Rory Sutherland | Nudgestock 2018

right I thought I had to mention this because Ogilvy went through an absolutely massive rebranding campaign in which like all rebranding campaigns takes a lot longer than it should but in my first ever foray into making a kind of corporate message what I thought I do is I just thought I'd say that the whole point of creating one Ogilvy that there's one entity is and I going to make a promise to you and the reason I'm making the promise it's not because I'm absolutely sure we can deliver it or fulfill it but because by making the promise I increase the likelihood that the promise comes true sorry said that's how advertising works probably a marriage works to a degree okay and what I want us to be better at is Ogilvy when we're one entity is solving what I call Sudoku problems I don't know how many of you do that think of a crossword as a sort of vague analogy it's a crossword four nerdier people but the thing around of Sudoku is you can't practice division of labor with that kind of problem you can't cut one in half and hand different parts of the problem to different people and solve it it's only solvable if you see the whole picture and my contention is that what we should be able to do and if we're not doing it in five years time come and tell me and shouted me is we should be better at solving problems because there's one entity we can now look at the hole the problem in its entirety rather than little fragments of a problem which on their own I often find marketing problems a bit like doing a crossword if you can't solve three across try and solve two down and see if it helps and I think the same thing applies to solving what you might call complex problems in real life and the particular role I think of non-stock is very simple I found that this book and then found that the book was fascinating our job is making brands matter by making social science matter a bent fly burg is actually at the side Business School I think I'll try and invite him to nudge stock next year fact we'd better be quick because he's Danish and so it won't be long before he's brutally murdered in a dimly lit underground carpark and that's that's the impression I get of Denmark from watching TV might be availability bias I'm not quite sure but we'll invite bent but he has a very interesting take on social science which he says that it's struggled to become a science is at some level inimical to its adding social value because what you're doing when you try and make something a science is you look for universal context-free laws so the great success of the physical sciences is the laws of gravity or the laws of motion behave pretty similarly in Vancouver and in London there's slight gravitational difference between different places but by and large the laws of physics aren't location dependent they're not context dependent snooker balls move the same way on a table wherever you are in the world cricket balls move slightly differently when they're thrown by Australians but that's a detail Sam um but Tim if you look at it if you reframe things the great national variable science the great worry of behavioral scientists and people in the social sciences is the replication crisis which is that a lot of experiments don't faithfully replicate and my argument is actually as marketers and as practitioners weirdly it's the failure to replicate that we're really interested in the fact that tiny contextual differences can make something true or not true that's what marketing is about it's finding the context in which a behavior feels natural and habitual rather the content rather than the context in which it feels weird so the famous example of the replication crisis is of course the famous Barry Schwartz Jam experiment and what he found was that quite often in it's an absolute axiom of economics the more choice you have the more likely you are to buy something because the greater the opportunity there is to maximize your own Jam utility okay and what Barry Schwartz found is that in certain situations at least if you have too much choice people don't buy anything because they can't confidently decide and a lot of people said well we've tried it and it doesn't always replicate and they go oh no oh no we're not really scientists are we now as a business person I go that's fine I just need to know that the way you design a choice has a big effect on how people choose and whether they choose and I need to know also that sometimes the logical economic assumption isn't true if you think about it okay if you're in a fairly hurry state having to choose between 27 different jams it's not going to happen on the other hand if you've driven 27 miles around the North Circular to visit a place called world of Jam okay you're probably not going to walk in and go oh Jesus there's just too much Jam I can't cope I can't make a decision I think with British Airways who I think are here today we experimented successfully with reducing choice so when they have a winter sale don't mention all 29 destinations because you can't choose which of 29 cities you want to go to particularly as you're going to go to with somebody else I mean getting you and your partner to agree on one of 29 cities is basically never going to happen on the other hand you might say don't reduce choice redesign the choice so if you look at Starbucks there are a