Modern WisdomDirty Little Marketing Secrets That Always Work - Rory Sutherland (4K)
EVERY SPOKEN WORD
150 min read · 30,032 words- 0:00 – 13:49
Are We Seeing the Death of Remote Work?
- CWChris Williamson
So talking about lockdown, how effective do you think companies will be at dragging people back into the office?
- RSRory Sutherland
Uh, it's interesting actually because in the UK, for whatever reason, there are exceptions. If you go to tech companies, they, there's tumbleweed. S- you know, companies which are very strongly kind of tech engineering driven still seem to be very empty. What I know best is the ad industry, and actually they're generally a fairly gregarious bunch, and I think it's returned to a pretty acceptable kind of equilibrium. And by the way, I don't, I, I don't want, well personally, I don't wanna see people in the office five days a week because everybody who's engaged in some sort of part of the knowledge economy, 20 to 40% of your working week is going to be stuff where you just need to truckle down, choose your own environment, and get on with it. And you're much more likely to be more productive if you have some degree of discretion over where and when you work for those tasks that you perform on your own. But there is this value of what you might call serendipity, coaching for example, co-creation-
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
... collaboration, which I think still requires some degree of, of, uh, of co-location. Uh, you know, it helps to have people in the same place at the same time for all kinds of reasons. However, what's weird is that the level of absenteeism, if you want, I don't wanna call it that, but you know what I mean.
- CWChris Williamson
Mm-hmm. Mm-hmm.
- RSRory Sutherland
Okay. Is much, much higher in the US and Canada than it is in the UK. Now, I'd always seen-
- CWChris Williamson
More sick leave?
- RSRory Sutherland
I d- well, some of it's probably geographical in the simp- simple sense that there are people who've moved. I- in other words, it's difficult in the UK to move so (laughs) far away from the office that you can't come in for one or two days of the week.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
You have to choose an island somewhere, you know, or, or go to Scotland I guess.
- CWChris Williamson
Mm-hmm. Mm-hmm.
- RSRory Sutherland
Um, in the US there does seem to have been a sort of widespread dispersion of people to a distance away from their place of work where it's a flight away, not a train ride away. But, uh, it's not, it's ab- absolutely not what I would've predicted because if anything the, um, the US had a very strong culture of presenteeism, of people effectively getting in early, staying late-
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
... uh, being absolutely desperate to show their face. And i- uh, the, uh, the office occupancy rates are much, much lower in the US and Canada than they are in, in Europe or, or the UK.
- CWChris Williamson
One of our mutual friends, uh, has a team that works remotely around the world, so they speak to each other on Slack but they don't see each other in the office.
- RSRory Sutherland
Yeah.
- CWChris Williamson
And as part of a team building exercise I think every so often they bring people together, uh, and he thought this would be brilliant, everyone's gonna get to know each other, they're all gonna become friends, it's gonna bond the team together so much. The week after they had this in-person meetup separately three people asked for a pay rise because they all got to go-
- RSRory Sutherland
Of course.
- CWChris Williamson
... together and had a beer.
- RSRory Sutherland
And they compared notes.
- CWChris Williamson
And were like, "So what do you want? Hang on a second. I was told such a..." Because you don't have that kind of non-critical conversation if you're just dealing with people on Slack, right? First off there's a digital record of it.
- RSRory Sutherland
Of it.
- CWChris Williamson
Uh, and maybe someone's able to check. I don't know. Can the admin check Slack? Maybe they can. I don't know. Uh, and secondly it's like we're just here to do the job. This isn't sort of play around time outside of work. And do you really text the other marketing guy or whatever after work about stuff to do with-
- RSRory Sutherland
No.
- CWChris Williamson
... work? Probably not.
- RSRory Sutherland
No.
- CWChris Williamson
Uh, so there is from a totally Machiavellian totalitarian state organization point of view, there is an argument to be made-
- RSRory Sutherland
Divide and rule.
- CWChris Williamson
... silo off, yeah, compartmentalize the staff and then they never know if one of them's managed to negotiate a pay rise and the rest of them haven't.
- RSRory Sutherland
(coughs) That reminds me of an agency back (laughs) in the 1990s who sent their staff on assertiveness training and, uh, they all came back (laughs) and half of them resigned. (laughs)
- 13:49 – 27:45
We Are Too Impatient to Be Intelligent
- RSRory Sutherland
Okay?
