Hacking The Unconscious | Rory Sutherland

[Music] I will just point out I'm the only part of the day not sponsored by Huntsman of Savile Row they've disavowed me but I wanted to make that clear right from beginning um well I have to say follows on rather well actually from Gabrielle was saying which is talking about a new narrative and I'm going to take exactly that point I'm going to widen it and narrow it it's something we can do across quite a large number of areas of economic activity which is just to change the narrative it's also something we can do in our own personal life which is we can also change the narrative and this is probably my principal discovery I suppose from working for 30 years in the advertising industry I talk about a thing occasionally called innovation an innovation is the internal obverse of the innovation coin they're basically two ways you can actually innovate and create economic value you can find out what people want and then develop a really ingenious way to provide it or you can find out something you can provide and work out an ingenious way to make people want it and in fact they're rather similar in fact there's no point in making a distinction between them what I'd look for particularly if I'm looking for some innovation it's understanding complexity economics and I think one of the things that has to change if we're looking for a new and better future is economic thinking while fine in itself has become stultified and has a ridiculously narrow idea of what success progress and happiness depends on so that's one of the things is a new and more nuanced form of economics is needed the possibilities of technology but also the possibilities of psychology and I'm actually most optimistic about the third interestingly that we can improve the human condition within our own minds rather than through external invention and consumption and the reason I'm not interesting about that is very simple it's simply that we're really much more wrong about psychology than we are about physics and so the potential for progress I think more progress has been made in reasonable psychology advances such as behavioral economics in the last 20 or 30 years than in the previous century and there's still a great deal of progress to be made but among the findings are the really important and very fundamental findings in psychology are one that we don't really know what we want nor do we know or accurately understand why we do the things we do that most of human conscious reasoning is actually an act of post rationalization we essentially do things instinctively and then construct plausible sounding stories to explain them now that's hugely important because there are enormous ly expensive mistakes to be made by taking people literally because the reasons they give for their behavior it's by the way a defense of capitalism as well that in fairness you the only way you can really find out what people want is to make lots of different things and see what they do the second thing I think which is also interesting where we have this capacity for self-deception we don't really have introspective access completely to our own behavior the other thing I think that's a vital in a discovery to understand is simply that we don't really have a concept of anything except in context the idea of kind of utility which pervades economics isn't really accurate the same thing can be good or bad entirely dependent on our frame of mind or what we compare it to and I'm going to show a few examples of that coming up but I think it's useful if overly change has got a mantra this is from the Austrian they're always three in the room Austrian school economists are enthusiastic school economics where are there they usually sitting at the back being shunned by everybody else but the Austrian school was right this is the school including Hayek von Mises other people like that the oestrogen and of course Peter Drucker actually whose dad was Schumpeter's best mate so we've already had a Peter Drucker quote earlier on today the Austrians were emphatic ly right about one thing that they realized that value was fundamentally subjective and this is something of his defense of marketing and advertising he uses the analogy of a restaurant the idea that a good restaurant purely depends on the quality of the food is a nonsense the quality of the food multiplied by the setting and the context and the service and the experience and the expectation is what makes a great meal the idea that it's all about what comes out of the kitchen and not at all about what sits in your head is completely wrong economics wants to believe that something hasn't you know particular utility this is undoubtedly a strong subjectivist argument my view is that psychology is increasingly saying this is right I'll just show you an example of this if you boys just a second peep shows really really good badly presented isn't good at all you can have a kitchen producing michelin-starred food and if the smells wrong or if one of the tines on your fork is out of alignment or the service is surly or you're not even led to expect that the restaurant is particularly good you can completely ruin the effect and this is really potent I mean wine tastes better if you pour it from a heavier bottle this is the way we perceive the whole world analgesics painkillers are more effective if they're branded they're also more effective you tell people they're