#92: Rory Sutherland: Why The Dumbest Ideas Make the Most Money

28:44You know, in other words, you know, normally people, you know, we can take a weakness, which is it's expensive, and turn it into a strength. Sometimes you do the opposite. I think sometimes restaurants actually deliberately amplify a negative, i.e. we, you know, sort of we won't serve ketchup, famously, that kind of thing. And sometimes you actually do something that's counterintuitive as proof of authenticity. but it's it's it's very very interesting because most scientific breakthroughs don't really happen through an you know through deliberate intent they happen because of a fluke observation an outlier an unusual event which then encounters someone with enough scientific nous and vision to investigate it and i would argue that real life is most of real life, by which I'd include business, I'd include your own personal life, and I'd actually include a large part of science, should be practiced much more akin to detective work rather than what you might call evidential science.

29:52And detective work, I make the distinction, I made this point quite a lot. If you have a crime, do you want to learn a true life crime? Because that's another thing you can be proud of in Australia, case files, some of the best bloody serial killer podcasts going? Do you not listen to them? Australia is practically the world capital of really cool crime podcasts. Gary Jubelin, the killer's podcast. He's got a big show now. See, you're not making enough of this. Anyway, what happens is you have a crime. You know that you're dealing with imperfect information unless the killer confesses. And the killer who confesses really is the killer because people are lying to you.

30:35You don't have all the information you need to make a completely objective judgment most of the time. And so what you often need to do is either wait for evidence to emerge or create evidence or notice something or have an insight. So what I'm saying is you have an evidential phase, which is later. That's in court. That's when you have to prove the person did it. But before that, you have an investigative phase where you're making use of totally imperfect information. Sometimes you're generating evidence rather than finding it or being presented with it. And it's a period of total uncertainty.

31:10And we're uncomfortable with this to the point where after we find the killer, we pretend all this messiness never happened. We rewrite the narrative. Peter Medouin has made this point about science, by the way. When we make a scientific discovery, we write it up as though it were what we were planning to do all along and as though we knew this was going to succeed when we started that's how a scientific paper basically appears that's not necessarily what happened there's a whole period before that which is much much messier and our addiction to the pretense of of uh of what you might call uh being scientific causes us to, I think, misrepresent how progress really happens.

31:57Yeah, well, it's tying back into that logic piece of like, you're boxing yourself in and you're not allowing any creativity. But what stems up, what's upstream from creativity? Because it's easy to say, oh, we just need to be more creative and not as logical, right? And let's... No, no, I mean, there's nothing wrong. If you're using logic appropriately, I mean, in engineering, in rocket science, where there are a very large number of atoms involved, where, you know, as Aristotle put it, this is again Roger Martin, the future will be the same as the past. Gravity. We're not expecting a sudden gravity disruption halfway through the afternoon here.

32:34But in areas like human behavior, or indeed, actually, probably epidemiology or biology, this idea that you can proceed with complete certainty in the same way that you can with an engineering problem or a physics problem is just complete overreach. It's not realistic. So when I say one of the things I think I think it's really important is we've always tended to put creativity in opposition to reason and logic. But they're in many ways sort of parallel streams. They're two strings to your bow. You should deploy them in parallel because and, you know, the same would apply to, you know, one of the most important things you can do both in a police investigation, by the way, and in science is to ask the question.

33:20What if we're proceeding on the basis of an incorrect assumption? You know, what if this person didn't do it? You know, what if everybody's wrong about this? And the question, what if, is fundamentally, it's a creative question, okay? It's not inductive logic. It's not deductive logic. I think there's a technical term, which is something like abductive inference or something. This is all from some philosopher in the 19th century called, I think, Charles Saunders purse but the point is it is an awful lot of human decision making involves effectively a degree of what you might call speculative thinking what if what would have to be true if what if this isn't true you know what if the yorkshire ripper doesn't have a geordie accent okay uh you know uh what if we've got a very big one in the uk at the moment um uh involving a nurse who was convicted of a series of murders on a neonatal ward uh and the real what if there is which some statisticians have advanced is what if there weren't any crimes committed in the first place it's happened before in um and so this idea one thing to be very cautious of by the way is that the more data we have, the easier it is.

34:45Trust me, I've worked in advertising for 36 years, okay? And one thing you learn very quickly is you can take the same information and present it in 15 different ways and get a completely different emotional response depending on how you present it and what you choose to leave out and what you choose to highlight. Even if you don't highlight one thing and leave out something else. You can, you know, 75 % of people will survive, 25 % of people will die. They're both the same thing, but people respond differently because there's an implicit sort of social context contained within the framing of the figure.

35:29And by the way, you know, in Australia, I think, I know New South Wales has a really, really good, the government has a really good behavioral science thing,

35:43has done some very good work in that area. This is vital because there is no point in simply providing people with objective information when they won't consume it in an objective fashion because we're incapable of doing so. Yeah, so you need to have this fine balance between using logic, science, and creativity and kind of using them both as a superpower. if you lean too far to one side, it gets too extreme. If you lean too logical, you're not really creating any room to be able to grow. But then if you're - Just to be clear, my brother's an astrophysicist. I don't go around his house and go, you're getting it all wrong.

36:16Okay. There are fields in which it is entirely appropriate to use these methods. Definitely. But what happens is that in business, what you really need to do is, what you really get rewarded for is not solving a problem. It's winning an argument. And the easiest way to win an argument is to pretend there are very few answers to begin. with, i.e. you close down creativity, and then you pretend that of those three answers you have isolated, okay, one of them is clearly superior to the other two. Slam dunk, nothing to see here, move on, all approved, signed off. And if everything turns tits up as a result, you won't get blamed for it because you apparently were making the decision under the influence purely of the rational scientific approach.

36:57So a large part of the use of science, which is actually scientism, it's something with the appearance of science, which isn't, is actually done for the purposes of blame avoidance. It's ass covering. Yeah. I want to talk about this piece you were saying before around how in advertising, you can say one thing, word it in 15 different ways and get 15 different emotional reactions. How massive is capturing emotion in advertising? And I guess the follow on part of that is if we're capturing emotion in advertising, are we trying to attract more emotional beings to have more influence when we're advertising something specifically?

37:35Like, are we trying to use emotion to influence more than most things? If you want to change behavior in the same way that you can't reason someone into sleeping with you, okay? Well, you probably could. No, no, no, no, no. Okay. What I mean is if you want someone to change their behavior voluntarily, which is ultimately in a free and democratic society what we need people to do to a large extent. Okay, willingly and voluntarily. That's at least the first port of call before you resort to legislation or economic incentives, is can we just change people's minds so they do this naturally? It is not really possible to get someone for rational reasons to do something which they're emotionally ill-disposed to do.

38:28What do you mean? I find the adoption of electric cars and the hostility they arouse very, very interesting because, for example, I think there's a large group of people who don't buy electric cars because they don't want to be identified with the tribe of what they imagine to be tree huggers and patronizing kind of, you know, upper middle class, you know, environmental people. And that is literally a tribal, you know, it's literally a tribal behavior. It's to do with, you know, kind of in groups, out groups, who you want to identify with, who you don't want to identify with. And I think you could sit down with those people and talk to them about kilowatt hours and energy efficiency and talk vectoring and everything else for hours and hours and hours and unless you can change the essential tribal unless you can get rid of the essential tribal instinct okay i mean okay someone who was a someone who was a spurs fan would experience something not unlike physical pain if you forced than to walk around in an Arsenal shirt, right?

39:45They'd probably rather go naked, to be absolutely honest. So what I'm saying is that we're monkeys, okay? We have, for good and ill, brought with us most of our mental hardware, was, realistically speaking, optimized for circumstances very different from those in which we find ourselves in. Not least, we're optimized for groups of 150 people, you know, probably not for groups of 7 million. Do you think that I mean, consequently, sometimes our hardware actually, sometimes our hardware does an extremely good job and we don't realize why. You know, there's an awful lot of tacit knowledge and wisdom in human instinct, which seems irrational to economists.

40:27The fact that, for example, a lot of suboptimal, seemingly irrational behavior as defined by economists is perfectly intelligent if you look at it in a wider context. I'll give an example of that, okay? I'll say, you know, where I'm a bit of a Darwinian, how do we get people to save for their pensions when they're younger? And I came up with various suggestions, some of which I think might have helped. But at some level, I said, what you've got to remember is that if you're 25 years old, in both a rational and an evolutionary context, one of the priorities of being in your 20s or perhaps early 30s is finding a reasonable quality life partner.

