Rory Sutherland (1:23)

Following Farnum street devotedly appreciate that. And it's always, always interesting. Very, very interesting. And I mean the whole question of the decision sciences is, I think at the moment completely critical. And actually, by the way, it'll be very, very interesting with AI because I keep hearing people saying, you will say to your AI find me a skiing holiday. And and it will provide you with the perfect skiing holiday. And I keep saying, people don't decide like that. At the very least, you'll have to show them three or four or five skiing holidays from which they choose, because we can't really choose in the absence of comparison.

Rory Sutherland (2:05)

Do you see what I mean? It's a sort of freakish element of free market capitalism, which is we can only like something if we choose it in preference to something else.

James Clear (2:13)

That's interesting. How does that relate to like a travel agency which would do that inherently? Like if you said, I'm going to India to chat GPT and you're like, plan it for me versus you go to a travel agency and you're like, I'm going to India, plan it for me.

Rory Sutherland (2:27)

Well, among real estate agents, there's apparently a kind of little bit of a trick which is you always, before you show someone the house you want to sell them, you show them a less appropriate house, ideally that's slightly more expensive, say, so that when they see the house that you want to sell them, it's now clear cut because they can say, well, oh, it's a bit cheaper than the other one and it's got a conservatory, there's contrast. So there's a kind of decoy, effectively a bit like the famous economist experiment with the decoy effect. So, you know, one of my interesting questions is, you know, what interface will AI deploy to help us make choices and will it make the mistake that you could very easily make? If you think about it, nobody clicks the I'm feeling lucky button on Google. I think it's still there, isn't it? It's been there for years and they've removed it and found that it slightly reduces the appeal. But number of people who actually click it, I. E. I'm feeling lucky, take me straight to a single page is vanishingly small. People want to choose between, you know, effectively above the fold options. And so, you know, I'm just intrigued because it's very, very easy, I think, for people with an economic or tech background to make assumptions about what people are trying to do and how they choose. And that where, you know, utility maximizers and all this kind of thing only really to be completely wrong.

James Clear (3:48)

Do you think we're looking for efficiency in the wrong place?

Rory Sutherland (3:51)

We usually do in the sense that when you pursue efficiency there are quite a few problems. But when you pursue efficiency, generally you start looking at numerical or mechanical factors. And of course in the process you disregard psychological factors where the greater gains may be found. And so you focus too heavily on cost reduction and too little on value creation. I mean, one of the greatest forms of efficiency, by the way, is employing a human being who's really, really nice. Now this is complete anathema to people in tech who love to define business processes so as to make them susceptible to automation. You know, person X does this, we will take that function, we will replace it with algorithm Y. And it's a very beguiling message because it usually comes with cost savings attached. You might have heard of my thing, the dormant fallacy, did you? I'll remind the viewers and listeners, which is simply that, you know, you have a hotel, it's a five star hotel, it has a doorman, someone who welcomes incoming guests, you know, a combination of, say McKinsey or Accenture, and A tech firm will come in and say, your doorman currently costs you x thousand dollars a year. We have defined his or her function as opening the door. We will replace said doorman with automatic door opening mechanism and an infrared human detector, and we'll save you 30, $40,000 a year. And then they walk away, they take the credit for the cost saving and then two years later, you know, the hotel's a catastrophe, the rack rate's fallen off a cliff because the doorman was doing multiple things, many of which were human and kind of tacit. Security would be one. You know, there are no vagrants asleep in the doorway, hailing taxis, dealing with luggage, recognizing regular guests, providing status to the hot. There are loads and loads of value creation components to that doorman which aren't captured in the open the door definition.

James Clear (5:53)

Is that an example of where the costs are really visible but the benefits are correct?

Rory Sutherland (5:58)

Yeah. So it's very, very easy. Management consulting firms, if you're in a business and some management consultants come in, go to the management and say, are they on a gain share agreement? A gain share agreement is a management consulting scam where you claim a certain percentage of the cost savings you identify in year one. Now, as Roger L. Martin, your fellow Canadian and my own personal Svengali, says any idiot can cut costs, okay? What takes real skill is cutting cost in a way that doesn't destroy value. One of the things that I don't think is understood by tech nerds, and if I'm being really cruel, males in general in many cases is the extent to which in evaluating any business or experience, the human component of it, the face to face component, does really, really heavy lifting. I've got a lovely story to illustrate this, which I think is fantastic. It's the absolute perfect example of misalignment of optimization through quantification bias. So wonderful man. Alex Batchelor used to be the marketing director of Royal Mail. You know, similar to what you have with Canada Post. Right? Usps. Sorry, not usps. Yes, just usps. And they couldn't make any sense of the fact that the brand perception of Royal Mail bore no relation to service levels. So there would be districts and areas where, you know, every single first class letter arrived early the following day. Extraordinarily reliable levels of service. And Royal Mail wasn't particularly held in affection or esteem. There were other areas where the service was frankly a bit ropey and people seemed to love it. Now this obviously upset them because they thought that all the billions or certainly hundreds of millions, they'd Invested in service quality improvement should translate into customer satisfaction and therefore, you know, some sort of brand voltage. And someone had a theory and they said, I think something else is going on. And the theory, which was put to the test and proved absolutely right was that the major determinant of whether you liked Royal Mail or not was whether you liked your postman or postie, technically, to be used the gender neutral term. So people who had a rather unreliable service, but the postman did the odd favor for them, left things in the porch, had a chat with them, those people thought it was a brilliant organization, regardless of the actual metrics that were being pursued. And I think that's very true in any service organization. You may, there's an electricity company, a gas company, a water company, a utility. You may interact with them online 95% of the time. But the one or two occasions where you interact by telephone or face to face disproportionately affect your perception of the organization. And I've argued for quite a time, if I were being completely honest, I've worked in advertising for 36 years, and if I were a wholly honest person, without fear of annoying my colleagues, probably 50% of the time, I would advise to a client, take 10 to 20% of your marketing budget and spend it on upgrading the call center. Pay the people too much, get the best practitioners. I think it's perfectly legitimate. In some organizations, there should be the very best call center people should be on six figures, because it makes, if you're good and nice, that's how much difference it makes. In other words, it more or less drowns out all your other stuff, all the other noise. It. If every time you have a personal experience, you have a good experience, then broadly speaking, in the human brain, that's a good organization, which I can trust. And when you think about it, I suddenly realized why this probably is. We don't really have much evolved experience in evaluating postal efficiency, do we? Okay, we have quarter of a million, half a million years of evolved experience in deciding who to like and trust. Because for most of our evolutionary existence, that was one of the five most important questions to get right. Do I trust this person? Will they attack me? Are they an ally? Are they a foe? If I pay them money, will they deliver? And so consequently, I think what we do in our brains is we use our human judgment as a proxy. Now, a story to back up that you probably remember this. Okay, it's in my book Alchemy, which is imagine you're turning up to buy a secondhand car and you turn up at the house, nondescript house, and the car's parked outside the house. And you have a looky loo at the car and you judge the, you know, whether the pedals are worn and the condition of the bodywork. And you have a look around the car and you decide you're interested in paying, let's say, $5,000 for this car. So you go and ring on the doorbell of the vendor and the door is answered in one situation by, for example, a female vicar. Okay, could be Catholic. Well, they can't be Catholic, but you know, Episcopalian doesn't really matter. Okay, female vicar. And it's a tidy, clean house. At that point you probably upweight what you're prepared to pay by 20% or so. In a parallel universe, the door is answered by a guy in his underpants. In other words, someone with no shame. In that instance, you devalue the car, I suspect by about $1,000 or more. In fact, you may not even buy it at all. And what we're doing here is we're effectively saying, what I'm going to do is a stand in for the question, do I buy the car? Which I don't have the technical knowledge to answer. I'm going to ask a supplementary heuristic question which is do I trust the person who's selling the car to me? And it's an interesting question. My mother didn't know anything about cars, knew a lot about people. I think she would very reliably go around buying cars just through her assessment of the seller. And similarly, I think she might do better than someone with an engineering qualification who ignored who the seller was and their personality and character. Now, as a bit of evidence of this I discovered, cause I've been investigating this, various real estate agents have said to me that every estate agent does their utmost to make sure that until things are signed and sealed, the vendor never meets the buyer and vice versa. And the reason for that is if one of them doesn't like the other, they won't buy or sell. Now when you think about it, that's completely. Unless the person's moving next door. Obviously, if you're buying a house from someone who's planning to move next door and they turn out to be a psycho, that's relevant information. But it seems to be the case that if you meet the vendor and you basically don't trust them or think they're a bit shifty, it doesn't matter what the price is, it doesn't matter the condition of the house. Suddenly you revise your valuation of the house downwards if you don't like the person selling it to you. And so that's one of the reasons why apparently real estate agents will leave any kind of contact between the two until after at least a survey has been done and enough commitments taken place. I once, by the way, I once didn't buy a house, basically because the guy was being an asshole about the fridge. Now, the fridge was only worth, you know, I think, 0.2%.

Rory Sutherland (13:37)

Of the value of the house or 0.02% of the value of the house, I can't quite remember. But because he was being a dick about the fridge, I no longer trusted him about the house. Yeah, weirdly, it turned out my instinct was right because then a friend of ours went to buy the same house. They got some separate land registry search done and found out that a chunk of the garden actually belonged to Network Rail, not to the house. It effectively filched a large part of the garden.

James Clear (14:05)

So does that mean. I just want to go back to the real estate thing for a second. Does that mean pretty or attractive real estate agents would be more successful than.

Rory Sutherland (14:15)

It's a really interesting question, which is, I think. I think we ought to study these things much more because the assumption of an economist is that you need to disintermediate. You don't need estate agents. We just go on Willow Zillow, sorry, or rightmove in the UK or whatever it is. What's the Canadian equivalent?

James Clear (14:34)

I don't even know.

Rory Sutherland (14:35)

Cabins.com or whatever. Okay, realtor.com. exactly. You go on one of those things, you choose the house you want, you look at it, you then look at the house, get a survey done by the house. We assume that there is, you know, this is a purely transactional exchange. Maybe in a rational world that's exactly what it would be, but for one thing, actually, someone who's invested 15 years in doing up a house probably cares about what the person buying it is going to do to the house. So. My parents in law, for example, are fanatical gardeners. Don't get into this.

James Clear (15:11)

Seriously.

Rory Sutherland (15:12)

Get into something like crack.

James Clear (15:13)

I don't think they have addictive. We have no worry that I'm going to be.

Rory Sutherland (15:16)

Don't worry, you're going to become an enthusiastic.

James Clear (15:18)

I can barely keep a plant alive.

Rory Sutherland (15:19)

Good, good, good. Okay. But I guarantee if you went and looked around their house and placed an offer while being an expert in botany and generally quoting people like Gertrude Jekyll and, you know, prominent garden designers and Sittinghurst and Daddy, Daddy, Daddy, Da.

Rory Sutherland (15:39)

You could buy their house for 200,000 less than if you turned up and said, brilliant, we can knock down that tree and put in a helipad. I think if you said we knocked down that tree and put in a carting track, right. I don't think they'd sell it to you at any price.

James Clear (15:53)

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Rory Sutherland (17:58)

Richard Thaler did. I think his most interesting work of all is actually on the concept of transaction utility, which you may remember. Do you remember this a little bit? Yeah, it's in. I think it's in nudge. And the famous thought experiment is this Which I find fascinating and I think it's a really insightful thought experiment. So the idea is you and your best friend are lying on a beach somewhere and it's hot and you're very thirsty. And about quarter of a mile down the beach there's a place that sells ice cold beer. And your friend says to you, and he asks people to imagine this, your friend says to you, I'm off to, to buy a beer. Tell me what the maximum amount you're happy to pay for a beer is and if the price they quote falls below that thresh, okay, I will buy the beer, and if not, I won't. And he asked people to imagine what the threshold would be of what they'd pay for a beer on a hot day when they were parched on a beach for a cold beer. The beer is going to be consumed back where they're sitting. So the ambiance or you know, the, the clientele of the establishment selling the beer is irrelevant because you're not going to consume it there. And the interesting thing is in one situation he says there is a boutique hotel selling chilled beer. And in the other situation he says there's a shack selling cold beer. And your price changes and your, your readiness to pay changes partly in accordance to what you imagine to be the overheads of the establishment selling the good. Even though the, even though the utility of the beer as distinct from the how good the transaction feels, the actual utility of the cold beer is identical in both cases. I think that's a, I think that's Richard Thalen. I think it's extraordinarily interesting because I think we can make.