- CWChris Williamson
Yeah. What do you mean when you say that we're too impatient to be intelligent?
- RSRory Sutherland
Oh, that's simply a question which is... I, I, I think it's a wider question. So, I mean, email, which I mentioned earlier, is an interesting case in point in that it was assumed that there could be no finer form of communication other than immediate and free, and we automatically assume that faster is better. And, and, and one of the questions I raised, which I still think is a serious question, by the way, is, do we need slow AI? Do we need slow Tinder? Do we need slow Rightmove? Now let me explain just, just what I mean by this, which is that in most processes of search, if you look at consumers, what they do is they refine their preferences according to what they find out there. So, they go into the property market, the dating market, the holiday market, and they have a set list of preferences to begin with. If you talk to any real estate agent, most people who deal with a human real estate agent end up buying or renting a property which meets remarkably few, if any, of their initial criteria. That's probably true of the people people marry as well, I would guess, that you, if you ask someone, uh, effectively to write down... Uh, put it, put it very simply, we think we know what we want, but we don't, is probably the simplest way in which... And the way we discover what we want is by a kind of exploratory process of discovery where we explore the market and what's available and what they cost and what we experience when having a look at a particular house or person, then refines our preferences. And so this, what you might call the Rightmove approach to decision-making, which is define what you like, we give it to you, you buy one of those, okay, looks to us as if it's a perfectly sensible and efficient way of choosing a house. But actually, we don't see what we don't see. (laughs) I was actually ta- I was talking to someone this morning, I better not give away who they are, who, who discovered that Rightmove, there are areas of London which are holes. In other words, they don't fall into any predefined area on Rightmove.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
And property prices in those areas are disproportionately low because you can't search for any property that's in that area. Now it might be if you're looking for a much bigger area, but in other words, in other words, they're not in Kensington-
- CWChris Williamson
Yep, yep, yep.
- RSRory Sutherland
... they're not in Notting Hill. In other words, they're these weird little islands of undefined location where you can actually (laughs) find disproportionately cheap property, because Rightmove is kind of blind to their existence.
- CWChris Williamson
Search volume is so low. Wow.
- RSRory Sutherland
You also have the problem, which is you can't sell a property apparently now for 850,000 pounds. Your estate agent or anybody else will tell you, "No, no, you've gotta make it, say, 810 or 900 and, uh, 890." Okay, that's fine, and the reason is that people search for property either 900,000 and down or 800,000 and up.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
And two things happen. One, they're less likely to find you at all because you're further away from their searching point. Secondly, if they do find you, the people who are searching 900 and down are a bit disquieted 'cause they think you're too cheap-
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
... and the people who are searching 800 and up think you're a bit too expensive. So, the extent to which what seems like a completely rational filtration process in online searching activity or decision-making may be deeply flawed because it doesn't reflect the way in which we make decisions in the real world, which is we recalibrate what we want according to what we find.
- CWChris Williamson
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- RSRory Sutherland
Oh, the story at the beginning? No, that's just a story about how undoubtedly, in all kinds of areas, driven partly by technology, what's urgent, um, crowds out what's important. And it's a joke, it's an old advertising joke told to me by someone who was literally from the Mad Men era, which is you have a copywriter, an art director and an account man, okay, who are boarding a plane to present work to a client. And they open the overhead locker, and somewhat implausibly, a genie gets out and says, "I've been trapped in that overhead locker for years. To thank you all for releasing me, I'll give you each a wish. So you can choose anything you want." And they go to the art director, who says, "I want, um, uh, I'd like Picasso's life, you know? I don't mind my life, but I want Picasso's life, the locations, the eye, the artistry, uh, you know, probably the womenfolk, the romantic life. That's what I really want." And whoosh, the art director disappears. And then the genie turns to the copywriter, who goes, "It's gotta be Hemingway, you know?" He enumerates a whole load of reasons why he'd like to be able to write and live like Hemingway, and whoosh, disappears. And then the genie turns to the account man and says, "What about your wish?" And he says, "I want those two guys back. I've got an important meeting in two and a half hours." Okay?