41:11Okay. And if you find that actually buying a nice house or a nice car or spending money on your wardrobe is a more reliable route to that end than investing in a pension, because let's face it, I don't think many people in their 20s on Tinder talk about their pension provision, right? I bet there are a load of guys in their 60s and 70s on Tinder who would talk about how good their pension is quite a lot. But I don't think many people in their 20s are doing that. Therefore, you know, what is financially rational, okay, in terms of your long-term provision for the future, may be actually fundamentally suboptimal in the society in which we find ourselves.

41:58And consequently, you know,

42:06it's extremely difficult, I think, to tell other people what to do, because if you're not sitting in their shoes and you don't face the problems they have, fundamentally second-guessing what they're trying to do and then optimizing for other people, this is why I'm a little bit libertarian, OK, optimizing for other people's best interests without really understanding those people, which I think, by the way, the political class has been doing for a long time under the, I think, the malign influence of lawyers and economists. tends to lead to, well, an upsurge in populism, which in many ways actually makes perfect sense.

42:49The populist uprising makes perfect sense if you understand that these people have been saying things for many years and have been ignored because those opinions are deemed to be unfashionable, economically illiterate, or not in keeping with some legal mechanism by the people in charge. So what do you expect people to do if effectively their opinions are ignored, not for a year, not for, you know, three years, but more or less in perpetuity? And then the news media have also connived in that by suppressing opinions, which make people working in the media are uncomfortable. Do you think that people's opinions, though, maybe they're being formed and influenced by something that maybe deep down doesn't even serve them, and so then they start making decisions in their life not really based on what they truly want to do, they've just been influenced by other people?

43:48I would argue this idea, which I think is highly prevalent, that working class people, for example, or people, you know, less educated are somehow massively manipulable and in the grip of totally ridiculous forces. Do you really think middle class educated people aren't in the grip of ludicrous social conventions and constraints? I'd say they're more so. I think you get independent opinion from working class people and you get it from aristocrats who don't give a shit. I think the upper middle class in the UK is reputationally paranoid, is incapable of expressing opinions that might get them disinvited from dinner parties.

44:25This idea that there's this weird sort of, you know, manipulation going on among ordinary people, and they're being completely misled, okay, or, you know, in the grip of demagogues, whereas somehow everybody who's got some fancy Dan degree is wonderfully objective and wise, absolute bullshit. Middle class people are incapable of independent thought, because they're so reputationally paranoid, and so fragile in terms of their careers, it's very difficult for them to actually... It's what I call mental nudism. I always ask the question, it purely interests me, okay? How many people do you think would be naturists if there were no social constraint on the behaviour?

45:11I'm not talking about wandering around a shopping mall with no clothes on, but at the beach. I don't know, quite a lot of people, right? The reason we don't is not because we wouldn't enjoy it. It's because of the social constraints on the behavior or the associations. So why do people live in this lens of having these constraints?

45:33It's called the Overton window in politics, that there's a very narrow area of acceptable discussion, usually defined in legal or economic terms. and anything. There are various phrases, if you think about it, which have emerged. There's the Overton window. There's the third rail. I don't know if you have that phrase in. It means the electrified rail that you can't touch. You see, it's by analogy with railways. I'm not sure how electrification works in the Australian Rail Network. But in many parts of the UK, you'd have the third rail, which is the two rails which carry the train and the third one, which provides the electric power.

46:08And if you touch that one, you're dead. um and you get and effectively i would argue that um a cabal of lawyers and economists have constructed a self-serving seemingly consistent kind of mental framework for government and politics uh which has led the practitioners of those disciplines to think that others outside those fields can be safely ignored well let's go to these middle class people though By the way, just to be clear about this, okay, I'm undoubtedly in the quintile, probably, of the UK who is most in favor of immigration of the right kind personally, okay? However, I also accept the fact that if you live in a democracy, one of the constraints and requirements of living in a democracy is that you actually pay heed to the opinions of your fellow countrymen when they disagree with you in large numbers.

47:11And by the way, and there's a reason for that, which is I'm not affected by migration in the same way that everybody else is. You know, some twat in London with a, you know, with a Polish cleaner, right, is not sufficiently qualified in terms of the objectivity of their experience or the representativeness of their experience to lay down stipulations about what the overall migration rate should be in a country. And people presumably want to move here because it's democratic. One of the requirements of being democratic is that you accept votes that don't go your way. I mean, my political opinions are a total fucking mess, by the way.

47:52I'm in favor of wealth taxes to a large degree. I'm in favor of land value tax. I'm a Georgist. and would I have been a Georgist in 1975? Possibly not. Am I now? Yes. Why? Because things have changed. Let me explain. My father was a landlord, okay? We lived in a bloody big house which he'd bought for not very much money and done up in the 1960s, and it was split into six apartments effectively, or six blocks, and we lived in one, the biggest one, and five other parts of the house were rented out to tenants. Back then, this is in the Welsh borders, probably four out of those five tenants could have bought a home if they wanted to, they just chose not to.

48:37So they were renting. The act of renting the property was a voluntary action, a voluntary engagement with my father, who provided them with flexibility and, you know, a degree of maintenance and everything else, in exchange for them having a slightly easier or more flexible life. Kind of win-win. in london or sydney now okay if you own a house and you're renting to five people the odds are that none of those people can buy a house so the rent is no longer a choice what you have done is effectively reduced five people into a form of serfdom it's different okay it's one of those things which is highly problematic because it's one of those things where you can't generalize except you can't generalize irrespective of degree or duration.

49:27I'll give you another example of something where you have to be ambiguous. And what we seem to have done, you see, we've created a political and legal class of decision makers who are deeply uncomfortable with ambiguity. And they would prefer to be theoretically consistent in terms of how they feel inside their own heads and how they present their argument. They would prefer artificial consistency to realistic messiness. I'll give you another example, Airbnb. Is it a good thing or a bad thing? Now, I'll be realistic. You're from Queensland originally. You're now living in Austin. You've also lived in Sydney, right?

50:07Well, in certain circumstances, I regard Airbnb as a great blessing, OK? If you're a Welsh farmer, you've got some crappy stables which no one really would want to live in, but they make a great weekend holiday let. Whoop-de-doo, everyone wins. Okay? Bang and a bit of electric car charging and a dishwasher. You've got a new source of revenue to add to farming revenue. You're now a little less at the vagaries of climate or harvest or whatever it may be, or lamb prices. Generally, I think, and the people from London can get out and actually spend a decent amount of time in a civilized country like Wales.

50:42And by contrast, Central Barcelona? Nah, right? Because someone who owns a two-bedroom apartment in central Barcelona can make more money renting it out to some tourist on a city break, 14 weekends of the year. They'll probably make more money, certainly 15, 16 weekends of the year. They'll make more money doing that than they would renting 365 days a year to someone who actually lives in Barcelona. At some point, Barcelona is no longer Barcelona, right? Because you're sitting outside a cafe, no one's speaking catalan okay it's just a load of other airbnbers and you sit there listening to a load of french people and americans and everybody else outside your cafe and you watch people wheel bloody wheelie luggage across the cobbles well that's not why i went to barcelona and so tourism you know massively problematic because you get these winner takes all up take all effects you get um and fundamentally trying to navigate life of almost infinite complexity by over-reliance on some utterly simplistic theories just isn't going to play but i guess i guess the airbnb example right is what's the alternative because if you don't have the airbnb is the people just not even traveling there in the first place not experiencing it um think about how much tourism increase we always got by with hotels okay which you know employ more people uh i mean do you think the travel i also i also think by the way that they're australians did this with wine by the way they could have probably taken over pretty much the whole of the uk wine market but they got a bit too greedy a bit too soon all right and i would argue that Airbnb-ers, there is a danger there, that they're all getting a bit greedy because they're charging effectively hotel prices.

52:38Now, OK, if they're a group of six of you, there are advantages to being a place. If you're staying for a longer time, there are advantages. To be honest, you don't want to stay in a hotel for 10 days. It's kind of a bit weird. All right. But Airbnb-ers are starting to charge prices not unadjacent to hotel prices without providing any of the services or facilities that you would reasonably expect, even from a modest hotel. Yeah, I'm paying way more in Airbnb fees than hotel fees. What is an experienced good? Oh, that's very interesting. I would argue that most innovations start as one of two things.

