RORY SUTHERLAND’S 10 RULES OF ALCHEMY

here are 10 rules you can adopt which will help you profit from being less logical than everybody else number 1 the opposite of a good idea can be another good idea conventional logic loves the idea of the single right answer business and policymaking loves the idea of the single right answer because once you've come up with a single right answer however narrow the material you've used to derive it no one can really blame you because you can say no subjectivity was involved in my decision I have gone with what the model told me to do that's wonderful if you want to keep your job if you want to have an original idea it's potentially disastrous rule number two don't design for average most models cause you to aggregate people so that you're solving the problem for a single representative individual that makes problems very very difficult to solve because improving things for the average person or indeed developing new products for the average person it's pretty difficult to find anything they'll like look out on the extreme as however and you may find things that will be adopted by extreme or unusual consumers which then make their way into the mainstream but starting with the assumption that there's a single representative person with lots and lots of average characteristics for whom the solution has to work you've just basically created a dead end for yourself rule number three it doesn't pay to be logical if everybody else is being logical there's a simple reason why you can't be logical in military strategy it means you're predictable the enemy will know what you're going to do in the same way in business strategy it doesn't pay to be logical because logic will probably get you to the same place as everybody else now being in the same market space as everybody else is essentially a race to the bottom what you've got to do is find out what your competitors are logically wrong about because their use of logic is too narrow and restrictive and find out what's wrong with their model and exploit it if you want to buy a house in London nearly everybody goes I want to be near a tube line the problem is that the tube Maps open to everybody and everybody uses it don't get yourself a tube map but get yourself a rail map and say I want to be close to a railway station nobody's thinking that and you can buy a much cheaper house which will get you to work in half the time than your teen years tube journey from Fulham will alchemy rule number four the nature of our tension affects the nature of our experience whether a restaurant or a hotel is good or bad doesn't just depend on what the hotel is objectively it depends on what we expect the hotel to be like one of the five best hotels I've ever stated in my life was in East Berlin or the former East Berlin and it had previously been I think a police station or a prison it had a spot in rooms with I think just one wall hanging your bed was on a platform above the shower it had one black-and-white television tuned to one channel which showed the big lebowski on continuous loop okay now here's the thing if you had turned up at that hotel expecting the Marriott it would have been the worst experience of your life if you turned up expecting a really cool East Berlin experience it would be possibly the best hotel of your life alchemy lesson five a flower is simply a weed with an advertising budget nature engages in quite a lot of what seems like pointless and inefficient display but the very pointlessness and extravagance of this sometimes is what conveys meaning to us broadly speaking when you invite people to your wedding you don't make your wedding vows door-to-door and you don't send the invitation out by email you send out an expensive or costly creative or just elaborate invitation and you make your vows in front of everybody you know simultaneously in attempting to make advertising an efficiency game we've completely lost sight of a large part of what advertising works which is that it's costly to deliver costly to generate and is in many cases just laney indiscriminantly it's those things that give it effectiveness trying to make something efficient and trying to make something effective are not the same thing flowers discover this 20 million years ago six the problem with logic is it kills off magic once you devise what seems like a logical schema or map for things then essentially what you'll be doing is creating something which is modeled on physics and simple GCSE or children's mathematics something which is solvable something which always gives you a single right answer the problem of that is that the rules of logic demand that there can be no magic the rules of logic would effectively say if you want to improve people's experience of a hotel you don't change their perception of a hotel you have to improve the hotel itself that's a completely wrong headed assumption context is a marketing super weapon and it works because it works magically if you simply think that people perceive the world objectively you will be confined to improving people's experience and improving the value of your product exclusively by doing objective things now the very fact that Apple which is the first highly subjective technology company is worth in the region of one trillion dollars should I think give the light of this approach rule number seven a good guess which stands up to empirical observation is still science so there's a lucky accident the dontcha philosopher who describes himself as a methodological Alchemist who's a man called Paul Ferrar bent he effectively