leave yeah But they're not actually connected to Anything at all
Yeah I find that when I order from Deliveroo or ubereats the fact that like Oh your Rider has arrived at the Restaurant oh you're right it's waiting It's just sort of those those extra Touch points make me look forward and Anticipate like yeah food's on the way I Don't need to worry yeah There's a wonderful model by David Rocker neuroscientist called the scarf Model stands for status certainty Autonomy relatedness Call it reciprocality it's probably Better and fairness okay okay And there are five things Okay Which matter hugely to humans on an Emotional level but which economics Doesn't understand and which we can't Really quantify hmm 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 card Drawing up because it makes me feel like Kaiser Soze at the end of The Usual Suspects you know yeah it makes you feel Like Louis XIV you know 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 know you wouldn't get Snoop Doing that would you you know right and So there are other details and I think There's a little bit of affiliate when You just get out of the car without Having to do any transactions yeah Thanks very much feels like a chauffeur Rather than a taxi yeah Um changing it a little bit uh 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 tea cheery kind Of guy not always Um but at least I guess in the public uh The the the public perception um 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 the 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 account of Depression when I first read things like The selfish Gene this is actually plausible it Really is just that random okay
Um you know uh you know there is no Particular narrative Arc that's actually You know or 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 And there isn't necessarily a plan and Actually the needs to see everything Um 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 oh I'll give you what give you an Example penicillin okay the whole of Medicine will probably be different Um Uh if uh by the way you're the real Worry Um of the day the discovery in Penicillin was made Um uh Fleming was kind of working from Home uh 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 mold That had blown through the window and Actually died my guess would have been That he did briefly consider just Chucking it in the bed 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 salt 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 really is That God I'm random I mean God you know I mean you know Mick and Keith meeting On a train and what was it I think Mick Happened to have a load of Blues records Which got killed 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 you Know I think it was a tubes platform Wasn't it 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 Indoor Harare 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 either get overrun by your Agricultural neighbors who can basically Out populate You by a factor of about 20 Or give up enough you know or Effectively get with the agriculture
Program and engage in suddenly Hierarchical societies you know all Manner of kind of Oppression and um Control [Music] 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 Um shape to 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 evolve into a lens Okay the convex shape never can yeah 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 lot of random going on of you Know I was amazed by the way at the and I voted to remain but the confidence of Remainers in pronouncing it a bad Decision struck me as I mean you really Know enough about the future to Confidently pronounce this a bad Decision yeah You know I mean you also look at it by The way I also made the point okay Let's say you thought the EU was pretty Good as it currently stands okay But you thought that in the next 20
Years very much 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 um uh The EU would morph into something highly Unattractive or inescapable or whatever You know or just you know And actually all just to 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 U.S okay and the Entire government class gets replaced Yep run out of ideas become corrupt Whatever it may be now that's impossible In the EU particularly with 27 countries And and so you know there's the Possibility by the way the idea that Groups of people make better decisions Is is very very unsafe 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 look it up on Wikipedia so if you thought okay I just Think the EU is a bit dangerous because
Everybody in the governmental class is Far too committed to this idea of you Know games to scale Their thoughts you committed often for Status reasons for the idea of general Cosmopolitanism and you know and the Eradication of national boundaries and Differences Then you had to ask the problem okay I Think there's a 20 risk this would Bother me normally but whenever 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 does it you know if You're looking at this decision Objectively Um I don't really want to leave now But 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 Them Um 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 it's not irrational okay it's Absolutely nonsensical to say that's Irrational you may disagree with it by The way I'm totally I'm totally happy
Listening to both sides of opinion who Acknowledge you know that you know there Is a trade-off involved 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 I mean genuinely thought you know 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 that's a great place to Wrap this up um final thing I'd love to Ask any book recommendations Lots we've Talking about a few already Um throughout this conversation but Yeah I've just what's what are some Books shot and it's pretty good okay um Uh he's written lots of books about Behavioral Science if you want to become A rapid practitioner Richard Shopkins The first place okay Obviously chaldini Kahneman sailor Etc The what you might call the Canon of Behavioral Science Um uh also Dan ariely a lot of these People hate each other but that's Because they're academics and they're Weird Okay Um you know the whole thing's whack Um
Uh the um uh Um uh great book I read recently um I Mean algorithms to live by Um seeing like a state which by the way I think is also a warning not only to Government that their weird average way Of making the populace comprehensible Actually destroys understanding in the Process I think it has enormous Implications for large.com entities Which is that what happens when the Person Who has the problem the customer who has The problem fundamentally cannot get in Touch with anybody who has the power to Solve it 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 the 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 yep okay Um so that's seeing like a state by James C Scott uh I'm gonna this is going To be a slight cross-section of Interesting books What I'm currently listening to is Drayton Bird'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 Logan made the direct one