53:13In other words, the things we already knew we wanted, we probably already have, okay? Because we've said so, and people have responded by making them. so a lot of innovations will start either as a status good which is the car was to a great extent for the early years of its existence it was a rich person's toy which they used to show off and because because they had basic neophilia and because it was it was a status good there's this extraordinary piece written by woodrow wilson when i think he was the um president of princeton University before he became president of the United States, where he denounces the car.

53:53He later became quite an enthusiastic car user, a very keen cyclist. He denounces the car because he said it's going to lead to socialism in the United States, because all these rich people swanning around with gay abandon enjoying their cars are going to annoy poor people. Now, the idea, when you think about it, that in the United States, the advent of the car could somehow bolster left-wing opinion is so bizarre but at the time that's how it seemed okay now by contrast okay um uh so uh so most innovations will often start as a rich the flat screen tv was a real bling ass when i was young it was a real bling ass thing to have you know they were really really expensive.

54:41And they were sometimes done for reasons of status, sometimes just very rich people bought them. But there are also things which aren't necessarily expensive or status goods, which effectively the only way you can describe them is you can only discover how good they are by actually using them. Now, an example of that would be when you were young, beer, right? When you first took your first sip of beer, you probably didn't like it very much. And then over time, you realize and learn to associate the perfectly healthy consumption of beer with being in a better mood. And then you start enjoying the taste.

55:20Just like matcha. Matcha would be similar. I mean, that's an interesting question. Also, you know, some of these things are probably, you know, in effect, we're building neural pathways of association with something. Now, there are a lot of things which always fascinate me because I think marketing becomes more and more difficult. because saying you've always wanted this thing and here it is, is a rarer and rarer occasion. More and more of the things we're trying to persuade people to do are things which you only fully appreciate once you've done it. Now, I'll give you a great example of this.

55:53Did you grow up in Australia? Was there a big tradition of having manual stick shift cars? Yes. Yeah. And everybody in Australia, as it was in Britain, would go, no, there's no way I'd have an automatic. You know, you lose control. I need the sense of control. however virtually everybody who ended up with an automatic car never went back okay that's a classic experience good i argue and the late sam tatum your fellow countryman one of the greats commemorating him here he made the same point that electric cars are very similar to that that the statistic to look at with electric cars is not the pace of adoption because that will always be slow to begin with because adoption paths tend to be s curves the question to ask and by the way i think it's a question every business should just ask all the time what's our rate of repeat purchase because that's what really that's the metric that really matters not your conversion rate cost per click bullshit like that okay what really matters in a business is do your customers stay with you do they come back for more and ultimately i suppose the absolute apotheosis of that is, do they recommend you to their friends?

57:01So you don't even need to do marketing at all. And a lot of things are like that automatic. You must have grown up with a lot of Australians berating the automatic. And what you knew is that once they'd actually had an automatic, I mean, don't get me wrong, if I moved to, okay, if I moved to like the north of Scotland and I lived a mile away from the A9, you know, an empty winding road going through glorious mountain passes and I could pretend I needed a double D clutch and do a load of fancy shit with the car I'd probably go back to a stick shift okay most of the time I'm stuck in traffic or I'm on a motorway or I'm stopping at goddamn traffic lights every bloody two minutes the automatic wins and there are a lot of things like that which you only really discover the virtues because they're the virtues of the product are felt they're not thought goes back to feelings again mattress toppers.

57:49Have you got a mattress topper? By the way, in Australia, fascinating thing. Do you call a continental quilt or duvet a dina? A duna. It's a duna. Ah, right. Now, why is that? I don't know. The continental quilt versus the blanket. Okay. It's one of those things. I mean, you're probably way in advance of us, but for a long time in Britain, if you went to anybody, oh, anybody, elderly's house, they still do that folding the bed thing. Okay. You know, tucking in the corners bullshit and then once you have a duvet you never go back and once you have an air fryer you never go back and once you have a mattress topper you never go back so what about adoption once you have one of those taps you've got one of those bullshit taps which produces boiling water and sparkling water okay i mean rationally i'm there going i'm paying 800 quid for a fucking kettle yeah you know but actually you can't go back you can't go back yeah so what's this rate of adoption then?

58:44I think what we see is America would lead the way in the sense of how quickly they adopt things, would you say? Yeah, that's interesting. One of the reasons America's rich is because they are the world's most active consumers. If I'm being a bit snarky, okay, if I was snarky, I'd say they're slightly more credulous than Brits or Australians are. But if I'm being honest, they're also much more adventurous. So in America, you are almost brought up with this idea that life is capable of almost continual improvement they don't have that equivalent of the sort of conservative british or australian cynicism which is it was all right 10 years ago it'll do me fine yeah right what's wrong with that you gen z wankers you're fucking matcher right okay why are you drinking bubble tea okay so we don't have that to the same extent um uh and um yeah i think that's fair that what we we never economists weirdly okay it caught the whole joy and the glorious kind of galapagos islands of marketing human behavior perception which i tend to kind of float around in okay you know if i try and model myself on science it's it's darwin not newton right or technically technically since he was born in my home village It ought to be Alfred Russell Wallace.

1:00:02All right. He was born in the same village as me. He was the other guy who got less famous, but was actually equally, I think, creditable. In other words, look at things and see what you can infer from it rather than theorize and try and find applications. And economists just have a get out of jail free card because they make the assumption that everybody is operating in a world of perfect information. Yeah, fucking right. Right, OK, right. Yeah, I mean, seriously. OK, can you imagine an assumption in physics that's as absurd as that? You know, any assumption in the world of physics or engineering, which is, well, we'll imagine that balsa wood is just as strong as concrete and then we'll proceed from there.

1:00:47Fuck off. You know, seriously, right? OK, no one in engineering in any other discipline will be allowed to make the bullshit assumptions. Gary Stevenson, Gary's Economics, makes the point that they deal with single-agent models. So you treat the average as being representative of everybody. So you optimize for an economy as though everybody is an average person, which means that if 10 % of people get massively rich, you deem it to be the same as if everybody had got a bit richer. But obviously, in terms of societal and all manner of other factors, those two outcomes are totally different to the extent to being opposite.

1:01:25So they make these utterly, utterly ridiculous, perfect information, perfect trust. Yeah, right. Again, fuck off. I mean, seriously, these people should be laughed out of court, but they get rid of all the interesting psychological stuff by setting it all to zero. We all know exactly what we want. In fact, I grew up. In fact, not even that. I was born wanting a mattress topper, apparently, right? Because somehow I'm possessed of this spectacular particular uh informational capacity to know what i want in advance uh we all completely trust the person who is selling it and we're trying to buy it at the lowest possible price because we have no social intelligence to realize that sometimes it's worth paying more for something for reasons you don't understand at the time okay what do you mean well okay i often give this example apologies by the way uh to people who've heard it before and i need to come up with perhaps a new or you're a better example.

1:02:20If you imagine you're going in to buy a Bluetooth speaker at an airport, just to give a sort of kind of... By the way, again, you probably already have four Bluetooth speakers, but somehow the incidence of being at an airport convinces you that you need a fifth one. Do you ever notice this? One bit of economic advice to all of you folks, don't buy anything at an airport. They turn your brain to mush and you end up buying shit for no reason at all and coming out and going, why did I buy that? Okay. But airports, for some reason, have this power to turn people into basically super consumers possessed of no sense whatsoever.

1:02:57But anyway, you've got these two Bluetooth speakers. Okay. One of them is bigger than the other. It seems to have, you know, a couple more woofers or something than the other. Right. And it's also cheaper than the other one. Now, to an economist, you get higher utility, lower price, easy decision by the cheaper one. What the human brain would do is it would actually operate social intelligence. It's actually capable of putting itself in someone else's shoes, unlike economists, apparently, because the human brain would go, well, that's funny, because if that were really the best Bluetooth speaker or the better of the Bluetooth speakers, surely they'd charge more for it.

1:03:35so the fact that it's cheaper must mean that in some unspecified or unknown way it's either a mark of lack of seller confidence or maybe it's a bit shit and you might well end up buying the more expensive one with fewer features i would yeah okay now we use those heuristics not all the time because that'd be silly but there are heuristics we use very frequently like that which are completely in conflict with uh neoliberal economic assumptions now the problem is Okay. Here's a point of difference I have with behavioral scientists. Have you come across Homo economicus? No. Right. Homo economicus is, I think it's a coinage of Richard Thaler's, which is the kind of organism that inhabits economic models, but is not never found in the wild.