Rory Sutherland (19:48)

Car, car salesmen will know this. You know, make the transaction feel good. Make them feel good when they drive out of the place.

James Clear (19:56)

That was cld, right? You, you know, people are more likely to buy from you if they like you. They're more likely to like you if they trust you and you have something in common with them. And you can use all of these things to manipulate people. Unfortunately, it's not manipulation.

Rory Sutherland (20:11)

Be careful of that because. No, no, no, we've got to be really careful. I think we've got to be really careful here. One thing might be that a genuine cold blooded psychopath would intentionally.

Rory Sutherland (20:24)

Might find it difficult.

Rory Sutherland (20:26)

This is a Jeffrey Miller theory that if you're on a first date, there's an element where apparently it's a long time. I've been married for 30 something years, but women on a first date will turn up a bit late or do something a little Bit annoying. And Miller's theory is that it's a psychopath detection test. So that if you interested. So, you know, one of the worst things that can happen to women is to get into a relationship with someone who's, you know, psychopathic. Because you end up with an empty bank account and a, you know, and you know, your sister's pregnant by everybody. Everything goes, you know, everything goes hopelessly wrong. Someone who's written very interestingly about this, by the way, is fabulous woman who writes about education and absolutely brilliant. Like, I'll remember her name in a second. But she's written quite about this having a psychopath in the family. Likewise, Kevin Dutton has also written about this about his own father. There are certain things which you can do which make it very likely that psychopaths will out themselves. So the perfect test might be you bribe the waiter to tip soup on them. Oh, interesting. And they'll lose it.

James Clear (21:34)

Gotcha.

Rory Sutherland (21:35)

Or you turn up late and someone like, assuming you're not a psycho. Cause you're Canadian. So, you know, that's probably by default. We're not relatively low.

James Clear (21:44)

We're too polite.

Rory Sutherland (21:44)

You're too polite. Exactly.

James Clear (21:45)

Yes.

Rory Sutherland (21:46)

It'd be too tiring to be a psychopath in Canada, wouldn't it?

James Clear (21:49)

It's super. Me. I'm sorry, I shouldn't have been sitting.

Rory Sutherland (21:54)

I shouldn't have been here.

James Clear (21:55)

My fault.

Rory Sutherland (21:56)

I got in the way of your soup. The psychopath will lose his rag.

Rory Sutherland (22:02)

And can't control this. And likewise, if you turn up late, there's a chance they'll go, look, I've been sitting on my own like an idiot for 15 minutes. Whereas you and I would go, oh, I know. I only just got here myself. The traffic's terrible. Yeah, we don't fully know. You see the value of what is going on in using a personal quality as a proxy for a decision which is simply too complicated to legalize or to reduce to numbers. Also, it is. I'll completely agree, in economic terms, it's suboptimal. But if it leads to downside variance reduction, which is what we're really trying to do, we're not trying to optimize, we're trying to reduce the risk of downsize. Downside variance. I mean, that's true in all sorts of things. Investment strategy, et cetera. You know, the barbell approach. First of all, make sure you don't do anything disastrous. Then after that, try and get lucky.

James Clear (22:58)

You say it like it's a conscious thing, but I think it's an unconscious.

Rory Sutherland (23:01)

Oh, no, no, it's not remote because.

James Clear (23:03)

If it is conscious, it's taxing, then it's probably a reverse signal that you're actually a bit off kilter. If you're consciously doing that.

Rory Sutherland (23:11)

In fairness, if you study social science matters, you've probably. But I agree with you that the. I mean, my wife occasionally gets a bit annoyed with me because I'll get. You know, I will literally apply Caleb logic to decision. Just to give an example. I always argue that over 36 years, holidays where I've rented a car are better than holidays where I haven't. And my argument is you have more optionality. See. Oh, interesting. So if you've rented a car and you find the hotel's a bit meh or the hotel's not in a great area, you can just get in the car and go and find a beach somewhere else and go there every day, you know, in other words, you know, so I deploy. Occasionally we'll deploy these kind of taleb lines. And you know, I'll also say, let's fly from so and so because, you know, it's the satisfices airport.

James Clear (23:57)

You're the one who. I remember this. You said you should always fly from the smallest airport that's convenient for you. Is that it?

Rory Sutherland (24:05)

Oh, I'm a big, small airport thing person. Yeah. Yeah. Actually, it's kind of interesting because airports are schizophrenic in a way because the clientele of an airport is, roughly speaking, a 5050 mix between people who fly a hell of a lot and just want to get through the damn thing as quickly as they can, and people who only fly once a year who regard the trip to the airport as part of the holiday and they love going through a shopping center and looking at Hermes outlets or whatever. And so airports are effectively catering for two totally disparate groups of traveler.

James Clear (24:42)

And you can separate these people in the security line effectively.

Rory Sutherland (24:45)

You can absolutely. You can separ. And that's why, you know, in a weird kind of way, I think you notice sometimes that the queue for the priority lane in security is longer than the queue for the amateur lane. But frequent business travelers will still join the priority lane on the assumption that the people in front of them are more competent. I mean, there's a George Clooney up in the air gag about that. Right. And so it is very interesting because is it. Is it irrational if it's a very reliable mechanism? So, all right, one example would be. I don't think it works very well nowadays because there are enough posh Spivs around. But in the 19th century, if you were a posh and respected real estate agent, you had a lot of reputational skin in the game in the local community, both commercially, in people, you know, so you are highly vulnerable to reputational damage, both commercially and also socially, because, you know, a small town or a, you know, would have been to a large extent, a prestige economy. And therefore, you know, dealing with the posh local estate agent rather than some guy who claims to be cheap is not irrational. You know, you know, the commission may be higher, whatever it may be, but in terms of reputational skin in the game as insurance against being, you know, treated appallingly. But. And, you know, I think there's a kind of weird thing going on, which is that, you know, the job of the real estate agent is to some extent to be the person who stays behind in the place where the house is sold to suffer the reputational consequences of, you know, of anything outrageous because the vendor of the house isn't really reputationally vulnerable if they're moving 300 miles away. And so, you know, some of the role of these intermediaries is just highly complicated. But when I say that, you know, we fundamentally seem to attach very, very high weighting to, for example, a call center experience versus website design. I'm not suggesting for a second website design isn't really important.

James Clear (26:56)

It's almost like there's some experiences that are sort of additive or subtractive, and then there's some that are multiplicative. Like you can multiply by zero or you can multiply by ten. Like a difference in that one particular factor.

Rory Sutherland (27:10)

There's a really interesting organization. I can't remember what they're called online. They call this a brand quake. A brand quake is where you do something. It could be resolving a problem really well. That would be a very good opportunity for a brand quake. The person has a problem, you put quite a lot of effort and intelligence into solving it very effectively for them.

Rory Sutherland (27:30)

And then you ring them back to check that the problem has indeed been solved. Now, that would be an example of something. I'll give you the per. Okay, I'll give you the perfect story of this. My father, who is, you know, half Scottish and without stereotyping anybody, you know, was quite parsimonious with what he bought generally. I mean, I'm not saying it's genetic, by the way. I'm just culturally, he was descended from long lines of Highland Scots who didn't get where they were today by, you know, splashing out. And he had I think three. When he died he had three or four Dyson devices which he'd bought from New in his home. He had one on each floor to save him carrying them upstairs. Now these are by any objective measure pretty expensive vacuum cleaners. One of the reasons he was so fanatically loyal was that Dyson. Now interestingly, I'm going to make a point here which is a privately owned company and do not underestimate the importance of this. PLCs or.

Rory Sutherland (28:35)

Companies on the NASDAQ or the new Stock exchange are incentivized to behave like psychopaths because they're optimized around short term transactional value, not long term relationship building.

James Clear (28:47)

I think maybe the generalization is that if they're private companies led by a founder, then they're not run by the finance department. It's so interesting, I think about this a lot where you have these Short term optimization and long term effectiveness are.

Rory Sutherland (29:06)

Two completely different things. Short term money off versus long term value on.

James Clear (29:09)

Yeah. And so you can. There's always somebody making more money than you, but maybe they're cutting corners, maybe they're doing things that are unsustainable. And like you said, you can always save money in the short term but do damage your brand and long term.

Rory Sutherland (29:20)

By the way, my theory is the primary reason reason for the success of these private companies. The secondary reason is they look after their consumers better because they're effectively, unwittingly, they're practitioners in the customer value movement, not the shareholder value movement.

James Clear (29:38)

Well, Buffett had this saying where his directive, his letter, I guess to all of his CEOs after he acquired the company was the only expectation I have for you is to treat this company as if you and your family have 100% of your money in it for a hundred years and you can't take it out.

Rory Sutherland (29:52)

Exactly that. Yeah.

James Clear (29:53)

And I think that that approach enables, even in a public company that enables people to take long term do the thing that's optimal.

Rory Sutherland (30:00)

Actually they do something. They do something, they look after their customers. And there is an interesting exception to this probably, which is for example Costco, which actually Enterprise Rent A Car is family owned, isn't it? Enterprise is family owned in the, and I've told everybody this in the IPA Advertising Effectiveness Awards in the uk. My argument is that with the exception of P and G Diageo Unilever marketing led companies, I don't think that PLCs, what do you call them in you know, publicly traded corporate. I don't think they can actually do marketing Very well. Because the requirement for short term self justification and numbers effectively overrides the real purpose of marketing, which is investment in long term customer value.

James Clear (30:45)

I think this is why generalizing a little bit, but this is why founders outperform even when they lead public corporations. They have the same pressures, the same analysts, the same.

Rory Sutherland (30:56)

But they also are considering posterity, aren't they? What is my legacy? I mean, it's interesting actually, the German car industry, although their public companies are sort of family run. Aldi famously, which owns Trader Joe's, is basically owned by actually two German families. They had a huge feud, but some things going on there. One of the things they do is they look after their staff better. And I think when you look after your staff better, the customer notices.

James Clear (31:22)

Well, this is part of the Costco thing, so.

Rory Sutherland (31:24)

Yeah, Costco, exactly.

James Clear (31:26)

But that comes from the Saul Price line of thinking, which when he started fedmart he sort of outlined the obligation of our business is we have a fiduciary relationship with the customer.

Rory Sutherland (31:37)

Yeah.

James Clear (31:38)

And Jim Sinegal, who founded Costco was a student of Saul Price and later on they would merge the companies.

Rory Sutherland (31:45)

Of course they did, didn't they? Yes, you're absolutely right.

James Clear (31:47)

Yeah. And I think that's interesting, right? Where you treat your employees better.

Rory Sutherland (31:53)

Nice story from Dyson. Which is family owned. In fact, I think family run companies, this would include people like S.C. johnson. I think they should wear a badge. You see what I mean? Just as you have a kite mark on British. Well, Loblaws is family owned, isn't it? For example, in Canada, Family controls, family control. McCain family control. So what I was saying about the advertising effectiveness awards, four out of the five gold winners. It's only every two years, this award and it's very, very rigorously judged. Four out of the five winners, namely McCain, your Canadian heroes, McCain, Yorkshire tea specsavers and Lathwaites, a wine company. Four out of the five winners. The fifth one was Guinness, which is sort of a family company in a sense, although it's owned by Diageo. And so my point is that we should actually have a kite mark that allows consumers to prefer to buy from companies which aren't listed on some stock exchange somewhere and hence aren't controlled by the finance function because they're more trustworthy.

James Clear (32:55)

That's an interesting. I don't know if I agree with.

Rory Sutherland (32:59)

That, but it's interesting to think.

Rory Sutherland (33:03)

Is Roger still family controlled? I mean, Canada's absolutely packed full of Canadian Tire. What about that?