potentially 85,000 different drinks you can order in Starbucks now if Starbucks adopted the same menu design as a Chinese restaurant they would hand you a sheet you know sheet of paper about eight inches thick and you'd come back three days later and say I wanted number twenty three thousand four hundred and seventy-three no Starbucks don't do that and by making choice take place in stages they make it easier so in baby the next test with the winter sale is to actually say okay skiing destination was interesting city breaks a depart ition the choice that way to make it manageable and so it's an interesting question about the interesting symbiotic relationship between the behavioral sciences and marketing the most interesting thing about marketing is the very thing that logic tries to remove what logic is looking for is universal consistency okay actually in the real world if anybody did discover a universal law of human behavior of course the marketing community you have to have them killed because we'd be out of a job what we're actually interested in is the very inconsistencies that social scientists find most most frustrating and the rinsing this is a passage from Ben's book and he quotes an excellent term anthropologist French anthropologist called boards yeah he says look actually context is basically everything anthropology gift-giving is generally a nice thing in the right context on the other hand if someone gives you a present and you return it that's not a gift it's not even neutral it's an insult so tiny contextual differences make a huge difference to how things are perceived I've got a few examples of this my favorite example is for years I've been landing on at airports and when the engines wind down when you're kind of a mile from the terminal and everyone in the plane goes oh it's gonna be a bus you know that experience oh and then once I land at Gatwick and the planet says I've got bad news and I've got good news the bad news is we won't be able to get an air bridge because there's a plane blocking our gate the good news is that the bus will take you all the way to passport control so you won't have far to walk with your bags and I look to my companion they said oh that's always true isn't it I'm actually glad there's a bus but you never before gave me the context in which I could post rationalize it as a plus to adaptive preference formation and so how you actually present something can actually change something from being to being a bit of a bonus entirely based on the context in which you judge it and the context in which it's presented that's the most interesting thing in the world to marketers I'll give you a couple of other examples I was asking a question in today's spectator if you look at student loans from one perspective they're a brilliant way that mean that everybody can afford to go to university but they're also when you look at it from someone else's perspective a weird thing that forces people to go to university in order to get a job even if they don't want to because when you don't have an excuse for why you didn't go to university not going to university makes you look like a subversive dangerous troublemaker or loser okay the perspective think London housing now this is where it gets really interesting okay the standard laws of economics would suggest that as London houses get more expensive people take the win and they move out to the country taking the financial gains because it's no longer worth that amount of money to live in London what actually happens is when prices go up is half the people actually even if they want to leave they can't leave because they're frightened of missing out on future games or they think that once they leave they'll never be able to move back again now if you look at that okay the crude oil market probably works pretty much like economists predict when prices go up more people sell more oil gets discovered more oil gets pumped it probably is an equi Librium market the property market at least some of the people and maybe the majority behave in exactly the opposite way to how economics would predict so the impossibility of universe laws is one very crude physics physicist said imagine how difficult physics would be if atoms could sink so maybe the very universality and scientific status that the Social Sciences are looking for is actually never going to be found what is going to be found is some fascinating stuff about how context affects behavior I've got two examples the Craven form formulation pulls over there this is by the way worth the admission ticket alone Paul Craven a very good friend of mine a brilliant doyen of the behavioral sciences he owes half his career success to a particular formulation of a request now all of you have done this right you got a colleague and you want to ask them a question and or you want to ask them a favor and you don't give much thought to how you phrased the question one of them might be sorry to dump this on you but or I wonder if you could do me a favor or whatever okay Paul says don't use any of those say say the phrase to use is I wonder if I can help you you can I wonder if you can help me if you phrase it like that there's a raise in status to the person hearing it because they feel they've been chosen it's very difficult to say no and you've positioned them as someone actively helping you which is