Of the decisive people in my life other Than my parents a guy in University Who's a mature student called Ray Fouke Who who was studying architecture at Christ's in the 80s but had previously Been the um uh he and his brothers had Organized the Isle of Wight festivals in The uh about 60 68 69 70. so when he was In his early 20s he was kind of Negotiating with Dylan and um 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 Um but uh he was an extraordinary man Who was the chairman of Oakley and made The direct when I first joined and was Absolutely you know really fantastic Influence and so I'm just reading his uh Memoirs at the moment Um I mentioned algorithms to live by in The alignment problem Uh I that 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 uh with a very interesting Philosophy on hospitality and or service Um that you know I I'm a big fan by the Way of of effectively as I said the Recurring fractal patterns model of how Life Works reading about a completely
Unrelated business uh and saying what is You know well give me I'll give you an Example of this okay Airlines have spotted the fact with Loyalty programs and if you're a Frequent flyer uh you're Um utility function if you like your Preferences are different to infrequent Flowers if you're an in-free 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 when 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 passenger carriages were people Who bought a first class ticket won People who had a season ticket who have More right 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 And anybody who's a frequent traveler Just gets a slightly better course of Seat okay now the airlines have been
Doing that okay so even if you're flying An economy if you're a frequent flyer You get the business class experience at Check-in and you get the business class Experience at boarding you know the the Airport and the lounge the airport Experiences business class it's only in The plane you're in economy okay That's 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 prep Coffee subscription ah it's so good so Tell me how it works how much a month Does it so it's 12.50 for the first Month 25 pounds a month thereafter and You get up to five free coffees every Day Um that can be obviously for your Friends because to fight for yourself it Might be a bit excessive is it uh it can Also be for your friends but yeah There's got to be at least 30 minutes Between each order got it yeah and so What that means yeah I see so you can't Get five all in one go you could you get Two in the go no just one no just the
One one but you can go 500 a day if you Really want to so now part of my routine Is well there's like loads of preps Nearby instead of making a coffee at Home I'll just walk to the nearest prep I get some fresh air I go to prep and Usually while I'm there ask the team hey Anyone anything I end up buying a bit More maybe I'll get a box of fruit and Now I I do not go to any coffee shop Other than prep purely because they've Got the Amazon Prime model exactly I've always wondered why no Hotel chain Has done it where I live in Seven Oaks Or just outside Um and uh basically a taxi home from London the seven eggs it's about 110 it Used to be famously seven pounds an oak To Seven Oaks that's one of the black Cab drivers would always quote but it's Now more like 120 yeah Maybe a bit more actually and I'm an Uber would be a bit less Um but um Uh 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 a year okay after 10 p.m I I've Missed my train okay I can check into Any hotel where you have a vacancy and Pay 50 to the thing okay Now you know Um uh interestingly
Um I was talking to someone who worked Front of front desk at one of the most Expensive hotels in London who said fun 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 Bachelor services so they're Actually comparatively cheap to serve You see now that Arrangement would seem To me obviously sensible because you Know what's the worst that was gonna 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 you know people who live 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 you know 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
I'm now actually Tesco is now doing it With clubcard I think aren't they where You pay him an extra but you get either Discounts or perks on top yeah Yeah like the waitress card I mean the Only reason I got that was because you Get like 30 off the fresh produce so Fresh I got it thingy and Immediately pays for itself of course of Course I 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 mentioned at the very Beginning of the talk as well you can 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 Uh the economic well-being does not Translate into emotional well-being very Well especially if we insist on using Um numerical metrics okay in order to Construct some model okay okay the what You gain is not a visual 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 right I think That's a fantastic place to end this Thank you so much pleasure uh where can People learn more about you uh we'll Obviously put next time Rory Sutherland
Uh or one word Um uh uh the books are um now I can Actually say a thank you to Amazon Because although the books sold about Seventy thousand uh wh Smith's have Never stocked it even as a penguin Paperback and so loads of people go who Did the 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 In taking an opposite side of what you Might call the middle class default Position because middle class people are Basically sheep okay it's you know in Other words they're so status conscious That actually uh they say things for What they imply not for 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 and 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 Travelodge or a non-travel lodge and no It's going to be at least about as good As a travel launch okay now in the age
Before you had chains like that the same Goes for coffee okay every time you Bought a coffee every time you um 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 huge value not Just to raising the ceiling there's a Huge value to raising the floor Love it 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 yeah Fair way of looking at it absolutely Right right 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 would 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 uh do hit the Subscribe button if you aren't already And I'll see you next time bye