1:04:24In other words, it's the person who goes, you know, more woofers, lower price, I'll buy that one without making without deploying any kind of social or second order intelligence at all okay and the standard claim of behavioral economists is that homo economicus doesn't exist and by the way i don't think there's anybody who's homo economicus in every respect but in quite a lot of markets homo economicus does exist okay it's your worst customer right so here's the thing right so bluntly put homer homer economicus does exist and he's a cunt okay right this is the person who literally doesn't care about the relationship doesn't care about the brand doesn't care about your reputation is only interested in how many features first of all if there were lots of people like that in a category products would be very very bad, all right, because they'd be judged by a very narrow set of criteria.

1:05:24Quick one, when you took out your motor insurance, do you pay a bit extra for a recognised brand? Yes. Yeah, interesting. I mean, obviously, young people, 17-year-olds don't do that because they can't afford the insurance anyway, and it's a legal requirement. Most of us do that. We'll go basic. We won't go silly about it. I'm not going to pay double. But I went, never heard of them, Admiral, 70 quid more, bingo right and also their call center was in wales so i basically would have paid anything they asked for because i like talking to welsh people but um uh but but people who don't have those instincts are actually very stupid consumers and they're very unpleasant and they're the last people you should attempt to build a relationship with because they're incapable of reciprocation you know they'll sue you if something goes wrong there they have no give and take they have no wiggle room.

1:06:13Now, most businesses are run by a finance function, which is optimizing that business for its worst customers. Okay. So what you're doing, if you're a procurement person, or if you're one of those people who's like in finance, who's going, what the main function of a business is to increase operational efficiency so we can reduce costs rather than the purpose of a business is to discover new forms of value exchange so we can charge more. Right. That's what I think a business is for. That's what Herbert Simon thought a business was for. It's a total sort of Friedmanite load of bollocks to think that the purpose of business is to, you know, is effectively an efficiency optimization thing.

1:06:49If you're playing that efficiency optimization game, you're going, how can we create a company that's really appealing to people who are cunts? Okay. I mean, seriously. Okay. Actually, that's not good on YouTube. Do we need to re-record that? No, we're good. But, you know, it is literally saying, okay, our target audience is arseholes, proceed from there. I want to touch on this cynicism piece because I think this is fascinating when you're explaining, like, obviously the different, I guess, like the different operations people are doing in businesses. But what I'm more fascinated in is from a consumer standpoint, we were talking about adoption before and talking about, like, how quickly people adopt.

1:07:27And the reason someone takes longer to adopt is because of their cynicism, explaining, like, how... But if we have, like, Australians or people in the UK... One of the reasons I've got a very, I've got a few really distant economic theories. One of them is that gold arose as a currency because it was a means of paying for prostitution. Okay. Which is, think about it. Okay. You're a sort of bloke hacking at rocks and occasionally hunting some mastodon or whatever it might be. And you discover this metal, which is totally useless for tool making because it's completely soft. Okay. it's absolutely crap for weaponry right compared to anything else but you can turn it into really great jewelry okay to attract the opposite sex right that is my deeply cynical it is what i call it's what i call an anti-theory in that however true it might be no one will ever accept it because it's just too discomforting to believe it might be true so there is some evidence of it by the way, which is that when you teach bonobos, I think, to use currency, prostitution rackets start, you know, within a matter of days.

1:08:38They work out that, why would I just pay for bananas when I can? Okay. So anyway, that's one of my totally mischievous theories. My other mischievous theory is that America didn't have a lot of cars after World War II because it was rich. I think it got rich because it had a lot of cars. and that is because america okay can i do you want me to explain georgism here yeah yeah so georgism is the belief that you should basically be very free market uh with relation to all productive economic activity but you should effectively to some degree treat land like a socialist so that everybody pays tax according to the value of the land not the property because the property is the work of human labor, but the land which they occupy.

1:09:28And the argument of Georgism is whenever you have any form of economic activity which is somehow dependent on location for its performance, whether that's a high street, an airport retail experience, or a central business district, the gains to that activity increasingly go to the landowner in the form of rent rather than going to reward and incentivize the person who's doing something useful. One of the reasons I hated back to the office mandates was back to the office mandates were really a large company saying to its staff, it's more important that we funnel money to the Duke of Westminster, okay, or to our landlord than it is that we give disposable income and freedom to our employees.

1:10:11So as a Georgist, I found back to the office mandates really, really offensive. The argument is that you can escape this, as Singapore has done, by effectively having land value taxes, and Singapore is extraordinarily rich and combines unbelievable wealth with the avoidance of insane property prices for the majority of the population, which is like, basically, that's ka-ching, all right? The other way you can escape it, if you don't adopt the one true Georgist faith, is that you discover a frontier. In other words, a way of escaping location. The United States obviously started with a frontier, which is you could just move west.

1:10:56Slightly mischievous, but the Declaration of Independence was as much about real estate interests as it was about freedom and pursuit of happiness. But as a Brit, I won't go on much too much about that. A large number of people who signed the Declaration of Independence were principally pissed off that the king was preventing them moving into Native American land. All right. It's in there. Nobody knows. It's in the Declaration of Independence. Why won't you let us take these people's land? I'm standing to make a fortune here. So the Declaration of Real Estate Self-Interest, as I prefer to call it.

1:11:31Okay. So it's a frontier, right? We can just move west. Move to California. Get out. Go and find some low-cost land. All right. Then another frontier can be created by technology. Now, interestingly, what would happen to Sydney real estate prices if you had single-person pilotless drones where you could just go and live out in the suburbs or, you know, right by a beach, you know, 15 miles away and just fly into town, okay? It would mean you could escape from the need to live further in. And the railway provided us with that. The canal arguably provided us with it to a degree, all right, because it made things highly movable.

1:12:13um but the railway was a frontier the frontier was a frontier the car was a frontier arguably i would say there should be a zoom frontier being created so there's do you see what i mean which is the freedom to pursue perform useful remunerative activities free from the depredation of a land owner or landlord, it undoubtedly contributes extraordinarily to economic growth because it basically spreads wealth rather than concentrating it. But how important would community be? Because when you start separating really far, then there's isolation, wouldn't there be? Because if we look at where people are migrating, yeah, they're migrating for work, for opportunity to do things on the land.

1:12:58But then the people that they're with is so important as well. And even if we tie in before about this happiness pillar and stuff, would you not say that being alone escaping california for austin okay which i don't think you're the only person to move to austin in the last year one of the appeals by the way is because texas has quite high land and they're actually property taxes they should be land taxes but they're property taxes much higher than california the property is cheaper so you effectively pay tax obviously it's terribly bad news for land owners if you if you put up the the property tax but for young people who want to buy a property, right?

1:13:35It's a tax you don't have to pay because you get your money back in the shape of lower property prices. But then when everyone migrates there, it just starts skyrocketing again because there's more people. You have an advantage in Austin, by the way, as you do in Phoenix, Vegas, and a few other cities, which is those are American cities which effectively got big after the car was invented, okay? And to be honest, I don't know where you live in Austin, but if you wanted to live 50 miles from Austin, you could drive to work, right? Yeah. Yeah. london doesn't have that luxury edinburgh does amsterdam probably does okay so it wouldn't really matter if you were if you were somehow you know keen rancher all right have you bought a pickup truck yet apparently it happens to everybody all people arrive well of course it's a ute for you but apparently all brits arrive in texas get the first three months disparaging the pickup truck culture and the next thing they know is they're queuing at a gmc dealership or whatever it is, because it gets to you.