James Clear (33:08)

Increasingly you get family controlled, but not economically Controlled. So you have like a dual class.

Rory Sutherland (33:14)

The Western family would control Loblaws to some extent, even though they're not majority shareholder.

James Clear (33:20)

Well, I think if you, if you have a corporation that's hundreds of billions and you control 10 or 15% of it, you effectively have control over the course.

Rory Sutherland (33:27)

Yeah, Ford Motor Company falls into that definition. I think the, you know, the family or some. There's a particular class of shares, a.

James Clear (33:35)

Lot of dual class coming.

Rory Sutherland (33:36)

But hold on, I want to go.

James Clear (33:37)

Back to Dyson for a sec. What makes Dyson so effective at advertising?

Rory Sutherland (33:41)

Actually, it's not advertising, it's marketing and it's customer experience.

James Clear (33:44)

What's the difference between marketing and advertising?

Rory Sutherland (33:46)

Advertising is a subordinate part of marketing. And in many cases, even though I've worked in advertising for 36 years, I want to think of myself, probably unsuccessfully, but I still aspire to be a marketer, not an advertising person, because advertising is a useful toolkit available to the marketer and by the way, generally is pretty effective. But Peter Drucker, the purpose of business is to find and keep a customer profitably. That's the purpose of marketing. It's to, you know, to, you know, to either create or find customers with whom over time you can engage in mutually advantageous relationships to mutual profit. That's it.

James Clear (34:28)

So what makes Dyson so good at marketing?

Rory Sutherland (34:30)

Well, the story I heard from someone who worked at Dyson for 12 years is that he was sitting in a presentation, James Dyson presiding, and they were presenting the call center sort of efficiency statistics. By the way, I'm absolutely fanatical about call centers because I'm terrified that in an AI age people will try and effectively automate them. I think what you should do instead is make them slightly smaller, but a lot better.

Rory Sutherland (35:01)

Because I don't think you can substitute for the human in cases of unusual problems, special circumstances. Empathy generally, don't get me wrong, I think you can get AI empathy. I'm not suggesting that AI is going to be completely unempathic, but at some point it's rather like the equivalent of I want to speak to the manager. There will be situations where you want to speak to a person who can understand your specific situation and has the power to intervene to override the normal rules and regulations to solve your problem, because it is commonsensical to do so. Even if you know our service level agreement doesn't normally allow us to send out a replacement part. In this case, since your part is faulty, somebody who has the power to.

James Clear (35:47)

Do the right thing.

Rory Sutherland (35:48)

Got it. Exactly. And I think, you know, I think that will ultimately, you'll have to have the human as the last port of call on that. Also, your call center is the only way you can find out the problems that people can't solve anywhere else. Do you see what I mean? So there was a very smart person I met at Microsoft who when they took over some fairly niche Microsoft product, they put the call center in the middle of the development team. I mean, I would argue that the call center of British Airways should be on the same floor as the boardroom, because it's where you find out where you're going wrong with your existing customers who are the most important people.

James Clear (36:30)

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James Clear (38:52)

It'S the map, territory problem, right? So often the businesses are run by the map, which is like the spreadsheets, the volumes, the wait times, the whatever, but the territory is the customer call falling in.

Rory Sutherland (39:03)

And the problem isn't it the map is not the territory.

James Clear (39:06)

Yeah, they're experiencing. And so if you're not touching reality, you can get distorted by the map.

Rory Sutherland (39:12)

But I want to go back. You said, by the way, exactly the same thing Dan Davis did, which is one huge advantage of being a customer value company, not a shareholder value company, is that customers live in the real world, and therefore you are actually rooted in reality. Whereas shareholders, by the way, not share owners, but the shareholders, are principally interested in justifying their own existence to their investors, and therefore, they're dealing with a highly artificial construct in terms of defining the value of a customer.

James Clear (39:42)

But I think what's best for the shareholders is what's best for the customer. It's just the timeline mismatch that people have. So if your timeline for.

Rory Sutherland (39:50)

Well, it's incoherent, by the way. The shareholder value movement is totally incoherent, because over what time frame? Which shareholder is. What are you optimizing for? It's a completely incoherent nonsense, which is very, very friendly to stock market analysts who want a ready supply of quarterly data so they can bullshit their way out of things. How valuable it is to people with pensions is a completely separate matter, because one of the things it does is it prevents companies from innovating effectively and it prevents them from investing properly in customer relationships.

James Clear (40:21)

Okay, come back to Dyson. You were telling me this story. Somebody had worked there for 12 years.

Rory Sutherland (40:25)

So they were going, blah, blah, blah, average call time, blah, bl, blah, average wait time. And it was the standard kind of call center metrics about effectively, how quickly can we get these people off the phone? I mean, it's a bit more sophisticated than that. You know, I'm sure there's some measure of satisfaction, but it was kind of evaluating the call center on an operational efficiency standpoint. And Dyson basically said, stop right now. You've got this all wrong. The way we should look at this is we should treat it as an honor if one of our customers chooses to get in touch with us, and we should therefore respond to them. Accordingly, as if we're flattered by the contact, not as if we're bothered by the interruption or words to that effect. I'm putting words in his mouth. But this is, roughly speaking, what the person said happened in the meeting.

James Clear (41:07)

That makes a lot of sense.

Rory Sutherland (41:09)

I mean, and by the way, that's why my father had four Dysons, stingy man though he was. I hope he won't mind me saying this, my late father. But every time he rang them up, which might have been only once every year, they did something astonishing and they were really, really helpful and they solved the problem and the part arrived the next day. Sometimes they didn't even charge for the replacement part. And therefore he completely trusted those people and therefore was willing to pay an enormous premium really over other vacuum cleaners which might have had the same notional effectiveness precisely because of that trust.

James Clear (41:43)

There's so much opportunity here, right? If you think of you competing in a world where we're moving to AI driven call centers. If I took the exact opposite approach.

Rory Sutherland (41:54)

Which is, by the way, you should do both, a really, really good service organization allows for very streamlined, efficient service for people who know exactly what they want, and extremely empathetic service for people who are undecided, uncertain or find themselves in an unusual situation. And so you need to do both. And that's where I think the tech bros have got it all wrong. Because they see the opportunity of tech as being a one way street towards ever greater efficiency streamline. And let's face it, tech bros are not neurotypical in terms of what they want from things. When you allow tech bros too much power over decision making, along with their running dog lackeys in kind of management consultancy, you're optimizing for something which may be very, very distant from what your real world customers really care about.

James Clear (42:43)

You're using tech pros as like a.

Rory Sutherland (42:46)

No, no, no, no. It's perfectly reasonable to say that the people who work in this field are not representative of the whole human population. That's a reasonable assertion.

James Clear (42:55)

What is it you're representing when you say tech bro, though?

Rory Sutherland (42:58)

Anybody in a tech industry, just as anybody in advertising, myself included, is overweighted towards a belief in the ability of advertising to solve all problems. And I will truly admit that I am guilty as charged. However, ad people don't get that much opportunity to convince other people of the rightness of their argument argument. What has happened is that in marketing, for example, the tech companies, the consulting firms that sell stacks, and I owe a lot of this to a Guy called Adel Borki. Very interesting. Self taught Libyan marketing writer, former boxer Adel Borki and I coined the phrase technoplasmosis by analogy with toxoplasmosis, which is tech people and consultants have taken over the finance department so that the marketing metrics the finance department has faith in and demands from marketing are not those metrics which are most conducive to building brand and customer value over time. They're the metrics which are most conducive to selling tech solutions to the companies.

James Clear (44:03)

What are the metrics that are.

Rory Sutherland (44:04)

Well, it's all about short term, transactional, bottom of the funnel, click through. You know, how can you shovel money to meta in a slightly more efficient way? It's not about long term value creation at.

Rory Sutherland (44:17)

Now don't get me wrong, all that bottom of the funnel, short term transactional stuff is very important to get right. I'm not disparaging it, but it's only a third of the game and they're not interested in the other 2/3 of the game because they don't make money. If someone spends money on their call center or upgrades their call center staff or allows the call center staff to call out.

James Clear (44:39)

It's sort of like cybersecurity. It's seen as the cost. It's a cost.

Rory Sutherland (44:43)

Yeah, yeah, yeah, yeah, yeah. I mean Bonnie Blue would do really well in this. Cause she's all about the numbers, not about the quality of the relationship. You know, funny enough, she did work in NHS finance. Procurement, ironically, finance recruitment actually. She recruited people for National Health Service finance. So her approach to sex is merely an extrapolation of what she learned. I think recruiting finance people for the National Health Service all about the quantity, not about the value creation, the relationship.

James Clear (45:11)

I like this quantification bias thinking.

Rory Sutherland (45:15)

I mean Buffett, okay, you're quite rightly, your hero is he was obsessed with the quality of the management of companies with whom he invested, wasn't he? What I mean, I mean he was obsessed with personal factors.

James Clear (45:28)

I've read a lot in. I think I'm going to give a nuanced answer here. I don't know the answer, so I'll preface that with that. I did read a lot about what he used to do in the 60s and he used to hire private investigators and what he was trying to determine. I don't think it was anything about the person other than does what they say line up with who they are? And if the answer is yes, I can deal with that because I know what to expect and if the answer is no, if they can't go to work and claim to be a penny pincher because if they go to work and say they're going to cut costs but they're driving around with a Ferrari or whatever, like this is a thing that it doesn't line up. And so I, I feel like he was always just trying to assess the predictability of people, if that makes sense.

Rory Sutherland (46:16)

In other words, by looking at their consistency, consistency.

James Clear (46:20)

Did the management do what they said they were going to do? The balance sheet changes over. You know, like he was a very, he had to different emphasis on things than people I think realize. And I think with a lot of his investment, I mean my personal take is he was looking for predictability and it wasn't about massive disruption. It was never about things being turned around. He got out of that in the late 60s with diversified refilling was the last real turnaround situation. They sort of got themselves into and they exited quickly. And when I.

Rory Sutherland (46:53)

They got burned.

James Clear (46:53)

Did they quite well, they didn't really get burned. But I was talking to Munger about this over dinner one day and he's like we just realized that we made a mistake. We were never going to make a lot of money in this business and it was highly competitive and we had no edge. And so they got out as quickly as they could. And I think that the predictability of what he buys at least his long term holdings, like if you look at that, I think it's really interesting because it's like you can kind of see it.

Rory Sutherland (47:22)

The railroad people are going to be.

James Clear (47:24)

Using the railroad in 50 years. That's a great example.

Rory Sutherland (47:27)

So it will be unbelievably difficult to build a competing one but you can.

James Clear (47:30)

Also, you can lever it if it's predictable and leverage is, is this interesting thing where he says they don't do a lot and they don't when you look at the whole company. But on the railroad, for instance, they'll put a decent amount of debt in the railroad because they know what the earnings. It's very predictable and that comfortable. The same as the energy where they're putting a lot of capital, they put a lot of debt in. And I talked to this guy in Nova Scotia, John Bragg and he sort of did the same thing. And so he created, he created Oxford Frozen Foods. He's this incredible story. He's this billionaire from this small town of 1100 people. He started.

Rory Sutherland (48:07)

I've been to Nova Scotia, what's it called?

James Clear (48:08)

Oxford Nova Scotia.

Rory Sutherland (48:10)

It's called Oxford Nova Scotia.

James Clear (48:11)

And he started out not one, not two, but three multi billion dollar companies from this small town of 1100 people.

Rory Sutherland (48:17)

Is he still there?

James Clear (48:18)

He's still there, yeah. Such a great guy too. And, and it was fascinating to talk to him because he basically was like, look, you know, he owns North America's largest private telecommunications company. And he said, I wasn't afraid of debt at all. And we levered up massively. We went all in multiple times, acquiring more assets, acquiring.

Rory Sutherland (48:39)

But if there's something more volatile, he gets very nervous about the debt.