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
And there is that element where... And by the way, we could, we could refer to this in everything from things like the shareholder value movement to business quarterly reporting, to the extent to which in advertising too much money is spent on short-term performance advertising, and too little is spent on long-term brand-building.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
And that's not because it's necessarily more valuable; it's because it delivers measurable results faster. So I'll give you a, I'll give you a fundamental problem. Um, the FT wrote a very, very good article, um, specifically about the UK, but I think it applies more widely, which is, how did customer service get so bad? Now, the point is, I felt like writing an article for the FT saying, well, if you occasionally acknowledged there was something interesting about business other than their quarterly financial forecasts, maybe the problem wouldn't have happened. If you actually discussed marketing occasionally-
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
... or customer experience or, uh, you know, the value of repeat business. If you looked at business from the point of view of what you might call a competition for customers rather than the competition for operational efficiencies and cost-cutting, maybe we wouldn't have got into this total shit storm, okay? But parking that rant for a moment, um, uh, w- what seems obvious... Okay, if you spend some money on acquiring customers, you can see whether it's working very quickly, and you can say very confidently, "We spend X, and the value of the acquired customers was Y." Let's say you want to make a corresponding investment in customer loyalty or customer experience. In other words, ensuring your existing customers have a great experience, and so they come back, or dealing with problems very well so that your customers don't leave. Generally, you could perfectly well prove that that was cost-effective. And indeed, my hunch would be that money spent there would be more cost-effective in many cases than money spent on acquisition.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
However, it might take you five years to prove the efficacy of what you do, because it's slower. There are businesses which are fast. There are businesses which are slow. There are fast-feedback businesses which you learn very quickly. An example, by the way, of a very fast-feedback business is comedy. You have an instant feedback mechanism from the audience which basically tells you whether or not a joke is any good and whether you've landed it. And so apparently, if you go to small comedy clubs, you'll occasionally be surprised because you're sitting there and there are only sort of 20 tables, and Chris Rock will come in. And effectively, it's all a bit weird, but he's trying out his new material for the next run. The ne- Before you go to bigger theaters, you try your material out on a small scale. And that's a fast-feedback business. Amazon's a pretty fast-feedback business, I would argue, because it has a very high degree of frequency of interaction with customers. Something like banking or insurance is unbelievably slow. I mean, if you're a bank and you piss off a customer, they don't even leave, by the way. They just go inert, okay? It's not, it's not like people go, "I'm gonna close my current account, and I'm gonna walk off."
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
They just open another current account somewhere else. Your current account th- they don't buy anything, any other products from you. But it's not the same as, uh, uh, as something like comedy where you know within seconds how, whether you've landed something or not. And then there are also things which I, which bother me, which is... There are also things where... I was talking to the guy who founded AO, and they, they have this lovely little system where when they deliver a washing machine or a dishwasher or whatever, if there are children in the house, because they deliver things themselves, they give the children a little branded bear-Okay? Now, as he said perfectly, right, you know, someone in finance is going to say, "Okay, what's the cost-benefit analysis..." (laughs) okay, "on that?" And his point is, it's impossible. You just have to make a judgment, subjective judgment-
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
... that, uh, the cost of the bear is trivial and the long-term effect is likely to be quite high.
- CWChris Williamson
What's that thing about, uh, that Bezos has got, uh, when anecdotes disagree with data most of the time-
- RSRory Sutherland
The anecdote is usually right.
- CWChris Williamson
... I trust the anecdote? Yeah, yeah, yeah.
- 27:45 – 39:43
Was the Jaguar Rebrand a Disaster?
- CWChris Williamson
going badly, Jaguar's rebrand. What do you reckon?
- RSRory Sutherland
Um, now, I'm in a small minority of people who would argue that before you criticize what someone does, you've got to understand what they're trying to do. And they have been completely forthright about the fact that they expect to lose all but 15% of their customers.
- CWChris Williamson
All but 15%-
- RSRory Sutherland
Precis-
- CWChris Williamson
... of their customers?
