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

by Rory Sutherland

We discovered that problems almost always have a plethora of seemingly irrational solutions waiting to be discovered, but that nobody is looking for them; everyone is too preoccupied with logic to look anywhere else. We also found, rather annoyingly, that the success of this approach did not always guarantee repeat business; it is difficult for a company, or indeed a government, to request a budget for the pursuit of such magical solutions, because a business case has to look logical.

When you demand logic, you pay a hidden price: you destroy magic. And the modern world, oversupplied as it is with economists, technocrats, managers, analysts, spreadsheet-tweakers and algorithm designers, is becoming a more and more difficult place to practise magic – or even to experiment with it.

The human mind does not run on logic any more than a horse runs on petrol.

This is an important metaphor for the contents of this book: if we allow the world to be run by logical people, we will only discover logical things. But in real life, most things aren’t logical – they are psycho-logical. There are often two reasons behind people’s behaviour: the ostensibly logical reason, and the real reason.

Modern consumerism is the best-funded social science experiment in the world, the Galapagos Islands of human weirdness. More important still, an ad agency is one of the few remaining safe spaces for weird or eccentric people in the worlds of business and government. In ad agencies, mercifully, maverick opinion is still broadly encouraged or at least tolerated. You can ask stupid questions or make silly suggestions – and still get promoted. This freedom is much more valuable than we realise, because to reach intelligent answers, you often need to ask really dumb questions.

Human behaviour is an enigma. Learn to crack the code.

To avoid stupid mistakes, learn to be slightly silly.

The trick to being an alchemist lies not in understanding universal laws, but in spotting the many instances where those laws do not apply. It lies not in narrow logic, but in the equally important skill of knowing when and how to abandon it. This is why alchemy is more valuable today than ever.

Not everything that makes sense works, and not everything that works makes sense.

More data leads to better decisions. Except when it doesn’t.

It’s important to remember that big data all comes from the same place – the past. A new campaigning style, a single rogue variable or a ‘black swan’ event can throw the most perfectly calibrated model into chaos.

In theory, you can’t be too logical, but in practice, you can. Yet we never seem to believe that it is possible for logical solutions to fail. After all, if it makes sense, how can it possibly be wrong? To solve logic-proof problems requires intelligent, logical people to admit the possibility that they might be wrong about something, but these people’s minds are often most resistant to change – perhaps because their status is deeply entwined with their capacity for reason. Highly educated people don’t merely use logic; it is part of their identity.

We could never have evolved to be rational – it makes you weak.

Irrational people are much more powerful than rational people, because their threats are so much more convincing.

A rational leader suggests changing course to avoid a storm. An irrational one can change the weather. Being slightly bonkers can be a good negotiating strategy: being rational means you are predictable, and being predictable makes you weak. Hillary thinks like an economist, while Donald is a game theorist, and is able to achieve with one tweet what would take Clinton four years of congressional infighting. That’s alchemy; you may hate it, but it works.

If you are wholly predictable, people learn to hack you.

Be careful before calling something nonsense.

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.

It is impossible for human relations to work unless we accept that our obligations to some people will always exceed our obligations to others. Universal ideas like utilitarianism are logical, but seem not to function with the way we have evolved.

And in reality ‘context’ is often the most important thing in determining how people think, behave and act: this simple fact dooms many universal models from the start.* Because in order to form universal laws, naïve rationalists have to pretend that context doesn’t matter.

The two categories of retailer who have weathered the global economic instability best in recent years are those at the top end of the price spectrum and those at the bottom. Some of this is a result of widening wealth inequality, but a glance at the demography of shoppers shows that it is not quite that simple; for instance, the bargain department store TK Maxx has a customer base that perfectly matches the UK population.* In fact, we derive pleasure from ‘expensive treats’ and also enjoy finding ‘bargains’. By contrast, the mid-range retailer offers far less of an emotional hit; you don’t get a dopamine rush from mid-market purchases. I was reminded of this idea recently when my wife and I were buying bed linen. After wandering around a department store for half an hour, I explained that there were only two sums of money I was prepared to spend in the store: ‘zero’ or ‘a lot’. Zero would be good, as we could keep our existing linen and spend the money on other things. A lot of money was also acceptable, as I could then become excited by thread counts, tog ratings and exotic goose down. By contrast, spending something in between would have given me neither of these two emotional rewards.