a status game sorry to dump this on you is a status loss in the monkey brain to ordinary grammarians they seem remarkably similar to the monkey brain they're totally opposite and yet tiny there's a very important question with market research by the way no market research company I know does this but if instead of saying we want your opinion you say we'd like your advice it completely changes the nature of a research question so whatever thing is these contextual variations are the absolute frustration of behave scientists but they're actually meat and drink to us the reason I mentioned the Western Chronicle is it's my local paper Chartwell where Churchill lived happens to be within the the bounds of westrom I was once reading my local paper and a man had sold on eBay a coke that Winston Churchill had given to him when he was a young gardener and my local paper referred to Winston Churchill as the former Western resident and wartime Prime Minister I realized there is no other publication in the world where you would put those words in that order what's significant about Winston Churchill he used to live in Western apparently so maybe we load it up sorry this is one of the most interesting things of all which is there isn't necessarily a right way of doing things what a lot of humor shows is the right behavior in the wrong context if you look at really really funny jokes what they often show is someone behaving in one context which is appropriate in context a totally inappropriate in context be so this is one of my favorite little 10-second clips or airplane you'll remember this there's a plane coming in to land with a very inexperienced pilot and the man in charge of mech air traffic control is an ex-military guy maybe we ought to turn on the searchlights now it's just what they'll be expecting mr. yeah if you think about it that's the right guy in the wrong job okay he's thinking like a military guy he's thinking like a game theorist you don't want a creative experimenter or a game theorist in air traffic control but equally you don't want a procurement person in marketing okay military strategy if you think about it it's impossible in military strategy to be strictly rational or efficient because as soon as you do that you're predictable okay if procurement had been in charge of the d-day landings they would have insisted they took place between Dover and Calais to minimize fuel costs so there are certain modes of thinking that are appropriate in certain settings which are totally inappropriate and others what's happened in business is business a bit like the social sciences has basically only got one mode of mental activity which is let's pretend this is science let's pretend everybody's rational let's pretend that you know that shareholder value is a really sensible model for orienting a business okay and all they have is basically a kind of physics fetishism where they're trying to replicate on a business spreadsheet the kind of same context-free certainty you get everywhere else now you can see one management attempted by this because management are at a level where they don't know the specifics so they need generalities and so the generalizing rule is disproportionately appealing to senior people because it frees them from the obligation to understand context it can I would argue be incredibly dangerous because you have a whole management cast now who all think the same way and so this is probably one of the most important lessons most people if you pretend something's of science you assume there's right and the opposite of right is wrong actually in coming up with marketing ideas the opposite of a good idea may well be another good idea one of the most successful retailers high-end retailers bargain retailers the middle that's suffering and then isn't to do with demography or distribution of wealth it might just be to do the fact that we get a hit from getting a bargain and we get a hit from an extravagance but we don't get an endorphin rush from mid market compromise it's perfectly possible that the same two things which appear to be opposites can actually both be brilliant ideas and that's one thing that makes marketing activity fundamentally different from conventional scientific activity but the more you pretend to be a science the less you actually acknowledge this so what I'm ask you to do today is don't look for rules look for patterns if you think about it behavioral economics got started because of the happy accident that Tversky and Kahneman happened to share a coffee room at Stanford with the economics faculty it was actually the interplay between two disciplines was much more interesting than either of the two disciplines in isolation and in the same way the reason non-stock encourages people from such a diverse range of backgrounds is precisely that reason that common patterns which make perfect sense in one context maybe you can borrow them to understand something apparently completely different and the reason this becomes more and more important I have a total obsession with things being dishwasher proof okay I don't see the point of having anything that isn't I want some violent things like children okay you can't put it in the dishwasher you don't want it and I explained to my might we've got a really good solution to this problem which is if you treat everything in your home as if it's