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

by Rory Sutherland

Robert Zion, the social psychologist, once described cognitive psychology as ‘social psychology with all the interesting variables set to zero’.

Highly educated people don’t merely use logic; it is part of their identity.

My problem with Marxism is that it makes too much sense.

"I don't believe you."

Like a criminal investigation, what looks neat and logical when viewed with hindsight is usually much messier in real time. The same is true of scientific progress. It is easy to depict a discovery, once made, as resulting from a logical, and linear process, but that does not mean that science should progress according to neat, linear and sequential rules.

Behavioural economics is an odd term. As Warren Buffett’s business partner Charlie Munger once said, ‘If economics isn’t behavioural, I don’t know what the hell is.’

Regular church attendance, for example, is particularly instrumental in helping young people escape the poverty of inner-city life.

Citation Needed. Sounds like correlation at best.

Religion feels incompatible with modern life because it seems to involve delusional beliefs, but if the above results came from a trial of a new drug, we would want to add it to tap water. Just because we don’t know why it works, we should not be blind to the fact that it does.

Zomfg. Please do put religion into a clinical trial like we do with drugs. It would fail miserably. This is bad reasoning.

‘At the federal level I am a Libertarian. At the state level, I am a Republican. At the town level, I am a Democrat. In my family I am a socialist. And with my dog I am a Marxist – from each according to his abilities, to each according to his needs.’

It is much easier to be fired for being illogical than it is for being unimaginative. The fatal issue is that logic always gets you to exactly the same place as your competitors.

we have evolved to deceive ourselves, in order that we are better at deceiving others.

The theory is that if all our unconscious motivations were to impinge on our consciousness, subtle cues in our behaviour might reveal our true motivation, which would limit our social and reproductive prospects.

‘The trouble with market research is that people don’t think what they feel, they don’t say what they think, and they don’t do what they say.’

Imagine a world where we had no capacity for deception, and where people on dates directly asked prospective partners about their earning power and career prospects, without even pretending to be interested in their personalities. Where would we be then?*

China. You'd be in china.

When the machine barely registered an amber light, the police let him go – at which point, he drove back to the club and demanded that the head barman be fired for watering down the drinks.

I am willing to bet that there are ten times as many people on the planet who are currently being paid to debate why people prefer Coke or Pepsi than there are being paid to ask questions like ‘Why do people request a doctor’s appointment?’, ‘Why do people go to university?’ or ‘Why do people retire?’ The answers to these last three questions are believed to be rational and self-evident, but they are not.

An attendant problem is that people who are not skilled at mathematics tend to view the output of second-rate mathematicians with an high level of credulity, and attach almost mystical significance to their findings. Bad maths is the palmistry of the twenty-first century.

In maths, 10 x 1 is always the same as 1 x 10, but in real life, it rarely is. You can trick ten people once, but it’s much harder to trick one person ten times.*

Many other mathematical models involving humans make the mistake of assuming that 10 x 1 = 1 x 10. For instance, our tax system assumes that ten people who earn £70,000 for one year of their life should be taxed the same amount as one person who earns £70,000 for ten consecutive years, yet I have never heard anyone question this – is it another example of bad maths?

Is this really true?

For instance, it would be perfectly possible to improve your racial diversity figures by employing ten highly talented Nigerians. You might congratulate yourself for the admirable diversity shown by your firm, but what if you were to then find out that all ten came from the Igbo tribe and none come from the almost equally populous Yoruba tribe – would you bury this fact and remain smug about your newly diverse workforce, or would you ask whether your definition of diversity is a little heavy on weighting skin colour and a bit light on everything else?

Logic may be a good way to defend and explain a decision, but it is not always a good way to reach one.

In making decisions, we should at times be wary of paying too much attention to numerical metrics. When buying a house, numbers (such as number of rooms, floor space or journey time to work) are easy to compare, and tend to monopolise our attention. Architectural quality does not have a numerical score, and tends to sink lower in our priorities as a result, but there is no reason to assume that something is more important just because it is numerically expressible.

Feynman, in a Lecture in 1964, describing his method: ‘In general, we look for a new law by the following process. First, we guess it . . . Then we compute the consequences of the guess, to see what, if this law we guess is right, to see what it would imply and then we compare the computation results to . . . experience, compare it directly with observations to see if it works . . . In that simple statement is the key to science. It doesn’t make any difference how beautiful your guess is, it doesn’t matter how smart you are, who made the guess or what his name is . . . If it disagrees with the experiment, it’s wrong. That’s all there is to it.’