- RSRory Sutherland
Yeah, exactly, of their customers, by moving to a much more upmarket, uh, expensive car, uh, on, uh, an electric platform. And the argument I might make is that normally what they did is anathema to anybody who loves what you might call brand maintenance and brand management because... But by the way, they didn't change their name, okay? They didn't call the car Zog. They still call it Jaguar. They still, contrary to rumors, have kept the leaping cat motif, et cetera. But what they've done is a very, very bold kind of... Okay, in a sense, it's, look, bet the farm here, okay? Either we do this... We- we either succeed, in which case, great, or if we fail, to be honest, we were heading for disaster anyway, because you've got to be slightly careful. This is where, uh, you know, uh... Okay, when Dylan went electronic, okay, someone shouted, "Judas." The crowd in the Manchester Free Trade Hall absolutely hated it. Jaguar purists are going to hate anything. Uh, by the way, I've had six Jags, by the way. So I'm, you know, I'm- I'm a loyal Jag enthusiast. I- I love the brand. And in many ways, I love a lot of the heritage about that brand. But equally, I love red telephone boxes, but I don't think it should be the BT logo. Okay? I love, you know, what was it, Giles Gilbert Scott's design for red telephone boxes, but I'm also cognizant of the fact that I don't make many calls from pay phones anymore. And I like Burberry Macs, but I'm also cognizant of the fact that because of various things like, uh, you know, central heating and Uber, not many people wear macintoshes anymore, you know, apart from Americans and flashers, in my experience. I was saying this the other day. Now-There are occasions where you might argue that electrification completely reshapes the competitive landscape for any car brand or any car manufacturer, and that what you have to do is a fairly dramatic pivot. I'm gonna, I'm gonna join you on that. Yeah, yeah.
- CWChris Williamson
Get that in you, Rory.
- RSRory Sutherland
Yeah, absolutely. It will, it will ............................ Exactly.
- CWChris Williamson
Not enough stimulants in us today.
- RSRory Sutherland
Um, the ... there are cases, Kid A for example, where bands produce an album that kind of alienates their existing fan base.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
Okay? You might argue that for Jaguar, this was a kind of Sgt. Pepper moment-
- CWChris Williamson
Yeah.
- RSRory Sutherland
... okay? Where we've got, you know, fundamentally, we've gotta do ... Am I right that there was a sort of Pet Sounds/Sgt. Pepper interplay going on, which was-
- CWChris Williamson
I'm not sure.
- RSRory Sutherland
... who was first?
- CWChris Williamson
Were th- were they on some trajectory toward slow motion irrelevance? Was that where they were going?
- RSRory Sutherland
Well, the problem with Jaguar is lots of people love the brand, but the people who love the brand didn't necessarily buy Jaguars from new, in particular.
- CWChris Williamson
Right.
- RSRory Sutherland
And the new car buyer is a pretty niche audience to begin with. I thought the ad was deeply weird. It wasn't produced by an ad agency, by the way. Um, it was, as someone said, it was less a branding exercise than a de-branding exercise.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
You might make the count- contrary position whi- which is that it got millions and millions of people all over the world talking about Jaguar-
- CWChris Williamson
Yeah, I mean it-
- RSRory Sutherland
... which hadn't happened for years.
- CWChris Williamson
It's-
- RSRory Sutherland
Now, you know, I, I, I'm not, I'm not one of those people any publicity is good publicity. That emphatically is not true.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
Okay? Um, however, it did signal the fact ... and by the way, it's not as if Jaguar hasn't done this before, 'kay? That a big change was afoot-
- CWChris Williamson
Yeah.
- RSRory Sutherland
... and that something remarkable was going to emerge. And the new car, by the way, which we've only just seen this morning, just for people listening-
- 39:43 – 46:56
Why Posh Hotels Still Have Doormen
- CWChris Williamson
that, uh, y- I've been thinking about since I've been staying here. I'm at the Royal Garden Hotel in Kensington and, uh, on the front door, there's maybe two or three doormen.
- RSRory Sutherland
Mm-hmm.
- CWChris Williamson
Uh, and i- it's not so much of a, at least the places that I tend to stay in America, it doesn't seem to be so much of a, uh, a trait. Yet over here, it could be replaced... I've heard you talk about this before, it could be replaced with an opening door, it could be replaced with a, a series of sensors and buttons and switches. But it's not necessarily about that, it's about the experience of the doorman being outside.
