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[00:00:08]

Hey, it's Shane Parrish. Welcome to a new episode of the Knowledge Project, where we deconstruct actionable strategies that you can use to make better decisions, learn new things and live a better life this time around. We have one of my dear friends, Rory Sutherland. Rory is the vice chairman of Ogilvy, another one of the largest advertising companies in the world. He's also co-founded the Behavioral Sciences Practice, which is applying behavioral insights to advertising. This interview was recorded live in London, England.

[00:00:40]

Rory and I talk about a host of subjects, and I think you'll find his views, his sense of mischief and his insights well worth listening to. A complete list of books and websites mentioned is in the show notes at Farnam Street blog, dotcom slash podcast.

[00:00:55]

That's fair. And a street blog dot com slash podcast. A full transcript is also available for members of our learning tribe. If you want to join, head over to Farnam Street blog Dotcom Slash tried. In addition to transcripts, we have the world's best online reading group and a host of other goodies.

[00:01:13]

Without further ado, here's Rory. Rory, welcome. I'm so happy to have you. This is phenomenal. It's been a long time since we chatted. I thought this would be a great opportunity to sit down. Thank you for coming on.

[00:01:33]

It's a great pleasure to have you here. Delighted to welcome you in London as well.

[00:01:37]

Let's start with something maybe simple, but not easy to answer, which is tell me a little bit about what you do on a day to day basis.

[00:01:46]

So having worked with my father for twenty seven years, about four or five years ago, I started a division of the company called Ogleby Change, which has recruited sort of seven or eight recent psychology graduates or graduates from what may variously be called the decision sciences nowadays with a view to taking the best and most interesting work from behavioral economics, evolutionary psychology. A little bit of complexity economics, I would argue, as well, and using that mental money tree of tools that are presented to us in those disciplines to solve problems that conventionally advertising agencies haven't been asked to solve.

[00:02:39]

So it's always easiest to give anecdotal examples, a brief we received just yesterday was how do you prevent this problem where half of the backlog at airport security is caused by people trying to smuggle liquids through?

[00:02:56]

Now, in ninety nine point nine nine percent of cases, when I say smuggle liquids through, they're not intending any nefarious purpose.

[00:03:02]

They're not trying to blow up the plane. No, it's one hundred and five millilitre bottle of champagne. You've got it.

[00:03:07]

Exactly. I didn't realize this myself that it's the size of the container. That's the discriminator. Not not the volume of the content. So if you've got a, you know, a third of a large tube of toothpaste remaining or or, of course, in North America where everything's effing massive, you know, you have sort of six point tetra packs full of orange juice. For some, you're all survivalists, aren't you, really? In North America, you're all preppers deep down.

[00:03:31]

So but if you if you have that but, you know, it's only a six full, it still doesn't count because the size of the container is the discriminator, not the size that the volume of content.

[00:03:42]

And it's an enormous problem because partly because airports are partly rewarded or punished on the speed of throughput through through security. It's patently annoying to passengers. It's one of those glorious problems which if you can solve it, it's a win win all round.

[00:03:59]

Now, what I love about this is no one would have gone to an advertising agency 10 or 15 years ago and listened and asked them to solve this problem. They might have gone to a consulting firm. They might have gone to, I don't know. I mean, they might have actually treated it as an engineering problem and just said we've got to build six new six new x ray lanes and an engaged in changing reality rather than changing behavior, which is strangely often a default public sector behavior.

[00:04:29]

Has it always much more acceptable to spend money on infrastructure than it is to spend money on psychology? Why do you think that is? I don't know. There's something something about the human brain tends to think that if you solve problems through intangible means, it's somehow cheating. I don't know which part of the brain that is, I'd love more research, obviously, you understand there's a notion that says that actually the advertising industry is kind of cheating, that you add perceived value to something.

[00:05:02]

It isn't really value. You know, if you make people like something more without changing its its real objective qualities, you know. Is that cheating or is it value creation by changing the intangibles of how we think?

[00:05:20]

I mean, if you take if you take a very extreme case, purists in the tech industry kind of hated Steve Jobs because they look at Apple products and say, well, look, if you look at the objective measures of clock speed or processor power or whatever, they're actually less impressive than you'll get in this new LG Android phone or whatever. And therefore, they kind of thought that Steve was a bit of a snake oil salesman. What Steve was doing was saying actually beyond a certain point, you hit the law of diminishing returns with all this clock speed objective stuff.

[00:05:50]

Actually, let's let's focus the market on something like the loveliness of the interface and the joy that results from using it and will create psychological value rather than subjective value. Now, if you're a purist engineer, you regard that as a bit of a copout. I obviously don't, because I work in advertising and I have a natural proclivity towards favoring the creation of subjective value. I mean, you do see that divide in different schools of economics so that in the Austrian school, one of my favorite quotations from Ludwig von Mises, who in his book, I think on a Human Action, says there is no sensible distinction to be made in a restaurant between the value created by the man who cooks the food and the value created by the man who sweeps the floor.

[00:06:34]

Now, in this metaphor, this kind of parable by the man who sweeps the floor, he means quite literally advertising and marketing. The enjoyment of a restaurant, the value created by a restaurant is a product of an I probably mean product, most of the mathematical sense, the intrinsic qualities of the food that's being produced and the context in which you consume it. If you produce Michelin starred food in a restaurant that smells slightly of sewage, you can make the food as good as you like.

[00:07:01]

No one will really enjoy it, right? I always give the example. You know, if one of the times on your fork is misaligned, it's impossible to enjoy any meal. Just one prong is slightly out of alignment. And I think that once you accept the fact that humans haven't evolved to deal with perfect information and therefore the chance of making a purely objective decision is going to be difficult anyway. But secondly, we perceive the world in a way which is which aggregates a lot of information to form a unified impression.

[00:07:34]

And actually, ah, the taste of the food will be affected by the decor of the restaurant. Once you accept that, you have to get a bit a little bit more forgiving of intangible value. I would also argue, by the way, as if you are an environmentalist. Intangible value is the most environmentally friendly way of creating value. You don't have to chop down any trees, you don't have to burn any coal. You generate value simply by getting people to look at something that already exists in a more favorable light.

[00:08:05]

Now, that's a kind of alchemy. I don't think we should reject it. I think we should look for ways to do it. An example of this, of creating intangible value out of nothing. I'm very, very keen and looking for brilliant examples of accidental real world marketing where someone without necessarily intending it just changes the way you look at something. So that's something that was bad, becomes good. Those you familiar with, Mark Twain, will know the example of painting the fence in this instance.

[00:08:34]

You know what it's like when you land in an aircraft and you're parked on the tarmac and told we haven't been able to get an air bridge. All the gates are full. We're going to dump you on the tarmac and bus you to the airport. Every single passenger on a plane in those conditions generally goes, oh, shit, I've been short changed. You know, I kind of paid you for the service. The least you could do is at least connect me to a proper gate with a tube.

[00:08:56]

Now, you just dump me on the tarmac and you're putting in a bloody bus partly. But his bus automatically creates the assumption of second best in us in our mind. And a couple of months ago, I'm on an easyJet flight. I think I land and the pilot is either just an accidental genius or he's a brilliant psychologist because he suddenly says, I've never heard before all this. He says, I've got bad news and good news. Not always quite a good way to start.

[00:09:22]

Do we like we like a little bit of a trade off on. The bad news is all the gates are occupied, so we haven't been able to get you an average. But the good news is that the bus will take you all the way to a gate right next to passport control. So you won't have far to walk with your bags.

[00:09:41]

That's always true, isn't it? When you get a bus, it takes you right next to passport control so you don't have to schlep past seven hundred yards of duty free shops in order to actually get your luggage and then get to the arrivals. Some 30 people on the plane was suddenly, miraculously transmuted into happy people by the presence of the bus. Well, I got to quite heavy bags. I'm quite glad there's a bus to bloody long walk over that bridge so suddenly by getting someone.

[00:10:10]

And Robert Cellini's work on persuasion covers a lot of this by getting us to shift our focus to what's good about something rather than what we assume to be bad about it. You can synthesize happiness out of nowhere.

[00:10:24]

Now, deep down, I know that's kind of the view of this is well, that's kind of cheating that I should only really appreciate an object or appreciate a good in proportion to the amount of real work and pain that's gone into its creation and delivery. But that's kind of Marxist. What do you think about and that's kind of the labor theory of value? Actually, you know, it's a miraculous attribute of capitalism that it has more than one means of creating value other than just grueling human labor and suffering.

[00:10:56]

The fact that you can take something fairly banal that's easy to manufacture and make it magical.

[00:11:02]

Now, that's a great thing. Not a bad thing now. OK, bear in mind, I work in marketing and advertising. I'm obviously biased because this is my bread and butter. Nonetheless, I am interested by the fact that we intrinsically tend to think that marketing values kind of cheating, whereas engineering value is the real deal. And it's worth remembering that the way we actually perceive the world, as I said, actually, we don't separate what we take from what we smell, from what we have, from what we see.

[00:11:32]

Wine will taste better if you pour it from a heavier bottle. Wine will taste better if you tell people it's expensive but has a story to it. And essentially we drink. It was always said of lager that no one can distinguish between lagers and blind tastings and effectively they were drinking the advertising. And you may argue that the way to add value to lager is through brewing. It's through storytelling. Now. I think in truth, whether you think that's cheating or not, I think it is inescapable.

[00:12:05]

I think that if if you pulled someone a perfect beer and said, actually, I just pissed in that it would be impossible for you. If we look at negative examples, we see that all over the place. You know, that actually the one negative story about something, you know you know that lovely sweater you know, you bought on eBay. It used to belong to Ted Bundy. Right. We understand that negative storytelling makes things worse. I've got a friend who owns Fred West's Junction Box 25 Cromwell Street, as Mamud allowed into the house.

[00:12:38]

OK, so we understand the negative side of it. The fact that there's a positive side is just something we need to accept because apart from anything else. The biggest source of economic waste is when people produce something that's objectively brilliant. Or they produced invention, which should be life changing. But then they tell the wrong story about it and it doesn't sell. So a great product, badly marketed is exactly like a Michelin star restaurant where unfortunately the drains are backed up and there's a smell of poo that pervades the whole thing.

[00:13:11]

It doesn't matter how good the damn food is, if the context in which it's consumed was one, Mises would say if the people are no good at sweeping the floor, no one will enjoy the food because a restaurant, it would be very difficult.

[00:13:24]

Maybe not for hipsters who would actually enjoy the food more if the floor were covered with wood shavings and other detritus of most people. You know, a really grubby restaurant would make it very, very difficult to enjoy an ambitious meal. We might be able to enjoy a sandwich in very grubby conditions, but anything more than that will be difficult without some sort of framing and some sort of expectation setting. So I think am I an example I was given that I think there need to be more is the example of video conferencing, which I think should have been adopted much more.

[00:14:02]

This is pure. Now, bear in mind, I going to be really clear. I don't think I would ever have been able to predict this in advance. I think this is a post rationalization and it may even be wrong, but it's a theory of mine that part of what went wrong with video conferencing was it was sold as the poor man's alternative to air travel, not the rich man's phone call. So video conferencing was like owning a pager in about nineteen eighty nine.

[00:14:28]

It was what your company gave you when they didn't trust you with a mobile phone, you know, and a video conference was what your company allowed you to do. And they didn't allow you to board a flight to Frankfurt. You know, it's kind of the animal, Bemelmans Sutherland, actually going to Frankfurt because he might raid the mini bar and watch a pornographic film in the hotel. And there was a bit of him to go down to a basement room in the office, sit in front of a brick wall in some windowless room and talk to again over a screen.