expensive your car drives better after it's been valid okay you cheapest way to get a new car is to have your existing car valid it's smoother faster more comfortable everything about it improves okay and similarly you can have a great thing you know arguably in this case one of those fantastic things of the world if you present it frame it or tell a story about it in the wrong way you can destroy all this value and this is a fantastic agent I think it's a very great example for much of the financial services industry which is if you have a great product but nobody trusts you you don't have a great product and this is a brilliant example of someone who got the hottest entertainer and performer in the world and sold them in a terrible way keep on going thanks very much hey peep shows they have a pretty bad name normally associated with lewd content but by definition they don't have to be so to change that with just one of the world's biggest performing artists kept all these clothes on and set up an Ed Sheeran ape show would anyone dare to believe what was written outside and come in to our very dodgy looking venue [Music] that was fair enough because we dressed Hamish is a fairly shady looking spruiker in charge of getting customers I got you Sheeran it wasn't Sheeran all right I can hear do you think I share kneeling I don't think it's gonna be a brave soul I wouldn't I wouldn't come into if there was dude with a beard of the heart and say like competencies aid was right this was going to be tough on paper dude Sheeran for two bucks insurance do you want to peep at Ed Sheeran your loss what are you ranking big fella got hu in any a beautiful GG hitman sitting on a stool what do you reckon two bucks got an edge here and just sit on a stool in there you want him to bucks three bucks for a beats think about it it's actually pretty good value despite trying we had a total lack of interest for over 50 minutes it's been some time we should have got you a more comfy chair maybe felt like it was here and you need in there two bucks each urine is a singer yeah yes no I think one of the big problems is people think Ed Sheeran's a code word for a new drug you guys like it cheering two bucks two bucks for 30 seconds people what like are they just saying no yeah dirt cheap paper dirt cheap paper here we go two bucks chicken we're pricing it too high here we go boys it's a Friday get you engineering peep show two bucks sitting on a stool play your song if someone actually does think it's a peep show and I quickly give you the go-ahead to take away your clothes and you're willing to do that been drinking a lot of beer recently all right you're not a couple of months ago maybe but I'm in shape that's just the shape of a potato two hours in and Hamish was getting more desperate it sure is literally sitting in there on the stage waiting for your $2.00 where you were feeling in this world the just thought this had been a giant waste of everyone's fun guys like it's hearing you love us here two bucks game show just got him sitting on stage of it welcome to that's gonna cost you two bucks you only get thirty seconds I don't come in but well there's only one way to find out we might be on here here we go he's here in Peep Show he's there somebody died all right your choice no she did this mouthing and walks away I'm just saying he guys whenever guys see me there by himself and probably a busy later on two bucks 30 seconds I mean you both can come if you want to see back to him everything's aboveboard I can assure you not absolutely not like you can't guarantee what it'll do but yeah let's pay two bucks and after two hours 23 minutes including some final hesitation we finally found people brave enough to take it to the beach you guys shows a lot of get your clothes on style mistake behind yourselves just listen to the announcements never give up enjoy your pay hello and welcome to the peep show your title stop do 70 [Music] baby man still 420d and I'm thinking about anyway it's a really important thing what the story is really really matters okay there's the thing itself and there's what the story is I totally agree by the way about that point that the tree-hugging narrative except for five to seven to seven percent of obsessives will be completely ineffectual at getting people to adopt greener behavior if you look at public hygiene for example you know companies like Unilever and P&G contributed enormously to human longevity by improving levels of cleanliness but they didn't have abs that read use pears soap and prevent a cholera epidemic they actually sold it on a more Darwinian thing of status and sexual attraction it's a really important thing you can use kind of Darwinian psychology to reach non Darwinian ends but the idea that actually what you might call the display of overt altruism and self-sacrifice is going to be a mass behavior I think it's implausible I think Gabrielle is absolutely right about this the really important thing to understand is that everything we view we view within context that's how our brain works those two colors that look like blue and green they're actually the same color green our brain just makes them different in evolutionary terms evolution doesn't give a damn about accuracy it only cares about fitness and it's more important for us to detect a small difference in color than it is to it for us to judge absolute color if you look at this for example that looks like