James Clear (48:43)

So he wouldn't do it if there was volatility. But he also had this thing so counterintuitive to what you hear on Wall street, which is like, I don't mind paying more, you know, I don't mind paying the most. And I was like, really? That surprises me. And he's like, well, a lot of these things only come up once. I don't get another shot at it. And if I'm a private company, I don't have public company shareholders and it takes me, you know, five years versus three years to get my money back out of the deal. Why do I care? I'm never going to be offered this again. And they're not going to build another one. No, no, no. So when it comes to fiber optic in the ground, he's like, like it's getting harder and harder to do.

Rory Sutherland (49:20)

What is this company, the Canadian company? Telecoms?

James Clear (49:22)

It's Eastlink Cable Communication.

Rory Sutherland (49:24)

Got it, I've heard, yeah, yeah.

James Clear (49:25)

And so, but they, not only do they deliver cable to a large portion of Canada, but they own a lot of infrastructure that people aren't aware of. And he's like, well, what difference does it make? And I've been chewing on that nugget ever since. And you know, you can apply this from a marketing perspective as well, right? If you, if you have a client or go back to real estate for a sec, you have a client who's looking at a lake house or a cabin or a cottage or whatever you call them in, in the UK or in the United States and you get a property and you say my budget is, I don't know, say 500,000 and you find a property that's seven and is it worth splurging on the $700,000 property or whatever it is? And the answer is, is this like a once in a generation property that I'm never going to have the shot at again? And if you can frame things, it's.

Rory Sutherland (50:17)

Also much more likely to be scared.

James Clear (50:18)

Yes, yeah.

Rory Sutherland (50:19)

The rarer you get generally.

James Clear (50:21)

And then overpaying, you make overpaying seem rational. And in a way it kind of is rational, where it's like, well, this is only going to come up once. So like, I have a friend actually going through this now. They're looking at buying a family cottage. And I'm like, how do you think about these things? He's like, oh, I saw this one, it was perfect. But it was a little more money than. And I brought this up.

Rory Sutherland (50:43)

Having a cottage on a lake on which yours is the only cottage is the kind of gold standard for Canadian property.

James Clear (50:50)

That would be the dream.

Rory Sutherland (50:51)

A lot of lakes, yes, but I'd always heard that as a kind of.

James Clear (50:55)

But it's sort of like, what do you want? If you want a second property, you want proximity so it's easy to get to, you want privacy, so there's not a lot of things around it. And these things just don't come up very often. As many lakes as we have, I mean, the prime properties come up maybe once every five or six years or per lake and.

Rory Sutherland (51:16)

And as Kane said, in the long term we're all dead and we're all dead serious.

James Clear (51:20)

Anyway, an interesting aside here, but when we sat down we were talking about high trust versus low trust societies and introducing friction. Yeah, I'm wondering spend a beat on that for a second.

Rory Sutherland (51:31)

Well, I met someone you must interview, by the way, called Philip K. Howard, who's written various books called Life Without Lawyers. He's just written a book which is coming out right now called I think it's can do, which is restoring the spirit of American Can Do. And he argues that a large part of economic decline and social malaise has come from the over intrusion of law and regulation into practices which should properly be left to subjective human judgment. That we've created a culture where people are so afraid of making a subjective decision that they fall back on often totally inappropriate rules and regulations. And there are a whole bunch of people who are employed, not always by the government, just as much by the private sector, who are much more interested in adherence to approved procedure than they are in quality of outcome.

James Clear (52:25)

Because you can't get fired, because you.

Rory Sutherland (52:27)

Can'T get fired for following the rules.

James Clear (52:29)

You can't get me in trouble. You told me to follow this procedure and common sense would be to opt out at some point in certain situations and use your brain and judgment and.

Rory Sutherland (52:37)

But if I do that, if I turn a little head eye, there's no upside and there's considerable reputational risk and career risk from doing something slightly perverse and different. But there are a whole bunch of arguments. First of all, an awful lot of quality human decision making of necessity has to be tacit and instinctive, not regulatory. There are various people, I think it might be Michael Polanyi, who says most of life is like a kaleidoscope. We never completely encounter the same situation twice and therefore regulating for the universal. When in fact the great evolutionary gift of the human brain is adapting to context.

Rory Sutherland (53:24)

Is inherently. Lawyers love it, of course, because they make money out of this. Arguably.

Rory Sutherland (53:30)

The legal system, particularly in the United States, has strayed into all kinds of areas which were once settled by two humans amicably discussing something and possibly finding a creative resolution to the trade off that's replaced by effectively, we will take this to a legal decision. And that starts to infect, particularly because there's no tort law reform in the US and that's partly because I was told yesterday, trial lawyers are among largest donors to the Democratic party because they resist any kind of tort law reform. This has led to things that should be solved through our evolved human talent for conflict resolution being solved through totally inappropriate application of legal structures to a situation which is in many cases not really adequately captured by law, or where a legal decision is made which makes perfect sense within one setting, but which sets a precedent which leads to ludicrous second order consequences. So, for example, if you accept the fact that a, I think has happened in one of Philip K. Howard's cases, someone demanded that trees were chopped down in their street because one of their grandchildren was allergic to the nut that came off the tree, the argument would be that if you accept that which may seem kindhearted and, you know, and generous within that particular frame of reference, ultimately you've opened up the path to widespread deforestation because nobody can grow a tree anywhere to which anybody could claim to be allergic. There was an interesting case in England where someone broke into a theme park or some park of some kind and then while drunk, dove into a pond which wasn't really deep, and hurt themselves and then sued in the lower court, they said there should have been a notice warning of the shallow water because you could reasonably anticipate this problem. And then it went up to the high, whatever it was, the law lords at the time, and they said if you took this ruling to its natural consequences, you would have no lakes, you would have no swimming, you would have no swings, you'd have no playgrounds, because everything would have to be girt around with warnings about every possible anticipated negative consequence that could arise from this part of the environment. And so what happens is that you've created a kind of idea, I suppose, where the legal solution has become the default.

Rory Sutherland (56:19)

When it should in fact be the last resort.

James Clear (56:21)

What happened to common sense?

Rory Sutherland (56:23)

Well, this is the argument being that your fellow countryman, what's his name? Ralston.

James Clear (56:30)

Saul.

Rory Sutherland (56:30)

John Ralston.

James Clear (56:31)

Saul.

Rory Sutherland (56:31)

Have you come across him? No. You Canadians totally underrate yourselves. You produce wonderful people and you're always trying to import people like me from the UK or people from the us. John Ralston Saul wrote this book which I think is called Voltaire's Bastards. And he argues that human brains have evolved with a variety of mental capabilities, only one of which is the capacity for reason. There's also the capacity for imagination, creativity, common sense, et cetera. We have a whole variety of different mental mechanisms at our disposal, gifted to us by a few million years of evolution as a social species. And yet we've made rationality the gold standard. This is what's weird about working in advertising, by the way, and I think it's probably similar to theoretical physics and it's probably similar to entrepreneurialism, which is what's unusual about those fields is that rationality is the bronze standard in advertising. If someone says this is the problem and you come up with a completely rational solution, people don't go, right, that's perfect, let's go and do it as they would do in a finance setting or a compliance setting. In most of decision making in institutions, rationality, that is quality of argumentation, is the gold standard in advertising. If you came up with a rational ad, people would go, yeah, it's all right, but can you do a bit better? Is there an ad that says the same thing but in a more emotionally engaging way? Is there an ad that says the same thing in a way that's funny? Is there an ad that says this in a way people will remember or will act on? So what is funny about being an advertising creative, and I spent 20 years of my life either in or managing those departments, is the rational solution is where you start. You use it as a springboard to something better. There's a famous quote, fascinatingly from Niels Bohr, who said, you're not thinking, you are merely being logical. I think you'll know that. He was an interesting guy, wasn't he, in terms of his. Because he also was the person who said the opposite of a good idea. In boring physics, the opposite of a good idea is wrong, but in high level physics, the opposite of a good idea might be another good idea. Yeah.

James Clear (58:45)

What can we learn from marketing from the Mad Men era that's still true today?

Rory Sutherland (58:51)

I think there was an understanding then and the remuneration of agencies respected this because you were paid on commission. So if you had a big idea and you came up with a campaign and the client spent millions running the campaign, you made money from that campaign for years after you'd conceived it. So it was rather like having royalties on a book.

James Clear (59:09)

Oh, okay.

Rory Sutherland (59:11)

We didn't realize that at the time. Then media independence came along and so we had to be paid by the hour like lawyers and management consultants. And we've never recovered because it's a catastrophic way to be paid. And the reason it's a catastrophic way to be paid, my argument is that marketing is actually fat tailed. So is innovation, R and D, pharmaceutical research, science. Okay? In other words, 5 to 10% of what you do delivers perhaps 110% of the value. And therefore paying people by the hour and demanding that every quantum of effort has to be matched to a quantum of value creation in some neat proportion.

Rory Sutherland (59:51)

This is so the way market, never mind advertising that. Okay, right. Let's look at the whole of marketing as a discipline within an organization of which advertising is not necessarily very important part. You know, for a lot of organizations it may be, you know, relatively trivial what they actually spend on bought communication. On the other hand, you know, how you design your reception or you know, whatever you know, that's still affected the application of psychology to value creation. Let's say you have a brilliant idea and the value of that idea goes on for 10 years. I've seen this happen all the time. The agency, let's say an agency, had the idea. It may well have been the client who had that idea. They are held responsible for every single unit of cost they incur year by year, by year, by year. You cannot offset any of those costs against the value you created in 2023 by having a huger idea. Let me give you an example. There's an enormous idea for a very large, enormous American, let's say fast moving consumer goods company. There's an idea conceived by Ogilvy Australia. It has made that company in excess of a billion dollars in the last 10 years. It's still running. It runs in something like 100 markets, still useful today. For that idea, the agency in Australia got paid 350,000 Australian dollars, or rather that's what they made from it. So in other words, you have a billion dollar idea, you get to buy a Small flat in a crap part of Sydney. Now what I'm saying is that this is not me bleating about the advertising industry. It's saying that anything like R and D or marketing, which is fat tailed, in other words, a small percentage of what you do. It's Jeff Bezos point about in business, in baseball you can only score 4. In business you can score 1000. In marketing, when you score 1000, which. And the purpose, half. The purpose of marketing is not operational gradual incremental improvement. It's finding another way to hit the ball out of the park and score 100. If you cannot claim the credit for that except to the extent that it delivers value in the quarter in which you had the idea or the financial year in which you had the idea, you are underfunding your marketing effort. So it's like saying to J. Imagine you went to J.K. rowling and said, yep, you can have the royalties on the Harry Potter books, but only on the first edition and consequently long term marketing ideas when you're paid by the hour or when you're evaluated by the quarter as marketers would be. Now, you wouldn't go into a pharmaceutical research company and said, you invent a blockbuster drug this week. No. Or you're all fired. You accept the fact that you spend a load of money effectively, okay? This is the brutal truth, okay? You don't find entrepreneurs in chess clubs. You find entrepreneurs in casinos. They're playing poker, they're playing backgammon. You know, they're playing games of chance with an occasional very high payoff. And a lot of life is exactly like that, but you don't know where the huge payoff's gonna come in advance. The people who are running these organizations for the benefit of financial predictability are trying to make it chess. They're trying to turn it into a reductionist game where the most you can score is one for a win.

James Clear (63:05)

They're trying to put it ceiling on.

Rory Sutherland (63:07)

They're trying effectively to, to. To pretend it's a high variance mechanism, sorry, a low variance, mechanistic, predictable process. 50, 50% of your effort in life once you ensure the fact that you're not going to starve to death, die, et cetera, you know, you've looked after your children should be attempts to get lucky. In other words, what Nassim would say. I love this phrase, increasing your surface area exposure to positive. To positive upside optionality, you know, finding opportunity.

James Clear (63:38)

But hold on for one sec, I want to go back to this. I want to think about this out loud. Here, Maybe I'm wrong with a book. It's great. I write a book once, I can sell it for the next hundred years, assuming I've earned it on my road.

Rory Sutherland (63:49)

If you have a great marketing idea which continues to add value for the next 15 years, it's different. Some of that credit should be offset against your current marketing costs. Fair.