[00:14:54]

Now, if you made video conferencing the way that chief executives made phone calls, I think you could have sold it much, much more. You could have made it the, you know, something aspirational rather than a poor ASAT substitute for something better. You know, it should have been the rich man's British Telecom, not the poor man's British Airways.

[00:15:14]

Maybe I'm wrong, but I would assume that the CEOs are still traveling to meet people face to face. And it also became a class or hierarchy distinction as well.

[00:15:27]

And there's possibly and this is a fairly large part of air travel may be driven by costly signalling.

[00:15:38]

So possibly if you've made video conferencing cost four thousand pounds an hour, possibly you would have replaced air travel more effectively, because a large part of the reason for air travel is not that you couldn't do what you do in a phone call. It signals through both the cost of the tickets and the effort required to make the journey the importance of a client's business.

[00:16:03]

It also signals how important you are that you have to go, that you have to go it.

[00:16:07]

So it signals actually maybe cell signaling to a large part that you're signaling to yourself, well, since my company spends a fortune moving around the place, I must be an indispensable human being. Yeah, exactly. And it it I suppose it also signals the importance of the job at hand. So if you fly in from London to Frankfurt or London, New York, it effectively says. Right. Someone spend an hour ticket on this project. So we're going to devote the whole day to focusing on this project while Bob is over from London.

[00:16:39]

If you have a one hour video conference, it's something you kind of cram in in between doing your emails, and it doesn't signal the same level of focus and attention. So that's what one of my big, big obsessions, if only we could replace the communications, language and marketing and use the language of signalling, particularly biological signalling, costly signalling, reliable signalling with skin in the game, for example, costly doesn't just mean financial could mean effortful signalling.

[00:17:09]

Marketing would make a lot more sense to everybody because a very large part of marketing.

[00:17:14]

Is really costly signaling. So the cost of something, particularly the upfront cost of something which may only pay off over time, is a very, very reliable gauge of commitment. So strange argument I've had recently is that in London, the taxi drivers, to qualify as a black cab driver in London, you have to do a thing called the knowledge. It takes about three or four years to qualify, during which time you spend a lot of your spare time riding around on a moped with a clipboard, memorizing all of the six or 8000 streets within six and a half miles of Charing Cross.

[00:17:52]

Oh, now, this is not American city stuff where you just go 12th Street, 13th Street.

[00:17:58]

Every goddamn street or road has a different name. Yeah, there are probably 40 streets called Belsize Something. Belsize Park Avenue, Belsize Park, Crescent, Belsize Park Road.

[00:18:09]

You have to memorize all of them and they're all over the place and you have to memorize the best route from one to the other and you will be examined on it.

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Now, the reason this originated was Prince Albert, Queen Victoria's husband, he being German, the Germans have a general view that you have to be qualified before you can do anything. They're obsessed with vocational qualifications. I was in Frankfurt Airport. There's actually a sex shop called Dr. Mullers because the Germans are incapable of buying sex toys from someone who doesn't have adequate medical qualifications. You know, in Britain, we're not that bothered. You know, no one asked whether Anne Summers has a PhD, but.

[00:18:47]

But anyway, this is the Germans with Prince Albert sets down this thing. Never before you can drive the hansom cab in London.

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You have to master this incredibly complicated, examined test.

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And people have come recently and said, well, I'm saying, well, now we've got satnav.

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What the hell's the point of making someone learn this thing? The answer is part of it. Whether this is still necessary or not, I'll leave to further debate, part of that was nothing to do with memorizing the streets. It was a commitment device. Effectively, I can still put my two teenage daughters in a black cab in London driven by a total stranger. And without bothering to memorize the badge number, even I can just say to the driver, can you take them there?

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OK, without really giving any thought as to their safety.

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Now, part of the reason is that if you're prepared to spend four years becoming a cab driver and four years of your life, which you'll never get back, is spent reaching that level of qualification, you're patently committed to the job. Secondly, you have a lot of skin in the game because it's not worth risking losing that badge, which took you four years for the sake of ripping off a random Canadian on a trip from Heathrow to gain 10 quid, just not worth the risk.

[00:20:00]

So as a reliable gauge of honest intent, you can trust a black cab driver in a way that you couldn't trust a black cab driver if the qualifications simply demanded two weeks at night school and buying a Tom-Tom brand. So understanding some of that stuff I think is really, really vital to understanding a lot of what goes in everything from medieval guilds.

[00:20:23]

A lot of these things are kind of trust placebos, and it's very, very easy to look at them in a kind of modern technologist's rationalist eye and going, well, clearly the knowledge is unnecessary because it's been supplanted by the satnav. But maybe the purpose of that was really to do with the knowledge tool. This is a criticism I have of Silicon Valley that what they often do is they take something that a human does. They define its role very, very narrowly devised an algorithm or technology which replaces that very narrow, narrow role and then assume that the human being has become redundant.

[00:20:59]

But in truth, as I say. An automatic revolving door is not the same as a doorman here, if you define a doorman as simply a man at a hotel who opens the door, then you can replace him with technology very easily. If you recognize that the role of the doorman also encompasses things like security and recognition and, you know, status. To some extent, it says something about the hotel and handly helping with directions, if you're lucky.

[00:21:28]

And then you realize that what Silicon Valley is doing is sometimes taking the simplest and most salient part of someone's job, replacing that and then leaving the rest of the functions to go hand.

[00:21:41]

Yeah, and I'm always really cautious of that because I think in complex evolved systems, quite a lot of people, just as your mouth serves multiple purposes, it helps you breathe and speak and eat. Quite a lot of things have evolved to have multiple purposes, of which one may be more the most obvious. But that doesn't mean if you replace the one with a technological solution that actually all three somehow become miraculously technologized.

[00:22:08]

So what would be an example, I guess, in your mind of how that will play out with self-driving cars?

[00:22:16]

Well, it's interesting question, because one of them, which would be that if you're in a very large number of parts of the world, you employ a driver or a taxi driver, partly for security, not not only for actually maneuvering.

[00:22:35]

I mean, okay, it tends to coincide with countries where you have low labor costs. But most people in, say, large parts of, let's say, Pakistan, you wouldn't hire a car and drive it yourself. And part of that is just navigating local customs, its local knowledge.

[00:22:53]

Now, to an extent, some of that can be replaced with technology. But the fact that actually if you have a local driver, no one's going to dick with him. Whereas if you've just got two American tourists in the back of the thing, you know, they're quite vulnerable.

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A second one, by the way, with human driving is that of Google's most detested this thing in California.

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There are two things about Californians. There are very few pedestrians. And I would argue that that Californians have a very low level of mischief, again, compared to, say, competitors.

[00:23:29]

Let's try Liverpool. OK, let's try it. Let's try a really mischievous British town where the people are just canny and slightly, you know, cunning. Someone is going to find a way of hacking that driverless car within seconds.

[00:23:43]

By which I mean, you know, they'll work out that by putting a particular pattern of balloons on the road, the driverless car basically stops just going around in ridiculous circles or becomes unable to proceed the extent to which a driverless car could be manipulated.

[00:23:59]

I don't I don't mean software hacking in this case simply by if you think about government, all humans have learned how to capture elephants and an enormous pachyderms through a combination of ingenuity and cooperation. A driverless car may be very, very good at certain aspects of navigating, but it's probably stupider than a Rhino Vallens.

[00:24:21]

So the ways in which I would have thought people could very quickly learn ways to really one of the problems, by the way, being that the driverless car doesn't have emotions.

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Now, one of the reasons you don't dick with large animals is they might lose their temper. They might be very placid, but they might get angry. Great book, by the way, if you want to book recommendation, Robert Frank. And I think the strategic value of the emotions, Robert Frank at Cornell. But one of the reasons as humans we need to be we need to be capable of rising to anger is to stop people taking us around.

[00:24:59]

So let's let's say when I came in here, you kept sort of farting around with my jacket, which was hung over the chair as of throwing it to the other side of the room. OK, well, you know, we're friends. I'd be highly tolerant of that. You know, for the first 20 minutes, I'd think it was interesting, whimsical obsession of yours. Eventually I'd be at the point of hitting you right off. And the reason I have to be capable of rising to anger at some point is to stop people simply becoming victims of anyone who wants to stick around with them.

[00:25:28]

Now, one of the problems with the driverless cars that pedestrians will know that it's already known in London. By the way, if you want to use a pedestrian crossing, a zebra crossing, as we call it here, black and white crossing, that means without the without the traffic lights, simply as a stripey area of road where the cars traditionally stop the pedestrians. It's a useful hack in London that you wait for a black cab and you walk out in front of the black cab because black cabs get very, very heavily disciplined if they're caught breaking road regulations.

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So they're much more eager to stop at a stripey crossing for you. Now, why you're not doing it to annoy them.

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You're doing it. You're doing it for safety because they will always stop. And because if anybody reports them for not stopping, they get into a whole load of crap with the licensing authority for cabs. Now, if we take this in the driverless car situation, we'll know that when we want to cross the road, just walk out in front of a driverless car is always going to stop.

[00:26:29]

Now, this may cause the passengers in the driverless car to lurch around in a comical or uncomfortable fashion, but without the fear that the driverless car will either, a, make a mistake and hit us because it didn't notice or, B, lose its temper. We're just going to stick around with those things. California, there's no consequence, no consequences, so there's no potential downside to dicking around with a driverless car. So at what point will other drivers just learn?

[00:26:55]

You know, if I were a bit of a shit, right, I have done this my wife's to do and often curious. I do need to explain the context. Yes. But when I see people with a Jesus fish on the back of the car, I always teased my wife what, you know, don't we just, you know, slightly mistreat this person because they're not going to retaliate? OK, now my wife is an Anglican, not really keen on my game theoretic obsessions, but nonetheless, someone who displays obvious Christian symbols on the back of that car is probably safer to dick around with than someone who, for example, has, you know, some heavy metal band or whatever or bikers.

[00:27:32]

You wouldn't stick around with that.

[00:27:34]

Now, the driverless car is the most never mind, never mind, fundamentalist Christians. The driverless car is the easiest thing to dick around with because its reactions are going to be entirely predictable. This is a fundamental philosophical question about rationality, by the way, which is it's impossible for anything rational to successfully evolve because the byproduct of being rational and efficient, optimally rational, efficient would be that you'd be predictable. And if you you're completely predictable, you'd be dead.

[00:28:06]

The military do not look for the most efficient route from A to B because they know that the most efficient route will be the one that's most heavily guarded.

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So there's a huge danger in looking at life as if it's an optimization problem at every angle, which is a fundamental one, that once you accept the fact that our psychology is is the product of evolution, then at some point our psychology has to evolve to be a bit weird and random and unpredictable for the simple reason that anybody who's completely predictable is what you call someone who you predict, who's totally predictable of the deceased, you know, and they could be people would set traps for them.

[00:28:47]

It could be people would fool around with them, take advantage of them, whatever, but some degree of kind of the capability to rile to anger or whatever or revenge has to be built in. So, I mean, it'll be interesting to see when the driverless cars start to actually infiltrate some of the tougher parts of the world where people aren't quite so Californian.

[00:29:09]

And we also have a system where it probably won't be overnight. Everybody switches to self-driving cars. You'll have a combination of self-driving cars, car cars, people in vehicles now taking advantage of maybe the same level of mischief, whereas you can cut off a self-driving car without worry about retribution, limiting their lack of social intelligence.

[00:29:32]

In the first ever crash of a Google self-driving car where the car was inarguably at fault, it pulled out in front of a bus expecting the bus to give way. Now, the interesting question is where that let's be clear. In aggregate, driverless cars are going to be safer than driven cars, at least until people work out how to hack them, which is a slightly different question. But that showed a slight lack of social intelligence, because my hunch was there that a human driver would have said I can pull out in front of traffic because my route is blocked by some sandbags on the road, but don't pull out in front of a bus.