In his book Skin in the Game (2018), Taleb includes what might be the most interesting quotation on an individual’s politics I have ever read. Someone* explains how, depending on context, he has entirely different political preferences: ‘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.’

The problem that bedevils organisations once they reach a certain size* is that narrow, conventional logic is the natural mode of thinking for the risk-averse bureaucrat or executive. There is a simple reason for this: you can never be fired for being logical. If your reasoning is sound and unimaginative, even if you fail, it is unlikely you will attract much blame. 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.

There are five main reasons why we have evolved to behave in seemingly illogical ways, and they conveniently all begin with the letter S.* They are: Signalling, Subconscious hacking, Satisficing and Psychophysics. Without an understanding of these concepts, rational people will be condemned to spend their lives baffled and confounded by the behaviour of others; with a grasp of these principles, some of the oddities of human behaviour will start to fall into place.

The reason we don’t always behave in a way which corresponds with conventional ideas of rationality is not because we are silly: it is because we know more than we know we know.

A fascinating theory, first proposed by the evolutionary biologist Robert Trivers and later supported by the evolutionary psychologist Robert Kurzban, explains that we do not have full access to the reasons behind our decision-making because, in evolutionary terms, we are better off not knowing; we have evolved to deceive ourselves, in order that we are better at deceiving others. Just as there are words that are best left unspoken, so there are feelings that are best left unthought.* 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.

Evolution does not care about objectivity – it only cares about fitness.

For a business to be truly customer-focused, it needs to ignore what people say. Instead it needs to concentrate on what people feel.

The reason we do not ask basic questions is because, once our brain provides a logical answer, we stop looking for better ones; with a little alchemy, better answers can be found.

For the last fifty years or so, most issues involving human behaviour or decision-making have been solved by looking through what I call ‘regulation-issue binoculars’. These have two lenses – market research and economic theory – that together are supposed to provide a complete view of human motivation. There’s only one problem: the binoculars are broken. Both the lenses are pretty badly cracked, and they distort our view of every issue. The first lens is market research or, to give it a simpler name, asking people. However, the problem with it is that, if we remember David Ogilvy’s words: ‘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.’ People simply do not have introspective access to their motivations. The second lens is standard economic theory, which doesn’t ask people what they do and doesn’t even observe what they do. Instead it assumes a narrow and overly ‘rationalistic’ view of human motivation, by focusing on a theoretical, one-dimensional conception of what it believes humans are trying to do. Again, behavioural economics has shown that it provides an incomplete and sometimes misleading view of human behaviour – neither the business nor the policy worlds have paid sufficient attention to the failings of economics and research. Why might this be? Generally, it is safe for anyone making business or policy decisions to act as though everything seen through these binoculars...

As the novelist Upton Sinclair once remarked, ‘It is difficult to get a man to understand something, when his salary depends on his not understanding it.’

A few years ago, a High Court judge was driving home from his golf club after five or six double gin and tonics when he was pulled over by the police and breathalysed. 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. Dodgy barmen have known for years that, after one proper G&T, you can sell people tonic water in a glass lightly rinsed in gin and not only will they not notice the difference, but regular drinkers may still manifest all the effects of drunkenness – slurred speech and poor coordination – even though they have consumed almost no alcohol.

It seems likely that the biggest progress in the next 50 years may come not from improvements in technology but in psychology and design thinking. Put simply, it’s easy to achieve massive improvements in perception at a fraction of the cost of equivalent improvements in reality. Logic tends to rule out magical improvements of this kind, but psycho-logic doesn’t. We are wrong about psychology to a far grater degree than we are about physics, so there is more scope for improvement. Also, we have a culture that prizes measuring things over understanding people, and hence is disproportionately weak at both seeking and recognising psychological answers.