1:14:32Again, it's an experience. No, it's getting to me. I'm looking at those Tacomas, the Toyotas. I want to talk about the UK. Ford F-150 Lightning. Yeah, it's a bit big for me, I think. The one that's coming, I'm talking to the people who are doing this, is the Slate. Have you seen this? No, I haven't. It's a kind of$20 ,000 to$25 ,000 totally basic vehicle, which is designed for pimping. So it's totally plain. It's a rear-wheel drive pickup truck. okay without even a radio it's got wind down windows it's made in indiana i think warsaw indiana i think their factory is planned to be and the idea is it's a totally basic vehicle but you can convert it into a five-seater you can convert it into anything just by basically you know add-ons if you want if you want to if you want a radio there's there's a space for your mobile phone it's got all the safety equipment okay but if you want a radio you just plug one into the face here you just open a kind of glove box plug in the radio but if you don't want to pay for a radio you don't pay for it okay that's that's that's a really fantastic innovative idea if you're if you're into that unfortunately i don't think they make them yet but actually if you drove one around austin you'd be the coolest guy in town so um let me talk to the people and see if i can blag you a trial talk talk to me about the uk and i want to share investing in it by the way quite interesting well there you go i want to talk about my experience in the UK, it's my first time here, first time in London, I get off the plane and I've been told that there's this thing called the tube and everyone takes the train everywhere.

1:16:08And public transport's pretty popular in Australia, but it's - In Sydney, it's pretty good, isn't it? Sydney, it's good. I have never really had, I've always had a bit of a sour taste for public transport. I haven't really loved it. Anyway, I thought, okay, I'm in London. And we bet apparently the tube's quicker than taking a car for most instances. Yes. Actually, by the way, in a way that we don't often realise, one of the things I campaign for with Transport for London is speedometers in tube carriages. Because no one's really... Because you can't... You know how it is, OK? When you're... You can't judge speed between different modes of transport, right?

1:16:46If you're going at 120 miles an hour in a car, it feels like a white knuckle experience in a train. because in Australia you have the beautifully named Very Fast Train, don't you? Is that what it's seriously called? No. I thought there was a train between Sydney and Melbourne or something. Maybe. Called the Very Fast Train. Well, I mean, I don't catch the public transport. Oh, you never use it? No. So if you're in a speedboat going at 30 miles an hour, it's really exciting. If you're in a jet ski going at 15 miles an hour, it's quite exciting. If you're in a car, it's only exciting. So we don't really know how fast we're going by looking out of the window because there are a whole load of other kind of sensory inputs.

1:17:22Now, my argument is in the tube on the central line, you're driving down Oxford Street at 70 miles an hour. I've always wanted Transport for London to produce a film of a car travelling through London at the speed of a tube train to make salient to people how fast the tube is. So maybe the speed is what you're referencing here. I'm talking about like the time, right? So, OK, it's going to take me an hour to get to central London or whatever. if I catch an Uber, it might take an hour and a half. The train, okay, it says 40 minutes on my app. Let's just take the train. So I proceed to go and figure out how to get to this damn train from Heathrow.

1:18:01Did you take the Heathrow Express or did you take the Piccadilly line or did you take the Elizabeth line? Heathrow Express. That's probably the best way to do it. Okay, well, I'm glad that my horrible experience was the best way to possibly take the transport. Why was it horrible? Well, I'll proceed to explain. So I get off and now if I'm sounding like a wanker saying this, then please tell me. I get off. There's like one of the elevators that goes down was out of action. So I think there was two elevators and just so many people, chockers just next to each other, shoulder to shoulder, waiting to go down this elevator to go to the train.

1:18:36And I'd be waiting and just there's a sign just over there that says Uber pickup. I'm just going, so I can just walk down those stairs and get in an Uber and go straight to my thing hassle-free. But everyone's telling me to take the train. So I'm like, okay, I'll go on the train. Wait in this line. Every time the elevator opens, they're like squeezing and barging in. And then they fit like six people with their suitcases. And then like you're waiting again. Everyone around you is all angry and pissed. And then you kind of get down onto the train. What you've got to remember here, just to caveat this.

1:19:05So Sydney must have about the lowest population density of any city in the world. One of the things I loved about it is you don't really do crowds, do you? At all. Really. Unless there's a sports game or something. Yeah. You don't really have... Unless you're in the CBD, like you're in the city and it can be crowded, but nowhere near like London. No, no, no, nowhere near like that. No, no, no. And Japan would be more extreme still, you see, in terms of tolerance of close proximity to other people. apparently it's a cultural kind of a cultural norm arises about how close people feel is unnaturally close so in india people will you know be in very close proximity to other people uh you know uh but the population density paris is very dense actually london's less dense than paris i think at least in the middle um uh paris tends to have you know what eight-story seven-story buildings as a norm um uh but sydney sydney is is freakishly low so but but so i want to tie this into my it's like chicago versus new york okay you know chicago less basically they had they had a fire so they rebuilt the place uh with actually a bit of space around the place chicago also has a big advantage over new york which is they rebuilt the place where every building has a kind of back access path where the trash gets taken out the stuff gets delivered so you don't have that weird thing you get in new york where you're sitting outside a michelin-starred restaurant and there's a garbage truck like yeah and a rat like four feet away from you but but the so the problem i have with the tube and the train and and and to fast fast track my experience there you had like one train that got you there and then you went to another train and then i finally got into the city and then I had to find my way around.

1:20:48That's fine. My problem and what I didn't like was the people that I was surrounded by, this concept and the whole visual, I'm not sure if you've seen that video of the rat race where it's titled on YouTube, happiness. If you just look up happiness, it's like this video of like people going to their work and there's all these rats and they're up on the train and everyone's in there and they're on their phones. My problem was what I noticed was it was muscle memory for everyone on the trains to be on their phone. They would know exactly where their stop is. The door would open. They would barge through everyone still on their phone and muscle memory, walk their way through.

1:21:25It was like they were fully out of the moment. No one was looking up at anything. And I went like, what is the attraction to the train? Is the main thing the financial savings you're getting from catching the train? Yeah, yeah, yeah. I'll be absolutely candid uh you didn't go into terminal five you presumably for quantus did you what do you fly emirates or who do you fly uh i was with united from okay okay if you've been at terminal five there's a little thing called the pod which i think is one of the greatest forms of transit invented uh and it's a little they're little autonomous battery pods which drive you to a car park about a mile away anybody by the way listening whoever lands at heathrow terminal five just if you've got half an hour to spare it's free just take the pod to the car park and ride it back again okay um because it's beautiful bluntly put i think people would given the choice prefer to be in a private space and you know than in a crowded space there are a few problems you're encountering here by the way which are unusual which one i do think that since covid people somehow lost the skill of navigating spaces uh in the presence of a lot of other people i think the quality of what you might call of crowd how would i how would i describe it kind of voluntary cooperation within crowds uh has deteriorated since covid a bit i mean it's purely a theorem airports are weird by the way airports are totally weird for a very interesting reason you have a lot of people okay most cultures have a norm which is if you're two approaching two people approaching on a pavement in many countries people will default right in other countries they default left and it's you just as we drive on the right or drive on the left it's a universal usually unconscious an unknown rule that just gets normalized over time obviously this varies from country to country i think in korea they do it the opposite way around probably in japan they almost certainly do or something else happens so both the direction in which you go if you if you're anticipating a collision, as it were, both the direction in which you go and the distance at which you make the evasive manoeuvre are culturally dependent.

1:23:36So an airport, which is a complete assemblage of lots of people from lots of different cultures, is fundamentally very dysfunctional in terms of the movement of people, because everybody's operating unconsciously to a completely different rule in terms of both when they make the evasive manoeuvre and in which direction they go. in air travel you there's a rule um funnily enough there's a very famous air crash which was caused because there were two conflicting rules it was a cargo plane and a flight with a load of i think an air flight and a cargo plane and there was kind of a bit of an air traffic control mistake but what really caused the crash was that there were two conflicting rules as to in in the event of an impending crash do you go up and to the right down and to the left and airports are like that all the time and um it's it's kind of interesting because that does make them unusually dysfunctional the tube the tube has completely different social rules there's there's a comedian i think called george mikes who is hungarian and he used to do this comedy routine called advice for foreigners in britain where he deliberately gave foreigners totally inappropriate advice for how to behave in London.

1:24:51And one of his recommendations was, on entering a London underground carriage, be sure to introduce yourself to all other passengers. I mean, there's a cultural... I would love that. I don't know. Well, in Australia, that wouldn't be... I would imagine on a longish train journey, people would actually make themselves known to other people. That would be deeply weird in the UK. We assume you're a serial killer or something. Yeah, here's the thing that I... Oh, it's Ted Bundy, yeah? Here's the thing that I think is... Northerners do that. In Britain, there's a north-south divide. There's a Welsh-English divide in terms of interaction with...