[00:30:10]

In other words, if you pull out in front of someone who's a commercial driver, their willingness to give way and of course, they don't own the bloody vehicle they're driving, the bus driver doesn't have to pay for the repairs to his bus. If you're driving a massive truck, there won't be any repairs anyway because all the damage will be done to that Google.

[00:30:29]

If you're driving some sort of Mack truck, you know, I mean, you could practically have one of those kind of, you know, bars at the front and center and be undamaged by crashing into a Google drive. Scott says that showed a little bit of lack of social intelligence. Now, how much of driving depends on unconscious social awareness in the UK more than it does in the US? The US drives if if you want to get into Hofstadter's dimensions in the UK and Ireland and Sweden and Holland and I think Norway.

[00:31:03]

Finland. New Zealand, Australia, also a country, is marked out by a fairly high tolerance of ambiguity. By which I mean, is there not totally rule driven, so weirdly, the statistics for Holland are much better than they are for Germany. There's no genetic difference. Dutch, that's crazy. But there's not much genetic difference being Dutch people and Germans. But the cultural difference is one of giving other people the benefit of the doubt. It's kind of why is that guy doing that?

[00:31:30]

Well, just that he shouldn't have done that. I'll let him go. Now, Ireland or Sweden, you would assume, might have quite high accident rate. I won't explain why you might assume that in the case of Ireland, but lots of windy roads, OK, quite a heavy drinking culture. Sweden has heavy drinking culture, snow all over the place, yet they have a very low rate of accidents because they're highly tolerant of ambiguity and they can't.

[00:31:55]

It's what my Danish friend calls the benefit of the doubt, you know? Well, maybe he meant to do that. But we all make mistakes that make the Germany in the US a slightly more Teutonic in that they say this is my right away and I'm going to stick to it. And if you get in the way or you do anything that interferes with my rights, I'm basically not going to make allowances for it.

[00:32:17]

So you do get it. You do get there does seem to be there's a paper on this about Hofstadter's cultural dimensions and how it affects driving style. Now, the interesting question is a lot of a lot of that benefit of the doubt, social intelligence and driving. Now you're Canadian. You can't even get the roundabouts. We can. You're learning. You know, in fairness, it's difficult to introduce roundabouts in very big countries because obviously to get good at using a roundabout for it to become instinctive, you've got to use them a lot.

[00:32:47]

And if you only have 500 roundabouts in Canada, a hell of a lot of people approaching that roundabout will be new to roundabouts.

[00:32:54]

Now, the interesting with a roundabout involves a huge amount of social intelligence, including probably totally unconscious things like reading people's intention from their road position, looking at the direction in which their wheels are pointing when they're parked.

[00:33:08]

There's going to be an enormous amount of kind of give or take that goes on in navigating a roundabout, which may be perfectly easy to do when you have what you might call roads exclusively populated by driverless cars. But in the intervening period where you have to have mixed use, it's going to be much more difficult.

[00:33:26]

Yeah, I want to switch gears just a little bit here and talk about reading.

[00:33:32]

I know you want to talk about behavioral economics, decision making. Maybe we can get into some ethical stuff about behavioral economics and even advertising and creating intangible value.

[00:33:43]

But first, let's talk about reading a little bit. I know you're a big reader.

[00:33:47]

What's your process for selecting what you read? I mean, we're all struggling these days with filtering a massive amount of information. And and you of all people I know, we've had conversations on this before.

[00:34:01]

I like I'd like to take credit for this. I have to admit that in the last two or three years, I've probably fallen behind. I don't know why that is. Partly I partly blame email. I had a friend who is a barista who, as part of his job, would effectively have to read hundreds of pages of sort of court papers and transcripts. And the biggest resentment he had about this was he said that when you have to read for work, it slightly kills reading for pleasure, because by the time you get home, at the end of the day, your mode is to zonk out in front of the television like a zombie because simply because you've read enough that day and you've been paid to do it, I'm less good that I was I think I was very, very lucky.

[00:34:48]

And who I chose the early influences. Robert Frank. Bob Sheldon, a nudge was obviously a very important book, some slightly unusual and quite a lot of evolutionary biology and evolutionary psychology.

[00:35:04]

Jeffrey Miller's The Mating Mind was one of those game changing books. Then he wrote Spent. We invited him actually to give a talk at the the Institute of Practitioners in advertising on the links between evolutionary psychology, sexual selection and signaling and consumerism.

[00:35:22]

That sort of stuff has fascinated me some of the happiness literature, but I probably was just lucky.

[00:35:29]

Tim Harford, another very good British writer whom you must meet and interview, by the way.

[00:35:34]

But they've been very good writings on the in the hinterland of kind of economics and biology, evolutionary thought and psychology, which fairly obviously, if someone working in advertising should interest me, I was lucky because back in 1989 I had a kind of road to Damascus moment where I said, OK, however elegant economic theory may be, it patently doesn't describe individual real world human behavior very well.

[00:36:09]

Now, my luck was when I went into the advertising industry with Ogilvy. I first started working at a place now called Only One, which was then called Ogilvy Mather Direct, which was the direct marketing wing of the agency. And there you do what are effectively social science experiments, but very well funded on a grand scale, which is testing different advertising approaches to see which gains the most response.

[00:36:33]

And fairly early on, sometime in about 1989, 1990, we were writing letters to, let's say, 100000 people at a time and selling. You'll remember these things like call waiting and call diversion. In other words, they were called they call star services with AT&T enhanced calling features on their phone. And you'd pay them two pounds.

[00:36:55]

Fifty, sixty seven. You've got the numbers in you more or less the same all over the world called version. Then there's a call waiting and I'd call a display. And we send out the letters and the letters at the time, Berrima, this is before the Internet existed, before the Web existed, so there was no online component. This would have a telephone number to call if you wanted to order it, or a related coupon at the bottom where you could take it and post it back to order the product.

[00:37:23]

The result was the same either way. And a client said, look, I don't understand why we're effectively encouraging postal response. I think that she wanted to get a call center volumes up for some reason or they had spare capacity. The calls and why don't we just send letters with just the phone number and not bother with the coupon?

[00:37:41]

And we said, let's not forget, by the way, that the randomized control trial was being widely used in advertising in the Edwardian era. And it took medical science until about 1947 before they they they reached the same point of sophistication as the advertising industry. Just a bit of a break here. But had people like Claude Hopkins in the 1920s and before you rather think old may be split run in the newspapers so that newspapers were usually printed on two printing presses, sometimes fall in parallel.

[00:38:14]

So you produce different advertising copy for the different presses. They'd have different plates. The coupons would be coded so you could tell which advertisement had generated the response. And you then fall through a sort of Darwinian winning process. You'd get rid of the worst creative executions and focus on the best.

[00:38:35]

So anyway, we we said, well, before you do that, let's just test it so we send out some 50000 letters, phone number only 50000 letters, coupon only, no mention of a phone number, and then fifty thousand letters, which are phone number plus coupon, that tragically, I don't have any copies of the original results, but I can remember them to within, you know, a one or so. I'm pretty sure the response rates were as follows.

[00:39:04]

Phone number only around about 2.5 percent. Coupon three point five percent. Coupon plus phone number five point nine percent, six point nine percent. Anyway, it was five, but it was practically the sum of the other two methods. So basically the people who responded by the phone were people who would only respond by phone. The people would respond by coupon, were more or less people would only respond by coupon.

[00:39:33]

And so the sum total when you offered people both modes of response was it was something like, let's say two point four, three point six and five point nine something. It was something exactly like that. So it was only point one percent shy of being the sum total.

[00:39:49]

Now, if you think about that and you think about economics, something very weird, which is that regardless of what the product is and how much it costs, which is several instances, the single biggest determinant of whether someone bought that product or not was how they could order it.

[00:40:05]

Yeah, but my recommendation then was we ought to we ought to offer a fax number so that an additional nought point four percent will order the product by fax.

[00:40:15]

That when you think about it, is very, very strange.

[00:40:18]

And from that moment on, as kind of, you know, as I said, the road to Damascus moment, I thought, okay, there's a whole missing science here because this doesn't make sense in any conventional model. Still doesn't quite make sense to me, to be honest.

[00:40:32]

But it but by the way, it has been found to be true in lots and lots of other instances. It's highly replicated. You know, if you offer if you offer a Web page and a phone number, you will sell a lot more than if you only offer a Web page. And I mean, if you're really sort of defensive economist, you double on about transaction costs, I guess.

[00:40:53]

But that was, I suppose, similar to wonderful experiments. You know, I love Richard Thaler thought experiment about the beach on the difference between a transaction, utility and acquisition. You tell. Oh, I think it's one of the most fantastic. It's not quite a thought experiment because you did actually ask people. So this is you're on a beach and you've been there with your friend. And it's a pretty hot day and you've been there for a few hours and you're both of you getting pretty thirsty.

[00:41:18]

And you mentioned the fact that you really could do with drinking. Your friend just says, well, actually, I happened to notice that about three quarters of a mile down the beach, there's a blank selling bottles of chilled Heineken. Tell me how much you're prepared to pay for a bottle of chilled Heineken and all.

[00:41:38]

Then if the price is lower than that, I'll buy you a bottle and bring it back. And if they're quoting a higher price, I won't buy your bottle because it's obviously too high price.

[00:41:48]

So tell me what you're prepared to pay. And an experiments with admittedly weird Western students. But nonetheless, in those experiments, if you describe the place down the beach as a boutique hotel. Now, this is an experiment that I think the late 80s or early 90s. So we'll have to multiply by two. But from a boutique hotel, people were prepared to pay perhaps the modern equivalent of six dollars, OK?

[00:42:13]

If if you described as a beach shack, they're prepared to pay about three now the utility you gain from drinking a cold Heineken, all bottles of Heineken being identies, the same is going to be the same. You can't say, well, it's the presence of the boutique hotel. You know, I'm gaining status by drinking in front of a boutique hotel because it's been described as three quarters of a mile away. It's not even within sight. It's just your expectation.

[00:42:37]

Instinctively, humans go will boutique hotel. They've got higher overheads than a shack has.

[00:42:43]

Therefore, the amount I'm prepared to pay for a bottle from that is higher, which is a fairly good thought experiment showing that the assumptions of just maximizing expected utility aren't the whole story in explaining willingness to pay. I always think that's a really, really wonderful point because I think it explains why there's a sales promotion industry.

[00:43:03]

I think it explains why, you know, why retailers have sales in many ways.

[00:43:09]

You know that there's there's in other words, there's the value we get from the ownership or consumption of an object, and there's the immediate positive or negative feeling we get from how much we pay for it and under what circumstances. I've got a hunch that, for example, if you wanted to buy a pair of shoes and they were on sale at 30 pounds, I mean, Richard Taylor was surmises that actually them when you buy a heavily discounted pair of shoes, you quite often buy a pair of shoes that don't really fit very well just because of the heat of the reduced from three hundred dollars to one hundred and fifty or whatever.

[00:43:49]

I don't know what shoes Richard wears that I might have been either vastly extravagant there or too stingy for all of his shoes. Actually handmade by Austrian Elle, the finest cashmere.

[00:44:01]

But but nonetheless, I mean, there's something very interesting going on there, which is that it isn't just a question of, you know, a simple one dimensional transaction between the value of a good and how much you pay. There's a context to it as well.

[00:44:17]

The context is so important. Do you think that factors in with people, too?