- RSRory Sutherland
Yeah, but what you're doing there is the old consulting trick of you define the doorman in terms that make him most amenable to automation. So you ƒ (0) function of doorman, opening door, replace the doorman with, uh, an infrared automatic door mechanism, lay claim to the savings, um, but an awful lot of consulting activity. Do you know management consulting firms engage in this thing which is called, um, gainsharing? Now, I can't believe that anyone in a company would sign up to this agreement because it's appalling. Where they effectively say, "We will effectively define the costs we have saved you and we want you to pay us a proportion of the cost savings which we identify." But as Roger L. Martin says, "Any idiot can cut costs. The real skill comes in cutting costs without actually losing long-term revenue as a consequence." And so short-term cost-cutting is dangerously easy. This is where I come back to that point of we're too impatient to be intelligent, that intelligence and wisdom is slow.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
Whereas seeming logic is fast. You can seemingly logically replace the doorman with a, uh, automatic door-opening device. What you're failing to notice is the other tacit and, um, uh, subtle, uh, human functions which a doorman... which might be recognition, hailing taxis, also security, okay? You know, basically, you know, you don't want drunkards sleeping in your entrance to your hotel.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
Um, the... and, and, and simply maintaining the status of the hotel. That arriving at a hotel which is notionally a five-star hotel and kind of, you know, just being met with an automatic door in London would seem-
- CWChris Williamson
Even if it's a very fancy automatic door.
- RSRory Sutherland
Ame- Ameri- Americans have come to a Lon- Americans want a London hotel. Okay? If you take American or, or for that matter, Asian tourists, they want London to be a bit Londony with a guy in a top hat. Okay?
- CWChris Williamson
Yeah.
- RSRory Sutherland
And I... Well, a friend of mine booked some friends from Los Angeles in the Hempel Hotel, which was, um... I don't think it exists anymore. It was in Bayswater, but it was kind of like an LA hotel, which was in London W2. And they were gutted, these Los Angelinos. I mean, they were very cool people, right? But they said, "If I come to London, I want horse brasses, I want hunting prints."
- CWChris Williamson
Yeah.
- RSRory Sutherland
Okay? And so-There are all these nuances which I think are very, very easy to lose because costs are quantifiable and instantaneous, and opportunity costs, lost opportunities, lost revenue, that's slow and it's generally hard to actually quantify.
- CWChris Williamson
Mm.
- RSRory Sutherland
I- I have a lovely story about this, which I- I- I wrote about actually in The Spectator, but people won't mind hearing it once more, I hope. Um, I- I'm- I'm driving along this dual carriageway in the Welsh Borders and we wanted to buy some milk, and the motorway service station appeared to be closed. All the lights were off. The kind of, you know, the petrol fuel logo was off. The fuel prices were off. It looked, you know, like, as I said, like The Bates Motel. It was completely kind of unlit. And my wife said, "Oh, bugger, it's closed." We, you know, we needed to buy her bloody lactose-free milk because, you know, she's convinced she has lactose intolerance. But, um, uh, I said, "No, hold on a second, now I remember going there on Christmas Day. I'm sure that a place that opens on Christmas Day wouldn't close at seven o'clock in the evening. Let's just go in anyway." And sure enough, we find a fully functioning 24-hour store, um, with I think, you know, it might have been a Starbucks or something as well, or a Burger King. And we're the only customers. And it's hardly surprising we're the only customers because to everybody else on the road, it looks like the place is closed. So I go up to the guy behind the till. I- you know, I'm a marketing person. I think, "You're pissing away revenue here. This is insane. There are, you know, every, every 10 minutes, there are three cars driving past going, 'Oh, shit, you're closed.'" So I go up to the guy behind the till. I go, "M- m- why, why are the lights off on the, on the road?" He goes, "Oh, yeah, I think the guy on the last shift left, forgot to turn them on." I go, "Okay. Turn those fucking things..." You know. Uh, there was no urgency. Now, it occurred to me when I left, the lights were still off when I left, okay. If that guy had nicked a Lion bar at two o'clock in the morning and been picked up on CCTV, right, there would have been a kind of inquiry. You know, he might have lost his job. There would have been extreme disciplinary action. Cost of the Lion bar is about, you know, one pound, uh, in lost revenue, okay? The cost of leaving the lights off is probably, certainly in revenue terms-
- CWChris Williamson
200 pounds an hour, maybe more?
