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

Summary

  1. There is a time and place for the “illogical” in complex human affairs. Not everything is bound by the laws of physics and it may benefit us to sometimes consider the magic which is cheap, illogical, and effective. “The whole point of this book is that just because something is irrational doesn’t mean it’s not right.” 

Key Takeaways

  1. Overview
    1. Can avoid many mistakes by being silly and playful. Seeing things from a variety of angles and always keep top of mind that people are far less logical than they appear and that this drives much of our decision making. “Psycho-logic” aims for utility rather than optimality. It operates in the background of our consciousness and is far more powerful and pervasive than we realize 
    2. The trick is not understanding all universal laws, but seeing where those universal laws don’t apply. Doesn’t rely on logic but on things that work. Just because something makes sense does not mean it works. This 2×2 is important to keep top of mind. What works and doesn’t and what makes sense and what doesn’t. By trying to rely only on things which we can rationalize, we eliminate a very useful quadrant where the solutions to our problems may lie
    3. In an age of extreme logic it is likely that the problems that have been able to have been solved by logic already have been. So, those that remain may require illogical solutions
    4. Those in positions of power today are nearly all logical so someone illogical someone like Donald Trump can we hold tremendous power because he is unpredictable
    5. Don’t criticize something just because you don’t understand it. Something may be valuable but not valuable all the time. Nature doesn’t take shortcuts and what may seem nonsensical to us may be perfectly logical from an evolutionary perspective. Often a more important question is not whether something makes sense but rather, does it work? The trick is always to remember and ask if something is smart both logically and psycho-logically
    6. An unconventional rule that nobody else uses can yield greater results than a “better” rule that everybody else uses.
    7. Logic is a good way to explain post hoc but it is not always a good way to arrive at creative solutions. If everyone is using logic, aim for the psycho-logic. With things in scarce supply, it can be beneficial to be a bit eccentric, to value things others don’t or overlook. The author prioritized architecture in his home rather than size or location and ended up with a small but beautiful and overlooked piece of real estate 
    8. Alchemy is not only what we do but what we don’t do. Approaching problems rationally is one club in the bag but we should also take into account psycho-logic and understand how people actually behave rather than how we think they should behave. We need time to disengage, to think, to wander, to play. Sutherland wrote most of this book on days where he wasn’t at work and his best work came when he was daydreaming. The modern workplace is incompatible with alchemical solutions. 
      1. Amazing story from Henry Ford: a visitor was walking through the Ford office with Mr. Ford when they passed the office of a senior executive whose feet were up on the desk. The visitor asked why Mr. Ford kept such a man on at such a high expense. Mr. Ford replied that this man had an idea several years ago which saved him $10 million dollars and as he remembered it, his feet were in that exact position.
  2. There are four reasons why people behave seemingly illogically or psycho-logically: signaling satisficing, psychophysics, subconscious hacking
    1. Signaling
      1. Economists seem to hate branding and advertising because they don’t understand it, but evolutionary biologists get it immediately. Expensive signaling has been around for millions of years and infers fitness and/or trust. The high upfront cost is expensive and unlikely to be undertaken unless repeat business is desired (flowers have expensive signaling for bees). Overcoming short term the desire for short term gains helps build trust and is done through signaling
      2. Must be willing to ask the obvious and childish questions. Are you really trying to solve the problem or merely seem like you’re solving the problem? Most people care more about making a decision that they can defend rather than a successful decision 
      3. How you ask the question impacts the answers you get
      4. A change in perspective is worth 80 IQ points and the inability to change perspective is likely associated with stupidity
      5. Never assume that 1×10 is the same as 10×1. In physics and math it is, but psycho-logically it is not. For example, it is much easier to fool 10 people once than one person 10 times
      6. The process of discovery is not the same as the process of justification. There is way more serendipity and experimentation involved in discoveries than is often attributed to it
      7. Creating a name for something drastically reduces pushback and increases acceptance. Creating a name creates a norm. 
      8. The conscious mind thinks it’s the oval office when in fact it is the press office. Post-rationalization is a huge part of human nature
    2. Satisficing
      1. Satisficing – much more worried about avoiding a disaster than making the perfect choice, so we choose something we trust which is “good enough.” This may seem lazy but it can also be robust in a Complex system. If there are strict metrics and incentives to meet, others will be neglected and perhaps fatally so. Having some “I inefficiency” may actually be very wise. People seem to bug and make decisions not necessarily because one product is better, but because it is less likely to be disastrous. This is a hugely important distinction and illuminates why expensive brand advertising works
    3. Psycho-Physics
      1. Psycho-physics is the neurobiology of perception between different species and how that impacts our view of reality
      2. An admission of inferiority adds credibility and trust to your product or service
      3. The IKEA Effect is found everywhere adding a little bit of difficulty or friction increases peoples perceived value of the product or service
      4. Perhaps it logically behavior comes first and then our attitude not the other way around. It is only the behavior that matters focus on that and I’ll peoples reasons behind it and you can harness alchemy