Imagine you are climbing a large mountain that has never been climbed before. From the bottom, it is impossible to tell which slopes are passable, because much of the terrain is hidden behind the lower foothills. Your climb involves a great deal of trial and error: routes are tried and abandoned; there is frequent backtracking and traversing. Many of the decisions you take may be based on little other than instinct or good fortune. But eventually you do make it to the summit, and once you are there, the ideal route is apparent. You can look down and see what would have been the best path to have taken, and that now becomes ‘the standard route’. When you describe the route you took to your mountaineering friends, you pretend it was the route you took all along: with the benefit of hindsight, you declare that you simply chose that route through good judgement.

THIS

As Alfred Hitchcock once said, ‘drama is just real life with the boring bits edited out’.

‘There are two key steps that a mathematician uses. He uses intuition to guess the right problem and the right solution and then logic to prove it.’

our tendency to attribute our successes to a planned and scientific approach and to play down the part of accidental and unplanned factors in our success is misleading and possibly even limits our scope for innovative work.

It’s true that we consciously believe our actions are guided by reason, but this does not mean that they are – it may simply be evolutionarily advantageous for us to believe this.

One astonishing possible explanation for the function of reason only emerged about ten years ago: the argumentative hypothesis* suggests reason arose in the human brain not to inform our actions and beliefs, but to explain and defend them to others.

In this model, reason is not as Descartes thought, the brain’s science and research and development function – it is the brain’s legal and PR department.

In the physical sciences, cause and effect map neatly; in behavioural sciences it is far more complex. Cause, context, meaning, emotion, effect.

The profusion of data in future will not settle arguments: it will make them worse.

Ffffffffuuuuuuuuuck

It sometimes seems to have been reduced to a kind of monotheistic religion of efficiency where, provided you can recite the approved managerial mantras about economies of scale and cost savings to your financial overlords, no further questions will be asked.

Why are large commercial organisations adopting this ideological approach to business? That was supposed to be the weakness of communism.

Perhaps people don’t ‘deserve’ to be rewarded for being lucky, but a system that did not ensure the survival of lucky accidents would lose most of its value. Evolutionary progress, after all, is the product of lucky accidents.

We don’t value things; we value their meaning. What they are is determined by the laws of physics, but what they mean is determined by the laws of psychology.

On menus, there seems to be more money in adjectives than in nouns.

A world designed by economists would be one where chairs were designed merely to stably support the weight of the sitter, with no regard given to physical comfort or padding. This is what you might call ‘aspergic design’ – design which gives consideration to the working of every part of the system, except the biological part.

a flower is simply a weed with an advertising budget.

To quote a Caribbean proverb, ‘Trust grows at the speed of a coconut tree and falls at the speed of a coconut.’

* An extreme pessimist might suggest that, although competition for wealth markers is wasteful and harmful to the planet, it is a lot less harmful than many other forms of intergroup or interpersonal competition.

Why are people happy with the idea that nature has an accounting function, but much less comfortable with the idea that it also has a marketing function?

feelings can be inherited, whereas reasons have to be taught, which means that evolution can select for emotions much more reliably than for reasons.

But the fact that we can deploy reason to explain our actions post-hoc does not mean that it was reason that decided on that action in the first place, or indeed that the use of reason can help obtain it.

The types of intelligence prized by education and by evolution seem to be very different.

The risk with the growing use of cheap computational power is that it encourages us to take a simple, mathematically expressible part of a complicated question, solve it to a high degree of mathematical precision, and assume we have solved the whole problem.

“decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world. Neither approach, in general, dominates the other, and both have continued to co-exist in the world of management science.”’

The solution being developed is to target cancer cells with a chemical that causes them to be to develop immunity to it, at the expense of their immunity to other things; at that point you hit them with a different chemical, designed to attack the Achilles heel that you have created, wiping them out second rather than first time around.

it’s surely better to find satisfactory solutions for a realistic world, than perfect solutions for an unrealistic one.

We will pay a disproportionately high premium for the elimination of a small degree of uncertainty – why this matters so much is that it finally explains the brand premium that consumers pay.

higher.

See footnote