says that when you look at scientific discovery the idea that all worthwhile discoveries have been arrived at by obeying very strict rules of scientific methodology simply doesn't hold true he supports an anything-goes approach to trying to find solutions after all why would you let methodological purity actually restrict the size of your solution set it makes no sense not if you want to make science useful rather than as a status signaling vehicle for obsessive rationalists and so in the same way one of the things we've got to learn to do quite simply is we've got to be much more comfortable with progress that arises from random accident not only allowing people who are wonderful at explanation or post rationalization to monopolize the toolbox of progress most of evolutionary progress after all happened kind of by total fluke rule number eight Tests counterintuitive things because nobody else will well the things you've got to realise in business is that it's unbelievably risky and dangerous being slightly bonkers in business the slightest bonkers thing you do which fails your jobs on the line do something rational or fails you get to try again what that bias means is that you can enjoy an extraordinary competitive advantage in your business if you create a small space where people can test things that don't make sense now a large part of a business has to exploit the things the business already knows I accept that but just as bees allow a certain number of bee is to make random journeys which disregard the waggle dance in the same way humans in our organization have to be given a certain amount of permission to experiment with things outside the rationalists comfort zone and the great value of experimenting in that area is that most of your competitors are too scared to go there so when you do enjoy a competitive advantage for that reason it tends to be a remarkably sustainable one rule number nine solving problems using only rationality is like playing golf using only one club I'm not disputing with that that rationality has its uses but every time you construct a rational neat sort of naive model of the world arguably what it leaves out may be more important than what you put in after all your prioritization will be you're assuming what's important to people you're also making a whole bunch of assumptions in about how people think decide MACT which may be based on a very very narrow view of human motivation and so ii you essentially say the way to solve this problem is by doing this what you've done is without realizing it you've defined the problem in a way that actually allows for a very small solution set if you define the problem in economic terms the solution boils down to basically fining people or bribing people now those are perfectly worthwhile solutions to behavior change incentives do work but as I said that's one Golf Club among many there are lots and lots of reasons why people do what the things they do and economic incentives only cover a small part of them number 10 dare to be trivial I'm a huge fan of trivia because quite often the trivial stupid thing adding a single sentence to a call center script for example has a bigger effect at widening the bottleneck than much much bigger things do why do I say dare to be trivial well in the need to be rational people construct models which roughly speaking modelled on a very simple idea of physics child's idea of physics and what a child's idea of physics or child's idea of economics has within it is the idea of proportionality that the scale of the effect on human behavior is proportionate to the scale and cost of the intervention that simply is not true in a complex system in a complex system really really small things butterfly effects in other words can have enormous effects if you believe that your system is conventionally kind of rational and mechanistic you will assume that big changes and behavior require big interventions this is miles away from the truth give you a very simple example of something I noticed the other day I'm quite keen to buy an electric car before I buy an electric car I want to be damn sure I can install a seven kilowatt charging point at home I can get a general granted 500 pounds to install the charging point but before I can get this grant I have to prove I already own an electric car now never to be rude but I'm not happy to order an electric car until I know that the charging point works something as simple as reversing the order of a decision in this case could have an order of magnitude effect but if you look at life through a narrow economic lens those tiny little decisive interventions never prevent themselves and my eleventh rule of 10 because why confine yourself to just ten after all we're looking for solutions here we're not trying to look clever we're not trying to look right we're simply trying to solve problems and when you want to solve problems be open-minded don't restrict yourself to ten and here my suggestion was really really simple if there were already a logical answer we would have already found it now this isn't the Middle Ages there isn't a shortage of people who are desperately trying to look logical to each other you can call them McKinsey you can call them your Board of Directors you can call me a finance department you can call them your procurement department rational people are all over the sodding place and they control everything therefore if a problem is persistent it's fairly likely I would suggest that the reason for the persistence of that problem is that it's logic proof there may be a solution to it but