[00:44:20]

And I mean this in the sense of one of the questions that I love to ask people and get answers from is how do you separate the people who know what they're talking about from the people who don't?

[00:44:31]

Is there a context to that?

[00:44:32]

I mean, there's a lot of people that pretend or they sound like they're they know what they're doing. And you probably want to run across, what, in behavioral science?

[00:44:40]

Oh, and just in general. Just in general. But in every industry. In every trade, there's you know, for every Warren Buffett, there's one hundred people trying to sound like Warren Buffett and emulate him, but they don't have his skills and attributes are all Warren's luck.

[00:44:57]

It might be that all these people are equally virtuous. Warren happen to have a lucky I mean, without without a warrant. They both admit that to some degree that, you know, that fortune of birth, the males and the time of your birth and of course, the geographical location will play a large part in how successful I think Warren himself or Charlie Munger said you may. Had I been born in the middle of Pakistan, it's unlikely, like I would have made it as a major in a lot of us don't even recognize that.

[00:45:25]

Right.

[00:45:25]

Like a lot of the virtues that we have that are valued today in a different time or different circumstance may not have been as as valued. Right.

[00:45:35]

I mean, bullshit confidence is probably a huge evolutionary value, particularly in sexual selection. I would have thought so. I mean, one of the great people we've had to speak here and it's been an absolute privilege to have him is Robert Trivers and his you'll know him as the man who did the great work on reciprocal altruism and to some extent was behind the whole selfish gene idea. But his his recent work on the self-deception of self-deception is evolutionarily advantageous. And that we deceive ourselves the better to deceive others, because the best way to bullshit is to start by believing your own bullshit.

[00:46:14]

Yeah, so and also you as an outsider then recognize that?

[00:46:19]

Well, I might be bullshitting. I mean, one of the things I would say is that I have a higher bullshit tolerance coming from business than academics do. And I occasionally scandalize academics of the behavioral science. But they actually said off the record, if you've got any slightly rubbish research that's a bit inconclusive, doesn't quite hit the P value test, but it is showing some fairly interesting results. Are they good? How can you say such a horrendous thing if you you're actually you know, the whole Baconian message is a big method is being polluted by your standards.

[00:46:54]

My point is that if you're an academic, your job is to try and be right unambiguously, completely, absolutely right about something in business.

[00:47:05]

If only 30 percent of people do a weird thing 20 percent of the time, there's still a business opportunity in that. It's only one. Part of the comments I made is that occasionally in attacking some of the behavioral science, which has appeared not to replicate, people have said, well, the experiment, the paradox of choice, you know, we've actually done a similar experiment and it doesn't work. And my view is, look. Actually, I said, all I need to know is that that might be worth testing, right, because economics, the problem of economics now, this is the most important sense in the entire podcast.

[00:47:38]

OK, so, you know, the problem with economics is not only that it's wrong, it's that it's incredibly creatively limiting because it tends to posit a very one dimensional view of human motivation.

[00:47:50]

And therefore, if you wish to change human behavior, the only two ways you can do it, basically by bribing people or fining them.

[00:47:57]

So once you define something as an economic problem, essentially your answer will boil down to a very, very simple assumption about human motivation. So it would be almost universally assumed in the business world that if you have more choice, you will sell more.

[00:48:15]

Now, I would argue that is exactly the sort of thing which belongs in the category of if you reduce the price of something, demand will go up. It is true more often than it isn't, but it isn't always true. There are cases where putting the price up increases demand. We've recommended our clients test that.

[00:48:33]

Our argument is, look, eventually you may have to drop the price, but let's try putting the price up first. Which products work best for them?

[00:48:40]

If you're choosing from a menu in particular, a menu of options, let's say a fast food restaurant, OK, you use price to navigate the menu to that extent. Am I to pan 70 hungry or my three pounds hungry?

[00:48:54]

So if you have a fantastic, generous burger and you price it too low, you may actually miss out on people who are looking for a I mean, the most extreme cases sometimes in the art world where someone says even if a product if a painting doesn't sell in the window of your gallery, if it hasn't sold after three months, double the price. And part of the reason that is someone who's looking to buy a ten thousand pound painting doesn't want to buy a five thousand pound paint.

[00:49:21]

Right.

[00:49:23]

I mean, they've already set the expectation they've got a certain expectation level in. The funniest case was as me as a Brit going to Baker, I think it was Bakersfield, California, in the early 90s and my first ever visit to a Taco Bell. OK, now Taco Bell's fantastic value for money.

[00:49:44]

And so I can remember that I think a bean burrito back then was fifty nine cents. It might have been sixty nine. So I'm a Brit. I'm used to McDonald's being, you know, four pounds, eighty three. So this is this is this concept is topos is basically tatis isn't it. So I just get I have to be burrito's, I have three of those this bloody great pyramid of Cheops of Taco Bell food.

[00:50:09]

I'm standing there, the other people behind me are looking at me absolutely aghast because there's this pile of food on my tray which would have fed actually all six of us for the rest of our holiday. So, you know, there are cases where there's a whole expectation level where you can throw people completely.

[00:50:25]

There's a strange thing I always notice, which is there's always a breed of hotels in really low labor cost countries which are charging the same prices as Savoy. But is this your mean I mean, if you're going to like Butan or something, you go, well, you can probably have a really good Bhutanese people for a tenth of what it costs or less than what it would cost in California. So you'd expect the best hotel to be a bit cheaper, but people basically want to spend four hundred dollars a night.

[00:50:59]

They just made up their mind that they got anything less than that might be a compromise. I don't know where the excess money goes probably into the pockets of the owners of the hotel brand.

[00:51:09]

But I mean, what do you think the psychology behind the prison deciding that is?

[00:51:14]

Is it I'm treating myself and I've decided I can treat myself to four hundred dollars a night. Like, how do you think that framing Hapoel.

[00:51:23]

There's also the fact that holidays are scarce, so you may say taking back your multiply by zero thing, you know, there's no point in spotting the ship for another time. It's going to cost you a bloody fortune to get to Bhutan or Machu Picchu or whatever you're going to be burning, sort of. You know, if you're that kind of market, you're probably travelling business class. You're burning three or four thousand on the journey.

[00:51:44]

Maybe if you're American or Canadian, you only get an absolutely meager and pathetic annual vacation allowance, which, by the way, is the most extraordinary case of status quo bias, OK?

[00:51:55]

I have never met anybody in Europe or the EU, including the UK and the UK is a bit more Trumpy than the rest of Europe generally, OK. I have never met anybody in the UK who is so right wing they think we should have less vacation. Nobody who says will we get an extra two percent of annual GDP growth if people just worked 50 weeks of the year instead of forty eight. Forty seven. We didn't even work between Christmas and New Year, didn't let you let you into that, but all told, nearly every office, OK, basically, but December the twenty third the budget shuts down doesn't get going until January the second.

[00:52:32]

OK, and then we have four weeks, five weeks, maybe vacation. On top of that, Germans have about six and then tons of paid holidays, not as many of the weird holidays as Americans have.

[00:52:42]

Actually, you have slightly more of those kind of one day weird Labor Day kind of things, which used to be a case where just the DMV closed but now have become slightly more streamlined. But I've never met a Brit, not a single Brit who says, no, no, no, we ought to have this vacation thing. It's getting out of hand. And yet when Bernie Sanders and it was Bernie goes into Congress and tries to get two weeks mandatory paid vacation for every American worker, he's basically looked on as if he's fucking Lenin.

[00:53:12]

OK, I mean, this is considered like practically communism. But I mean, the Germans are perfectly efficient at making stuff. I'm not I'm not even sure that the United States wouldn't be economically better off with more vacation simply because when people spend leisure money, it generally generates more labor and more work and more locally than if you buy manufactured goods. I mean, Henry Ford created the two day weekend so that people would buy cars. It's slightly apocryphal, that story, by the way.

[00:53:41]

But I mean, it was Henry Ford rather than legislation that that seemed to have created the two day weekend in the US, partly because of his surmise that if that became a norm, then it was worth the American worker owning a car. If you only had one day off every week, not so much. So that's a really interesting case of status quo bias, which is I mean I mean, generally, if you went to the UK and said we're just going to go round two weeks vacation, there would be I mean, just total rioting.

[00:54:06]

I mean, it's inconceivable, except in case of war time or something that you could achieve like that.

[00:54:12]

And Canadians weirdly go along with it, don't you? Despite all your liberalism and stuff you fancy, you know, your fancy left wing views, you still go along with this grueling work schedule. Oh, my bias.

[00:54:24]

I don't know. He's he's a bit weird, overweight, OK, but I mean, there are a few Silicon Valley places I get all the time if I want. Yeah.

[00:54:32]

I want to go back to something we were talking about before we started recording actually, which was thinking through decisions forward and backwards along the axis of time. And you had some pretty profound thoughts on that night cut you off. I'm wondering if we could reintroduce that.

[00:54:47]

And I think the context in which I'll get back to that is that economics is problematic because it's very, very uncreative, because it defines human motivation, as I said, as if humans just have this single lever, which is patently ridiculous in evolutionary terms, for all kinds of reasons.

[00:55:08]

And therefore, it reduces when you reduce something to an economic problem, what you effectively do is you create artificial certainty, which is, of course, appealing to decision makers in institutions because certainty, the artificial certainty effectively means they can't get fired for making the decision because it involves no subjective judgment whatsoever. So they love a formula. You know, bureaucrats really, really love a formula because it prevents them having to exercise judgement for which they might be blamed.

[00:55:37]

So economics creates this idea of certainty and we automatically have to pretend that everything we do is scientific. Now no one goes home to their family. I just bought a really expensive pair of headphones. Now I don't go back to my family and do a whole presentation on why I made that decision. I just felt like it lasted a couple of nights ago. You know, I don't have to justify it to other people why I bought this pair of headphones rather than another pair of headphones.

[00:56:04]

Because the great thing about being consumer is you don't have to generate a whole load of self exculpatory bullshit every time you make a purchase decision.

[00:56:12]

But in a business, what you have to do is pretend there was a science behind your decision because then you effectively you've covered your own ass. Look, the answer to this is 74, and that's what we're going to do, because the formula told us to tell, the algorithm told. And then if it works, I get credit for it. And if it doesn't work, it doesn't. I was going to work anyway because we did the best we could.

[00:56:34]

OK, so what you've done is you've created you've exploited this incredibly asymmetric reward blame culture that exists in most corporations. That's interesting debate. Do you have to have absolutely insane bonuses for people in the financial industry?

[00:56:51]

Because if you actually paid people in the financial industry by salary, they'd become so risk averse they'd never do anything at all? I don't know. But one thing about insane bonuses, at least they do, you know, they do mean there's a reward for being different and a punishment for being bad. What generally happens if you're in a kind of bureaucratic or governmental or even any large private organization, just as in individual behavior, the big driver seems to be avoidance of regret in corporate settings.

[00:57:23]

The big driver is avoidance of blame, and you can avoid blame by claiming that it was, you know, that what you did was entirely rational, in fact, was therefore unavoidable because Riesen told me to do this. We scoped the market, we did market research. It told us that people wanted that. So we produced that. OK, if you follow all those precepts and fail, you won't get fired or blame because you were rational, right?

[00:57:49]

If you do something which is better but involves the degree of human imagination or judgment, if it works well and better. You might get a bit of credit, you probably will get people saying, well, it would have been even better if you'd followed race.

[00:58:05]

You just get a tiny bit. If it goes wrong, you get all the blame.

[00:58:09]

And this creates a huge amount of herding behavior in businesses. No one ever got fired for buying IBM. We always call this in Ogleby change. We call this the Heathrow effect that when if you ever ask anybody to book you a flight from London to New York, they will always book you on a flight from Heathrow to JFK. Now, both those airports may be suboptimal, particularly if you're visiting Ogilvy in New York, which is much closer to Newark.