James Clear (63:59)

The difference is marketing also can go the other way. And. And like Jaguar, perhaps, or Cracker Barrel. I don't know if you followed the. So you can create negative value. It's not like the baseline is zero and there's only upside. And the upside is like 1 to 1 million. You can actually destroy a company through marketing.

Rory Sutherland (64:21)

The case is okay.

James Clear (64:22)

And advertising.

Rory Sutherland (64:23)

Some of those. I'm going to defend the companies.

James Clear (64:26)

Oh, please do.

Rory Sutherland (64:27)

Yeah, yeah. Because in the case of Bud Light.

James Clear (64:29)

Are you defending. But I want to hear this. Yeah.

Rory Sutherland (64:32)

They could not have necessarily anticipated that because it was confected outrage. Look, I'm politically on the right, okay? I get just as angry from confected outrage on the right, which is, oh, they've gone woke. When, you know, you're merely showing a mix of ethnic groups in your advertising or something. This is bull, right? And the right do it and the left do it. There's confected outrage on the left. I would argue about American Eagle, and it's confected outrage on the right. It's done for signaling purposes by a very narrow group of people. Do those cases actually damage the business? I don't know the figures. Gillette did. There was an extremely. Now, this wasn't confected outrage because Gillette ran an advertisement. They realized they had to move on perhaps from the best a man can get, despite the fact, obviously, that their customer base is overwhelmingly male for fairly obvious reasons. And they produced an ad which I would argue, and even my wife would argue was needlessly insulting towards men in that it conflated the MeToo movement with barbecuing. Okay. In other words, it seemed to take a definition of toxic masculinity, which went the whole spectrum from things which, all right, thinking men would quite rightly think condemn to things which, for example, two boys having a small scrap on a patch of grass which all primates play fight. It's not, you know, don't get me wrong, sorry. If there's a kid wailing on another kid with a plank of wood, you know, I'll be quick to condemn it. But I'm not totally, you know, the odd play fighting thing, barbecuing. I don't think is particularly objectionable. And that was a case where it was almost a kind of act of deliberate effrontery to your core target audience. The Bud Light thing, to put it in context, was a influencer marketing campaign of which most people in the company were probably unaware, where they sent personalized candles of Bud Light to a variety of different influencers, one of whom was Dylan Mulvaney. Now, I've got to confess about this. As a Brit, you're Canadian. The gender thing isn't quite the flashpoint in the UK or Canada as it is in the United States. Did you know, for example, that when it came out, I find this quite interesting. In Britain, we've had pantomime for 200 years. You know, men dressing up as women. You know, women dressing up as attractive women dressing up as young boys. Shakespeare, da da da da da. You know, cross dressing. Some Like It Hot was a highly controversial film with all the studios in the United States when it came out, because it involved men dressing up as women. Now in the uk, my grandmother went to see it. She was a sort of conservative woman in a Welsh provincial town. It would not have occurred to her literally that there was anything controversial about this at all. It was simply funny.

James Clear (67:24)

I think what maybe has changed is the meaning we ascribe to it.

Rory Sutherland (67:27)

Well, in this case, my argument was, okay, all it was, they hadn't made Dylan Mulvaney the face of Bud Light.

James Clear (67:35)

Right.

Rory Sutherland (67:35)

You know, and I think creating these cultural flashpoints through confected outrage is something to be disparaged when the rights do it and when the left do it. I don't. I think it's equally. I think it's equally absurd because in any communication, you have to understand context and the intention of the person producing the communication. Now, in the case of Jaguar, they wanted it to look unlike, I would argue. I mean, I was talking to Rick Rubin, who was in Hawaii, and he'd heard about the Jaguar ad. It wasn't an ad, by the way. You know that, didn't you? It never ran as an advertisement. It was a brand film they showed at the launch of the car. And then I had a right wing podcast in the UK going, it utters the most outrageous anti conservative sentiment, which is copy nothing. Copy nothing was the exhortation of Sir William Lyons, who founded Jaguar. I think he said it in 1932. He was the original founder of the car company. You've also got to understand their position. What are they trying to do? So I'm just explaining this just in wider context. James, which is they fundamentally made a mistake. I can't blame them for doing it because we all do this. We all benchmark against our most obvious competitor. Don't benchmark against your most obvious competitor. All you'll do is make yourself a copy of them. And Jaguar was always trying to compete head to head with BMW, Mercedes and Audi. And bluntly put, because of the scale of those entities, it was always going to lose. Because if you're the kind of person who's happy to buy a BMW, an Audi or a Mercedes, and you're also happy to buy a Jaguar, you'll probably end up buying an Audi, a Mercedes or a BMW simply, you know, because of scale, winner takes all effects all manner of other things. So if Jaguar needs to survive in the electric car age, making its cars in the uk, which is a Jaguar lover, I dearly want them to continue to do. They've got to find a different kind of target audience rather than benchmarking themselves against, you know, companies which have gains to scale and a whole load of advantages they can't replicate. And so going for what you might call the car of choice of the wealthy, younger, creative class. Reasonable bet. It's a reasonable bet. Okay. I work in advertising, okay. I'm a massive car lover. I really, really like, for example, the Chris Bangle era BMWs I thought were magnificent. I really, really like those, Chris, because. Can't buy one. And the reason is because part of my shtick, okay, is being a bit left field. And if I drive around in an Audi, it kind of screams, I work in financial services.

Rory Sutherland (70:20)

I aspire to managerial roles. Do you see what I mean? And so I've always bought slightly weird cars. I don't know. I've been trying to know what you have. What do you have back in Canada? I've got to ask.

James Clear (70:34)

I have a Tesla.

Rory Sutherland (70:35)

Yeah, fine. You see that? You know, did you. Do you have a sticker on it that says, I bought this before Elon went mad or anything like that? So that Canadians don't key your car?

James Clear (70:44)

It's been keyed three times.

Rory Sutherland (70:45)

It's been keyed by and run into.

James Clear (70:48)

By somebody, I can only assume intentionally in the past.

Rory Sutherland (70:54)

Ottawa.

James Clear (70:55)

Oh, yeah, in the past.

Rory Sutherland (70:56)

Well, Otterwear is this, like, hot bed of Elon haters. Is it?

James Clear (71:00)

It's interesting because my mom got me one of those stickers and I was like, I don't have a problem with Elon. Like, I don't. I don't understand this. I'm not gonna put that on my car. And I want to relate this to sort of evolution.

Rory Sutherland (71:09)

I agree. It's a little like biting the hand that feeds you, isn't it?

James Clear (71:13)

Well, it's also like going back to the Jaguar bout. We can tie these two things together, right? And I think we need variation in approaches. And the, the point of this is like we need more people like Elon, not fewer in the world. Whether you agree with him or not, this is how society progresses. We need differences. We have an environment and people thrive or don't thrive in that environment. Ideally we have some sort of social safety net to catch people if they.

Rory Sutherland (71:44)

Don'T succeed, but not ideally. That's essential in any civilized society.

James Clear (71:47)

And so Jaguar, the same thing. They're taking a bat as a company. They're being different, they occupy an environment.

Rory Sutherland (71:53)

And if you think about it, they survive as Land Rover, Range Rover because they have effectively created the category they dominate.

James Clear (72:01)

Right. So I want more variety.

Rory Sutherland (72:04)

Right. This is where your wonderful compatriot Roger L. Martin raised me upon him. Okay, makes this point that economists have this fantasy of the world of companies in direct competition driving down price and increasing efficiency while supplying the same thing, which is based on a false premise that people know what they want to begin with. Now I would argue when you don't create differentiation, everybody suffers. Now let me explain. Because if you have a differentiated car market, it makes the car market more valuable overall to investors because there is more variety within the market. It benefits the companies because they can achieve a reasonable profit on what they do, because it has some degree of, of scarcity or uniqueness. And it benefits the consumer because the consumer ends up with more choice. What often happens is you have something like a regulated telecoms market or you have a regulated insurance market and everybody is forced to compete along the same dimension. And what you end up with is just red ocean competition and nobody wins.

James Clear (73:08)

But where I was going with all of this is that going back to the Mad Men era and how you can create a billion profit for the company and only get paid like 300k.

Rory Sutherland (73:18)

You need to watch that. Yeah.

James Clear (73:20)

And I think I've never actually watched Madman, but I think the point that I was getting at is you can also create negative value. And like, how do you ascribe for the negative value?

Rory Sutherland (73:30)

I can speak for Gillette, where the evidence was that it was. And by the way, the research showed it was deeply problematic with a large swathe of people. Has American Eagle suffered? I doubt it. In some ways you could argue it's an ingenious marketing strategy which is that you press the hot buttons of 1% of the population so they then repeat your message accompanied by their own, signaling outrage. Meanwhile, you get free media coverage practically everywhere.

James Clear (73:57)

But maybe I'm naive.

Rory Sutherland (73:58)

I mean, the media budget for that Jaguar film, you realize, was zero.

James Clear (74:02)

Maybe I'm naive. Like the Sydney Sweeney, American Eagle thing. I think we're just going back to normal, aren't we? And, like, we've. We've sort of deviated in the last few years and. And that seems more. Maybe it's akin to my time and my frame and, like, when I was brought up. But, like, nothing about that struck me as rage or on either side. Like, when I looked at that, I was like, oh, great, it's just like an advertisement.

Rory Sutherland (74:28)

It's a pub. Yeah.

James Clear (74:29)

Like, it just. I didn't even think more. I didn't think there was more to it. I just saw, oh, this is great. Right?

Rory Sutherland (74:36)

There's a kind of weird sensitivity signaling which generally has nothing to do with the groups you are trying to protect, which is just. It's sometimes called a purity spiral, where you effectively signal your moral or political purity by signaling extraordinary heightened sensitivity to anything that might conceivably offend someone else, Even if the group on whose behalf you claim to be campaigning is completely unconcerned by it.

James Clear (75:08)

But, like, the opposite of her, whatever that would be, would not cause rage in me either. It would just. I wouldn't. I wouldn't even think about the brand. You know, it would just be like another thing that flies by. I don't understand why we're so hair triggered at this moment in time, unlike maybe never before, where you have to.

Rory Sutherland (75:28)

Really watch it in. And I've noticed this in certain people on the rush.

James Clear (75:33)

Right.

Rory Sutherland (75:34)

Which is. I think it's fundamentally dangerous to invest too much of your own identity in a political standpoint to the point where I've seen it in people. Both sides become effectively deranged. Now, you could say that's the effect of the people who attack them and that the derangement wouldn't happen and wouldn't be necessary in a different kind of media environment.

James Clear (76:02)

What's different about today? Why is everybody on such a hair trigger? Why do we identify so strongly with extremes?

Rory Sutherland (76:08)

I'm going to say actually that everybody always blames social media.

Rory Sutherland (76:14)

I would argue that the mainstream media, it is always in your interest, and this is a problem in journalism. It's always in your interest to provoke a fight because then you have something to cover. Nobody's interested in reading about peace and harmony. They're interested in reading about discord and argument and dispute, by the way, that's an evolutionary tendency. If we're sitting here and we heard a fight break out across the street, we'd be there with our noses pressed up against the glass. If we heard, you know, people amicably discussing the weather, we wouldn't pay it the slightest attention. Where we've fundamentally evolved to pay attention to conflict.

James Clear (76:49)

And so the only difference is the.

Rory Sutherland (76:51)

Tools available to us and the extent to which social media provide the mainstream media with the tool. I mean, in 1975, if you wanted to find someone who was outraged by the Sydney Sweeney advertisement, you'd actually have to do some legwork, wouldn't you?

Rory Sutherland (77:08)

Now, it's one search on X or, you know, blue sky or whatever it may be. Willful misunderstanding is another thing that, you know, is another technique which is deployed. It's perfectly obvious. I mean, you know, it's perfectly obvious that that ad is not intended to mean Sydney Sweeney is the flower of Aryan womanhood.

James Clear (77:29)

Okay?

Rory Sutherland (77:29)

It's not, you know, it's not that. Now, in a perfect world, had they had more budget, maybe they would have had three celebrities of different. Different ethnicities or genders or whatever it may be. But nonetheless, this business where you effectively affect. To be outraged by things. Well, I'll give you a lovely story about this, as I always forget, which is I don't think phrases like uncomfortable or offended or inappropriate.

