Rory Sutherland's full speech @ Creativity4Better 2019 Conference

[Music] Rory Sutherland vice-chairman oh go be UK TEDTalk superstar columnist and writer after 30 years in this industry I've come to the very sad conclusion that in many ways it is the stupidest industry in the world yep so first of all it completely fails to take its own advice so it's trying to sell advertising as if and vert izing can be reduced to a narrow Newtonian science now selling advertising on its efficiency is a bit like trying to sell Coca Cola on its ingredients it's not completely irrelevant but it completely misses out on the magic that you create when you put those ingredients together that there's something far greater than the sum of its parts and we're becoming obsessed with the parts of advertising and we're forgetting the whole and I would argue we're trying to make advertising the wrong kind of science we're trying to turn it into kind of engineering or economics or Newtonian physics when a better science might be the science of magic of pure alchemy because that's really what advertising does and every time we get a chance to do this we actually chicken out we bottle it we make utterly insane decisions early in my career the separation of media and creative was the most batshit ridiculous and stupid decision to take imaginable it was taken for financial reasons no one has ever come to me with the reason which explains why the work might be better as a result um all that happened in a sense was that you separated media and creative at the very time this shouldn't have happened it was the worst possible moment for this to happen and you now have people in media agencies who've never met a copyright and vice-versa by the way this is a horrible state of affairs because there are a lot of problems which we can solve using the magic that advertising can produce but their kind of problems a bit like a Sudoku okay you can't solve one of those problems by cutting it up into nine squares and handing them to nine different people if you can't see the whole grid you can't solve the problem and what we also fail to realize is the extent to which we are entirely undervalued by most areas of the business world and there's a reason for this which I'm going to go into in rather nerdy detail most business decision-making is dominated by finance people just as most government decision-making is dominated by lawyers and economists most of you don't realize this but there is within economic theory non Austrian economic theory if I'm being technical an inherent devaluation of advertising and marketing the assumption of standard mainstream economics is that value is inherent in the product the consumer is making a decision under conditions of perfect trust and perfect information they know exactly how much they're prepared to pay for something what utility they'll derive from it and therefore essentially they've created a model of the world which is commonly used elsewhere in business where marketing and advertising needn't exist if you completely trusted the person you are buying from first and foremost and secondly you knew exactly what you're going to get from what you're buying and if the value of that product were not affected at all by the context or framework in which you perceived it I freely admit you wouldn't need a marketing and advertising discipline at all the problem this creates is that most people in finance tend to see marketing and advertising as a necessary evil it's essentially something which you do as little off as you possibly can it's not seen as the source of value creation it's seen as something you do as efficiently as possible because in a perfect world you wouldn't need to do it at all the fact that we've allowed this to happen is kind of terrible and so I'd like you to define for a second which I think is a really useful way of looking at marketing it's actually the science of doing what economists are wrong about go and spend a week studying mainstream economics if you've worked in this industry for any length of time you'll realize that the model they use is crazy it makes assumptions simply for the purpose of attaining mathematical neatness which are rubbish furthermore and this is really important there are thousands and thousands of problems in the world in which by the way I'll place my wash basin at home and the environmental crisis which can't be solved by economic thinking because they're not remotely economic I'll start with my wash basin it's easier okay six months ago my wash basin cracked at home I think it's fair to say that if I could have waved a credit card a contactless credit card over my wash basin and had it repaired instantaneously for a fee of three hundred euros say I would have done that immediately the day it happened I would have replaced the wash basin you know noise the hell out of me it leaks you can't fill it up beyond about two inches the whole thing's a disaster but I still haven't done it six months later it hasn't been done there is nothing to do with economics it's nothing to do with benefits and it's nothing to do with costs it's to do with the fact that the actual path the choice architecture of fixing a sink is a royal pain in the ass you have to find a time when a plum is available when you're at home etc etc where your wife has to agree on the taps once you get a kind of multiple complicated decision like that the obstacle to action this is also true of the environmental movement it's deadly the obstacle action is very little to do with the kind of things that economists study by the way if anybody here works for TaskRabbit or works for trusted traders or local heroes