- RSRory Sutherland
...1,000, a thou- might be 1,000 pounds that night.
- CWChris Williamson
Yeah, could be, yeah.
- RSRory Sutherland
Could be more, okay? But sins of omission are much less... Dogs that don't bark in the night are much, much less easy to identify than sins of commission, and we correspondingly get much less upset by them. And so what you often end up doing is, there are a lot of things, like giving a soft toy to someone when you deliver their tumble dryer-
- CWChris Williamson
Yeah.
- RSRory Sutherland
It's, I mean, no- nobody, nobody would... Can you imagine a world, I'd love this world but I can't really imagine it, where someone goes, "What, you mean you deliver, you deliver things to people with kids and you don't give them some branded merch?"
- CWChris Williamson
Mm-hmm, mm-hmm, mm-hmm.
- RSRory Sutherland
Okay? Are you serious? What, what a fucking idiot.
- CWChris Williamson
No, the anchoring and setpoint-
- RSRory Sutherland
Okay, no, but, but, but, no-
- CWChris Williamson
... that we have behind that.
- RSRory Sutherland
If you, if- if for some reason, you know, there was a cost attached to something as opposed... So opportunity costs, finance people basically pretend opportunities aren't there because they're too nebulous as far as they're concerned to pay any attention to. But then you wonder why companies aren't growing, and the reason is because they're fixated on the efficient performance of what they're already doing and completely uninterested in what they're missing out on.
- CWChris Williamson
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- 46:56 – 52:48
Solving Problems Through Addition & Subtraction
- CWChris Williamson
Talk to me about this, uh, the problem with seeking solutions through addition rather than subtraction thing that you've been on recently.
- RSRory Sutherland
That, um, that's an interesting observation, which is that s- we- we have an automatic default when we want to solve a problem that we add things rather than removing them. Um, there is actually a very good point, I think Nassim made this point when Elon was appointed the, what was it, the director of government efficiency, where he said quite rightly, "You should be the director of government effectiveness because it's perfectly impossible to do things very efficiently which you shouldn't be doing at all." And that's a Peter Drucker quote which is, I think it's, "Nothing, nothing's more wasteful or stupid than to see something done efficiently that shouldn't be done at all." And undoubtedly I think there are, um, particularly among things which are ostensibly well-intentioned, okay, we never ask the question, "Would we be better off if we just got rid of this entirely?" And so there's a great quote from cybernetics, a guy called Stafford Beers, where the quote is, "The purpose of the system is what it does."
- CWChris Williamson
(laughs)
- RSRory Sutherland
Which is... Quite a lot of systems, quite a lot of, you know, quite a lot of bureaucracy has this ostensible purpose which is entirely praiseworthy and worthwhile. And so we actually attach much less scrutiny to that kind of thing than we do to something that's actually selfish. I mean, you know, one thing about being a commercial company is people go, "What's in it for them?" Okay? "What'll they get out of this? I'm suspicious. This is too good to be true. I'm not really comfortable with this." You know, we- we- we deploy, quite rightly, you know, high degrees of skepticism towards the private sector (laughs) because we wanna know what they're up to. Now, to some extent-... if you're working in, for example, something that's altruistic or charitable, we suspend that level of skepticism. We go, "Oh, well, it's so well-intentioned, isn't it? Brilliant." Okay? Okay. "Oh, they're working for so-and-so. Isn't that great?" Now, it's nonetheless perfectly possible that the ultimate consequences of that well-intentioned action... First of all, it's possible that the motivation isn't nearly as, as wholesome as we may like to think. Um, uh, but secondly, it's also possible that just because something is well-intentioned doesn't mean the consequences are necessarily positive or benign. And so, uh, I mean, there is undoubtedly a really interesting question of what should we s- what, what should we stop doing? I mean, I'm very interested... Uh, uh, one of the reasons I'm very interested in flexible work is it occurs to me that companies looked at in one way are actually very inefficient. I, I tried to get, I did actually get our finance department. I said, "Now, forget about the usual method of financial reporting, okay? How much does a client have to pay us in fee income in order for my younger colleague..." and by the way, the fact that they're younger is relevant 'cause they're, uh, they're not kind of vested in the property market as someone my age is, okay? "... in order for my younger colleague to go out and have a curry?" And what you look at is the client pays us, then there are various overheads and costs and there's HR and finance and there's office space and there's all that other expense, okay? Then finally, the money trickles down to the salary of the person actually doing the work once the kind of landlord has taken their cut and the shareholders have taken their cut (laughs) and everything else. It trickles down to my colleague. Then from that incremental amount of money, 40% will probably go in tax, okay? Then of the remainder, 40%, maybe 50% will go in housing costs and transportation costs, commuting costs.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
So it works out that in order to buy my colleague, you know, you know, a trip to the, uh, Koh-i-Noor, okay? A client has to give us about 250 quid.