a gray thing hinged to a white thing put your hand across so that you block off the join and you can only see the top and the bottom and you'll see that the top of the bottom in reality are exactly the same shade of grey it's our brain that again creates the distinction the same applies to price you probably have most of you probably have an espresso machine okay now the uncertainly about Nespresso is in reality objectively it is insanely expensive if she had to buy a Nespresso coffee in a jar for an equivalent amount of coffee of caffeine a large jar of Nespresso coffee would cost about $50 and you'd look at it again that's completely insane they weren't paying that she doesn't come in a jar it comes in a pod so when you put it in your machine your frame of reference isn't Nescafe its Starbucks and you think well it's 20 down pay but it was Starbucks cost me two pounds 20 this machine's practically making me money okay so even even our perception of price is completely relative that's why ingeniously Maserati and rolls-royce stopped exhibiting their cars so energetically at car shows where they look really expensive and started exhibiting plane shows if you've been looking at Lear Jets all afternoon a 300 thousand pound car is an impulse buy okay the same thing can be good or bad depending on how you frame it this is really really important for years I've absolutely hated it when I've landed in an airport and there's been a bus you feel cheated don't you go bloody hell you know I paid for this ticket they could at least give me a decent air bridge now I'm on this bastard bus all right and yet weirdly once I landed and the pilot said ingenious they said I've got some bad news and some good news the bad news is we haven't been able to get you an air bridge because there's a plane blocking the gate but the good news is the bus will take you all the way to passport control so you won't have far to walk with your bags to my neighbor that's always true isn't it why don't they tell us that I'm quite glad there's a bus because think about it if you were picked up by a 7 Series BMW and taking the passport control you think it was marvelous wouldn't you ok so because it's a bus we automatically assume it's crap until someone changes the narrative so my joke the three worst words in the English language of course our bus replacement service just the three best words of course all day breakfast you can also play this trick if you're running a restaurant okay now where your mama does an ingenious thing which is one it's Japanese if you claim to be Japanese we will accept an enormous level of weirdness okay I said you are ghosts the retailer your greatest tragedy as a brand is that you're not Japanese you know if I goes for Japanese we think it was incredibly Zen wouldn't we you put a few little bonsai trees and a pebble in the shop and we think it was the coolest shop in the world okay they will see the brilliant trick which if you're going to wagamama they say have you ever been to wagamama before and if you say no they'll say what you need to understand is it's based on an authentic Japanese noodle bar okay and that means that the food arrives fresh and hot straight from the kitchen but not necessarily in the order you'd expect now by being Japanese and focusing you on fresh and hot not food delivered at random okay most of you without that without that sentence my contention is that half the people would leave their first visit to everyone getting complete that incompetency right i order the duck dozer the starter track you're over that bloody coffee right in a French restaurant that would be intolerable wouldn't it okay oh by the way I just forgot here's your soup right at the end of the meal okay but if you change the frame you can change judgment and I think what the advertising industry has historically done successfully for products I think there's a much much wider application for what you might call reframing and storytelling and changing creating value not by what something is but by how we think about it in particular I think economics at some point has to reframe how we talk about wealth wealth really is a proxy measure for the number of options you have the number of choices you can make and so there's a really important thing I'd like to look at which is one of the things that happens both collectively in societies and can happen individually is what I call sat-nav thinking now your sat-nav is very very good indeed at optimizing one thing which is fastest possible journey to given destination the only problem of that is sometimes it's optimizing the wrong thing it has no concept of a scenic route for example the other thing he doesn't understand just to get into the decision science for a second it doesn't understand variance reduction I ignore my Sat Navs when I go to the airport because I want to go on a slower route that's always 20 minutes slower but it is never an hour slower if I get stuck on the m25 I miss my plane if I'm 20 minutes slower pretty much constantly okay it's a bit slower but I don't miss that there's no risk of missing the flight so it doesn't understand certain aspects of decision theory but depending on the nature of your journey you're optimizing a different thing variance reduction is a strategy just as speed as a strategy and I think what happens is that you've got to be very alert if you want to make yourself richer without actually having more money