any of those websites that are trying to solve that problem they've also got it wrong they ask you the question what do you need done and you go I need a plumber to fix Jason I think there's a billion pounds in the UK in the US in every launch country I think there's a billion pounds of economic value being squandered in what you might call home handiwork by the fact that they're actually asking the wrong question the question you ask is when you next gonna be at home all day yeah and I can answer I work from home most Friday so I gotta be at home this Friday and I'm gonna be home next try they and then they can say well on those two Fridays we have free a plumber a carpenter a handyman a guy who can paint things and a plasterer how many of them do you want if any of those companies want to take them take me up on this if it works just give me a few pounds and maybe a couple of days of handiwork just to say thank you what I'm saying there is it's nothing to do with price it's to do with things like coordination the environmental movement this by the way I think it's rather beautiful so during the extinction rebellion crises and this girls actually a student at one of the creative colleges in London and she's one of the very few protesters who is doing something which is tell me something I can do don't shout at me don't get angry don't just meaninglessly disrupt the traffic give me steps I can take now my proposal for the environmental movement is very simple you need to get experts to come up with eight actions we all need to take maybe we need to be vegan for six months okay maybe you need to install solar panels buy an electric car not own a car at all maybe we need to pledge not to fly at all for nine months of the year every year give eight actions which we can take and ask us to choose four see what happens then no one's tried that instead there are a lot of people who are very angry quite justifiably but they're trying to get everybody to do everything at once change never happens like that so what you must all realize is by dint of possessing it doesn't matter where you work in marketing by dint of possessing what I call the marketing mindset you have a view on the world which is unique and irreplaceable because unlike nearly every else in an organization whether it's government you work for or whether it's for example a business you see the world through the eyes of a consumer living life over time most businesses don't see their consumers like this most people in business density they consumers like this they see them as an aggregate snapshot every now and then they they add all their consumers together they create an average and they watch how that average changes over time every time you create an average you lose information every time you create an average you lose the facility to solve a problem because solving for the average is really really hard recently I spoke to a train company in the UK and I said you're trying to reduce train overcrowding aren't you and they said yes I said you'll never do that because it's really really difficult because there will always be times when lots of people decide to travel on the same train it's almost impossible without having an insane amount of surplus capacity to solve that problem split the problem up into individual travellers however and things become more interesting ten people who have to stand on a train ten percent of the time doesn't matter one person who ends up standing 100% of the time does matter once you split the problem out that way it's actually quite an easy problem to solve for example people with an annual season tickets should probably be the people who are allowed to sit in first-class if they can't get a seat you could run a few extra trains only for annual season ticket holders if you solve the problem where it matters it's a much easier problem to solve if you try and solve them for the average its intractable and impossible and what environmental campaigners are trying to do is they're trying to solve for the average and it ain't gonna work now just to be clear about this there's a whole science around this which I've recently discovered don't worry it's called agar DISA tea and you don't need to know about this it's a concept that arose in physics in the middle of the last century but what agar DISA T is very crudely is the difference between looking at everything in an aggregate way and looking at everything in a time series marketers are probably the only P within an organization who take the time serious point of view think about this okay nearly everywhere across Europe whenever house prices go up the press presents it as a good news story because on average lots of people are getting richer if you look at it from the point of view of any individual who isn't 70 years old it's bad news if you don't own a house it means it's more expensive to buy your first one and if you're already owning a house and you've just had kids and you need to move into a bigger house it's gonna be more expensive to trade out so except for people who are planning to downsize or for people who are waiting for their parents to die a rise in house prices is basically bad news and yet the press because they're looking at the average presented as good news this is a weird example from these two guys London mathematical laboratory this is the nerdiest session you'll have all day I promise you this yep even they make the point that even mathematics is contextually dependent are you looking at the average or are you looking at what happens to an individual over time take this bet okay you all put all your money into the into the table let's say a hundred