- CWChris Williamson
(laughs)
- RSRory Sutherland
Now, my argument is if you could get rid of all that shit and just do the work on Zoom, okay? Y- uh... In other words, in other words, the people... And this, this seems to be an extraordinary extent to which, you know, in large organizations, the people who are act- who, who are creating the value, the people who are doing the real work... I mean, it's amazing that capitalism functions at all when you look at the extent to which, you know, money goes in and then incidental costs, particularly property... I'm a Georgist, okay?
- CWChris Williamson
Yeah.
- RSRory Sutherland
Particularly Geo- you know, property costs-
- CWChris Williamson
Chip, chip, chip, chip, chip away.
- RSRory Sutherland
... chip away at all of that. And so the actual incentive for the person to perform valuable work and the reward they receive for it has mostly disappeared by the time it reaches them.
- CWChris Williamson
You were talking about feedback loops earlier on.
- RSRory Sutherland
Yeah.
- CWChris Williamson
The feedback loop is so slow and it's so molested from what, what goes in to what actually comes out, the amount of time. You're on 30 days, you're on 60 days, you're on 60 days from the end of the month.
- RSRory Sutherland
You got it. Mm-hmm.
- CWChris Williamson
The, it's the big problem, uh, on the backend, for instance, with, um, uh, podcasting platforms. So YouTube has gamified not only for the audience, but also for the creators. You have this little number that's one of 10, so it compares where this video is now since publish in terms of the duration of time, 30 minutes, an hour-
- RSRory Sutherland
Got it.
- CWChris Williamson
... two hours, however long with other videos, and it tells you where it ranks. First of 10, wow, this is better than your last 10 videos at the same amount of time.
- RSRory Sutherland
At the same period after.
- CWChris Williamson
Exactly.
- RSRory Sutherland
Now, obviously something's a slow burn and something's a fast burn.
- CWChris Williamson
Some things pick up afterward-
- RSRory Sutherland
Yeah, yeah. Yeah.
- CWChris Williamson
... but you... Uh, generally it's a pretty good indication.
- RSRory Sutherland
You, you... So g- it's, it's a pretty good indicator, is it?
- CWChris Williamson
Yeah.
- RSRory Sutherland
'Cause you do get the sort of Shawshank Redemption phenomenon, don't you? Where, uh, yeah.
- CWChris Williamson
Where it kicks in, it kicks in toward the end.
- RSRory Sutherland
Where it kicks in late. Yeah.
- 52:48 – 1:06:27
The Current State of British Culture
- CWChris Williamson
y- you mentioned there, um, some inefficiencies within the system and some changes to do with Britain. Obviously two million people just signed a petition to, "We are disgruntled with Mr. Starmer or Sir Starmer. Uh, we wanna make some changes there." We've seen a lot of sort of turmoil and stuff across this year, generally 2024 in the UK. What do you make of the state of sort of British culture, the milieu that we're in at the moment?
- RSRory Sutherland
I did make the joke that, um, voting Labor and having a chancellor who's come from the Bank of England is a bit like going on a Club 1830 holiday and taking your parents along, which is... it kind of defeats the object (laughs) of the exercise a bit. In that one of, you know, one of the things I, I think we would like to see as voters, and I'm perfectly happy to give this government a, you know, uh, uh, uh, I think, I think you have to give the people the benefit of a few years before you get pissy about it. I mean, th- that is actually... I'd be interested to know who's signing that p- petition. Is it people on the left who are just disappointed? Is it reform voters? Is it Conservatives? I don't know. Um, who, who is it who feels most kind of cheated? Um, I mean, you've gotta remember that there are an awful lot of people who didn't vote for them if you consider the size of their majority, okay? They've got a massive majority, but the share of the popular vote was fairly-
- CWChris Williamson
Yeah, I'm not sure if you can be disgruntled with somebody that you didn't vote for.