dishwasher proof in two years time it will be its kind of dishwasher Darwinism when you think about it okay now Marvin and huge thanks to Kevin who's sitting over there for coming up with the less ordinary line which combines British understatement with a very very good description of the value of creativity most problems that persist in the world are either unnoticed or unsolved because their logic proof or to put it another way if they were a logical answer we would already have found it there's no shortage of McKinsey i'ts there's no shortage of accountants there's no shortage of people with spreadsheets okay if the problem has a logical solution which some problems do it probably wouldn't be a problem anymore the problems that persists are the ones that are interesting because they defy conventional logic in some way or another and I don't say for this reason I'm not that worried about the brexit vote because I go well 48% of people think thing 52% people think another two things you know about that is they're probably arguments on both sides and at least we're arguing about it okay the things that really worry me in business and if you go to the can advertising festival later the inferior version of Folkston in my opinion your see exactly there's people if you think if you think the people working at Conde Nast of fashion victims they're nothing compared to marketing conversations that can seriously if you want to hear the same words repeated over and over again it's much cheaper to become a Buddhist to be able to define and what worries me is you get questions like I think that the big data is essential to developing future marketing breakthroughs and the pursuit of marketing and you wants that question 99% of people say yes now that worries me much more because now we're not even thinking we're just chanting right and what happens with things like big data where they becomes fashionable because they help things look scientific is and they have an appeal because Wow I'll have numbers so I'll look like a scientist and no one ever gets fired for being logical never forget that much easy to get fired for being illogical than it is for being unimaginative okay so because of that nobody's even asking questions about the downside of big data now I've done a bit of research on this big data was behind the fall of Nokia and it was behind the failure of Helen irritant you know everybody when they were unhappy with the election result they went to Cambridge analytical and thought that big data must be responsible for this weird win because they're fetishizing data to such an extent it never occurred to them that big data might have been responsible for the loss there was a crazy guy called Robby Mook who ran the Clinton campaign he was obsessed with saying things like my data contradict your anecdotes and patronizing things like that and he said that to of all people Bill Clinton and Bill Clinton towards the end of the Hillary campaign was saying I think you really need to go to the Upper Midwest and connect with white working-class voters and mook parodied a grandpa Simpson voice for Bill Clinton to ridicule the idea that Bill thought he knew better his sophisticated data sets but I think we can confidently say that first of all whatever you think about Bill he's a marketing genius right okay secondly the bill said go to Wisconsin which they lost unbelievably on the last day you must go to Wisconsin nope the data said go to Arizona okay now I'm a Brit of only been - I've been to Wisconsin twice in Arizona four times nothing I saw in Wisconsin suggested to me on two visits this was a place where people were unlikely to vote for Trump they've got a huge history of of both right wing and left wing voter eccentricity but the data overruled the instinct in the case of Nokia there's a brilliant TEDx Cambridge speech from an anthropologist who discovered that Nokia's idea that nobody would buy smart phones from the developing world because they were too expensive an anthropologist went in and said I've been doing work in China in refugee camps and when a smartphone becomes available even if it's just an iPhone knockoff people will sacrifice half their disposable income to own one so all your data now remember all big data comes from one place which is the past right and all the data they had the five hundred thousand eight points were all based on what people would pay for a feature phone changed the context to make it a smart phone all the rules change and she went back to them and they said yeah but you're an anthropologist you've got 150 data points we've got about 500,000 and McKinsey have done some work with us and they show that the amount of people will pay for a phone is basically this so we need to hold off launching smart phones for another three years and so they won the argument basically on the basis of who had the most data when you think about it iceberg dead ahead is only one data point isn't it the fact is it's just quite an important one so one of the things we've got to do is there isn't an algorithm by the way now I know you don't like the guy I don't like you much okay but you've got to admit this is kind of brilliant okay I don't know any algorithm which will ever produce that now you will understand this okay you're an American and you're a guy okay and what it says is I've got my own plane but I