1:25:33And in Sydney, there's a bridge divide where the north and the east, they're like, oh, you're on the dark side if you live over there. It's a whole thing around... Or if you never cross the bridge. If you cross the bridge, you're on the dark side and each of them... Isn't that the best place to live? Well, depending on which cross you... referencing. But my thing is, I mean, look, I'm just stripping it back on a bit more of a deeper level when it comes to like fulfillment, having connection in your life and really enjoying the days that you're spending, right? I just truly believe that saying hello to someone and stopping their, disrupting their pattern of automatic programming that they're just going through the motions can really impact someone in a positive way more than we know.

1:26:15Because you You never really know what someone's going through. And the amount of times that people are just ordering their coffee based on the same coffee at the same time at the same place every single day. They don't even say hello to the barista and how they're going. You never know what someone's going through and you never know what impact positively you can leave on someone. I think economic efficiency exerts a price on our souls, which is I always distinguish between two forms of capitalism, which is transactional capitalism and relational capitalism. and the efforts of people like management consultants and procurement and everybody else have been towards what is the theoretically greater efficiency of transactional capitalism where you optimize the value of each standalone exchange without reference to the future or the past or to the possibility of investing in a relationship now i just to give an example of how this varies.

1:27:08I grew up in Wales. By the way, Australia, New Zealand, and Canada are not actually very English countries. They're quite Welsh, Scottish, Irish in terms of some facets. The sort of egalitarianism, for example, low status distance, right? New Zealand's the lowest state in Hofstetter's measures. New Zealand is the lowest sort of country in the world in terms of levels of deference you know um i love flying as a welsh person i grew up in wales i'm three eights welsh i love traveling on quantus because i don't like middle eastern airlines because they grow up i get it i'm paying the fucking ticket right you know but we're all we're all on the same plane here i love quantus service because it's like matey and helpful and competent without being obsequious.

1:28:04I don't like this. I mean, some people love it, right? You know, some people, it's always the difference between people who go to the Caribbean on holiday and people who go to Asia. The people who go to kind of Southeast Asia, the people who want people to bring them stuff on their knees. You know what I mean? Fuck off, right? You know, I'm paying them, they're doing a job, that's fine. You don't have to turn this into a kind of deference competition. I like that you know that sort of easy you know relation between people and relational capitalism is effectively what you find in a pub which you go to regularly where um I'll tell you a interesting story which always interests me because I used to go to a shop every day I used to smoke back then and I used to go to a shop every day and I'd buy a newspaper because this is the 1990s early 90s uh probably a packet of cigarettes box of matches I go every day and one day i go into this shop and i said i suddenly realized i haven't got money for the tube to get to work um i go i'm terribly sorry could you just i had 50p but i didn't have one pound 10 or so terribly could you could you lend me 60p and i'll come come on the way home and i'll pay you back no never went there again went out of my way went to different shops bought cigarettes somewhere else never went there ever again because they'd violated an unwritten un you know unlegislated rule that if you're a regular customer some degree of give and take forms in the relationship and you accept the fact that there are parts of if i um you know if i get my car serviced at a place regularly i accept the fact they should accept the fact that one time in five they're going to have a transaction with me that loses their money and in return i'll be grateful for that and bring them five future transactions.

1:29:50So you're there optimising for the lifetime value of the relationship. In transactional capitalism, you're trying to get as much as you can because you're never going to see them again and you don't give a shit if they choke on their sandwich after they bought it, right? And nearly all economic models don't really understand the deepening bond of trust and reciprocation that forms with each subsequent transaction. So 10 people buying something once isn't the same as one person buying something 10 times in a row. It's different. And yet, most economic models don't actually understand that distinction.

1:30:26And it creates a form of capitalism where you feel there. And you often get this because the call center person feels bad about it. OK. But there's nothing they can do. They instinctively go, this isn't a nice way to treat customers. But the rule is we can't do this unless, you know, because, you know, there's one rule. In other words, the rules for a regular customer are exact. If you went to a restaurant, you know, once every week, right?

1:30:55And they get you a table. I'm not expecting Goodfellas. You know that scene in Goodfellas, okay? Okay, it's a single take. Obviously, the guy's a member of the local mafiosi, so the restaurateur doesn't have much choice in the matter. But you would expect that the nature of each subsequent transaction changes as the relationship forms. And you know that they know that you are a source of significant future revenue, and you expect them to respect that in your dealings. Do you think it's... When that respect doesn't appear, okay, you feel violated. Yep. So it needs to be earned. Do you think it should be given straight away?

1:31:39Or do you it's the more you build these relationships acts of symbolic almost trivial discretionary generosity have an extraordinary effect on trust i'll give you an example of this um uh if

1:32:00one of the things i think that small acts of generosity probably signal in human exchange is I'm not a psychopath. What's one thing that women would find a massive turnoff in a guy, okay, if he suggested splitting the bill? Okay, a colleague of mine was dating a cop, right? And cops get, I didn't know this, but if you work for the police, you get lots and lots of special offers, especially for cops. And this guy would literally say to her, I can't meet you on Wednesday evening because the special offer at TJ Fridays doesn't start on Thursday. She ditched him. Okay. And you understand why? Because someone who is so optimised around the transaction doesn't seem to be capable of understanding the kind of relationship you might want if you're going to move in together.

1:32:57Fundamentally, a marriage involves an awful lot of reciprocal, but what's the Pollyani phrase? Tacit. Okay. It's reciprocal, tacit, reciprocal effort, but on the part of one person for the other. And someone who is optimizing for the transaction, I mean, put it this way, you know, they may have, They may make a fantastic procurement officer, right? But again, it's that whole thing. These people do exist, but you don't want to do business with them. It's exactly the same as homo economicus. Homo economicus in your category does exist. They're the last people you'd want as a customer. Yeah. Because the second somebody else comes along who's 3p cheaper, they'll go there.

1:33:47Yeah. So this is this interesting thing. We apply, like, we don't like that in personal life. We don't like it when someone's complaining about that. Yeah, but perhaps we're not applying this in business enough and we're not using that lens of, okay, personally, we don't like this. But then in business, it's like, well, we don't like that either. We don't like the people that are fixating on money. I'll give you a beautiful example, which comes from Ogilvy, my very own agency, which I think is a work of art, which is, I can actually show you. Should be able to. There we go. Please, God, say they haven't got rid of it.

1:34:25Yeah. Member since 95, American Express. Right? Wow. I know from people at American Express, that was an Ogilvy person, I think, who had the idea, which is we put your date of membership in partly because you feel very reluctant to cancel. Because if I ever cancel my American Express card, I then go back to member since, you know, 25 and relatively look like a bit of a loser. Right? Okay. But what it also says is we know how long you've been a customer of ours. It's somewhere on record because we put it on the card. In the case of American Express, every now and then, this is what I mean about you only really learn what you're doing when you make a mistake or you stray off the narrow path or you deviate or you have a lucky accident.

1:35:05Every now and then, American Express cocks up and a load of people will upgrade, say, from the gold card to the platinum card, and they send them platinum cards that say, remember since 25. I'm speaking in 2025, just a bit. Remember since this year. I can't remember the exact percentage. It's in high double digits, the percentage of people who ring up and say, my card says member since 25, member since 95. And they get their card replaced. Now, there is no material difference between those two relations. This is the point that when humans are actually making financial transactions, financial transactions are just a highly refined form of a social transaction, but with numbers attached.

1:35:50Okay? Now, financial transactions, me going to a shop, is a subset of all the evolved mental mechanisms I have for dealing with other people.

1:36:05When you engage with someone, at some level, brands are a sort of proxy people. We personify brands, right? the way in which the brands treat us as people has a far greater effect on our perception of that brand than you know nugatory things like whether something costs 395 or you know whether something costs 595 in many ways how you treat me as a person in other words are you in my group or not. We also understand things which we intuitively understand. Okay, let's imagine we're here and someone I know, John Cleese, comes in. Okay? Now, would you happily leave valuable laptop equipment, etc., with John Cleese?

1:36:57Yes, you would, right? Not for a millisecond would it occur to you that John Cleese was going to nick your laptop. Why? One of the reasons, and there are many, You know a bit about him, etc., etc. But one of the reasons is John Cleese is quite famous, so it would be deeply embarrassing for him to be caught nicking a laptop. We understand this with brands. We understand the fact that something that's famous that has a lot of reputational capital invested in it has more to lose from treating us in an unreasonable way. We can effectively create more shame in the instance of dealing with a famous brand than we can with an obscure unknown brand.

