Alchemy: The Surprising Power of Ideas That Don't Make Sense

by Rory Sutherland

This example illustrates that, when we make decisions, we look not only for the expected average outcome – we also seek to minimise the possible variance, which makes sense in an uncertain world. In some ways, this explains why McDonald’s is still the most popular restaurant in the world. The average quality might be low, compared to a Michelin-listed restaurant, but so is the level of variance – we know exactly what we’re going to get, and we always get it. No one would say that a meal they had had at McDonald’s was among the most spectacular culinary experiences of their lives, but you’re never disappointed, you’re never overcharged and you never get ill. A Michelin three-star restaurant might provide an experience that you will cherish for the rest of your life, but the risk of disappointment, and indeed illness, is also much higher.fn7 In a world of perfect information and infinite calculating power, it might be slightly suboptimal to use these heuristics, or rules of thumb, to make decisions, but in the real world, where we have limited trustworthy data, time and calculating power, the heuristic approach is better than any other alternative.