      5. Give people more options and information and they will come out with an optimistic reason that serves their situation. For example, in the second and third years of the author’s university, there is a ballot for choosing rooms. If you’re at the top of the list in your second year, you choose first. However, if you’re on the bottom of the list, you get to choose your room first during your third year. What was amazing was that nobody was ever disappointed with this system
      6. What works well on a small scale works on a large scale. Human behavior is amazingly fractal so the trivial details we pick up on in every day situations can help us better understand how to approach big decisions
    4. Subconscious Hacking
      1. Never denigrate an action as irrational until you consider what job it really serves. People spend an enormous amount of time money and energy advertising to themselves and once you understand this much irrational human behavior makes much sense. many of these things fall into placebo effect territory and the author argues that they often have to be expensive silly logical or rational in someway in order to work
      2. It has been evolutionarily beneficial for us to be able to deceive ourselves so that we can more convincingly and consistently deceive others. That is why trial and error and then seeing what works is more fruitful than simply looking at what makes sense
      3. To be truly customer focused you must ignore what people say and instead focus on how they feel because this impacts what they do
      4. We cannot influence subconscious processes through a direct act of logic or will. It speaks a different language. Instead, we must tinker and change the things we can control which impact the things we don’t. We can change or design our environment to influence our emotional state. Evolutionarily, it is much more effective to bake in emotions rather than reason – instinctively afraid of snakes rather than each generation having to teach it to the next. This phylogenetic knowledge is not software, but hardware. It is on the Motherboard
  3. How to become an alchemist
    1. Given enough material to work on, people often try to be optimistic.
      1. Example of economics department choosing office and parking spots Jura lotto and those who got the highest number got first choice in office but last choice in parking spots this allowed people to focus on where they did well and over-emphasize that    This is an extraordinary finding in how to divided limited resources amongst a group of random people in order to maximize happiness.
      2. The admission of a downside can help you convince people
    2. What works on a small scale works on a large scale 
      1. Human behavior is surprisingly fractal. Adding cute animals helps increase sales and while this may seem like a silly example, using the lesson behind this can be helpful even on the largest scales
    3. Find different expressions for saying the same thing
      1. The way you ask the question impacts the response you get to the question
    4. Create gratuitous choices
      1. People seem to like choices for their own sake
      2. Give placebo choices as often as you can
    5. Be unpredictable
      1. The logical answers, while safe and conventional, have likely been tried. So, if you’re still in a bind, you may need “psycho-logic” rather than logic
    6. Dare to be trivial
      1. Best Buy’s $300m button – rather than forcing people to sign in or create an account, Best Buy allowed people to continue to checkout rather than having to register. This shows that what matters is not what we’re being asked to do, but the order in which we’re asked to do them. The same thing can be seen as good or bad depending on context and framing
    7. In defense of trivia trivia
    1. The devil is in the details so it often benefits us tremendously to pay attention to them
    2. The most important clues often seem irrelevant
  4. Other
  1. With psycho-logic, the opposite of a good idea can be another good idea
  2. People are great at rationalizing regrets. Sour grapes or sweet lemons. Either believing it’s not worth it or putting a positive spin on a bad situation
  3. Context is everything. It is impossible to wholesale import a food, liquor, culture, or even political system from one context into another unexpected to work flawlessly
  4. Think through the counterintuitive because nobody ever does
  5. Akio Morita, founder of Sony, made the first pocket-sized radio but, rather than pushing the limits of the technology and making the radio smaller, he made the pocket on his employee’s shirts larger 
  6. The “Jacks of All Trade” heuristic makes people assume that something that does one thing is better than something which claims to do a lot of things plus that one thing. Many world-changing products arose from the removal rather than the addition of features. Sony Walkman first did not have a record function because they wanted people to understand exactly what the Walkman was for – they later introduced the record button. Google is Yahoo without all the crap, Twitter is blogging with a maximum text amount…
  7. People will pay a high premium to remove uncertainty. The amount of time you have to deal with uncertainty impacts how likely you are to make a decision. Credit card companies approve or deny applications in less than 12 hours because they understand this human nature
  8. The behaviors we adopt influence our attitude more than our attitude can influence our behavior. Behavior comes first and attitude later changes in order to keep up, keep consistent
  9. Never think something irrational until you understand what the person is optimizing for 
  10. When Prussia was going through an economic downturn and war, the wealthy chose to make iron rather than gold desirable. The wealthy only wore iron jewelry and this trickled down to everyone else. Iron showed that not only were you wealthy (because you had gold that you traded for iron) but also that you were selfless and fighting for a greater cause
  11. Prussia wanted to become less reliable on bread so they tried introducing potatoes. It failed miserably until someone (probably Frederick the Great) chose to have an “exclusive” royal patch of potatoes which was “loosely guarded.” Local people broke into the garden, stole the potatoes, and spread the potato to the masses
  12. Getting people to do the right thing sometimes means giving them the wrong reason

What I got out of it

  1. An extremely enjoyable book on human nature and psychology and how we can use “psycho-logic” to get better outcomes even though they might not be logical. Focus on what works over what is logical and “makes sense.” Nature favors utility and fitness over rationality and accuracy/objectivity