[00:58:33]

OK, the reason they do that is if you book someone Heathrow, JFK, which is the default, it's probably not the best solution for a lot of people. But if anything goes wrong, they'll blame British Airways. If you do something imaginative and strange, you book someone from London City Airport. Do you book someone into Newark? It may be a better decision 95 percent of the time, but in the five percent where something goes wrong, they might blame you.

[00:58:56]

You can't ring your secretary from Heathrow and say, well, how were you thinking about going on a flight for the world's third busiest international airport? Are you insane because he throws the norm, the normative choice. The second you do something weird, there's this.

[00:59:09]

Oh, I thought I'd try to settle. I would I would have been in New York by now if you hadn't. But with this Bloody Toytown airport, you're drawing attention to yourself and you're drawing attention to yourself.

[00:59:18]

You're putting your head above the parapet. And so that's why there are only four big accounting firms in the world. OK, if you appoint one of the big four and they cock up, everybody blames P, C or in Y, whatever. If you appoint a small boutique accounting firm, it may be better, but if they cock up now, they blame you because you didn't say so.

[00:59:37]

There's this weird thing about what you might call the rational, boring norm thing, which is a very, very safe place for all business people to. And it's exactly like a copy or antelope or whatever which herd around, you know. In other words, I'm not going to get picked off here because I'm in good company.

[00:59:57]

Now, what's problematic about that is it creates, I think, in business decision making and in government decision making, what you might call bogus rationality. I mean, scientism might be the the better. The problem is scientism is an unfortunate invention of the word because the world really needs a world where you can abuse things that pretend to be science. But art and scientism is the technical term for it. But then what do you call someone who practices scientism will naturally say scientist.

[01:00:25]

I guess you can't say a scientist. OK, so unfortunately, as an abusive term, it's not very flexible because you can't you know, now what happens is you basically pretend that you are you have a process that allows you to arrive at the right answer without any imagination being required through the application of pure sequential logic or other induction or deduction.

[01:00:52]

I get the muddled up. You'll know the difference. One of them goes in one direction, the other one anyway. But you pretend.

[01:00:59]

That that's how you've made your decision or that that's now what happens is often that's a good way to justify a decision, but it's imagination that gets you to the hypothesis in the first place. In mathematics, someone instinctively believes something and then they set about to prove or disprove it. But it isn't the act of the mathematics they use to prove the theorem. That is the mental process they use to generate the theorem in the first place.

[01:01:27]

Peter Medawar wrote a paper about this is the scientific paper of fraud, and his argument is that the way in which the scientific paper is written dishonestly misrepresents the mental processes that were involved in generating the insight in the first place. Because you downplay the imagination bit and you pretend that it was reason that got you there on its own. And I think that is a really, really costly and interesting thing that happens in all institutional decision making, which is that you and to a point where it's not always easy to tell the difference between rational decisions and they do exist.

[01:02:08]

OK, well, if this is the case, that must be the case. And if that's the case, we must do that. OK, that's a rational decision. And they exist. Not denying that for a second. Then there's what you might call what Arthur Conan Doyle called it, reverse reasoning. You know, this the study of Scarlet where this has happened. There's a dead body here. What might now? OK, we're quite good.

[01:02:31]

All of us humans are saying this has happened. What's going to happen next? Which is Forward's reasoning, the detective, and I would argue the advertising person as well, engage in something different, which is reverse reasoning, which is we got to this state where there's a dead body on the floor. But what might have happened immediately beforehand to have caused this state of affairs to have arisen? And in advertising, you may say it's we want people to do this thing, what prior stimuli will we need in order to get them to that place?

[01:03:03]

It's almost like seeing people who used moist lavatory paper. That's one of my total obsessions, by the way. Why the hell? I mean, what is it about the West that thinks that it's OK to wipe your arse with dry paper? We need Japanese toilets. You know, if I were Trump, that'd be day fucking one. Japanese toilets in every single building is disgraceful. You know, the Islamic world's right on that. They have a proper tap, OK?

[01:03:26]

It's only some weird Western thing. The idea that I mean, you wouldn't you wouldn't clean your hands when they were muddy with dry paper, would you? So why don't you do the same with your ass, but for whatever reason, OK, people don't really buy moist lavatory paper. So I've got to ask, does an advertising person want prior conditions? Might make this more likely. And, you know, I mean, that's that's hypothesise a bit, you might say, OK, actually it's the shelving, because when you look at supermarket shelves, we instinctively derive social information from the relevant prominence and proliferation of dry versus wet paper.

[01:04:07]

And so we look at the supermarket shelves, we go, well, basically there are a ton of dry toilet rolls all over there stretching as far as the eye can see. On the top shelf, there are two miga little packets of moist lavatory paper. That means it's basically for perverts. So people with a weird medical condition. So I'll buy the dry stuff now. And I've said I've tried to persuade someone to do this. Kimberly-Clark, why don't you just take one the supermarket and have three times as much wet paper as there is dry and see how people buy loo paper then if they think the social norm is is is wet.

[01:04:39]

Now that's reverse reasoning because that's only one theory. And what Sherlock Holmes has to do. This is why I slightly resent the fact that Sherlock Holmes is always described as this paragon of pure reason because he's a really creative guy. This is an important distinction. Do you think of Sherlock Holmes as being a model of the scientific method, or do you think of him as being a brilliant scientific thinker who is also a really imaginative guy?

[01:05:03]

Because a large amount of what he does is noticing things that no one else notices, the dog that doesn't bark in the night, the, you know, strange little details about someone's dress that would be meaningless to 99 percent of people, but from which he can infer some interesting thing about the correspondence. For now, the act of detection is patently one where some degree of hypothesis you imagine eliminated is going on. And then there's a third thing which you have an instinctive urge and then you just post rationalize it.

[01:05:37]

Now, the problem of those three completely different modes is that when you write them down, they all look the same. But all three of those modes are actually very different modes of thinking. And in advertising, I'll let you into a secret about advertising. Most of it works this way, OK, which is you put two or three very interesting or very strange people in a room. You tell them a lot about the problem. If you're lucky, within a week or so they notice something really weird, which may seem entirely tangential or irrelevant when they first mention it from which you can arrive.

[01:06:13]

It's a really interesting invention, but you don't go into your client and say, well, we just got these guys in a room and they had a few beers and actually nothing happened. Then they went down a completely wrong alley for three days, a total disaster.

[01:06:25]

I thought, we are going to have you actually advise the client in and you pretend that you arrived at this insight or flash of imagination through the deployment of sequential logical thought. And it was the whole thing is a complete misrepresentation of what happened. What you did is you instinctively felt there was something in this idea and then you looked around creating the back story for it in retrospect, in a post op.

[01:06:51]

But the trouble is that you give yourself a rational framework after you've already completed it completely.

[01:06:57]

And what's interesting and what's interesting about that misrepresentation is it then causes people to think that there must be a process for doing this stuff, which, if followed, will work every time. And because the three kinds of thinking, as I said, convince yourself you're almost on your own bullshit, that you can then repeat this process. Reason we can't distinguish really between those processes and we automatically this is why scientific papers are written as if the you gain more status somehow.

[01:07:30]

There's a wonderful exercise following on from Peter Manuels paper about is the scientific paper a fraud? There's this fantastic piece where Jeremy Bulbul, who is an advertising guy in London, is about is about 78. Fantastic man. I mean, one of the great advertising thinkers of the last 50 years, he writes up an imaginary scientific paper for how Archimedes would have worked out the volume of the crown. And it is in order to work out the volume of a complex solid.

[01:08:01]

All that is necessary is for you to immerse it in a liquid. The displacement, the volume of liquid displaced into some suitable measuring container will then tell you the exact volume of the complex solid. Now, the fact of the matter is that is absolutely true, but Archimedes didn't arrive the conclusion that way. He had a sudden flash of insight while climbing into the buff.

[01:08:28]

And so. We often make the mistake that we think we spend a whole lot of time effectively trying to focus on how you write a scientific paper and that approach, there's not nearly enough thought given to, well, how do we just get more people to climb into more bodies so they can think of more possible explanations? So, I mean, the other thing that's very liberating creatively here is, I mean, evolutionary psychology and the understanding that of the adaptive unconscious, which is one of the most liberating things creatively is to say everybody says that this is annoying them about this, but what if they're bullshitting?

[01:09:08]

So one of the people I'm really grateful to, Robert Kurzban, I don't know if you've ever interviewed him. Obviously, I've mentioned Robert Trivers about self-delusion. I'd also include John Hite, people like that, who've made the point that most of we're not really a rational animal. We're opposed rationalizing animal that most of the time when we give a reason for an emotional state, it's a plausible sounding narrative that's actually invented in the aftermath of us experiencing that emotion.

[01:09:38]

And maybe partly because the the thing in evolutionary terms is emotions. Most of our really important behaviors are governed by emotions, because now emotions don't have to come with reasons attached, because evolution cares about survival. It doesn't care about how good your reasoning is. It's like capitalism in that sense. You know, if you happen to start a really successful cafe. Yeah. Even if your reasons for choosing the cafe or deciding on the location or the type of the total bullshit, if it works, it works right now.

[01:10:08]

You may go on believing that you were right all along and you knew that a cafe on the corner of that street was going to be fantastic. And it may or may not be that those reasons you have a true. But nonetheless, the reason capitalism works is if your reasons are shit, you've got no cafe. OK, if you basically if your reasons if your reasons are shit and the cafe actually is in the right place for entirely different reasons, the cafe will succeed.

[01:10:32]

You know, if your reasons if you've got a wonderfully plausible reasons why the cafe should be there, but it's kind of bullshit. The cafe goes bankrupt. And so it's really harsh exposure to reality. The problem with the kind of controlled economy is that you invest money according to how good people's reasons are, rather according to how good the results are or how good they sound.

[01:10:54]

I believe there are consumers that genuinely Red Bull makes no rational sense whatsoever. OK, nobody likes the taste very much. When you research, people eat the day, it costs a lot of money. It comes with a tiny cap health update. You could never sit down in a place like.

[01:11:13]

Isn't that part of what the fact that it tastes unpleasant? No, I think there's an evolutionary thing, which is if you want people to believe that something has medicinal or psychotropic powers, it has to taste a bit weird. You know, wouldn't the same theory apply to Red Bull then?

[01:11:27]

Like, if we're expecting to get some sort of energy benefit out of it, it shouldn't be a price.

[01:11:34]

We've got to pay a price, right? Yeah. And I think that I think that's emphatically true, that that little bit of kind of grit in the oyster thing is somehow appealing to us. And it's why, you know, medicine really should taste yucky, because I.

[01:11:48]

I don't I don't think the placebo effect works very well with Nurofen. So I don't have those in Canada, but they're kind of lemon flavored ibuprofen.

[01:11:57]

And my suspicion is always been there a bit too damn tasty for me to believe that an analgesic has already done research into the taste of placebos versus like how well we respond.

[01:12:06]

I know color matters, size matters, the number you take and how frequently all of those things have an effect on the placebo effect. The great guy on this is a theory from a guy called Nicholas Humphris. And his theory he takes is even further, where essentially he says homeopathy works because unconsciously the feeling that we're being medicated and treated by an expert causes our unconscious to generate more activity in our immune system and in the costly physiological processes of repair and renewal and and fighting infection.

[01:12:49]

And so just as we can't control our heartbeat consciously, but we can hack it, you know, we can practice yoga and reduce a heartbeat that way, or we can't control our pupil dilation directly. We can only control it obliquely by creating conditions which are conducive to a particular physiological response. In the same way, basically placebos, when administered with a bit of a weird taste and a bit of mumbo jumbo, basically creating our unconscious, the feeling that now's a really good time to invest big in getting better.