the same food you do miss Lee with a knife and fork shoes I suppose chases responsible side in that he's waiting for his gravy to cool down below the surface temperature of the Sun before he opens it on a moving vehicle but that one of them is the data thing we'll never generate something as incredibly lucid and potent as that is yeah I asked you to like it but I think you just got to recognize it and so what are the interesting things about context is that many of the things we argue about might just be the same thing in a different context and this is one of those interesting sentences I've read in five years which is a American political thinker called Vincent Graham and he explains his politics as being context dependent he says at the federal level I across the u.s. I'm a libertarian the state level I'm a Republican at the town level I'm a Democrat above my family and friends on a socialist and with my dog and the Marxist from each according to his abilities to each according to his needs and the understanding that humans are hugely contextually dependent is again the curse of behavioral science but it's the gift of everybody in this room because if it gives us a license at the very least to experiment non-catastrophic ly with different contexts we've just justified what marketing's for ten times over if you think about it nobody was going to mr. Dyson 20 years ago and saying I'm really annoyed because I'm looking for an opportunity to spend more money on a vacuum cleaner okay there was no data point that was going to tell you that no one ever told Starbucks you know it really pisses me off that I can't spend $5.00 on a coffee okay so contexture and by the way a lot of the things is there kind of true what research might tell you is true in one context in another you know there are some shops where a 200 pound bags expensive there shops where 200 pound bag is cheap everybody's been sleeping here anybody spend any time in sunglass hut you'll know that effect you've just got to spend about eight minutes in sunglass hut at terminal 5 and suddenly an 80 pound pair of spectacles seems really reasonable okay I'm just going to take you just with a weird maths lesson for the last three minutes okay but it just fascinates me um only is there mathematician the London mathematical Bharati he couldn't be with us today because he said I'd rather do some maths I said okay that's mathematicians for you basically okay there is a joke I could tell but I haven't got time now I want you to think about this okay I want you to look at this bet where you put some money down and if you win you get 50% more and if you lose you lose 40% okay and I want you to think whether that's a good bet gain 50% heads tails lose 40% and your first instinct of looking at the thing is going to go that looks like pretty good upside in fact I'm going to put a lot of money in and then go tell the guy to start tossing the coin and I'm going to tell him basically let the winnings roll let the winnings ride and I'm just often you know basically I'm off to Mauritius to enjoy my games you'd all look at that bet in that way wouldn't you because look at it in this way mathematically okay you've got four people okay and two on average two will throw heads to all throw tails to the 152 of them get 60 the net of that is let me get this right 321 in 20 quid they started with 400 so that's a 5% game okay so you're getting this bets pretty good isn't it does anybody not want to take that bet this is fascinating right you could make a fortune with essentially let's look at it now from a different perspective now oh they will explain that this is to do with the fact that all economics and most mathematical models assume real life is ergodic which it is don't look up a god akin Wikipedia because blood will start to come out from your ears it's a it's a it's a terminus statistical mechanics ok but nearly all models of rationality don't make proper allowance for time they assume that life's of one shot hit and what's good on one shot is therefore good for you and they and at the collective perspective that's a win isn't it we're increasing net wealth by 5% let's look what happens if you actually have two bands one guy ends up with 225 quid he's loaded the total indeed is considerably higher than 400 okay three of them are worse off than they were when they started and the poor sod on the right the two tails he's now gonna throw three heads in a row just to get his original steak bag looked at from an individual perspective this is a bad bet looked at from a collective perspective its wealth enhancing only claims with Alex Adamu that this explains things like for example the existence of insurance as a business which takes collective gains and uses them to minimize individual losses but none of you here had ever thought that that was that was a distinction that mattered before do you look at it from one person's point of view over time in other words do you most of you consider and from one weird reason or another the human brain considers the ensemble outcome is the same as the time series outcome if you play that game a million times a few people for a short time always end up insanely rich everybody else ends up skinned and so one of things I was chatting to earlier about because um actually there's a chap here called Peter day from Quantcast one of my great worries