Rory Sutherland (78:01)

You know, that you get these things where, you know, your presence here, people would find it, you know, would feel unsafe triggering. Okay? They don't really belong in the public sphere. You know, they're matters which for, you know, a few hundred thousand years, we simply sorted it out amongst ourselves. We didn't make recourse to the university dean or the Supreme Court in cases where we were bothered by things because you accepted that's just part of life. And we were allowed then creatively to find ways to get along without recourse to some sort of spurious rule book. Consequently, you know, I don't think those phrases, like in a. I mean, this is one of the worst things that happens. You say, you know, was accused. Someone is described in the newspapers being accused of inappropriate behavior. Now, I now have no idea. I mean, I've literally had to book people for speaking engagements. You go on their Wikipedia page and it says accused of inappropriate behavior. Now, I have no idea whether they're the next Epstein, right? Or whether they told a knock, knock joke that two people found unpleasant. Do you have them In Canada, knock, knock. At least they're not stop being completely. Because otherwise I could have been misunderstood. There, you see? But I now have no idea, literally no idea, whether the person's guilty of some utterly trivial infraction which would only have offended 0.01% of the population, or.

James Clear (79:21)

They'Re not guilty at all. All they've noticed is somebody just made up an accusation and the accusation became the framing and the framing became the narrative.

Rory Sutherland (79:29)

So it strikes me as highly problematic in the uk. I'm not one of these people, by the way. I'm not, you know, I'm not J.D. vance. I don't believe that free speech is completely dead in the uk, but there are worrying signs where people who make a complaint on the basis that they found something disturbing can then call in the. That's not a police matter unless it involves a direct threat of physical action. I mean, simply being disquieted by something can't be.

James Clear (79:57)

But we've gotten to this point, you know, to varying degrees in varying different countries. We're, you know, we don't tolerate people who have different ideas than us. And we saw this last week play out in the US with the assassination of Charlie Kirk. And so whether you agree or disagree with him and his views, I have.

Rory Sutherland (80:17)

To confess I was only dimly aware of his existence beforehand. Perhaps because I'm a Brit.

Rory Sutherland (80:23)

I'd heard the name and I knew he.

James Clear (80:25)

We see the same thing in Canada with sort of our politics. Right?

Rory Sutherland (80:29)

Yeah.

James Clear (80:29)

I imagine you see in the US too, where media is definitely intolerable of one position and more favorable of the other. And you can analyze this, you can study it, you could do a PhD on this. It exists. And it seems like we're just not capable of having to think for ourselves and we're not capable of having reasoned discussion on things and being friends with people. It used to be back in the 30s, the 40s, the Churchill era, both sides of the House would talk to each other, they would have dinner together, they would find common ground.

Rory Sutherland (81:04)

How many of these people who are hypersensitized on one side or the other, how many of them really exist, by the way, don't include things like. One of the things I find really disturbing is the practice of the media describing people who, say, oppose uncontrolled immigration and describe them as a far right group. Oh, and. Well, because that is that, you know.

James Clear (81:25)

Normal people are described as far right now.

Rory Sutherland (81:28)

So in other words, if you literally take an opinion which may be held, by the way, from my own personal Standpoint, I'm pretty benignly disposed to immigration within reason. However, I also believe in democracy, and if a significant proportion of the population disagrees with me, I owe it to them to hear them out because their circumstances are different to my own. You know, I might be beneficially. You know, one of the slightly annoying things is people who are very rich, people who are pro immigration because they say their Polish housekeeper is wonderful. Well, that is an experience of immigration which is not shared, perhaps by any means by the other 98% of people. I'm conscious of the fact that depending on where you are, you see the world differently. That's inevitable. And the job of a democracy is to accept the majority opinion, even when it goes against your own. And so describing and vilifying an opinion which is held by a fairly large swath of the population, regardless, by the way, the rights and wrongs of the whole thing. I'm not even getting into into this now. It's deeply dangerous because people go, well, if that makes me far right, it looks like I'm far right. I mean, insulting. Calling people deplorables is a terrible, terrible way of getting deplorables to gang up against you.

James Clear (82:43)

And then people don't speak up and they held their opinions. And then you lose debate and you lose. And then you lose perspective because you don't hear the other side of it. So you think there is no other side. And anybody who believes that might be an idiot.

Rory Sutherland (82:55)

Like, give an example. On this debate, which changed my mind a bit. A very, very good Oxford economist called Paul Collier wrote this economically balanced assessment of general migration and made some, you know, pointed out that on both sides of what you might call the balance sheet, it was immeasurably more complicated. For example, if Nigeria trains doctors who then immediately hoof it to the United States States, how is that possibly a good thing overall? In that a poor country trains doctors who move to a rich country which arguably has enough doctors from a country which doesn't have enough. That's not, you know, you have to.

James Clear (83:42)

I guess that depends on how you frame it. Right? Because another way to look at that, and I'm not arguing for this by any stretch, is that they come here, they make a lot of money, and they send that money to their family.

Rory Sutherland (83:52)

I agree. All Collier said is, look, this is inordinately more complicated. It is one of the things he said is the right, for example, of recent immigrants to family reunification is a bit dubious because you are giving someone a right which the native population do not have. So I can't pick five Canadians and get them British citizenship.

James Clear (84:15)

You see, I've yet to meet somebody who totally disagrees with all immigration. It's a matter of, of what reasonable immigration looks like.

Rory Sutherland (84:24)

And also it should be decided by someone other than human rights lawyers. Oh, yeah, I would probably agree because, you know, fundamentally, as a, as a branch of the law, that is not a partial entity, because human rights lawyers, it isn't it, you know that great phrase of Sinclair Lewis or someone, which is, it is difficult to get someone to disbelieve something when their salary is dependent on believing it. And just. Management consultants have a huge incentive to sell in digital transformation programs to their clients. And therefore we have a culture in business which more or less doesn't assumes that any money spent on tech is money well spent. They don't look at the opportunity cost. Should we have a better call center?

James Clear (85:11)

Buffett and Munger had a good way to sum this up, which is never ask your barber if you need a haircut.

Rory Sutherland (85:16)

Yeah, and it's the same a human rights lawyer. It is in their interest for human rights to capture a greater and greater part of public discourse at the expense of democratic bodies. And consequently it's, you know, you're not really in the, you're not really in the dispensation of justice. You're in the amplification of grievance business. It's very different.

James Clear (85:38)

I want to switch gears a little bit. My kids had a question for you.

Rory Sutherland (85:42)

Oh, got it. Okay, go on.

James Clear (85:43)

A few years ago, we were in Italy on vacation. We walked into Louis Vuitton store and they saw a purse and they were asking me what makes somebody spend, I think it was, I don't know, 20 or €30,000 on a purse. And I had given them an answer, but they wanted me to ask you.

Rory Sutherland (86:04)

Some of those things. By the way, weirdly, you can resell them for more than the purchase price, because in some cases, the Kelly bag, for example, they won't sell it to you until you've been a fairly reliable customer of theirs for some time. And therefore the price on ebay is higher the price they charge in the store. So by the way, it's complicated, but Veblen goods, effectively a large proportion of goods depend for their value on being perceived to be expensive.

James Clear (86:35)

So what goes into that, though? Because they were.

Rory Sutherland (86:38)

We're all guilty of it to a degree.

James Clear (86:40)

No, but they were talking about the store and the service and the love.

Rory Sutherland (86:43)

My wife just came back from, you know, somewhere where there was quite a Nice night dress in Harrods, I think it was in London, which was 1,800 pounds.

James Clear (86:50)

Okay.

Rory Sutherland (86:51)

Now you have to remember that there are quite a lot of goods where the purpose of the good emotionally is to, well, let's take the end line. I often think there's a lot of hidden truth in advertising end lines. The l' Oreal end line, because I'm worth it. Some part of that is the person advertising to themself. So, you know, when you drive around in your brand new blinged up Tesla, albeit slightly keyed, okay, you're not actually doing it to pick up chicks. I mean, maybe you are. I have no idea what you do in your private time. Okay. But if you, let's say you bought a bright red sports car. Yes. One purpose of it in a particular group would probably be signally, I visibly have resources to spare. But quite a large part of this stuff is actually signaling to ourselves, which is, you know, because I'm worth it, I deserve this, this, I'm the kind of person who drives this. It provides me with a kind of ego boost, a sense of reassurance, whatever it may be. And so consequently, if you think about, part of the reason why bags became very expensive is that very high end clothing can only be worn in quite specific situations. On the other hand, a bag like a man's watch can be worn every day. So one of the reasons why those things are expensive is to use a very interesting measure, cost per entertainment hour. I wear a Casio G Shock, I think it was 130quid because I actually decided as a gross rationalist that the best watch is one that's cheap enough to wear in the shower so you don't have to take the thing off every day. But Paul Dolan, Professor Paul Dolan, who's the behavioral scientist at London School of Economics, I met him, when I first met him, I, I said I'm intrigued because you've worked with Daniel Kahneman on happiness and I noticed you wear a Rolex. And he said, no, no. He said it's extremely good value for money because it makes me feel good every single day when I put it on. And in 20 years time I'll give it to my son. 21 years time, I don't know how old his son was. I'll pass it on to my son who can enjoy exactly the same thing. So as a repository of meaning. Now, cost per entertainment hour is quite interesting because it was used to explain the fact that relatively poor young people will spend 90, $100 on a computer game, which seems like a lot of money until you realize that they might play that game for 80, 90, 100 hours or more.

James Clear (89:17)

Super cheap.

Rory Sutherland (89:18)

So it's super cheap. I mean, compared to going to the Cinema where it's $10 per entertainment hour more if you buy popcorn. So it's quite an interesting metric. I mean, one of the things that used to make me really annoyed in Britain was when people, rich people got really snarky about poor people having large televisions. And I said, look, if you haven't got much money, TV as a source of long term entertainment is spectacularly cheap, okay? So having a really good television on which to enjoy because you're not going to go Porsche racing at the weekend, you know, you're not going to be there, you know, effectively going to Glyndebourne or popping up to the bloody Metropolitan Opera. Therefore having a really large television is a perfectly rational decision.

James Clear (90:00)

Go deeper on this truth in end line signaling to ourselves when we purchase.

Rory Sutherland (90:05)

Something, Jeffrey Miller is fundamentally right that a lot of what we're doing is to advertise ourselves to other people. And the Mating Mind and spent. Two books I think you really should read because they're extremely good. A lot of. A third book by my compatriot Will Storr, the Status Game, which you must know. Have you ever read it? Fantastic. I've heard of it. I haven't heard of it and I have to admit I'm gonna. The only caveat I give to reading these books, a bit like reading the Selfish Gene, is when you read them, you are at. You know, if you're someone of any kind of sensitivity, you are at risk of experiencing depressive episodes after reading them because. Not because they're not true, but because they are. And you go, God, you know, am I really that shallow? You know, I do things because they feel good. I explain why I do them. But deep down, the evolutionary and emotional reason I'm doing these things is really to show off off or to establish some sort of one upmanship or status. It's kind of complicated. Do I buy one piece of conspicuous consumption as is argued by various people like Lord Layard in the uk? Do I make my neighbors less happy if I buy a newer, better car? Because what I've done is I've changed their comparative frame and therefore my pleasure comes at the expense of theirs. Now that's not. I don't think that's totally simple. I think if you were a real car obsessive and your next door neighbor bought a Ferrari you'd actually be delighted because you could go out and talk about torque vectoring and an adaptive air suspension or whatever it may be. Okay. Or the, you know, the normally aspirated V12, and you'd probably be made happier by that purchase. So I don't think it's absolutely simple. I think Jay Leno and Jay Leno's Garage makes him one of the world's great philanthropists because he goes and spends a fortune on extremely rare cars and then shares his passion with an audience of millions. If you are a car enthusiast, you know, it's an extraordinary case, by the way of translating money into something which is both a selfish pleasure and a generous pleasure. It's complicated, but when you read these books and you realize that status is effectively a kind of thing within us which we can't turn off.