[01:13:22]

So I think we should support them. Now, he takes the idea further and says, this is Nicholas Humphrey. He says that there are placebos in the wild. So trumpets and marching and drums are bravery placebos, huh? Now, I gave a talk to a very large cosmetics company last week. Now, if you look at women's fashion and women's beauty, OK, now the really shallow explanations of why I'm not an expert in me.

[01:13:51]

I've got two fifty year old daughters and their behavior baffles me. And it takes an hour and a half to leave the bloody house. I'm going to say, you know, but what you're actually doing is, first of all, the theory, what you're doing it to attract men? Well, there's an awful lot of female fashion which men are actually men's taste in the way women would dress if they were dressing for men is not what you see in vogue.

[01:14:15]

It might be what you see on PornHub, but it's not what you see in vogue.

[01:14:18]

OK, that's the first thing. If you would simply try to appeal to men, you wouldn't dress in high fashion. Really? OK.

[01:14:25]

Second thing is they're doing it to signal to other women, which is a kind of status rivalry between them, which may have men as its object, but which is nonetheless, you know, in the same way that a secondary sort of it's a secondary status battle, just as men, probably men probably compete with other men in that same way that women might be the ultimate object. But the first object is to humiliate your competition in some way. OK, but then the other explanation is that in terms of cosmetics and in terms of fashion, you're doing it signal to yourself that it enables you to feel confident in a way that actually you cannot will into existence.

[01:15:05]

So you you know, in order for that to work, it obviously has to be expensive because I'm worth it.

[01:15:11]

Was the Loreal phrase, OK, you know that there has to be a kind of just a there has to be a nasty taste to Red Bull. That has to be a slightly full pain in the wallet when you buy the moisturizer or when you buy the I'm running out of the Cabiria Mascara Foundation. Can anybody think of anything else? Eyeshadow. That's the stuff. OK, but there has to be a kind of borderline pain threshold thing for us for that placebo effect to really, really work.

[01:15:42]

Just the same way that homoeopathy couldn't work, if you just go, here you go, here's your homie, you've got to have a little bit of mumbo jumbo and general sort of theater and effort around it.

[01:15:51]

And probably probably homoeopathy is probably better if you charge a lot for the appointment.

[01:15:55]

But isn't isn't there something I think it was a Dan Ariely who called it the IKEA effect, which was the effort, the effort engaged in the acquisition of some.

[01:16:03]

Nobody's going to spend four hours putting together a bookshelf. This is shit after.

[01:16:07]

So my bookshelf has to be valuable because I spent four hours just add an egg. Is the famous marketing example adding a degree of difficulty so costly signaling as in now?

[01:16:17]

Now I can say I baked it and also the extra effort actually adds to the perceived value. So something in the brain does seem to have something a little like that. Mark labor theory of value that the more effort you put into constructing the bookcase. In fact, very interestingly, we have worked with IKEA and IKEA said a very interesting thing. Once they said if you work with IKEA, do you want to know how to get fired immediately? And we said, well, we better know what that is handed in advance, isn't it?

[01:16:46]

After all, they want to discover that in retrospect said if you ever go to I can say the whole problem like here is that the purchase process is too difficult. Why do you need to set up an IKEA website, have all the products on that and have the furniture delivered already assembled to the people's homes, OK? In fact, the man who delivers the furniture can even assemble it for you. OK, that is how you get fired from IKEA in five minutes because you don't understand the fact that actually, particularly with low cost items, effort can destigmatize low price.

[01:17:18]

Pick your own strawberries doesn't mean the same thing as cheap strawberries. Cheap strawberries raises the question why are these strawberries so cheap? If I had really good strawberries, I'd be charging two pounds for this product. What's going on here? Whereas pick your own strawberries is I get it. The reason the strawberries are cheaper is because I contribute something in the shape of my own labor.

[01:17:38]

You probably should have pick your own strawberries in Canada, do we do you do the Christmas trees are another one where the Canadians you don't cut your own Christmas tree, wouldn't you?

[01:17:47]

Because you're a lumberjack position in the jeans is. Yeah, the tradition I have is to go every year and cut down a Christmas tree. It's actually more expensive to go cut it on yourself than it is to show up at Home Depot and buy a precut real tree.

[01:18:04]

So you're paying more and you're paying for that ritual or experience that you you share with other people.

[01:18:10]

But the effort contributes to the effort of it's because you're driving you're often driving. Forty five minutes to an hour to get to a Christmas tree farm.

[01:18:18]

So weirdly, if you invented a cosmetic where you could basically just get an aerosol go and you basically look fantastic, immediate, nobody, nobody would buy it because it just wouldn't work. Now, that's problematic. And Robert Frank's right about this, which is the extent to which rivalrous forms of costly signalling can lead to extraordinary economic inefficiency and absurdity.

[01:18:43]

I think I think I think Bob Frank's right there. I mean, in the book The Darwin Economy, I think he's I disagree in one area. And I think that an awful lot of human innovation has been made possible by really a combination. Geoffrey Miller agrees with me on this. But he I mean, he's much better think of this, the me, obviously, but that to some extent sexual signalling or cost is signalling, sometimes provides the early stage funding.

[01:19:14]

For inventions. So if you think about the power of an example, the car for a good five or 10 years, the car was actually worse than the horse.

[01:19:23]

It was unreliable, expensive, you know, ludicrously, you know, crap and slow compared to a horse. The reason people persevered with cars is because of the status and the near and the novelty. So there are whole technologies which before they reach proper sort of Model T realization, have to go through these painful early stages, which in themselves don't make sense purely in terms of utility. I would argue the computer actually, I think the computers, basically computers were a hobby for nerds.

[01:19:58]

OK, up in full. But I mean I mean, intellectually, the web came along for 95 percent of the world's population. The computers look kind of dumb because the only thing you can read on them was something you'd written yourself.

[01:20:11]

But even in very infancy of the Web, they were still very hard to use, cumbersome.

[01:20:17]

And I think the first four years of Web use after what was it? Ninety seven. Was it? Sorry for. Yeah, I first used the Internet in 88 and 87 before and I was on Usenet and things like this and. It struck me that it was unbelievably kind of unwieldy and ugly deep down, here was something absolutely brilliant, which had been ruined by not having a friendly interface. But all my geek friends said, no, no, no, that's the whole point, it's really minimalist.

[01:20:49]

We don't waste bandwidth on pictures or typographer. It's just just what it is. This is just doing it. And I suddenly realized that this was it was really the hobbyists and the neo files and the kind of weird people who are doing it for all manner of non utility based reasons. Who are the people who are probably essential if you're to get out of kind of local local máxima in innovation in a way, you know, I mean, think about the earliest electric cars are kind of shit.

[01:21:18]

I mean, not now, but I mean, 10 years ago before Tesla, a few serious people came along.

[01:21:23]

Basically, people had electric cars because they were novelty or because they wanted to show off their it's like the minimum viable product people will buy and then you'll increment incrementally improve or improve rapidly after that.

[01:21:35]

So I'm never sure about the typewriter because the typewriter was, in a sense, a rivalry signaling device that if you wanted to look like a serious business, you have to type all your letters. That meant that everything you wrote had to be written twice and corrected twice. So getting a letter out of an ad agency in nineteen eighty four might have taken you three days by the time you'd gone back to the typing pool.

[01:21:59]

That's an interesting one because once one business attaches to the typewriter, everybody has to switch.

[01:22:04]

The bad side of that is I think you had well well the good side was it limited the amount of communication in a business. It also meant that senior people, when you had a typing because of the friction caused the friction costs were huge. Someone who worked at Ogilvy in the in the late 70s said that if you're a junior guy at Ogilvy, if you're the chief executive or the chairman, it didn't matter. You get anything, you want it typed immediately.

[01:22:26]

Yes. And so senior people, unlike the email age, senior people had more communicating power than junior people. Yeah. Which is probably sensible when you think about it, because they could get in and just say, OK, I've written this, send it out tonight, and they would get if you're a junior account executive. Ogilvy, in the nineteen seventies, it was recommended to you that it was worth spending about half an hour a day. Terry Thomas being around the typing pool, basically going up, being a hell of a charming dude and going lady.

[01:22:59]

Well, what sort of weekend did you have? And I say because that's how to get things done, because if the typing pool didn't like you, you couldn't get anything for it. Exactly. And basically, it's the type of building like you, you might as well just resign because you are getting nowhere. You can get a letter to your client.

[01:23:15]

Now, there's both good and bad to that. The cost of the cost of signaling, of course, meant the signaling is more reliable because, you know, it requires effort and time multiplied by seniority in order to get something produced. So you might argue that the typewriter, in a weird way, had a benefit in reducing the amount of superfluous communication that was produced. But it did have this insane inefficiency that everything had to be written twice.

[01:23:42]

So I've often wondered, is email better? We assume it's free, it's instantaneous, therefore it's got to be better. But if you look at information theory, the big problem information is it's easy to create and hard to trust. Now, if there's a cost, if email had a stamp attached to it, arguably the nation should be to charity. You know, I want to be able to stick a stamp on an email which has a one dollar charitable donation on it so that you look at it and go, oh, shit, this is serious.

[01:24:07]

Now, this is costly. Segoline advertising. I can explain this beautifully with a single anecdote, which is very good guy called Steve Barton, who is an American account manager. We had launched launch back in the 90s, a new, very significant product for Microsoft, and we had to launch it to a community of about 300 developers. Very niche audience. OK, maybe it was a thousand. It might have been a thousand or two thousand developers.

[01:24:29]

Those were the kind of numbers and they had a budget of about fifty thousand pounds to launch communication back then. This is this is again printed that that meant sending something elaborate through the post. And the comments are just what I really want you to do, and we did actually something quite good in the end, it was quite arresting and quite fun with a sort of ironic boast that various things like that. But he said, I wanted to come up with something that uses this budget, which is sort of six pounds, seven pounds per pack with real theatrical effect.

[01:25:03]

But if you can't do that, just write a really good letter and I'll send it to them by FedEx. And the point is, if something arrives, we instinctively know as human beings that the importance of a communication is proportionate to the cost of its generational transmission. Now, in the same way that bumblebees can detect costly signals from flowers, the smell that correlates that a particular smell u.a.e produce if you're capable of producing a lot of nectar and bumblebees are disproportionately attracted to that as a reliable signal.

[01:25:35]

Now, bumblebees don't have massive brains, so it doesn't strike me as implausible that humans have developed a similar instinct around communication that the cost of generation transmission, not not necessarily the financial cost, any communication which involves a high degree of difficulty or scarcity in its creation is a more impactful communication. Now that scarcity or difficulty could be sending it by FedEx, no one would send a trivial message by FedEx because that's going to cost eight dollars a pop. That simple financial cost creativity shit.

[01:26:12]

They got someone with a real sense of humor or real talent to devise that message. Shit. This is an important message. It could be just the degree of difficulty of construction. Craftsmanship, it could be literally, you know, if you if you had a beautifully crafted wooden board with with the invitation to test Windows empty server on it, that would have set a lot of effort was put into this communication. That's the difference in poetry and prose.

[01:26:42]

Prose poetry is more difficult to write. Therefore, we automatically, as listeners attach more meaning and profundity to a piece of poetry than we do. A corresponding piece of prose was in our unconscious at the time here.

[01:26:59]

This is What Is the time now is an amazing, fascinating conversation.

[01:27:04]

Thank you so much for taking the time. One more theory on this.