you've got to be very alert to the choices you lose it's very easy as a human being to have a choice and to think you have freedom of choice okay very profitable sentence in the restaurant industry is simply still or sparkling okay you're a small but still or sparkling right they love that sentence why because it makes it really difficult to say tap okay every time they use that sentence there goes two pounds 18 similarly a restaurant wants you to drink wine why apologies to Barry brothers here but wine doesn't have an own price anchor so you can mark it up like a bastard okay you can't charge 30 pounds of glass for a glass of Johnnie Walker red because people know what that costs in the shops but you can buy a bottle of Chateau dibbs cure you know 2005 for 6 euros and charge 30 euros for it and because it's expensive everybody will say it tastes of black currants okay so what the restaurants do and be alert to this because it happens in your life all the time what the restaurants do is they make you think you're choosing what to drink while actually stuffing you royally and this is how it happens you arrive there are wine glasses already on the table okay in fact in the unlikely event that you don't have wine they take them away with a bit of a half don't they okay with a bit of a salt secondly they bring you a drinks menu which isn't good the drinks menu it's called anybody have all the weight on one of them I'm sorry to bury brothers I'm a bit of a wine skeptic I didn't there's ever an occasion where white wine is better than gin and tonic but I mean I also think the spirits pissed is just better than wine pissed deep dad okay okay let's be right now I suspect about a quarter of the people in the room agree with me secretly but they've never been able to come out okay now what they then do is it's not called the drinks list it's called the wine list and the choice architecture is about a page and a half of red wine and a page and a half of white wine and then a small thing at the back like a crappy little thing at the back for the deviants and perverts who want to drink something that's been brewed or distilled okay and then there's the final touch which is sheer genius they only bring one wine list and hand it to one person now there's only one drink that you can all share so once the guy has the wine list there's only one question you ask the rest of the table which is red or white at which point it's game over for the drink gin drinkers so well I think you've got to be alert to if you want to be genuinely wealthy which is some at some extent a degree of eccentricity is essential to wealth because if you're wealthy unconventional what's the point okay right I don't mean that quite seriously you know now you can be conventionally poor it's not that different right now we've got a watch and particularly with artificial intelligence coming on we've got to watch for things that make decisions for you thinking they know what you want the property market and the travel market every single website assumes it's about speed if you go down to the south of France so you get under the south west of France you want to change it Lille but it takes 40 minutes longer it's more or less impossible to get a railway website to tell you that because it forces you to go through Paris and waste an hour and a load of time in a taxi simply because you reach your endpoint about 30 minutes earlier than getting via Lille that's just dumb okay and all over the place their decisions that are driving us weirdly their airline websites that ask you what class of travel you want before you know what the price difference is okay and the weird thing is that when we're presented with Bad's Choice design we don't really notice it's a really useful insight this that when we're presented with exactly that kind of wine situation where the choice is hugely biased either by what other people do or because by the way the environments designed as humans we don't notice the choices we don't notice almost by definition in property for example here's a weird thing okay if we bought art the way we bought property okay Picasso's would be cheap let me explain okay the way we buy property is place then price then number of bedrooms a lot of things which happen to have a kind of numerical definition we obsess about the things that are quantifiable and then we end up with five and we buy the nicest one of those now if we bought art that way we said I'd like a painting landscape format about five feet by three mostly blue with a little bit of green and I'd like to feature it feature three cows and maybe a tree okay under those conditions Picasso's would be cheap because we'd left the artist of the quality of the artistry to low down in the choice architecture okay now in property what we need is a Parker score for architecture if you want to make really high quality architecture valuable we need a score or we need to persuade right move to have a little checkbox for I want a house of some architectural distinction this is where I live I live in the roof just in case you're getting a bit envious I live in the Attic it's the former home of Napoleon the third it's Robert Adam grade 1 listed my neighbors and economists and I said how much extra compared to a totally indifferent building 200 yards away with apartments the same size how much extra do we pay for the Robert Adam less of this house and he said I wondered about that - he