pounds for that and someone tosses a coin and if they throw heads your wealth goes up by fifty percent and if they throw tails your wealth goes down by only forty percent and most you're thinking that's a good bet in fact I'd like to take that bet as much as I possibly can because what you're doing is you're averaging what happens to four people when they take the bet once and what happens to four people when they take the bet once is you get two with 152 with 60 that's a total of 420 they started with 400 so on average they're getting richer by sized percent every time right as you'd expect so and so you probably all think as I did when I first saw this great put all my money into the table and just keep that coin running I'm off to the Bahamas with the winnings if you're an individual playing your part in this game it ain't so good let's look what happens after you've tossed the coin twice the guy with heads heads is loaded he started with 100 pounds he's now got 225 2 other people are now poorer than when they started in fact they're 10% worse off than when they started they've now got 90 the heads tails and the tails heads guy right and the fourth guy who's thrown tails twice is seriously screwed okay he's now got 36 pounds he has to throw three heads in a row just to get his initial steak bag so there are things that look great in the average that look completely different when you look at them over time and what this mean interestingly is it means that all economists are fundamentally wrong about what humans are trying to do because we're not trying to maximize for the average we're trying to maximize our chances over time when you want to maximize under multiplicative dynamics when you want to maximize the time average growth rate over time what you want to do is not optimize you want to reduce variance and that's because two plus two is the same as one plus three if you're adding two times two times two times two times two times two however is not the same as 1 times 3 times 1 times 3 times 1/3 it's much bigger now instinctively this means that for humans under evolutionary conditions it pays you to reduce variance in 1960 in probably the most important advertising conversation in the 20th century David Ogilvy and a man called Jill Rafelson had a conversation in Chicago and Joel said to David he said I don't think people buy brand a rather than brand a B because they think it's better I think they buy it because they're more confident that it's good and I think therein lies a really interesting but a mass we're buying brands we're paying a premium for brands not necessarily because they're better the boogers we're really really confident that they're not terrible it's a low variance outcome buying a brand compared to taking a risk from something you've never heard before that's why McDonald's is the popular restaurant in the world it's not because it's very very good it's because it's really really good at not being terrible okay do you not his same bolts eats for three weeks before he competes in an Olympic final chicken McNuggets okay now you'd assume he'd say my body is a temple I have my own quinoa chef to prepare me extort no because he says they're only two things the really matter he said I get loads of protein and I don't get ill that's all that really matters and so once you start to look at life through the marketers lens which is what happens over time versus what happens in an average ensemble you come up with answers and you spot problems that nobody else in your business can see one of the things I think we've got to get better at and one of the areas where I think advertising is gone wrong and agencies haven't been paid on Commission since basically about 1992 but we still behave as though we are we still focus on the bought media part of the solution first I don't see why that should be so I would argue the place to focus in any brand in any service in any product is you start with the end if the experience is no good there's no point in doing great advertising because people will only buy your product once if your conversions no good there's no point in doing great advertising because you'll create desire without action which is kind of fruitless and pointless get the end right and then work on the beginning and I think creative agencies have made the mistake of doing it the wrong way around we've focused on the beginning without worrying on the end let me give you a few examples of the things you spot when you look at life as it's lived in real time I wanted to buy an electric car so I went to the local garage which sells electric cars I said I'd like to buy an electric car they said it's great you get a subsidy quite a generous subsidies it's fantastic before I'm going to buy an electric car I need one of those seven kilowatt plugs at home so I can charge my car reasonably quickly because I'm not going to spend you know a Fivefinger sum on an electric car and then spend three years with a cable coming out of my bathroom window where it takes 16 hours for me to charge the bastard so I go along and say I'd like to install one of those plugs please isn't there's a really generous subsidy I said that's great so it's normally 500 pounds but you get 250 pounds from the government for installing the stalling plug I said sign me up right now they said you got to prove you an electric car now no one in the Department of Transport has clearly read catch-22 have they okay the point I made is you can actually solve the problem much more easily we think if you can encourage people to install one of those plugs you don't need to subsidize the electric car that much because if I spent 250 pounds on