[01:27:07]

Yeah. I just want to share. In case anybody wants to riff on it, because your readership and your listenership are exactly the kind of people who can tell me whether I'm full of shit here.

[01:27:18]

And as I said, as a marketing guy, as a business person, I'm much happier occasionally saying things that are a bit shit because my job, my job is to some extent it's partly to be right, but it's partly to come up with hypotheses or ideas that other people wouldn't and then test them. You know that the point of an advertising agency is it's a place where you can make slightly silly suggestions and still get promoted, because if you create that atmosphere of fear where one or two daft interventions and your job's on the line and you know that, then there's no point in having an ad agency like that because you have to have the confidence for people to say.

[01:27:56]

Maybe we should put a dog in this ad, you know, literally off field kind of stuff like that has to be permissible.

[01:28:04]

But my hunch is that nearly all things that you could define narrowly as marketing. Automatically, as a human being, there are two strategies you can do as a human, as the one off game in game theory and the repeat game. Any behavior which costs more up front. It only pays off over time. So something which could be advertising, it could be an engagement ring. It could be replacing the awning on your cafe. Right. Anything that costs now, it only pays off in the long term is a reliable signal of a business or an individual who's playing the repeat game, not the one off game.

[01:28:50]

Since he's playing the game, it will pay him to care about reputation and care about probity and to do well by his customers. So you could define marketing as the costly signaling of faith in your future. So the point is that once you understand satisfying, you realize that what we're really trying to do when we make decisions is often it's not to attain perfection, it's to avoid disaster. I would argue that one of the reasons why people pay a premium for brands and we didn't we didn't get this out of this earlier when I was not being recorded, wasn't it?

[01:29:23]

Yeah.

[01:29:23]

David, let's get out now. So the man called Joe Rafelson, who is a copywriter, contemporary of David Ogilvy, is back in the 60s in New York, went on to found Ogilvy Chicago. And I met him for dinner recently. He's the son of Samson Rafelson, who was the script writer for the jazz singer, would you believe it? And Ernst Lubitsch films things like Heaven Can Wait. And he became a copywriter in the 50s and 60s working with David Ogilvy and he not knowing of Herbert, Simon, etc.

[01:29:51]

. He and David Ogilvy had a conversation. It was mostly his theory, got very close to understanding, satisfying when Joel said to David, I don't think people buy brand B rather than Brand because they think Brand B is better. I think they buy brand B because they're more certain that it's good. In other words, they are considering not only the expected utility, but the variance, yeah, OK, if I buy Brumby, it might be ten point one hundred dollars more to buy a Samsung TV rather than this apparently identical TV.

[01:30:23]

But Samsung has more reputational skin in the game. They've got more to lose by selling a bad product than someone I've never heard of patently. Samsung are playing the repeat game because they've been in business for 25 years and they invest a lot of money on advertising a new product development. Ergo, if I spend the extra two hundred dollars and get the Samsung TV, it may not be better than the TV alongside, but it will be less likely to be awful.

[01:30:48]

And so that hunch that actually what we're doing when we make decisions is looking for ways to minimize the worst case scenario, reliable signals that the worst case scenario isn't going to be that bad or that likely almost more than we're attempting to maximize our expected outcome. And that suddenly, once you understand that a lot of human behavior, which economists think is irrational, becomes right, becomes rational. So social copying, if you you're moving to Jamaica next month, you've never been to Jamaica before.

[01:31:23]

You don't know anything about cars. What's the best car for you to buy? Probably the best selling car in Jamaica. Not because it's the perfect car for you, but it won't be terrible if you just say, what's the best selling car? Jamaica. If you, for example, habit is also perfectly rational. Once you understand people are trying to avoid catastrophe rather than the type of action, if it's been OK in the last 10 times, you know, going on holiday there, the 11 side where they may not be the best holiday can have, but it won't be a part of it.

[01:31:51]

You know, I do that all the time.

[01:31:53]

So when I go to a coffee shop, if I have a particular coffee at the coffee shop I like, I'll just order that.

[01:31:59]

I won't even look at anything else because the the I know what I'm getting with. And while I may be positively surprised with something else, I satisfy that on this particular decision.

[01:32:12]

An interesting question, which if you had a few million quid, you could actually turn into an experiment. We could make that happen if you can. We'll see how you do.

[01:32:19]

Now, my late mum knew absolutely nothing about cars, but knew a lot about people. My late mother, she had higher sort of social intelligence than anybody I've ever met. I mean, she was the kind of person who would go, you know, you'd have a really happily married couple locally, you know, and she'd say something not quite right. Then when you're talking about, you know, they're three months later, they'd be like this massive affair and a divorce.

[01:32:45]

And my mum had just picked up on the vibes in a way that nobody else had done. You know, that was the kind of social intelligence that she do. And I've always thought, OK, you set two people. You have to have ten people, ten people who are high in social intelligence but know nothing about cars. Right. And you get ten people who know a lot about cars. But know nothing about people is engineers would probably probably satisfy that requirement very well, just getting engineers.

[01:33:17]

OK, so you get 10 people to do a hell of a lot of bad engineering, but know nothing about human psychology, OK? And you set them off to go and buy 10 cars each right now. What my mom would have done if she would have known nothing about the car, but she would have basically detected the person who's telling me this car is an honest person.

[01:33:36]

How what's her algorithm? A vicar would be, you know, OK, now, even if you don't believe in God, right. A vicar has a lot more to lose. A vicar can tell you a bad car. What's a vicar? A priest. OK, Canadians, he's got nothing to be bothered to anyway. So. So you have a priest. OK, now, even if you don't believe in God, whatever, OK, he he can't afford to always put salt sold in the gap.

[01:34:06]

Someone who's a friend of a friend and that social intelligence. Because when, when I first bought my first shitty secondhand car I was living in London where suddenly becomes cheaper in London than they are anywhere else in the country, because loads of them and all of us, we're all kind of contemporaries, university contemporaries about simultaneously we're all buying our first shitty secondhand cars. We all do the same thing. We went back to the small towns where we grown up and we bought a secondhand car from someone vaguely known to our dad.

[01:34:34]

Now, that was like an instinctive thing, salmon returns for what's going on there. Well, that guy might sell dodgy cows, but he's not going to sell one of his dodgiest cows to the son of someone who drinks in the same pub as all his future customers. Yeah.

[01:34:49]

So we instinctively did a kind of reputational feedback loop thing and we understood reputational vulnerability instinctively. So what I'm saying is that if my mom just said, OK, well, I know Mr. Johnson, he's lived in the same house for 15 years, then she would probably look at things like whether they wash their milk bottles.

[01:35:09]

I don't have bottles in Canada, but in Britain used to have obviously in Canada, you have tetra packs that contain eight litres of milk because that's the kind of weird North American way. But anyway, we used to have pint milk bottles, British, not your bloody North American.

[01:35:24]

Monson's British Pie and respectable people would always wash their bottles before leaving them on the step for collection by the milkman. And dodgy people would always just put the bottles out full of kind of, you know, the dregs of the decomposing milk is a reliable indication of Tory voting. By the way, if you are ever canvassing the people who watch their milk bottles, you just mock Tory and went on to the next house.

[01:35:47]

As you're saying that it reminds me when you were talking about the businesses investing in something that has a high upfront cost but pays off over time. Is this a form of like individuals engaging in the same behaviour and signalling that there's really no middle class values?

[01:36:01]

If you think about it, everything like education is very largely a commitment device. Our preparedness to engage in kind of costly commitment devices or signalling is basically any sort of indication of middle class probity. And I think the problem with the shareholder value movement, by the way, and short term targets in business is you are creating in businesses with a focus on the short term. You're creating psychopathic businesses. You're creating businesses which consumers instinctively don't trust or like very much because everything they do seems to be focused only on the immediate transaction.

[01:36:38]

It's a great statement from America's most successful car salesman, where someone said, what makes you such a good car salesman? And he said one very simple thing. A game theorist would like this. Every time someone's I sell someone a car, I'm really thinking about the next car. I'm going to sell them. Now, you know, so there's no advantage way there's no advantage to any short term, because the second he actually misleads them, the second he actually calls them, essentially he's losing that second sale.

[01:37:09]

So he was he was successful by playing the long game, not by playing the short game. Now, you might argue he can only play the long game. He might not be able to play the long game in London. He could play the long game in a small town because the same people will come back. I mean, you know, conditions affect it's very different. If you're totally peripatetic or totally mobile, you might argue if you take getting into real political incorrectness, if you take communities, people who are hugely move around with the traveling doctors.

[01:37:42]

Well, I mean, they have doctors. They have the medical qualification.

[01:37:46]

I mean, the old ones in the in the early 19th century.

[01:37:49]

And, yeah, they didn't have to stay around to try to keep you out of politics. I was trying not to get what I was going to say in terms of people who moved around the state, oil people. You essentially trust a kebab shop more than the kebabs. And there because the kebab shop has sunk costs. Yeah. If he loses his reputation, he'll have to up stakes and start a new kebab shop somewhere else. I don't know that expects the kebab that can just go.

[01:38:14]

Looks like Sevenoaks is a bummer. I think I'll move to Oxford and poison a lot of people. Exactly. Yeah. So that actually gets to a weird bit of Soviet propaganda with it was actually intended I think is anti-Semitic code word but rootless cosmopolitans. OK, that was a stop. Was a Soviet attack on people who are insufficiently invested in Russia will therefore to be viewed with suspicion. Now, I don't condone anything about Stalin era propaganda, but it was very clever psychology.

[01:38:45]

The implication that these people, you know, are effectively opportunists who are not invested in a community where they'll suffer the reputational consequences of bad behaviour, they'll simply move somewhere else. So it's really, really interesting.

[01:39:02]

You know, when you get into that instinct, I mean, it's probably I've often wondered how much lies behind both Trump and Brexit, which is that all the people in the chattering classes are basically from a class of people who love moving around. OK.

[01:39:18]

OK, now one of the things we talked about, the right of movement of labour, OK, you know, you talk about all those things. Now, the only thing when you're always talking about rights of movement, which is easy to forget, is that 90 percent of people, particularly above a certain age, just want to stay put. OK, and it's always worth when you talk about the rights of movement, you never qualify with what about the rights of people who just want to stay in the same place and not suffer from much change?

[01:39:46]

Because that arguably is a right. No, I'm not I'm not a Trump apologist here. I'm just explaining the level of poor understanding. I think that one particular class of sort of liberal and semi intelligentsia, you know, their whole world is all about brilliant. I get to spend three years working in London and then I'm going to go. Now, generally, once you have kids, you can't bloody go anywhere, right? What you just want to do is stay in the same house and nobody bungles it.

[01:40:12]

OK, now. There is an aspect where young university educated people without kids who are obsessed with the idea of being able to float around, you know, free will forget the fact that I think some of the 80 percent of people in the United States live within 30 miles of where they were born. There are huge number of people who just don't want to go anywhere. You know, the college people would just say, though, they're ignorant or whatever, but it's a perfectly fundamental human right.

[01:40:41]

Surely the urge just to stay in the same place, the urge not to have to move around doesn't know that that seems to be a right as well somehow. There is I think, you know, there is this sort of mutual incomprehension. And I think there is a whole weird class of people who don't understand the conservative mindset very well.

[01:41:00]

I would say that it was a surprise that Trump won. It was a surprise for most people that Brexit won in part, I think.

[01:41:08]

I mean, I would argue that Farnam Street, my guess is it was there were quite a few people predicting a Trump win with her. Well, I think part of it is just the nature of prediction, right? Like what? We're surrounded by expert opinions that don't necessarily ever come true. There's no scorekeeping in them.