Rory Sutherland (92:25)

The currencies will change the status. Currencies change with fashion and time and everything else. You know, there was a time where having a digital watch was the, you know, the highest status thing in my school. If you were the first kid with an LED digital watch, people were in awe of you. So these things change, but nonetheless, it's probably innate. Would it be nice if we had the power to completely disregard the opinions of others? Well, yes and no. I mean, I think such a society might be better in some respects. I also think it'll be kind of atrocious because people would kind of go shopping naked. You know, Is Shame Necessary? It's a book by Jennifer Jackwood, actually. You know, I mean, as a social species, patently, at some level, we're massively calibrated to care about the, you know, the repute of others. And that's why some things need to be expensive, because then it's a costly signal. It's peacock's tax. So the guy who rescued the British sparkling wine industry effectively did so by improving quality by 10%, 20%, and then putting up price by about 150%.

James Clear (93:31)

Because price is a signal.

Rory Sutherland (93:32)

Because in the sparkling, in the champagne business, it doesn't matter how good the drink is, if people think you've bought it for 8.95, it's not doing the job it's supposed to do, which is to signal generosity, to signal hospitality, or to mark a special occasion, you know, oh, I see you've taken out the good stuff. Because it's my birthday and that's. I mean, you're a Canadian, right? Potlatch was, I think, a practice by the tribes of the Pacific Northwest. Was that right? Where they destroyed possessions you know more about Canadian history than I do, but I think it was tribes in the Northwest who practiced this potlatch thing where you destroyed things of value as kind of of, you know, a signaling mechanism that.

James Clear (94:15)

That is like ultimate signal. It's like the rappers burning money on videos or something.

Rory Sutherland (94:20)

Yeah, exactly. Yeah, yeah.

James Clear (94:22)

Signaling things that they're probably not intending to signal.

Rory Sutherland (94:24)

There is a serious question here, which is, can we take an innate and immutable human instinct and harness it for good rather than for ill? And Jeffrey Miller's example here is. Let's imagine two parallel tries. Bluntly put, in one tribe, the men folk signal their desirability as mates by fighting each other with axes. That's a negative sum game. In the neighboring tribe, they signal their desirability of mates by going hunting and trying to bring home meat, which they then share with the rest of the tribe. That's a positive sum game. So there is this really complicated question which is undoubtedly human pursuit of status has both positive and negative externalities, depending on the currency you choose to signal. And also it's not totally. It's not totally easy to say whether it's negative or positive.

James Clear (95:20)

I mean, it probably drives a lot of human behavior, which drives ambition, which drives progress, which drives.

Rory Sutherland (95:26)

I mean, if we genuinely didn't care, okay, if we had no shame. You're absolutely right. I mean, no one, you know, I'm sure. By the way, I think also a lot of valuable goods are affordable now by everybody because they started as luxury goods. Yes. So I always mention this because it's such a silly boast. My grandparents were the fourth family in Wales to own a dishwasher. And it cost about a hundred and something pounds at a time when their house, which was a very nice house, cost them £4,000.

James Clear (95:55)

That dishwasher probably works better than a model.

Rory Sutherland (95:57)

And one, two, by the way, it's still working. They bought it in 1959. 61, something like that.

James Clear (96:03)

Why are they four hour cycles now?

Rory Sutherland (96:06)

And it's like, yeah, I mean, ready Tuesday week, come on.

James Clear (96:09)

You know, I have one of these. It's interesting. Just as a funny aside, I have one of these dryers from the 80s in my house. It came with the house and the.

Rory Sutherland (96:17)

It drives the clothes in.

James Clear (96:18)

About the repairman is like, it's going to be just as expensive to fix this as it would be to buy a new one. I'll just assume. I was like, no, no, fix this one. And he's like, why? I was like, like, Hank tries to close in 30 minutes.

Rory Sutherland (96:30)

I'm going to make an unusual foray into environmental responsibility here, folks. Everyone listening. Do. If there's a do simple thing you can do, two things, put on your appliances. At times when there is an abundance of clean electricity, you don't have to change what you do, you just have to change when you do it. Secondly, if you've got a dryer that doesn't have a heat pump, get a dryer with a heat pump pump. Because yep, it's slow. I'm going to acknowledge that it's not as fast as an old fashioned dryer. However, the energy efficiency of a dryer with a heat pump or better still, Americans, if you live in Arizona, dry your clothes outside. Because this is something that's slightly bemusing because in Britain we didn't have the social stigma of hanging clothes up to dry to the same extent. Now we do now. Nobody would hold her hang clothes up. But that's just the social stigma. Now in Britain, in fairness, we've got a fairly climate. You're Canadian, okay. There are plenty of times of the year where your underpants could be hanging there for three months and they wouldn't notice. They might freeze, but they wouldn't noticeably dry. But I do find it slightly weird in the US where if you're somewhere like Arizona, you could literally hang them up. I was in Fuerteventura in an island in the Canaries. And the amusing thing was you literally, they had a washing machine but no dryer. You put it up on the line, about 40 minutes later it was ready to wear.

James Clear (97:50)

So how would you market that, that to people? How would you change the behavior?

Rory Sutherland (97:53)

Change the behavior so that it's not necessary. Now I understand that people don't want to put their underpants, you know, private things. I suspect that a lot of it is those weird housing associations already have rules that say you can't do it. And then bit by bit the social norm spreads. Those American housing associations basically like living in a Nazi regime, isn't it? And just following the sea. You know, it's like those co ops up apartments in New York which are, I mean in London we never tolerate that degree of kind of intrusion before we're allowed to move into a property.

James Clear (98:28)

The interesting thing about the co op apartments in particular, from what I understand, I don't understand everything. So I may be speaking a bit about something I don't know is the degree to which all people play it.

Rory Sutherland (98:40)

Yes.

James Clear (98:41)

Whether you're sort of like a student just graduating or you're a billionaire, you're all sort of like playing this game in the co op housing.

Rory Sutherland (98:50)

No, no, it is completely a game. And apparently they can demand information which the IRS can't demand. I mean, it is, you know, it is absolutely bizarre. You have a co op board which will, you know, in occasion kick people out as well. But what probably happens is that once. This is very similar, by the way, with the necessity of children playing outside, which is once the behavior drops below a certain threshold, you have an inflection point. So my parents couldn't believe this when I was 20, 25. And I told them that when I was 11, I used to cycle 11 miles to the nearest town to see my grandmother on my own at the age of 11. And then when I told them, which they didn't know, I used to, at the age of sort of 11, climb up onto the apex of the roof and just wander around on the roof 30ft up. My parents were aghast that they'd ever allowed it to happen, happen. But if most people did that at.

James Clear (99:43)

The time it was normal.

Rory Sutherland (99:45)

It was completely normal.

James Clear (99:46)

Yeah, it'd be locked up today.

Rory Sutherland (99:48)

My parents would have been locked up for several of the things which I was allowed to do when I was young. Now what happens, I think is that you reach a threshold or a tipping point where in my childhood, let's say someone had abducted me or I'd been hit by a car, okay. And I'll give the exact year. 1974, 75, 76, that kind of era. If I'd been hit by a car cycling to Monmouth or I'd been abducted by a pedophile, okay. My parents would have been described as unlucky. You get past a threshold where that behavior becomes weird. And now my parents will be held as irresponsible and would be blamed. I don't think it occurred to them I was funnily enough hit by a car. Not my fault, to be absolutely honest. I failed to signal before maneuvering. I was hit by a car. Nobody suggested it was my parents fault for allowing me to cycle around the place. That was just a normal thing you did. And then you get these weird. I've got a few theories. For example, what are the things that are products of social norms where you can suddenly hit a threshold? Tattoos among the middle class would have been an interesting thing in Britain. Is this true in Canada as well? So perfectly middle class people now have body art and it's normalized. It would have been deeply weird in any middle class milieu to see someone with a Tattoo in the 1970s or 1960s.

James Clear (101:15)

It's just normal. I mean, like everybody.

Rory Sutherland (101:17)

No, no, no, I know, but I mean this. You've got. You've got to be 50. You've got to be 59 to notice this stuff. There's a lot of. It happens over quite a long time frame.

James Clear (101:24)

It's been a slurch.

Rory Sutherland (101:25)

I've got a theory that all British men would wear shorts all the time if it weren't for social pressure. I also think, for example. Okay, here's an interesting one. I don't know if you're into perineal sunning, are you?

James Clear (101:37)

What is this?

Rory Sutherland (101:38)

It's a Buddhist practice where you basically expose your perineum to direct sunlight. I think that a fairly large proportion of the population are naturists to an extent, by which I don't mean wandering around the streets with their schlongs out, but I mean that on a beach, in a field, in sunny weather, in some sort of privacy, they would like to. To wander around with no clothes on because it's good for you. It exposes your whole body to sunlight. You get a lot of vitamin D. You know, it's generally healthful. And my argument about sunbathing is, well, you know, evolution made it pretty enjoyable. Maybe it's not all bad. And there are some schools of thought in dermatology which made the case that actually, weirdly, although it enhances the risk of skin cancer, it improves cardiovascular health. So there was a study actually among Swedes where there was a higher instance of skin cancer among Swedish sunbed addicts, but they actually had a higher life expectancy, which they didn't expect. So quite often, you see, what we do is we measure the narrow effect of a behavior, but not the broader effect. Quite interesting in terms of how we might get things wrong. By the way, I wouldn't do it on a beach if there were children present. And then, you know. But if you go to. If you go to parts of Europe, particularly Germans will just wander around. Nature. Now, I think at some level, if there are no children now in the United States, that would be perceived in a completely different way.

Rory Sutherland (103:08)

So you're about to make a trade based on a friend's text, but which you do you listen to, is it.

James Clear (103:15)

We could buy a house in Tulum.

Rory Sutherland (103:19)

Get optioning those options.

Rory Sutherland (103:23)

We could lose everything.

Rory Sutherland (103:26)

Or let's do a little research, get your head in the trade and make the investment decision that's right for you. Learn more@finra.org TradeSmart.

Rory Sutherland (103:37)

So quite a lot of these Things are arbitrary. They're just. In other words, you know, if doing something makes you weird, there is a point at which you reach a threshold. Vegetarianism, veganism, et cetera. Where it goes from being weird to mainstream. So what I'm saying is it's not an even process, and sometimes you never get to the threshold.

James Clear (103:57)

I see what you're saying. I know we're coming up to time here. I want to get to a couple questions. What are the rules of good copy? If I asked you to teach me how to write good copy, how would you do that?

Rory Sutherland (104:08)

I think a large part of it comes down to Michael Polanyi and his idea of a tacit skill, which is we know more than we can tell. There are some generally good rules, which is write conversationally. Much more conversationally than people think they should write, because everybody thinks they have to write. A. Actually, I'll give you two examples of this. David Ogilvy. All his books are incredibly readable because I think he was a copywriter first and an author second. His prose style is very good, and he also adopts a clever trick, which I've stolen and which a few other people is that he writes extremely plainly for the most part, but will throw in the odd sesquipedelian long word just to remind the reader that you're not an idiot. It's almost there to flatter the reader as much as it is to flatter the writer. Conan Doyle. I was talking to Rick Rubin about this. He and I both grew up on those Sherlock Holmes short stories, which are not only models of thinking and deduction and.

Rory Sutherland (105:09)

A fantastic lesson for mental gymnastics. I think they're also. Kingsley Amis believed this, that he was one of the greatest prose writers in the English language, because bear in mind, a lot of that stuff's written in 1880. You read a lot of stuff that's written in 1880. Fuck does that mean?

James Clear (105:23)

Fucking.

Rory Sutherland (105:24)

What does that mean? Oh, God. Hold on. I'll have to go Back to page 27 to work out who on earth Mr. Homer angel is. Or.