a plug outside my house he's basically gonna buy an electric car on time because I'd feel a bit of a buying a diesel right uber I think is a fantastic case where it created value just by getting the informational certainty at every moment right if you remember what I said that people hate variants that's why people like brands they hate variants they hate uncertainty and a brand is a kind of promise of certainty what uber did is a brilliant piece of this it removed all the anxiety points of ordering a taxi one before you even press the button to order it gives you an estimate of how long you might expect to wait that's psychological genius by the way because even when the waiting time is quite long you've been prepared for it so when the taxi comes up it's it warms you it might be 15 minutes for a taxi and the taxi comes up and says I'm going to be 13 minutes you're not angry you're actually slightly pleased because it's better than you expected waiting for the taxi we would rather wait for 15 minutes watching a taxi approach on a map than wait for 8 minutes in a state of uncertainty okay once you understand that humans have evolved to really really crave certainty and low variance because that's the evolutionary safe strategy loads and loads of brilliant things suddenly make sense which didn't make sense before uber is a case is uber is really psychological innovation rather than technological innovation if you want my cynical point of view I think we've kind of run out of technology for the next five to ten years nobody ever believes me when I say this but actually the low-hanging fruit technologically is probably been what remains to be exploited is psychological innovation which is what happens to people's propensity to repair a washbasin when you present the choices the other way around that kind of thing we need to do a lot more testing and experimentation in you can solve massive problems easily once you look at life through the lens of the consumer over time and understand their real why and their real motivation as distinct from trying to solve the problem in the average in the UK we have this huge debate about whether we spend 60 to 70 to 80 billion pounds on high-speed - which is a high-speed rail link connecting London with Manchester and I blow it and not wholly against high-speed rail there are city pairs where it makes fantastic sense but I simply made the point that I could reduce journey time to Manchester and increase capacity to Manchester and it would cost quarter of a million pounds it would take a year rather than costing 60 billion pounds and all the engineer said that's bollocks there's no way you can do that I said it's really really easy I can do it easily because every time I actually booked a ticket to Manchester I'd booked an advance ticket because otherwise they cost about a billion pounds and because I'm frightened of missing the one train on which my tickets valid I turn up at Euston station about 45 minutes before the trains due to leave because I can't afford to miss the train as a result two trains leave half empty for Manchester in the 45 minutes in which I'm waiting for my correct train I said all you need to do is have an app that says I'm it used to now and the app replies pay five pounds and you can board a train 40 minutes before your book train and you can have seat j8 maybe pay two pounds you can board a train 20 minutes early now that way I've reduced my journey time by 40 to 20 minutes which is 2/3 as good as high speed to would achieve and I've increased the capacity of the network now just to explain that you in yield management you should always allow people to travel on earlier empty seats because you aren't gonna sell them to anybody else whereas if someone takes an earlier train they vacate the seats on a later train which someone else might need so it's much better in terms of load balancing that you allow people to travel early I said with a tiny tweak to pricing and with a small amp you could achieve maybe 25% of the benefits of something that costs sixty billion quid but all the people were looking at time-saving as the time from the train leaving to the train arriving you don't want to reduce that in time that's the most productive part of my whole day I enjoy sitting on the train it's standing around the station I don't like okay anybody who's a business person knows that actually two hours on a train is a brilliant opportunity to actually get some done without interruptions in fact it's the meeting in Manchester you're travelling to you there's probably a waste of time to be absolutely honest it's vital that we understand that every part of a choice has to be made easy and I think Oberer is a model of this by the way doesn't necessarily make financial sense its valuation but as a psychological insight it's genius you can have everything upstream brilliant but if you get the point of sale wrong or you get the last-mile wrong you still fail I always wanted to demonstrate this but then obviously no clients give us say hey why don't you take a brilliant product and do terrible point-of-sale for it just to prove your point but by happy accent to Melbourne comedians did the job for me they got the world's probably the world's most fashionable performer and they sold him in a really really terrible way and this is what happened hello hi peep shows they have a pretty bad name normally associated with lewd content but by definition they don't have to be so in an attempt to change that we took one of the world's biggest performing artists kept all these clothes on and set up an Ed Sheeran Peep Show would anyone dare to believe what was written outside and come