1:37:36We instinctively understand that. And therefore, we pay a premium for brands because we know that it is much more costly for Samsung to sell a shit television than it is for, you know, those brands on Amazon, which are like a scrubble row of scrubble tiles. You wouldn't buy one. I mean, okay, if I'm really skint, I'll take the risk, okay? If I'm buying a thousand televisions, I might take the risk because the savings are so significant. I'm buying one television. Oh, fine. LG, Samsung, I'll do. And if it rocks up, you get the Amazon one. We're right, because if you, imagine, okay, imagine you're Samsung and you've made a batch of a thousand shit televisions.

1:38:14What do you do? Well, you either trash them, because the reputational damage from selling shit televisions outweighs the nugatory profit you might make from selling them. If you have some random manufacturer, why would you give a damn? It's not like, oh, my God, it will be damaging the Wougargoo brand, right? Bullshit. So we trust brands. Perfectly rational. Now, again, because economists assume perfect trust. I always give this example. And apologies, this is in my book. So you're turning up to buy a secondhand car. All right? And you go and look at the car. It's parked outside the house. You quite like the look of the car.

1:38:49You think you might pay$3 ,000 or$4 ,000 for it. And then you ring on the doorbell of the person who owns the car. Now, in one situation, the door's opened by a vicar. OK, let's say a rabbi. It doesn't matter. in the other situation the door's open by a bloke in his underpants now the amount you're prepared to pay for that car probably goes up in the first instance and down in the second instance because one person has shown themselves immune to shame and therefore unconcerned with reputational considerations and therefore inherently less trustworthy the other person has a lot of reputation invested in their perception of general probity.

1:39:29So they're more trustworthy. It's like an unspoken about insurance. Do you want a lovely story about this? So a British friend of mine moves to Australia, right? And he wants to buy a car. And the guy suggests meeting him in a supermarket car park with the car. And this British guy goes, well, that's a bit odd, isn't it? I don't really feel very comfortable about this right because you know you know in britain you go around someone's house to buy a car from right but he wants to meet in a supermarket car park and then he goes maybe that's what australians do it is you do that do you so many times i've bought a car and but he's really uncomfortable because he now instantly the car was a total bloody dog okay and his whole because his whole thing was you know maybe there's you know maybe just australian car parks do double duty as like car dealerships what the hell's going on but how funny but you never do that in the uk that well you might conceivably if you live 200 miles away you might meet halfway but it's a weird thing to do and funnily enough of course what you're doing there and what he what made him uneasy was the fact that you're trying to make an anonymous sale you're trying to detach the sale of the car uh from the um you from you and your reputation and where you live you actually do that no i will just come to think of it the one car i bought in a car park was an absolute shit show never again you see never again make sure and also it may mean that their house is an absolute bloody disaster with like rusting heaps up on remember i bought this old subaru and uh the clutch went on it two weeks later so uh you see this is a wonderful one because who's if you'd up my mum extraordinary woman grew up on a farm she had more uh psychological perception than anybody else i've ever met in that she didn't know much about cars but she knew a hell of a lot about people i always joke she could spot someone having an extramarital affair at like 500 paces you know that kind of stuff and i always ask this question if you gave 10 people like my mum five thousand dollars to spend on a car and you gave 10 qualified engineers five thousand dollars to spend on a car my mum would use entirely social heuristics to buy the car i don't know anything about this car but i know a lot about the person who's selling it and i'll rely on that as a proxy for the quality of the car because so and so a wouldn't have filled the the um gearbox with sawdust you know it's not going to be a cut and shut i'm going to use the effectively the the perceived probity and reputational fragility of the seller as the proxy for the quality of the car.

1:42:15In other words, I'm going to optimize for trust. The engineers would all ignore all that stuff and focus on the car. I'd love to do that experiment because I think the 10 people like my mum would overall end up buying not necessarily better cars, but they'd end up buying fewer terrible cars than the engineers would. Yeah, well, I mean, because they've got more reputational costs, right? Yep. yep like the the friend local i just bought lotus elettrae and you're a car fan no and i'm looking at loads of cars it's actually pretty reasonably priced then i see it's down the road from me i go okay decided okay i'd much rather buy from someone 10 miles away from me than someone 100 miles away from me nothing to do with the convenience of collection entirely to do with the fact that they don't want me i know they don't want me swanning around tunbridge saying you know they didn't play fair with me.

1:43:06I've got the potential for reputational retaliation. They're lovely guys, but I'm not suggesting they're dodgy, but this is just an additional facet of reassurance. Yeah. Rory, I really want to understand. It's good having a big social media following too, for the simple reason that no one can treat you totally like shit. Yeah. And you can't treat other people like shit either because you've got the reputational cost. It's a double-edged sword. This is exactly true. You see, this is the thing with Samsung. The reputation's a double-edged sword. They can charge a premium for the level of trust they inspire in their buyers, but they're also much more vulnerable to reputational harm in the event that they let people down.

1:43:43So they follow through, Blanc. So that is the one pain. You must have the same thing in Oz. Presumably in Austin, you can go around behaving like a total arsehole, can you? Because everyone's new. Because everyone is new. Okay. But in Sydney, my guess is you were famous enough that... What was your level of fame when you were back in Oz? Oh, it's just like get stopped in the street a few times a day. Same here, yeah. Yeah, yeah. But you can't. The tragedy is if I started having a total hissy fit at an airline check-in desk, there'd be six people bloody filming me. Yes, yes. You can't do that. You can't do that.

1:44:14I miss that. I want to know about you, Rory, because we've obviously been rolling for however long, a couple of hours, and you could just talk for hours. And you've got this really contagious energy about you. It's really cool. It's really inspiring. Can you pinpoint where this comes from, this nature from you to be able to just kind of talk and have such good energy for such a long period of time? I think it's the product, actually, of, like all things, I think I have corresponding massive mental weaknesses. What do you mean? There are certain things at which I'm absolutely terrible, so I've probably over-invested in my…

1:44:55Like what? just to give a trivial example uh anything to do with dates or time anything to do with chronology diary entries if you said i don't know what the date is today i think it's september is it first it's the first okay right okay but i mean you know i have you know those things i find unbelievably painful anything to do with um i'm probably you know dyspraxic in some way um but also it was an upbringing in an entrepreneurial household. My father was a self-employed business person. And I would say, if you grow up in like a shop or a restaurant, if you work in a shop or a restaurant, it's like a free MBA.

1:45:34And you realize effectively that no business is all about one thing. Businesses get reduced to silos where everybody is employed to optimize one thing to the disregard of everything else, whether it's finance or procurement or legal or whatever. That's why there's no economic growth. If you grow up in a shop, you realize all those things are interconnected and there are trade-offs or indeed complementarities all over the place between them. And what we do is we create these large organizations and we devolve responsibility to people who are typically rule makers. And that's why we've just basically created what I call Soviet-style capitalism, which is like a totally artificial bureaucracy.

1:46:21And to be honest, I work in advertising because it's a great way to monetize ADHD, if you want me to be absolutely honest. I don't have a sense of proportion at all. You know, people will be having some discussion about something, and I will look at the most trivial element of that problem and become fixated with it, which means that 90 % of the time I'm a pain in the ass, but sometimes I'm unusually right. Yeah, this is interesting. And do you feel like with that nature of you, where you're very passionate about things, you're very kind of sure in the way that you approach things? No, no, no.

1:46:58I'm only sure about being unsure about things. Yeah, but the way you deliver it is in so much surety. And it's this element of, It's really cool, but I feel like you've got to be so switched on with it. Do you feel like you get a bit drained when it becomes the time being alone after spending big days with people talking? My guess is you're the same thing, which is that in your spare time, you're surprisingly introverted. Is that fair? Very introverted. Yeah. Same thing. By the way, also true of a lot of stand-up comedians, which is everybody imagines that stand-up comedians come off stage and basically have the life and soul of the party and are buying rounds of drinks.

