Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life

by Rory Sutherland

The more reputational capital a seller stands to lose, the more confident I am in their quality control. When people snarkily criticise brand preference with the phrase, ‘you’re just paying for the name’, it seems perfectly reasonable to reply, ‘Yes, and what’s wrong with that?’

Tennis scoring isn’t quite socialist – one player can demolish another – but, in such uneven cases, the contest is over in a mercifully short time. There is, however, a kind of social security system in the sport’s scoring system, which means that for the duration of any match, the losing player feels he might still be in with a chance. It’s frankly genius.

In his book Risk Savvy (2014), the German psychologist Gerd Gigerenzer refers to this mental process as ‘Defensive Decision-Making’ – making a decision which is unconsciously designed not to maximise welfare overall but to minimise the damage to the decision maker in the event of a negative outcome. Much human behaviour that is derided as ‘irrational’ is actually evidence of a clever satisficing instinct – repeating a past behaviour or copying what most other people do may not be optimal, but is unlikely to be disastrous. We are all descended from people who managed to reproduce before making a fatal mistake, so it is hardly surprising that our brains are wired this way.

In institutional settings, we need to be alert to the wide divergence between what is good for the company and what is good for the individual. Ironically, the kind of incentives we put in place to encourage people to perform may lead to them to be unwilling to take any risks that have a potential personal downside – even when this would be the best approach for the company overall. For example, preferring a definite 5 per cent gain in sales to a 50 per cent chance of a 20 per cent gain. Why else do you think Management Consultancies are so rich?

A few years ago, the British chocolate manufacturer Cadbury’s received a large number of customer complaints, claiming that they had changed the taste of their Dairy Milk brand. They were at first baffled, because the formulation hadn’t been altered for years. However, what they had done was change the shapes of the blocks you would break off a bar, rounding their corners. And smoother shapes taste sweeter. Truly. Nothing about perception is completely objective, even though we act as though it is. When we complain that a room is hot, there may be no point at which we agree about what ‘hot’ means; it may merely mean ‘a few degrees warmer than the room I was in previously, to which I have become acclimatised’. ‘Time flies when you are having fun’ is an early piece of psychophysical insight. To your watch, an hour always means exactly the same thing, regardless of whether you are drinking champagne or being waterboarded. However, to the human brain, the perception of time is more elastic.*

As I have argued, psycho-logic and psychophysics need to be applied not just to the design of televisions, but also to welfare programmes, tax, transportation, healthcare, market research, the pricing of products and the design of democracy. There is no point in struggling to create changes in objective reality if human perception can’t see it, so all these things need to be perception optimised for humans.

The job of a designer is hence that of a translator. To play with the source material of objective reality in order to create the right perceptual and emotional outcome.

Japanese is a highly context-sensitive language, but then so are all languages. In British English, when said in the right context and tone, ‘You stupid fucking idiot’ can be a term of affection – something that can wrongfoot Americans, who mostly speak the same language but tend to interpret it more literally.* In translation, it is an enormous mistake to assume that what the translator conveys is what the speaker intended, and it is equally foolish to assume that what you intended to say is what will be understood.

However, misunderstandings are all too common, because Dutch conversation tends to be astoundingly direct, while British English is oblique and often coded to the point of derangement. In a business context a Dutchman might say, ‘We tried that and it was shit, so we won’t do it again,’ while an Englishman intending to say the same thing might say, ‘I think it might be a little while before we try that again.’

Nature spends a great deal of resources on what might be called ‘perception hacking’ or, in business terminology, marketing. Berries and fruits that want to be eaten develop a distinctive colouration and an attractive taste when they ripen. By contrast, caterpillars that don’t want to be eaten have evolved to taste disgusting to their predators. And some butterflies produce what look like eyes on their wings because many animals react more cautiously in their presence. Such are examples of how nature is able to hack perception rather than changing reality.

But what about snake-oil salesmen,* the fakers, fraudsters and conmen? Alchemy, precisely because it is not an exact science, has always been rife with charlatanry, and we should be on our guard for this. Many of the remedies proposed by people in advertising and design are wrong, and many of the findings of behavioural scientists have already been or will be proved wrong. Some parts of this book are also undoubtedly wrong – I am conscious that I have written this book from an incredibly optimistic perspective, but my argument is not that alchemy is always reliable, ethical or beneficial. Far from it – it is simply that we should not recoil from testing alchemical solutions because they do not fit with our reductionist ideas about how the world works. The purpose of this book is to persuade the reader that alchemy exists whether we like it or not, and that it is possible to use it for good; besides, if people are more aware of its existence, they will be better at spotting its misuses.*

Every day, companies or governments wrongly make highly simplistic assumptions about what people care about. Two major US retailers, JCPenney and Macy’s, both fell foul of this misunderstanding when they tried to reduce their reliance on couponing and sales, and instead simply reduced their permanent prices. In both cases, the strategy was a commercial disaster. People didn’t want low prices – they wanted concrete savings. One possible explanation for this is that we are psychologically rivalrous,