into our very dodgy looking venue that was fair enough because we dressed Hamish is a fairly shady looking spruiker in charge of getting customers I got you Sheeran and want some Sheeran all right I can hear Amy do you think my genuine I don't think okay it's gonna be a brave soul I wouldn't I wouldn't come into if there was a dude with a beard at her heart and say like competencies ed was right this was going to be tough on paper did she run for two bucks insurance do on a peep at ed Sheeran your loss what do you reckon big fella that each hearing in here beautiful GG hey man sitting on a stool what do you reckon two bucks got in sheer and just sitting 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'd had a total lack of interest for over fifty minutes it's been some time we should have got you a more comfy chair a big yeah maybe felt like I was here in your need in there two bucks it's here in your name and Sharon is a singer yeah yes not I think one of the big problems is people think Ed Sheeran's a code word for a new drug that's got you guys like it cheering two bucks two bucks for thirty second paper what like they just say no yeah that's good dirt cheap paper dirt cheap paper here we go two bucks you're checking we're pricing it too high and that's why we're not getting people coming in here we go boys it's a Friday get you in cheering Peep Show two bucks sitting on a stool play your song if someone actually does think it's a peep show I might quickly give you the go-ahead to take up for your clothes you're willing to do that I've been drinking a lot of beer recently all right yeah you're not a couple of months ago maybe but yeah men shave that's just the shape of the potato two hours in and Hamish was getting more desperate ed sheeran is literally sitting in there on the stage waiting for two dollars we were feeling it as well but just when we thought this had been a giant waste of everyone's fun guys I guess hearing your loners hearing two bucks Peep Show just got him sitting on stage and it well - that's gonna cost you two bucks you only get 30 seconds I don't come in but well I was only one way to find out we mop you on here here we go here in Peep Show he said somebody died all right your choice no she did this mouth thing and walks away [Music] I'm just saying he guys one of the guys sitting there by himself they're probably 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 I can't guarantee what it'll do but yeah baby bucks and after 2 hours 23 minutes including some final hesitation we finally found people brave enough to take your clothes on sit down the sake behind yourself just listen to the announcement ever good luck enjoy your pay hello and welcome to the peep show your time will start with us Darla's night well I'll be loving you too is 17 baby my heart still fall as hard at 23 and I'm thinking bout how people fall in love guitar is finished now share that to many of your colleagues if they think everything's about the economics okay do you hear that wonderful suggestion maybe we're pricing it too high the default economists suggestion if you're not selling but there lots of ways you could have solved that problem if you put an ad in the newspapers you probably could have charged $200 and had a key around the block okay if you'd actually hired actors to form a queue you would have created social proof and other people would have joined the queue okay there are loads of ways you could have solved it in the end they solve it with a bit of behavioral science by saying it's gonna get busy later on and he's only there till midday scarcity value not about economic measures and most of the world's problems remaining I would argue and no longer really just about economics in particular one of the things we've got to watch in advertising terms is this model of advertising we spend far too much time testing media in the digital world and trying to optimize that and far too little time testing different creative approaches which is where the magic really potentially lies okay no efficient advertising can find customers great advertising effective advertising creates them nature understands this a flower is basically a weed with a marketing budget and there there's a kind of model of advertising which is becoming prominent which is distribution model it's it's logistics how can we get a message doesn't really matter what the message is to the right person at the right time as efficiently as possible and some advertising works like that it's not a totally vacuous thing to do it's not a waste of time lots of advertising doesn't work like that works probabilistically it works because you don't know who your future customers are going to be you don't know where your market lies you don't know much about the future and therefore the best thing you can do is be famous because when you're famous you are exposed to more opportunities and opportunities tend to be positive I've got teenage children drives me crazy I just want to stay at home in the evenings they want to go out okay anybody with teenage children you end up picking them up from some scuzzy bar at 2:00 o'clock in the morning because they're obsessed with going out and if I ask them why'd you keep going out all the bloody time you know what's wrong with the Discovery Channel okay they'll basically say because I might get lucky they don't know how they don't know how it's gonna happen in advance they don't have a plan they don't have a strategy they just know that you might meet someone it might be romantic it might be sexual it might be a career opportunity someone might invite you on holiday you might make a new friend you might learn