1:47:35whereas not all the time not all the people but many of them basically then retreat to a hotel room and you know watch sky news in their underpants um and um i recognize sky news in australia means something slightly different but you get my point um the um uh the the whole thing there is that yeah i um i basically there's a probably a little bit of a male female divide there in whether it's cultural or genetic, I don't know. But the difference between high intensity bursts of activity interspersed with periods of dullness. You know, in other words, you're either on or you're off. There's a debate about this in education, by the way, because guys in education, and I'm not saying this is genetic or is indeed in, you know, unalterable, but guys tend to do well in a exam environment and girls do better in a continuous assessment environment which is there's something about the guy which is do bugger all then mug up you know over three sleepless nights you know three days before the exam no i'm not saying that's particularly healthy but um i mean you know in in animal behavior you see this there are animals which are basically continually munching at things you know gathering and there's the hunter mentality where as i can see see anybody actually on a wildlife documentary has anybody actually seen a male lion doing anything because they seem to sort of i mean they seem to assemble a pride of female lions who then do all the hunting do they actually do anything at all um i'm not quite sure but but but there is that fundamental difference in temperament between you know between you know what you might call you know do nothing and creativity by the way john cleese wrote a fantastic book called um creativity a short and cheerful guide and he quotes research from a guy called donald m something rather at berkeley uh in the 1950s on what makes creative architects different from uncreative architects in particular.

1:49:53He did lots of other research on creativity. And obviously, what he did is he took 10 really first-rate architects, and then he took 10 architects who were nominated anonymously as being pretty workaday and uninteresting. And he looked at their working patterns. And of course, everybody's different. They're people who are late birds. They're people who are early birds. They're people who move around a lot there are people who don't. Only one thing divided all 10 of the interesting architects from all 10 of the boring architects. The interesting architects didn't start work straight away. They didn't put pen to paper.

1:50:24Now, what you're doing there, I think, unconsciously as a creative person, you are one, and there's a good book by Margaret Heffernan on this called Embracing Uncertainty, you are content in a space of not knowing. In other words, you're emotionally content I mean I have sort of weird I don't know if you have this are you married or anything like that but my wife is much keener on like knowing what's happening on Saturday than I am I don't know we'll just wait and see you know we might get lucky you maybe we'll do nothing maybe we won't feel like doing anything a it's embracing uncertainty there's a second thing you're doing which is waiting to get lucky which is I'm not prepared to start work on this until something remarkably interesting has stimulated me into doing something different.

1:51:11And you need free space to be able to invite that stuff in. I feel like the surrendering to like, I don't have a plan. John Lennon said time spent doing nothing is very rarely wasting. Yeah. Well, I mean, to close this out, there's two things that Oprah Winfrey says. She talks about luck. You can't go from Lennon to Winfrey. No, well, you're talking about luck here. I'm a Stones fan, but even so. Well, she says that luck is just preparation meets opportunity. That's not bad, actually. Fair enough, Oprah. Okay, you're back in the room. But then what she also does. She's actually right. I mean, there's a great phrase from Crick or Watson.

1:51:54I think it was Crick, where he said, it's true that by stumbling around, we discovered gold. Talking about DNA. But we were looking for gold. Yes. So there was the preparation. But when we talk about this space thing, the other thing that she does. You find, great quote of mine, by the way, you don't find entrepreneurs in chess clubs. You find them at casinos. You find them playing backgammon. You find them playing poker. You find them playing games which involve an element of chance and where the future is, you know. Whereas chess, although it requires unbelievable feats of intelligence, right?

1:52:28One, you can't win big. You can be the most, okay. You win a chess game. you get one point okay poker you can win small you can win big you can lose small you can lose big it's a difference of degree secondly the skill in poker is to something said how you respond to random events not about preparation yeah yeah and then i guess that just tying into that is just that that free space to be able to invite the creativity and the the things into your life i think is really important and we're suppressing it yeah the point about creativity is not that that, you know, people are, you know, more creative or less creative.

1:53:05To a degree, I think there's their innate factors or their environmental factors we can't do anything about. But the real question is, why are we creating the environmental conditions that make creativity disproportionately difficult? Ogilvy itself, my own ad agency, which is, you know, should and mostly is intending to be a creative entity, made the slightly awkward discovery when it looked back on the best work it had ever done, which is that in every case we'd produce something really remarkable, someone had broken the rules. In which case, maybe it's the rules that were a problem. And then I think the powerful thing about this is, can we assess our life holistically?

1:53:50Let's just remove business for a second. Let's remove our job titles and our careers and actually just think about all of the imaginary or perceived rules that we're placing in our life. What is our life rulebook? and are they serving us or not? And is the rules that we're placing in our life ones that are actually getting us closer to a life that we want to live or a job that we want to achieve or an outcome that we want? Be very careful, by the way, about planning. At no point did I ever plan to become big on TikTok. Yeah. So what Nassim Talib would say is a lot of what you should do in life is not actually pursue a very narrow goal.

1:54:26It's increase your surface area exposure. I wait for this. increase your surface area exposure to positive upside optionality which is in other words maxim there's a great book written by david cleveley who's a british entrepreneur it's called serendipity it doesn't happen by chance and it sounds like a contradiction in terms it's actually a very serious point that you can make actions that will increase your chance of getting lucky take that zoom call from someone you know you've never heard of every now and then okay because if you don't do that if you're so narrowly focused on you know what you think you want to become one that's all you can possibly become and secondly you'll probably fail anyway because there are loads of other people trying to be those things see what i mean yeah okay i mean don't i mean i always joke about this but i make a massive divide between i think sports which people intrinsically enjoy and activities which people intrinsically enjoy where commercially they're probably going to fail you know there's room for a hundred rich tennis players in the world you're not going to be one of them statistically but if you really enjoy tennis you'll enjoy you know getting to number 3420 that's fantastic you know you're not going to be the next you too but if you really enjoy playing instruments brilliant go right ahead but what really worries me is people who are fixated on some very commonly held end goal where the cost of entry actually outweighs the prize and where the odds of success are appalling to begin with yeah and i think that's that's the same with everything but also there's this element of of die trying because because what's the point of not even giving anything a cracker anyway in the whole first place like let's it's the journey it's the pursuit of it but i i um just in respect to time i i want to commend you and and just yeah i thank you for your awesome insight it's a wonderful pleasure enjoy austin too because it's a fantastic city absolutely amazing city it's beautiful i love it you've been to a bucky's yet i've actually not been to a bucky's that's that's your that's your that's your next job when you get back seriously i've not been to the bucky's but i've heard you talk about bucky's a fair few times Oh, that's astonishing.

1:56:45But you shop at H-E-B, do you? Yeah, well, I learned it's H-E-B, not H-E-B. Oh, right, right, right. We say H-E-B, yeah, because the Americans say H-E-B. Got it. Yeah, yeah, yeah. But anyway, I'm a Whole Foods guy. Which started in Austin fantastically. It did, the original. I think I went to the number one Whole Foods. Yeah, it's quite a cool destination spot we can take people, right? Right. It's one very interesting thing is how many of these brilliant businesses are family businesses, Buc-ee's, H-E-B, et cetera. And one of my contentions is that we don't compare family owned or privately owned businesses like for like with publicly owned businesses because they don't issue the same financial reports.

1:57:25I would think if you looked at it, what you'd find is that family businesses are focused on the customer. They care more. And fundamentally, we've created effectively a kind of autistocracy in publicly run businesses where they're effectively run to optimize financial metrics and that those metrics do not really reflect the real world. Yeah. Yeah. And I think that there's trends trending more towards people buying people and people wanting to be connected to the thing that they're transacting on as well. And I do see that go down into people and especially even with people like having influence online being more inclined to buy from some person they follow online as opposed to the Nike or the...

1:58:08Reputational skin in the game. I'm very skeptical about the money that's been funneled into digital performance marketing. I'm generally big or I'm generally encouraged by influencer marketing because I think it goes back to what David Ogilvie said. If someone provides a testimonial where they have what you might call reputational skin in the game in the field in question. It's a very reliable form of information. I don't think digital or email marketing from someone with whom you have a relationship might be okay. But I don't think a lot of performance marketing satisfies the criteria for being what consumers believe to be fundamentally a reliable source of information.

1:58:57I don't think there are enough checks and balances there. Thank you for coming on the show, man. It's a joy. What a pleasure. I appreciate it, Ray. Thank you so much. See you in Austin. I think I'm back there next year. Well. So remind me. I'd love to meet up. A round two. Thanks so much, Rory Sutherland. Appreciate you coming on the show. And we're signing out. We'll see you guys very, very soon. Bye-bye. Bye-bye. Thank you. I see you. Avatar Fire and Ash is now streaming on Disney+. It's the film critics are calling the best Avatar yet. Go, go, go, go. A true epic and completely jaw-dropping.

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