said it's somewhere between nought and 2% so the cheapest way to buy art is to buy architecture that's because the choice architecture is different but we never noticed that so one of things I'd like to do is to look and just do thought experiments about the things we don't do because something's wrong with the way we're allowed to choose them if there were a button where you could do a prostate test as a man and it gave you an instant result everybody would press it fair why don't we have a prostate test my theory is that it's the variable that nobody's looked at optimizing which is the delay between the test and the results the human brain absolutely hates uncertainty you see if you notice a very successful way on the Internet of selling credit cards is to say you can be improved within 10 minutes take that insight from marketing and apply it to medicine maybe the reasons we're not doing things aren't the reasons we state there's a deep unconscious reason that's putting us off that we ourselves don't know the only way you'll find that out is through experimentation similarly what are the choices we can't make because in order to change them we need a lot of other people to change their behavior - 68 percent of Americans would like to have more holiday and a bit less money okay I've never understood why no American presidential candidate just goes on a platform of why don't you have a Ford 4 week holiday allowance like normal right ok but for some reason no American presidential candidate has ever tried that no interesting me I've never met anybody in Europe nobody at all who's so right-wing they think we should have less holiday if you I've never had anybody get moving another 2/3 percent out of GDP if we stop people going off gallivanting off in their spare time ok that's a case where you have a kind of collective minds trap and I think it's interesting because one of the things we might have to ask environmentally is do we need to read in economic theory it's completely easy to get the balance of work and money and leisure that you want all economists assume that we work until we reach a point where the games from leisure outweigh the games from working and then we stop working actually that's not true is it because if you're the first guy in the office to ask to work a four-day week even if actually everybody else in the office wants to work a four-day week the first person to raise his head above the parapet becomes the lazy guy and there are lots and lots of areas where what I'd like to look at is experimental legislation where you just say we'll try this for a year and make it compulsory and then we'll see what people think Varian Singh in Sweden when they wanted men to take paternity leave there was huge pressure not to do it nobody took their paternity dams so they made it compulsory for I think just a couple of years once you've created the social norm there's no going back I think there lots of things like on moist lavatory paper but what's fascinating about moist laboratory paper is it's completely logical when you think about it I mean you wouldn't go out of the garden get your hands dirty potting a plant and go I need to clean my hands rub them vigorously with some dry paper ok ok the interesting thing about moist lavatory paper is if everybody used moist lavatory paper and you tried to introduce dry lavatory paper you'd be arrested wouldn't you ok but because it happened the other way around getting people to switch from one equilibrium to the other is just really really difficult because the large extent of our behavior is conditioned by what everybody else does so what I'd like to do is to look at both ways individually and collectively we redefine wealth as gained choices I think uber which is technology psychology and complexity economics I think uber provides us with one example let me explain it provides us with the information we need that's relevant at the point at which we we travel through the booking process okay first of all previously you had to ring up somebody to find out how long you had to wait for a cab that doesn't it tells you that they're right the screen secondly it doesn't have to reduce the waiting time it just has to reduce the uncertainty we're actually happier the best thing London Underground did to improve passenger satisfaction wasn't faster more frequent trains it was dot matrix displays on the platform we're actually happier waiting nine minutes for a train knowing it's nine minutes than waiting four minutes for a train in a state of not-knowing in state of uncertainty I felt British Airways that I said the worst thing you can put up on a departure board is just delayed she wouldn't delayed 60 minutes we're kind of cool about that we can okay I'll work around that okay I mean if you don't make up a number I said yeah but don't ever just put delayed it drives us insane okay so but there are a whole lot of whatever did far more important that it's supposed to the economic disruption of status was it took a behavior and created an interface which made that behavior natural and easy you know you can see is it do I need to book in taxi now or shall I wait oh well as one in three minutes okay then emotionally again psychologically the experience the ego experience is much much better okay does anybody else do this where you time your arrival on the street to coincide with the arrival of your car which makes you feel like Keyser söze at