some useful information none of which will happen if you stay at home and in the same way if you're famous let's imagine you're a b2b company if you're famous it's impossible to plan in advance how the fame will pay and it's impossible to attribute the value of fame thereafter does that mean that because you can't predict it and you can't attribute it you shouldn't do it at all that's like saying to my daughters unless you can actually say specifically what's the value of going out and do a cost-benefit analysis I'm not prepared to let you go out there right I would be wrong okay if you think about it okay very simply you're a famous company when you're chief executive rings someone up the person calls back people come to you with good ideas because they've heard of you people come to you with suggestions for partnerships because they've heard of you people want to work for you because they've heard of you people work for you for less money because your name's famous and they want it on their CV okay now none of those things can ever be attributed to a particular marketing activity but they're really really valuable does that mean that we should take such a reductionist approach to the value of advertising that anything that basically can't be predicted in advance tributed in retrospect shouldn't be done at all because if we do that we're grossly under valuing the value of advertising flowers are big because the bigger your flowers are the more bees and insects come along and have a look it's basically how it works they just find that probabilistically on balance petals pay off you don't need to split it down into individual bee journeys to justify your activity something that works in general still works and so my final plea really because my times up is we're trying to turn advertising into a science by making it like a Newtonian science now the great problem of science if you try and make it like Newtonian physics is the first rule of science is no magic okay you know second law of thermodynamics heat cannot be created or destroyed you can't get something from nothing and if you follow that kind of scientific mentality you'll deny the really extraordinary thing about marketing which is from time to time you can create value out of nowhere economics notice by trying to be like physics this is Milton Friedman what's his famous phrase there's no such thing as a free lunch well sure of course that's rubbish we've all had loads of them and they're better than the kind you have to pay for okay but the idea that nothing can be created out of nothing is an incredibly dangerous mentality to have when you're engaged in marketing you can make things brilliant by telling a different story about them okay Nespresso is probably the best case in point okay if you have to buy an espresso in a jar for an equivalent dosage of caffeine a jar of Nespresso would cost 30 or 40 euros and you look at that and you go there's no way I'm paying that yet you know ground coffee for 1/10 the price doesn't come in a jar comes in a pod so when you use your $0.49 Nespresso pod your frame of reference isn't Nescafe it's not ground coffee it's Starbucks and you think well it's 49 P would it cost me two pounds 13 Starbucks this machine's basically making me money genuinely want something is does not depend on what it is it depends on the frame of mind that the perceiver brings to it for years every time my plane landed and there was a bus Brij I was really pissed off as was everybody else on the plane oh it's a bus you know the think the engines wind down you're a mile from the airport terminal ah it's an crapping bus and then one day I had a pilot who brilliantly we landed the engines wound down we were nowhere near the airport and he said I've got some bad news and some good news now anyways before we landed to say that you don't hear that at 30,000 feet right but I've got some bad news and good news the bad news is I wouldn't be able to get you an air bridge because there's a plane blocking our gate the good news is the bus will take you all the way to passport control so you won't have far to walk through the airport with your carry-on bags and we all know geez I thought that's always true isn't it I know is just seen as the bus as a shitty away than average of getting to the airport terminal as a way of getting out of the airport it's better than average because it takes you five hundred yards that you don't have to walk he'd rebranded the bus from being an inconvenience to being a conveyance next time you're on a plane and there's a bus just say very loudly to companion actually I'm glad there's a bus because it'll take you all the way to passport control you synthesized happiness in everybody around you by causing them to look at something differently advertising has always done this the top line is an ad for Hertz the top sentence basically says you're more likely to get lower prices the car you want car availability all those things you know a wide range of airport served if you go with Hertz but is its number one in rental cars you flip attention onto the attitude of a company rather than the capacity of a company and suddenly what was a weakness becomes a strength that capacity of advertising to turn a bug into a feature good things come to those who wait for Guinness reassuringly expensive for Stella Artois okay that capacity to take a weakness and turn it into a strength is pure alchemy it's the most magical thing we can do and time and time again we fail to do it because we're obsessed with the mine you see I once you understand human perception you understand its comparative hold up your hand and cover the join between the