Whether we use logic or psycho-logic depends on whether we want to solve the problem or to simply to be seen to be trying to solve the problem. Saving the world indirectly may not make you look like a hero; talking about the plight of polar bears makes one feel a good deal worthier than promoting the redesign of recycling bins, but the latter may be more effective. The self-regarding delusions of people in high-status professions lie behind much of this denial of unconscious motivation. Would you prefer to think of yourself as a medical scientist pushing the frontiers of human knowledge, or as a kind of modern-day fortune teller, doling out soothing remedies to worried patients? A modern doctor is both of these things, though is probably employed more for the latter than the former. Even if no one – patient or doctor – wants to believe this, it will be hard to understand and improve the provision of medical care unless we sometimes acknowledge it.

Instincts are heritable, whereas reasons have to be taught; what is important is how you behave, not knowing why you do.

Cleaning our teeth is good for dental health even if we do it for reasons of vanity. As far as evolution is concerned, if a behaviour is beneficial, we can attach any reason to it that we like. You don’t need reasons to be rational.

In the Middle Ages, Europeans moved cemeteries from inside their fortifications to outside because of a fear that the souls of the bodies of the dead might return to haunt the living. The incidental result of this fear of ‘revenants’ was improved hygiene and protection from disease. In trying to encourage rational behaviour, don’t confine yourself to rational arguments.

If you confine yourself to using rational arguments to encourage rational behaviour, you will be using only a tiny proportion of the tools in your armoury. Logic demands a direct connection between reason and action, but psycho-logic doesn’t.

Logic should be a tool, not a rule.

Strangely, as we have gained access to more information, data, processing power and better communications, we may also be losing the ability to see things in more than one way; the more data we have, the less room there is for things that can’t easily be used in computation. Far from reducing our problems, technology may have equipped us with a rational straitjacket that limits our freedom to solve them.

To put it crudely, when you multiply bullshit with bullshit, you don’t get a bit more bullshit – you get bullshit squared.

Online shopping is a very good way for ten people to buy one thing, but it is not a good way for one person to buy ten things. Try and buy ten different things simultaneously online* and it turns chaotic. Items arrive on four separate days, vans appear at your house at different times and one delivery always fails.* By contrast, the great thing about Walmart, which investors tend to overlook, is that people turn up, buy 47 different things and then transport them home at their own expense. Amazon can be a very big business selling one thing to 47 people, but if it can’t sell 47 things to one person, there’s a ceiling to how large it can be. Many other mathematical models involving humans make the mistake of assuming that 10 x 1 = 1 x 10.

If you were only allowed to eat one food, you might choose the potato. Barring a few vitamins and trace minerals, it contains all the essential amino acids you need to build proteins, repair cells and fight diseases – eating just five a day would support you for weeks. However, if you were told you could only eat ten foods for the rest of your life, you would not choose ten different types of potato. In fact, you may not choose potatoes at all – you would probably choose something more varied.

Remember, anyone can easily build a career on a single eccentric talent, if it is cunningly deployed. As I always advise young people, ‘Find one or two things your boss is rubbish at and be quite good at them.’ Complementary talent is far more valuable than conformist talent.

Don’t design for average.

Metrics, and especially averages, encourage you to focus on the middle of a market, but innovation happens at the extremes.

One great problem with metrics is that they destroy diversity because they force everybody to pursue the same narrow goal, often in the same narrow way, or to make choices using the exact same criteria.

As any game theorist knows, there is a virtue to making slightly random decisions that do not conform to established rules. In a competitive setting such as recruitment, an unconventional rule for spotting talent that nobody else uses may be far better than a ‘better’ rule which is in common use, because it will allow you to find talent that is undervalued by everyone else.

Real excellence can come in odd packaging. Nassim Nicholas Taleb applies this rule to choosing a doctor: you don’t want the smooth, silver-haired patrician who looks straight out of central casting – you want his slightly overweight, less patrician but equally senior colleague in the ill-fitting suit. The former has become successful partly as a result of his appearance, the latter despite it.

When most people buy a house, the order of search is as follows: 1) set a price band, 2) define location, 3) define number of bedrooms, 4) set other parameters – garden size, for example. Architectural quality comes low on the list – and is further devalued because it isn’t quantifiable. If you can convince yourself to value something which other people don’t, you can enjoy a fabulous house for much less.* I had decided before we moved that I wanted to live somewhere interesting, placing more emphasis on the architecture than on the precise location or the number of bedrooms. This eccentric approach certainly minimises status envy.