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Insights from "Alchemy."

Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business and Life” is a 2018 book by Rory Sutherland. Some thoughts for a rainy Sunday in New York.

Sutherland: “It seems likely that the biggest progress in the next 50 years may come not from improvements in technology but in psychology and design thinking.”

Why is this interesting? The biggest shift in my thinking over the past few years has been in understanding quite how limited the rational intellect is. Moreover, the faster the environment is moving, the more evolution & innovation moves “irrationally” to explore new possibilities. But…. how do you manage for irrationality? When is it career suicide? Rory Sutherland is the avuncular Vice Chairman of the ad agency Ogilvy. With 30 years of creative experience, he’s basically written a book outlining all the fascinating ways we are weird, and how you can create effective strategy around it. The book is filled with funny and illustrative anecdotes, and it’s an easy read.

I’ve also added a couple of relevant insights from Safi Bahcall’s related book Loonshots, which is about how to structure organizations to encourage breakthroughs.

[9 minute read]

Sutherland’s Rules of Alchemy:

  1. The opposite of a good idea can also be a good idea.
  2. Don’t design for average.
  3. It doesn’t pay to be logical if everyone else is being logical.
  4. The nature of our attention affects the nature of our experience.
  5. A flower is simply a weed with an advertising budget.
  6. The problem with logic is that it kills off magic.
  7. A good guess which stands up to observation is still science. So is a lucky accident.
  8. Test counterintuitive things only because no one else will.
  9. Solving problems using rationality is like playing golf with only one club.
  10. Dare to be trivial. If there were a logical answer, we would have found it.

The limits of rationality:

“We discovered that problems almost always have a plethora of seemingly irrational solutions waiting to be discovered, but that nobody is looking for them; everyone is too preoccupied with logic to look anywhere else.”
“Metrics, and especially averages, encourage you to focus on the middle of a market, but innovation happens at the extremes.”
“The people at the top of organisations are largely rational decision makers who are naturally disparaging of psychological solutions.”
“Most people spend their time at work trying to look intelligent, and for the last fifty years or more, people have tried to look intelligent by trying to look like scientists.”

[TM: I once read that a supermarket chain moved to an algorithmically-determined shelf-stocking approach. If there were 3 brands of hot sauce, and the most expensive one wasn’t selling, it would remove it. Sales of the medium-priced one plummeted. The algo didn’t understand psychological anchoring. Similarly- another algo removed high-ticket, low-turnover items like guns and ping-pong tables, and replaced them with high-turnover goods like bananas. Without realising that customers were coming from long distances away to play with low-turnover goods, and then buying larger overall baskets. People visiting from nearby bought smaller baskets. Managers knew this, the machines didn’t.]

The influence of evolution

Loved this idea: “The psychophysicist Mark Changizi has a simple evolutionary explanation for why water ‘doesn’t taste of anything’: he thinks that the human taste mechanism has been calibrated not to notice the taste of water, so it is optimally attuned to the taste of anything that might be polluting it.”

“Over 30,000 items on the shelves, the single item most frequently purchased, as by all grocery shoppers in Britain, is . . . a banana.”

Social exclusion/inclusion is powerful: “Soap advertisements never encouraged people to wash themselves to prevent community disease. The message was that people who didn’t use soap would smell and be lonely.”

Veblen goods (higher price leads to higher sales) are often created by evolutionary signaling: the Peacock takes the risk of standing out because of the offsetting benefits of signaling to his mate.

“Vacuum cleaners used to be a grudge buy that was only necessary when your old one had broken. Dyson added a degree of excitement to the transaction. Before he invented them, there was no public clamour for ‘really expensive vacuum cleaners that look really cool,’ any more than people before Starbucks were begging cafés to sell really expensive coffee.”

[TM: Related read on social media signaling in Seth Stephens-Davidowitz’s book, Everybody Lies. Las Vegas budget hotel Circus Circus and the luxury Bellagio each get around the same number of guests each year, but the Bellagio gets around 3x as many check-ins on Facebook. The Atlantic and The National Enquirer have similar circulations. But The Atlantic has 2.1 million likes on Facebook compared to 44,000 for The National Enquirer.]

“Wine tastes better when poured from a heavier bottle. Painkillers are more effective when people believe they are expensive. Almost everything becomes more desirable when people believe it is in scarce supply, and possessions become more enjoyable when they have a famous brand name attached.”
“If you replace the powder with a gel, a tablet or some other form, the cost and effort which have gone into the change make it more plausible to the purchaser there may have been some real innovation in the new contents.”

The value of a good filter [Ahem…]:

“Twitter’s entire raison d’être came from the arbitrary limitation on the number of characters it allowed. Uber originally did not allow you to pre-book cars. Highly successful publications such as The Week effectively take the world’s newspapers and make them digestible by removing a lot of extraneous content; McDonald’s deleted 99% of items from the traditional American diner repertoire; Starbucks placed little emphasis on food for the first decade of its existence and concentrated on coffee; low-cost airlines competed on the basis of what in-flight comforts you didn’t get. If you want to offer ease of use – and ease of purchase – it is often a good idea not to offer people a Swiss Army knife, something that claims to do lots of things.”

Structuring and Strategy for Alchemy/Breakthroughs:

“Given the modern open-plan office and our obsession with responding to e-mails as quickly as possible, it might be embarrassing or even damaging to spend 20 minutes staring blankly into space. However, without this time to disengage, it is harder to practise mental alchemy.”

Safi Bahcall’s Loonshots: How to structure an organization for breakthroughs: “separate the phases (the groups working on loonshots and on franchises) and create dynamic equilibrium (ensure that projects and feedback travel easily between the two groups). Break apart while staying connected.”

This keeps an organization balanced at the edge of chaos, the point of maximum creativity and reactivity.

[TM: As an aside, that sounds very, very coincidentally like, The Tao, and also the hemispheric structure of our brains. Also the same thing that makes an idea popular (discussed last week). Hmmm.]

Loonshots: Above Dunbar’s Number of 150 people, (see my insights from Social Chemistry/Friends a few weeks ago), organizational incentives tend to shift into politics from innovation. There’s probably a link here between Marissa King’s book on “small world” network structures, and corporate structure, I just haven’t worked it out yet.

There are 2 kinds of loonshots- P-Type, a product breakthrough and S-type, a strategy breakthrough.

Sutherland talks about comparatively cheap psychological moonshots. For example- by showing you the wait-time and progress map in advance, Uber removed the irritating uncertainty of hailing a cab.

“The single best investment ever made by the London Underground in terms of increasing passenger satisfaction was not to do with money spent on faster, more frequent trains – it was the addition of dot matrix displays on platforms to inform travelers of the time outstanding before the next train arrived.”

Conclusion: Our economy and culture has over-emphasized the quantifiable and intellectual. There is immense value from looking at behavioral and “irrational.” Evolutionary psychology is a great place to start, as it’s often evolutionary leaps that have determined some of the greatest breakthroughs in history.

If you like the sound of this, Sutherland did an enjoyable podcast with Jim O’Shaughnessy on Infinite Loops.

Have a good day!

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