top and bottom of those grey and white things and you'll see that the top and bottom are in reality exactly the same color our brain manufactures contrast it assumes there's a bit of a shadow at the bottom so it better make the bottom brighter we don't perceive the world objectively if you want to change perception of time you can reduce the length to the weight or you can reduce the frustration of a weight the second is easier and more effective and cheaper than the first stop measuring reality reality doesn't map neatly onto emotion here is an NHS waiting room you come in it's accident and emergency and you basically typically waiting times might be 2 or 3 hours you can try and solve that by employing loads more doctors or you can solve the problem psychologically do you know what you do you get the allow the person to come in you see them with a triage nurse quite quickly and you say you'll need to see the specialist and then while they're waiting for the specialist you show them through into a different waiting room they feel they're making progress and they'll sit there happily for two hours if you send them back to the initial waiting room they go batshit insane after about half an hour ok you can basically manufacture the psychological conditions for contentment and happiness without changing objective reality eg duration all that much uber knows how to do that those signs on the platform that or the bus station that tell you when the next bus is coming that's changing our perception of time patently time is something we don't perceive objectively we have phrases like time flies when you're having fun or it was the longest five minutes of my life okay we don't perceive time objectively so once you understand this this is my last slide and I mentioned the very beginning Austrian school economists ludwig von mises Hayek people like that understood what we were doing nobody else did this is a phrase from ludwig von mises in defense of advertising and marketing and here's the point is by the man who sweeps the floor he explicitly means marketing and advertising activity that if you serve michelin-starred food in a restaurant that smells slightly of poo okay or in a restaurant where there's dirt on the floor or where it's kind of grubby or the powerpoints have crud over them or whatever okay nobody'll enjoy the meal because context affects our perception and experience every bit as much as reality does we think it's about the food it isn't just about the food you can similarly by the way they served I think it was McDonald's chicken or KFC chicken at an organic food Fair in Amsterdam and everybody went going even just tastes the wholesome dose and the originality but KFC on a white plate and put some fancy salad on it people think it's fantastic high-end food okay the idea that our evaluation of something is dependent on what the thing is independent of the context in which it's perceived or displayed is the worst misconception in human problem solving once we understand that the Austrians were fundamentally right that to run a great restaurant is a it's not added value this is the last thing okay marketing does not add value because that makes it sound like an optional extra it makes it sound like where can see the value is inherent in the product itself and marketing adds a little bit of magic fairy dust on top to make it a little bit better not marketing value is intrinsic to the value of the whole thing if you present the right thing in the wrong way you've got a worthless product once we win that argument all the other arguments fall into place for us once we finally get people to abandon that economic view that people are basically only interested in those two things of the objective reality of the product and how much it costs and we realize that how you present something is the principal determinant of how something's perceived and how something is evaluated and what people will pay for it then again 90% of our other problems will go away overnight this is the one problem we face okay in business if you had a product that isn't selling and you just said our planet X isn't selling we've got to drop the price okay now that's the most expensive way of selling a product you're bribing people to buy your product and yet because it's consistent with economic theory that we get it proved in a board meeting in about three minutes okay if you suggested changing the name of the product and repackaging it your proposal would be argued to death and this is because of the fundamental asymmetry and business decision making creative people counterintuitive ideas have to be presented to rational people for approval the same does not apply the other way around when people have an apparently rational idea that's consistent with the economic theory do they go well this seems to make sense but let's show it some really wacky people to see what else they can do they do not it's probably right that creative people have to have their ideas evaluated by people more sensible than them when I fly home tomorrow I don't want to think the people who check the wheel nuts on the plane while the experimental people you know let's try anti-clockwise this time for the lols right I don't want air traffic control to be full of jokers but at the same time unplaced logic is allowed to run rampant and it's never questioned and the opportunity cost of being logical is never measured that's the other problem we've got to solve read my book for more thank you very much indeed [Applause]

Channel: IAA Romania

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Id: E8-4JliHzoc

Length: 42min 0sec (2520 seconds)

Published: Thu Jan 30 2020