about big data is there are far more big data sets that are mathematicians competent enough to handle them and if you speak to super competent mathematicians they're much much more skeptical about the potential of big data than fairly competent ones are a lot of they'll go yeah you can do regression analysis but it's basically you know okay and one of the best mathematicians I notice is effectively the a/b split test is still the only gold standard for finding anything out but I chatted you only and I found it very interesting talking to really really good mathematicians so one of the things we assume is that one time seven is the same as seven times one now that seems a bit weird obviously it is isn't it but if you look at a mathematical model of people this is my great objection to high-speed to you all came down or a lot of you came down on the high-speed one okay if you move to Folkston which I highly recommend the weather's always like this okay high speed one that saves you an hour a day 200 times a year so that's one person saving 200 hours a year that is a huge psychological game change it means you can move house it means it can change your life okay what high-speed to does to Manchester because nobody's going to commute from Manchester London is it saves too people one hour once again now to the model used by transport planners which is psychology free they treat that time-saving as if it's completely the same okay now anybody who just thinks about it for a second goes no they're completely different and yet it's perfectly acceptable to have a model of transport where one person saving an hour 200 times is basically considered the same as the reverse I get it I get it it's my last slide but one anyway another weird thing which is childish maths 2 times 2 times 2 times 2 times 2 times 2 is bigger than 3 times 1 times 1 times 3 times 3 times 1 variance reduction in an honor God ecstatic environment which is fancy term for real life ok simply reducing variance is a rational strategy because you end up better off if you basically minimize gains and losses what that means is that human rationality once you accept the fact that what a lot of people are trying to do unconsciously and instinctively is not to achieve optimal results it's to reduce the variance of the outcome that means that 10 times more things can be considered a rational behavior than if you don't include variance in the model and this is fascinating because I would argue that that's a large part of the instinctive appeal of brands we don't buy brands because we think they're better we pay a premium for them because we think they're less likely to be shite you know I mean you know actually the idea of maximization if you look at it evolution has to calibrate us this way there's one thing that evolution has to do a good job of is basically calibrating our approach to risk so what fascinates me is even mathematics which we think of as the purest thing of all can deliver completely different conclusions if you just look at it from a different context or a different direction and the reason this totally fascinates me is because I think looking at context experiments is genuinely the biggest future gain we can possibly imagine in terms of behavior change in terms of marketing in terms of business and with one suggestion which I've I've discussed with very good economists who generally agree with me okay no one in the diversity debate thinks that ten people each hiring one person they think is going to be the same as one person hiring ten people okay if you look at what the brain does instinctively when you hire people in groups when you hire individually you hire for conformity when you hire in groups you hire for complementarity now you can understand that in the car market you know what I mean about look for patterns right no one went when everybody had one car when I was a kid everybody had a saloon car okay because that was like the compromise car okay it was the white middle-class male of the automotive world okay cars and this is the last slide anyway when people have two cars the rules totally change you don't have to saloon cars in fact you possibly don't even have one so one of the most important things in the diversity debate which is really really important because if we actually solve it badly the cure will be worse than the disease is to look at the way in which we hire when you hire one person at a time people are disproportionately risk-averse and basically hire people for absolute conformity and I'm end on this with a perfect proof point the only reason I got my job in Ogilvy in 1988 was there were four jobs going there been one job going I wouldn't have stood a chance but they couldn't decide having decided on the first three applicants and somebody at the back said let's take a punt on the weirdo so that's me thanks very much indeed thank you [Applause]

Channel: Ogilvy Consulting

Views: 11,734

Rating: 4.9749999 out of 5

Keywords: nudgestock, nudge stock, rory sutherland, ogilvy consulting, behavioral science, behavioural science, behavioural sciences, behavioral sciences, psychology, behavioral psychology, behavioural psychology, behavioral economics, marketing, creativity, nudgestock 2018, rory sutherland psychology, rory sutherland marketing

Id: 0X0DwG5ZnAc

Length: 31min 39sec (1899 seconds)

Published: Wed Jun 13 2018