[01:41:24]

And it's just, you know, we've so centered our lens of media to only hear you could you could study the US political campaigns ad nauseum and you still wouldn't have a full view of all of the everything that was going on, because the way that we consume media is actually shaping.

[01:41:46]

That's becoming a bubble. Yeah, I do break out of that quite a lot. Partly, I think I have to thank people like John Hights created this thing, that heterodox academy. And it's by the way, it's a serious issue. You know, David Ogilvy said the consumers I mean, different a different language. But he said the is not a moron. She's your wife. And equally, the Brexit vote is not a moron. He's your dad.

[01:42:10]

You know, and I think it is a serious challenge to advertising agencies. If you genuinely have an advertising agency in a huge metropolitan city which completely fails to understand 50 percent of the population of the country, which it serves. Yeah, it may seem a strange language to say an advertising agency serves a country, but it can't do it if that's OK. And that is something I mean, it's a very interesting case of a wrong turn, which Jeff Miller pointed out.

[01:42:39]

Within seconds, Coke ran a Super Bowl advertisement which showed people singing America from sea to shining sea. Is America the Beautiful? And that was something I never did.

[01:42:50]

I don't remember where the people were from. A huge mixture of ethnic backgrounds. Yeah. Now, actually, if I'd left that, that would have been fine.

[01:43:00]

But they were singing it in their own languages, not in English. Now, that was an interesting case where I think the people in the big city didn't understand. Well, 70 percent of America, a lot of people went bananas getting to sing in English. OK, now that was an interesting case, which was you you'd pushed it a little bit too far. No one let you know. If you think about Coke Hilltop, that was a multi-ethnic scene.

[01:43:25]

They were all singing, I'd like to teach the world sing. Yeah, but they weren't all singing sort of Gujarati, Spanish, Brazilian, Portuguese.

[01:43:33]

Right. So it was an interesting case of what he said, I think was Madison Avenue not understanding Main Street. And the the slightly obsessive signaling of openness among young, college educated people is a bit pathological, to be absolutely honest, because it. It's not even as a case study as if the American cities, which are the the greatest proponents of that terms, actually a lot of those American cities, they're not actually that well integrated. OK, now, strangely, you've got two cities in the south and are a whole lot of people of different ethnic groups, all necking bears together in New York.

[01:44:16]

Right. I don't know what Toronto is like. All of Ottawa. I don't know what else was ethnic composition is. But but but it's it's not as if necessarily the people who manifest the manifest, the opinions most strongly necessarily also manifest the behavior. I think Nassim Taleb said in this piece intellectual, that idiot. You know, there are massive proponents of, you know, of kind of integration, but they've never got drunk with a minority cab. You know, there is an element to that, which is that these people live in very, very strange, rarified bubbles.

[01:44:51]

Yeah, I think that explains a lot of the surprise.

[01:44:55]

Whatever your political affiliation is, if you were surprised by the outcome and you were liberal, I think that a lot of that has to do with losing touch with a lot of what's going on, which was how a large swath of people were feeling. Right. They were feeling out of touch and out of sync with. And if you read them, John Touby piece on what you might call, actually, we choose our opinions tribally and he applies us to science that actually scientists would rather believe something was wrong than believe something that got them disinvited from conferences.

[01:45:32]

Yeah, OK. Yes. In the same way, you disproportionately focus on the things which annoy the outgroup. So I think there are loads of actually quite liberal ideas which would which would achieve fairly widespread conservative acceptance or which we really worth pursuing. So if you take the United States, no one said vacation allowance. Come on, you know, you're the richest country in the world. Take some fucking time off because, I mean, let's face it, you will venerate in the US, you venerate retirement, stand around for 15 years of your productive life wearing ridiculous clothes on.

[01:46:05]

A Florida golf course is considered totally virtuous. Right. But actually having like four weeks vacation when you're thirty eight, that's lazy. Well, why don't you work a bit later. Yeah. And have a bit more holiday throughout your life because you know that downtime makes you more productive anyway. Second thing I'd look at if I were in American politics is the ridiculous rate of incarceration. I'm not sure I'd look at gun control because I don't think there's anything you do that's not because I don't necessarily believe there might have been a better path for the United States in terms of gun control.

[01:46:39]

I'm just not sure there's anything anything you could do now, given the proliferation of guns. And you cannot have similar levels of gun ownership to the US, doesn't it? Although not small, not not handguns. I don't I guess Canadians are packs of feral heat seriously out of the cities. Have you got bears? Some new in fairness, I wouldn't know.

[01:46:57]

I mean, anecdotally, I would say it's much harder to get a gun in Canada than it would be in the US. And there's much tighter regulations. And most of the people that do have them on a farm or something, I mean, it's not a semi-automatic weapon.

[01:47:15]

But the interesting thing is that you could pursue things like the incarceration rate, particularly for minor drug offenses in the US. Now, I don't know that it's wrong. Right? Well, I would say is it's patently worth experimenting with. Maybe if we can find a better way of achieving this and rather than banging people up for very long periods for relatively trivial bits of self harm, really. OK, now, I might be wrong there. By the way, I'm not totally dissing the conservative hardcore viewpoint.

[01:47:43]

There has been a significant reduction in the US, but it's certainly it. But what tends to happen is the left disproportionately focuses on things which excessively annoy people on the right. Because the terrible thing is if you want to signal your membership of the group, the best way to do that is by focusing on those things which are disproportionately annoying to the group that don't agree with you. And so there's probably an element where political consensus becomes harder and harder simply because of the urge people have to signal their loyalty to one particular group by driving the other group practically insane.

[01:48:16]

So how do you how do you take people one step away from the tribal loyalty and more towards a middle?

[01:48:26]

Well, it's an interesting one for a start, which is that if you take the protests, there's a total asymmetry to the business of protest. Isn't that which is that basically right wing people don't do the demo thing, do a. I mean, the only reason a right wing person would stand on the street holding a placard would be to advertise a golf sale, right. We're not going to you know, we're never going to write weird messages like stop the Tory cuts or whatever it might be.

[01:48:53]

And just but I don't know why conservatives don't do that. PYT may say it's deference to authority. OK, we've chosen the damn government. We've had the decision. That's it. It's all systems go. It's why in some ways, conservative right wing political parties, certainly the British Conservative Party, what are the magic ingredients it has is that it falls in line. So there are a lot of people who have a huge disagreement with the leader of the party.

[01:49:17]

But there's a conservative kind of deference to arbitrary. I mean, we are Canadians, OK, you've got this, both of us, that it's totally arbitrary head of state, right? It's absurd. I mean, no one would have designed it that way. Actually having an arbitrary head of state is actually really good because it means that if the election doesn't go your way, it doesn't force you to reassess your loyalty to the country. The fact that I mean, the beautiful phrase also used by I think it's one of the Hitchins is, is that the monarch plays exactly the same role in a state as the king does on a chessboard board.

[01:49:53]

Not very powerful in itself. The purpose is in the spaces it denies to the other players, which is that it prevents your prime minister from living in a bloody great palace and getting delusions. It effectively says that, you know, the person who's the most powerful person in the country still has to defer to someone else. And then, you know, I mean, actually, if you look at monarchy and in terms of preventing catastrophe rather than being an attempted optimization, there are probably quite a few.

[01:50:27]

There are quite a few valuable roles that a monarch can fulfill. So that's like a Canadian thing. The Americans listen to this will be completely deranged at this point. But that would be if they stuck with George the third. I mean, they would have been. And look it up on Wikipedia. Yeah, exactly. But but no, I think the value of this thing is the decision. Science isn't just a question. It just causes you to lose.

[01:50:55]

Now, you know, a lot of what I've said, by the way, I'm not confident of, but I think it's worth considering. And I think the the great value of what you do in Farnam Street, the value of decision sciences, the value of people who, you know, that work on super forecasters, for example. It's just great. First of all, there's a huge tendency for people to crave artificial certainty. And a lot of the reasons for that are entirely defensive, that within an institutional framework, the urge not to break ranks and not be considered possibly wrong, you know, it's much easier to get fired for being illogical than it is for being unimaginative.

[01:51:37]

And I think what the decision sciences is starting to do is say, well, the very least, OK, actually, let's just let's just set aside a bit of budget to test something a bit weird. One of the opposite is true. Now, the perfect example of that is, of course, that hugely questioned experiment on the the paradox of choice. And yes, the experiment didn't always replicate. And I said, look, I wouldn't expect the job.

[01:52:05]

Nothing in marketing always replicates because context always matters patently. If you're just driven 50 miles to visit a vast superstore called World of Jamm, OK, you're not going to be put off by the large amount of choice you've got to the car today. We're going to a world of jam. You're not going to get the world. Oh, shit. There's just too much jam. I just can't cope with the joys of let's go home. Right. You'll persevere.

[01:52:27]

You'll buy some jam. But if you're a time press shopper who's just about to think, oh, God, have we run out of toilet paper? Are there someone there trying to sell you jam? Well, patently, if they're only five, it might be a less cognitively demanding decision to choose the apricots than if you have to choose between 76 different variants. That doesn't strike me as crazy. Now, all you need is a business person and as a practical person in policy making is you don't have to be right all the time.

[01:52:55]

That's academics are trying to do that to pretend it's like physics. Right. All you got to do is a you know, is actually have enough things to test that you can actually make some progress. Secondly, if you test counter-intuitive things, it's a much more valuable when they pay off because there's always a test, counterintuitive things, because your competitors won't and people expect a much more valuable discovery. So to take that one of our clients holds a sale of this is a few years ago of flights.

[01:53:25]

Sadly, we don't have absolutely robust data on this, but we said don't promote all 29 destinations. It'll do people's head in. When you email, people just mention five, you just focus on five. So if I said to you, OK, I'll take five European cities just to be you know, if I said you, Porto, Madrid, Budapest, Stockholm, Dublin, OK, probably one of those would just sing out a bit more.

[01:53:50]

Now, maybe you wanted to go with your wife or girlfriend and then between the two of you, you could decide which of the five you go to. If I gave you a list of all twenty nine, the chances are you're going to be arguing all bloody night, you know. So and sure enough, we tested this and it seemed to work gangbusters. Now, as I said, I don't have the data that's robust enough to go and say, but look.

[01:54:14]

But what happened is the paradox of choice. And the experiment encouraged us to try something which we wouldn't otherwise have tried. Exactly. And that's you know, if you if the cost of testing is low, OK, in other words, if you can either retrench quickly, if it appears not to be working, if if, for example, we sent out those first emails in the first thousand got a dismal response, we have to abandon this immediately.

[01:54:40]

Mentionable twenty nine.

[01:54:41]

The cost of failure is small. The cost, of course, has the potential upside is spectacular. Potential upside is immense. And importantly, the cost to test is really low.

[01:54:51]

So actually what you artificial certainty is less valuable in in the modern digital age that it was historically and yet weirdly, people are cleaving to it more.

[01:55:01]

Yeah, I think that is a great point to wrap this up. Delighted. It's always a pleasure.

[01:55:07]

Thank you so much. This has been phenomenal. And we will have to do this again because there's so many more things that I want to. You bet. Always a pleasure. As always, a joy. Thank you very much. A brilliant. Hey, guys, this is Shane again, just a few more things before we wrap up. You can find show notes at Farnam Street blog, dot com slash podcast. That's fair. And I am s t r e t blog, dot com slash podcast.

[01:55:37]

You can also find information there on how to get a transcript.

[01:55:40]

And if you'd like to receive a weekly email from me filled with all sorts of brain food, go to Furnham Street blog, dotcom slash newsletter. This is all the good stuff I've found on the Web that week that I've read and shared with close friends, books I'm reading and so much more. Thank you for listening.