the end of the usual suspects you know okay you know it makes you feel like louis xiv previously you had to stand around the street gang is that our car over there maybe he's already gone okay so design of choices in a way that's in line with our evolved psychology offers i think the economy enormous prospects for both changing behavior and actually improving experience and just to give a few examples of this in more important areas in the taxi industry if you want greater diversity in employment just redesign the choice system you don't need to impose quotas if you hire people in groups you will automatically hire a much more diverse group than if you hire people one at a time if you think about it you know when everybody had one car they all had a saloon car okay when families have two cars they don't have two saloon cars in fact they probably don't even have one they have one small car and one big one as your number of things you choose goes up the variance of what you choose increases massively with it when you choose when you employ someone for one job one at a time you look for conformity when you employ a group you look for complementarity and once we start to understand the way in which choice context really drives behavior I think the potential for progress in just asking better questions about okay we what we're doing seems to be like a logical form of free choice but is it as good as it could be I think the potential for questioning choice architecture is huge and on about more trivial scale we realized that if this is working with a drinks company if you want men to order a cocktail in a bar okay there is no chance they will do it at all unless you have a picture or possibly an illustration of the glasses in which it'll be served because if the male brain thinks there's a naught point three percent chance it'll arrive in a hollowed-out pineapple they'll order a beer instead okay now I'll end on this time a bit over time but if we start one I'm not suggesting for a second that choice creation is the only metric we need I'm just saying that reframing wealth in a variety of different ways you know are you rich if you have a lot of money but you have to work six days a week and you have no choice over that reframing definitions of wealth and therefore reframing economic ambitions for a country and indeed an individual level seems I'm not suggesting for one second that that's the only thing we should consider what we emphatically need to do is we need to experiment with a variety of measures other than GDP I'll just give one example where if you look at two very similar projects through the lens of a standard transport model versus the lens of choice creating choice and creating opportunity you come up with two very different results so high speed two of which I'm a skeptic okay 60 billion pounds they first of all and the model that justifies the expenditure is time saving okay they also claim its capacity don't want to be rude but the last train from Manchester to land and leaves at about 8:20 if you want to increase capacity on the line run the trains until midnight okay and give give everybody who's traveled up from London instead of 60 billion on the train line just give them a 50-pound voucher for a night on the rouse in Manchester okay I mean you know it's slightly weird having a capacity argument and then stopping running the trains late but the point is what they don't understand because they haven't lived it from a psychological angle they've purely looked at it from a sort of instrumental economic angle involving time the assumption is by the way that all time spent on a train is completely economically useless that's how they justify it now high-speed one saves somebody who moves to Canterbury an hour a day two hundred times a year that's a big change right that gives them a big choice because now you can go and live in Canterbury and commute to London nobody travels between Manchester and London two hundred times a year what you're doing with high speed - with your sixty billion pounds is you're giving 200 people the chance to save one hour once a year okay one of those projects is massively adding to human possibilities and options the other one is more or less trivial and irrelevant but looked at through the lens of time-saving which doesn't distinguish between saving one person 200 hours and saving 200 people one hour they look equivalent so one of the things I'm just which is something which I think government needs to do I think we need to do it collectively but we can also do it individually is just experiment with the frame and the narrative through which you view things try more than one that's the first point and also question choice architecture you can arrive at what seems like a perfect decision simply because you've asked a series of questions one after the other if you reverse the order of those questions you will however arrive at a completely different decision so some sort of experimentation with the way in which we design choices seems to me to offer huge potential for just improving wealth without increasing consumption so that's me thank you very much indeed you

Channel: Weatherbys Private Bank

Views: 27,895

Rating: 4.9207921 out of 5

Keywords: Future, Futurist, Weatherbys Private Bank, Creating The Future, Consumer Behaviour, Butterfly Effect, Rory Sutherland

Id: 1ei6F3dk4gE

Length: 33min 31sec (2011 seconds)

Published: Tue Oct 02 2018