conventional linear rationality isn't going to find it and so little while ago I totally hate things that aren't dishwasher proof so I said to my wife look here's a suggestion for two years we'll treat everything in the kitchen as if it's dishwasher proof and by a process of Darwinian elimination two years down the line everything that survives by definition will be now in the same way if you expose everything to logic and the thing still survived still persists as a problem it's fairly reasonable to assume that logic isn't the answer to that particular problem so the problems that persist the problems that the devil government decision-making the problems that divine politician the problems that obsessed businesses are probably still problems because no one's yet had the balls to try an irrational solution to them so if I had a twelfth rule do we even simplest L dare to look stupid and one of the simplest ways to solve a problem is to ask a question that no one's asked before now why might a question never been asked before one of which is that no one was clever enough to ask it a more likely explanation is that no one was stupid enough to ask it because there are a large number of questions asking which makes you sound really dumb because there's in pre-existing rational explanation for that particular question so let's take an example question I asked which I wouldn't be surprised had never been asked by anybody in the previous ten years because anybody in the rail industry for example or anybody in transport policy would have felt like a bit of a dick asking it and that's this why do people dislike standing up on trains no okay I'm not talking about three hour train journeys here I want to be absolutely clear I'm talking about commuter rail I'm talking about journeys of 25 minutes half an hour forty minutes most of the time after all that's as long as you have to stand and because people get off the train and you get a chance to flag their seat now why do people just like it actually maybe to some degree they don't it's quite common on the tube to see people who are standing continue to stand long after many seats become available but let's also ask the question is it for example simply that it's tiring to stand up and it's relaxing to sit down may be true on the other hand you've been at a desk all day standing up for a bit may not be that bad no it may be that it's a question of balance that once I've got to hold on to something I can't use my mobile phone I can't read a book I can't read a newspaper I'm basically bored because I'm standing staring into space like an idiot it could be that I filmed cheating because I paid my rail company for a seat and I haven't got one it could be actually simply because if you think about it the people with seats get everything and the people who stand get nothing if you get a seat you get a seat you get a table you get a place to put your coffee cap you little place to put your laptop and you get a nice for you looking out of the window if you're standing in the middle of a train you get precisely four fifths to bugger all you didn't get any of those things moreover if you've got nothing to hold on to 90% of your mental effort is now concentrated on the subtle art of not falling over and looking like a so if all your efforts expended on this and there's no upside to standing people can't tell themselves a story about why it might be good to stand on a train let's try redesigning trains for a bit let's make half the carriages in the Train put the seats in board they're in the middle you get no view and you don't get a table maybe you just get a cup holder along the windows a nice little bum rests so you can actually balance yourself small little desks for a mobile phone or a tablet and a couple of USB chargers can go with a nice view out of the window now interestingly remember Aesop's the Fox and the grapes for evidence of this you can tell yourself a story about why standing is actually a choice and not a compromise and the way people feel about it may be completely different there's a very handy trick in human psychology which is called adaptive preference formation which is if we're sometimes forced to do B over a over or a over B we construct a narrative in which we prefer a anyway because it minimizes feelings of regret if you can design choices so they actually build in the potential for adaptive preference formation you can actually make nearly everybody happy with an outcome if you design choices so that B is in arguably better than a and there's no possibility of a countervailing narrative half the people are pretty happy half the people are pretty angry you can create net utility out of nowhere by simply constructing a narrative by which people are essentially happy with in other words the compromises they have to make they can reframe as choices and so the really interesting thing is if you can construct a kind of I suppose the way you can describe it is a multivariate choice so that there are upsides and downsides to two possible decisions the level of human regret misery is actually minimized now this is a form of alchemy you're constructing value out of absolutely nothing now you can either despise that because it depends on cheap psychological tricks or you can go actually that's rather wonderful and magical why don't we use it a bit more

Channel: Ebury Reads

Views: 61,362

Rating: 4.9607844 out of 5

Keywords: Rory Sutherland, Ogilvy, Advertising, TED Talks, Alchemy, Business, Power of ideas

Id: UirCaM5kg9E

Length: 18min 37sec (1117 seconds)

Published: Fri May 03 2019