Rory Sutherland (105:32)

Ms. Something Sutherland. Isn't that Marlon? At no point in reading a Sherlock Holmes short story have I ever had to go back a page to work out who somebody is in terms of just absolutely brilliant clarity. Those are astonishing. But in terms of persuasion, there are various things. So you use generally verbs of movement. You use verbs in preference to adjectives and adjectives in preference to adverbs. I think you tend to use Anglo Saxon words rather than the romance words, for the most part, without Being silly about it. You convert a feature into a benefit. There's also an element where sometimes all you need to do is tell people a fact. Now, I don't know any evidence about this and I'd like to know it. And I asked this question, which is of the people who are anti vaxxers during COVID was there a difference between the people who are basically happy with the idea of a vaccine and the people who weren't partly driven by whether you knew that vaccination dated back to the 18th century and smallpox, in other words, it was a 250-year-old medical practice, or whether you thought it was some weird newfangled thing that you couldn't possibly trust. I don't know. But sometimes. Do you ever watch Presh Talwalkar on YouTube? You know, there's mathematical puzzles, geometry puzzles. I really recommend them because weirdly, I find myself on YouTube watching people solve mathematical equations for fun, which I never thought I'd do, but Presh Talwalka and I can't remember what it's called something like something decision or something. Anyway, it's a great, great little YouTube channel. It's not that little. He's got a huge following. And sometimes there's a geometry puzzle which looks completely impossible to solve until you just draw one extra line, at which point the solution becomes obvious. And so sometimes in marketing, all you've got to do is tell people a fact. It's not always about persuasion. It's not always about getting people. It's simply putting people in a, you know, a state of. Of knowledge or belief or conviction that this thing can make a difference to their lives. And by the way, you're almost always up against a problem, which is that the two human default modes do what everybody else does and do what I've done before. For obvious reasons, what you've done before and what everybody else always does is not necessarily optimal, but it's much less likely to be catastrophic than trying something new that nobody else ever takes does. Yeah, so we're kind of herd species and we're kind of habitual species. So in the marketing of something which is genuinely new, you know, you're the Tesla, the electric car, there is a degree of extreme anxiety which you don't encounter when you repeat buy or when you buy the brand leader.

James Clear (108:15)

There's like a resistance you have to overcome.

Rory Sutherland (108:17)

You have to. Yeah, you have to overcome it. Because just as a camera has a default mode, the human default mode is do what I did before, do what everybody else does. I feel comfortable Doing that very, very rational default mode. There's nothing silly about that in terms of, if you think about it, our evolutionary brain architecture. Those two things make a lot of sense, but it does mean. And something I only realized about a year ago, 35 years after I started working in the business, is that as a consequence of that, big, innovative new ideas don't require less marketing, they require more because you're asking people to at the initial stages, you're asking someone to do something that nobody else has done and you're asking them to do something they haven't done before. Both of which create a kind of disquiet and so providing people with conviction and reassurance. Quite often, I suspect, by the way, in the early stages of a technology that happens one to one, that it was my brother who's an astrophysicist, so he knows all the bloody maths about kilowatt hours and stuff. So my brother provided me with the reassurance to buy my first electric car. Offensive, I don't think. If he hadn't bought an electric car, I've now had three, would I have bought an electric car? No, probably not. Probably not. It will be my brother who persuades me to get solar panels or a heat pump or something of that kind. But big ideas don't require the classic geek idea is our idea is so good it will sell itself. Itself. Since your fellow Canadian, Stuart Butterfield, isn't it, who founded Slack, is that right? Yep. He says the only real measure of innovation is behavioral change. That the only real measure of whether an innovation is significant is whether it both in first order and second order ways, changes the way people behave. Now an interesting question is, is AI at that point yet? And my second question is the lesson of all tech is that loads and loads of geeks compete through for technological numerical superiority by some measure or other. And then someone else comes along with a cute user interface and makes all the money, basically Steve Jobs. Nobody's done that yet for AI. Now maybe this weird thing that Jony I've is concocting, which is some sort of weird pendant which talks to your mobile phone, maybe that's what it is.

James Clear (110:41)

Is there was this thing that sort of relates to that, which was Bill Gates had this saying, he's like the best and I have friends living this now. The best technology doesn't win.

Rory Sutherland (110:51)

That's a very engineering point of view because you're judging technology by its engineering qualities rather than its human appeal.

James Clear (111:00)

Oh, that's an interesting reframing.

Rory Sutherland (111:01)

So there are people in every field, like in the camera world, there are people called measure based on.

Rory Sutherland (111:08)

They're denigrated as measure betas because they're obsessed with the numerical qualities of the camera, you know, focal lengths and all that stuff. And they don't take very good photographs.

James Clear (111:19)

Yes.

Rory Sutherland (111:20)

And saying that the best, I mean, undoubtedly, by the way, I mean, you know, Betamax is the famous example where they failed to capture network effects. And in a world where there are network effects. Yeah. By the way, the best technology probably, oftentimes, I think that's probably fair. Everybody was competing to make a slightly faster, IBM compatible PC, but they were all gray and beige. Now, nobody in the tech world would go, the slight problem with this PC isn't the fact that the clock speed or the processing power or the RAM is insufficient. The problem is if I put this device in any room of my house, it turns that room into an office. If you put an IBM PC, a gray IBM PC in any room in your house, including the. You might as well put a fucking photocopier in a bloody filing cabinet in the room. Right? Whereas when Jolly I've comes along and has that lickable. The imac. The imac, you can actually put that in any room of the house. And it actually enhances a passion statement. It's a fantastic, it's an adornment. And so their failure to understand the wider context within which they were operating, which is the job of marketing, is exactly the reason nerds hate marketing. Because they think in a perfect world, nerd metrics win out. But the consumer is much more bothered by the fact that when you get to the bottom of the iPhone scroll, it gives a little bounce. Then, you know, you could, if we're to be absolutely honest, you could ridicule.

Rory Sutherland (112:48)

You know, Ives and Jobs over their obsession with, you know, bezels and chamfers and things like that. But of course, multiply that by a billion owners using the thing 100 times a day, okay, that's 100 billion encounters. And that probably matters a lot more, in fact, than, you know, by the way, I mean, I lost faith in Apple when they cancelled the car.

James Clear (113:13)

Oh, interesting.

Rory Sutherland (113:14)

Because I thought they had the brand power to create for places like New York and London a form of microtransport, which was really, really cool, really, really efficient. The brand power you have. You see, if you're Apple or Ford or whatever, people will buy a weird product from you much more readily than they will from Alfa Romeo because they go, well, if Ford's doing, must be okay. So one of the gifts of having a strong brand is your power to really disrupt and create new categories. New categories of transit, for example, which we need, don't get me wrong, I've got a fuck off 600 horsepower electric car, but when I go into London, I want a. A microlino or an itty bitty little thing, because that's appropriate to the task. And my argument is that they could have done something there. They could have used their power to do something and you know, the finance people killed it. Really. What was it called? Project Something. Rather never remember, I don't know. But no, no, they're just changing the shape of things and making the camera a bit better. Come on, guys. Produce. By the way, Johnny Gunther. Okay, Attend by. And this will actually apply to electric cars as well. Well, always a good reason to buy Korean stuff. Do you know why? Because they're going to do that anyway. The Koreans are going to make fantastic tech of fantastic cars, regardless of the profit motive. Do you know why? To wind up the Japanese. So they've got two motivations, okay? Other people are just trying to make money deep down. Do you know. Do you know why the largest Episcopalian church in the world is in Seoul?

James Clear (114:46)

No.

Rory Sutherland (114:47)

Right. This is really fascinating. I'm going to Seoul for the first time. I've never been. But the last four presidents of Korea have been variously like Catholic, Presbyterian. Now, before the Japanese invasion, Christianity was a tiny niche missionary religion in Korea. When the Japanese invaded, the tiny Christian population refused to acknowledge the divinity of the emperor. And some of them were martyred for refusing to effectively pay due respect to the divinity of the Japanese emperor. And therefore it became the patriotic religion because it was seen as a deeply patriotic entity. So I've got a hunch that deep down, if you go by a Hyundai or a Genesis or something like that, there's a dual motivation here. Let's make a bit of money. And that's purely so. So similarly, if you want to look for anthropological reasons to buy, an awful lot of German businesses are driven by sibling rivalry. So Puma versus Adidas, Aldi north versus Aldi South. There's a whole weird family rift in the German car industry, which is too complicated for me to understand about Porsche and the family who own Pinch Riede. There are a whole load of families which are kind of weird warring families. And sometimes the family business has a.

James Clear (116:10)

Motivation which actually the consumer is the winner.

Rory Sutherland (116:12)

Well, the consumer is exactly the winner in all this. But going back to that family business thing, that undoubtedly, if you can harness other motivations, Alongside the profit motive, Most people working for a company, unless you've bought them off with massive stock options because they're in the senior management, most people don't get up in the morning to enrich the share owners. No, you know, I don't get up. You know, I don't get up every morning. I don't know what a big shareholder is of my company. It's probably like the state of Wisconsin DMV pension fund. Well, for the best wish in the will of the world. I don't wish them any ill will.

James Clear (116:48)

Of course I don't get up in.

Rory Sutherland (116:49)

The morning because I go, oh, I really worry about those DMV people's pensions in Wisconsin. I can worry about customers, I can worry about colleagues. That's a natural human motivation to serve those people.

James Clear (117:00)

We always end with the same question. Question, which is, what is success for you?

Rory Sutherland (117:05)

Just expanding the adjacent possible. That's a really pretentious article, but push the pebble a bit further. That's it. I mean, you know, one of the reasons I do a lot of this shtick stuff is because the feedback I got was every now and then someone comes up to me and says, I made a different decision because of something you said. Someone said to me, I bought my house because of you. Shit. I thought they might be about to hit me.

James Clear (117:30)

We still hear from people about our first podcast. Every two or three months, somebody emails.

Rory Sutherland (117:35)

Me and, and says, you know, because of that, oh, I love this.

James Clear (117:39)

I never heard of this person. I went, looked them up.

Rory Sutherland (117:41)

And one thing I'm really clear on and I, we've made this mistake. All creative people have made this mistake, which is to go, oh, no, that rationality is silly. What you need is creativity. No, no, what you need is two strings for your bow, okay? This is a complementary mode of problem solving. It works best in parallel with some rational or quantitative or data driven measures. But the quantitative and data driven measures should not be allowed to crowd it out. And so when I say the reason someone bought a house because of me is I said, when you're looking for a house, don't optimize because everybody will want that house. Instead, find something the house has which most people won't like but you don't care about. About next to a pub. Now, I'm not saying next to a rough pub. I don't want to have fights outside my house. But most people, particularly older people, would hate the idea of being next to a pub because they crap on about noise and the beer garden and all that. Stuff I personally, the noise of a pub, a good happy pub, is music to me. I don't get to sleep before midnight anyway, so it's not going to keep me awake. Railway line, personally, to me it's a bonus. To most people it's negative. Go and look for those things where you can arbitrage what's possible. That would be my attitude now. Similarly, if you've got a problem to solve, don't purely define the problem in psychology free terminology. Just as in America you have a temperature and you have a feels like temperature, which is, by the way, very, very intelligent thing because what makes us feel hot is not just the ambient temperature, it's a combination of temperature, humidity, breeze. And I think there's one other factor. When they do the feels like temperature, there's something like temperature so many feet above of the ground that they factor in. Now, when I'm going outside, I'm not going to do chemical experiments. I don't need to know what the ambient temperature is, I need to know will I feel hot. And in the same way, I think there's something really important here which is that do not define an objective which is designed to serve human beings without considering psychological factors, because you might be able to solve your problem very, very cheaply and efficiently by changing the psychology, not by changing the technology, and provided people are looking at both with a reasonable amount of imagination. I'm not angry with. Well, I'm bit. I'm only angry with accountants and lawyers and economists, not because they do what they do, but because they have too much power doing it and they've achieved a kind of monopoly over decision making, which I don't think they have a reasonable claim to.

James Clear (120:17)

That's a brilliant place to end this.

Rory Sutherland (120:18)

It is not a bad place to end this. Thank you very much.

James Clear (120:21)

We're not gonna wait nine years before.

Rory Sutherland (120:22)

Nine years before we get back to together. How often are you in London?

James Clear (120:26)

Once or twice a year. Yeah.

Rory Sutherland (120:28)

Oh, we must meet up then. That'd be fantastic.

James Clear (120:30)

Definitely.