- RSRory Sutherland
Um, well, it's interesting who, who's demanding a kind of, uh, you know, run again. Um... Some of the things interest me because we kind of... I think a lot of people know that, uh, there's fundamental inequity, intergenerational inequity, uh, which is because salaries are taxed very highly and wealth, particularly capital gains from your main property, are barely taxed at all. And that leads to a... I think, a kind of absurdity.... which is that the one, one piece written about this is it's not actually intergenerational inequality that's the problem. It's going to be intragenerational inequality when people start inheriting houses or not inheriting houses. Because you can literally have the situation where you can work incredibly hard for 30 years and reach a, um, a, a position of some eminence in a business or in an institution, and because your parents happen to live in an area of low house prices or didn't own a house at all, you're still living somewhere crap. Whereas your underlings, you know, whose parents lived in Surbiton or Kensington, or whatever it may be, okay, are basically swanning, swanning around in palaces, going on cruises all the time. And it, that does strike me as a fundamental flaw, that we've created this system where unearned income, which is not really particularly meritocratic, or inherited income-
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
... is treated incredibly generously, whereas earned income, I think the top, if I'm right, is it the top 5% of taxpayers pay 50% or 60% of all income tax?
- CWChris Williamson
I think so in America. It may be the same here too.
- RSRory Sutherland
It prob- probably the same here. Yeah, I mean, th- that's ... By the way, it's a kind of statistical artifact. You generally, you, you, you usually-
- CWChris Williamson
A power user.
- RSRory Sutherland
... find those power law effects.
- CWChris Williamson
Yeah, yeah.
- RSRory Sutherland
So it's not quite as weird as it sounds. But nonetheless, that is quite weird when you think about it.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
Now, one thing I thought was extraordinarily interesting as an idea is, y- you know that chap who, who, w- what was it, who wrote The Trading Game, uh, Gary-
- CWChris Williamson
Gary Stevenson.
- RSRory Sutherland
Gary Stevenson. He makes a very valid point, okay, wha- whatever, whatever else you think, which is that nearly all economic models use single representative agents to populate the models, which is they assume that the person whom they're trying to optimize for is an average of everybody. And as a consequence, inequality doesn't feature in those models because you're simply dealing with an average. And so, uh, if Bill Gates walks into a football stadium, everybody in the football-
- CWChris Williamson
(laughs)
- RSRory Sutherland
... stadium is actually a millionaire suddenly-
- CWChris Williamson
(laughs)
- RSRory Sutherland
... on average, okay? It's not, it's simply not a reliable thing to do.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
And one of the things that strikes me as, as genuinely horrific is the extent to which I think the tax system is kind of gerontophilic (laughs) in that, uh, you know, there are huge, huge concessions in terms of pensions that are given out, huge concessions in terms of inherited property, huge concessions in terms of capital gains and existing property. You also get this utter absurdity which fascinates me, which is that, um, uh, there are five-bedroom, four-bedroom houses which have one or two pensioners knocking around in them. Nothing wrong with that, you might argue, except those pensioners are often skint, okay? Now, it's a weird kind of way of being a millionaire that you live in a massive house that you don't entirely need. Now, by the way, if, if you simply saved a hell of a lot of money and you just like living in a big fuck-off house, well, you can argue that's kind of, you know, you're entitled to that.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
But you literally get people living in these extraordinary houses who are, you know, going to Lidl and worried about the price of lemons.
- CWChris Williamson
Yeah.
- RSRory Sutherland
Okay, pretty weird s- ... If someone told you when you were a kid, "You're gonna be a millionaire one day, but you're gonna be really worried about where you buy lemons-"
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
... you'd think, "This is a pretty weird world."
- CWChris Williamson
But what's the, does, does-
- RSRory Sutherland
So, so I mean, one, one great idea, Roger L. Martin's idea, is that you should, at the moment you get your first $10,000 or whatever it is of your annual salary is tax-free every year. Roger L. Martin, a Canadian, proposed that that should be a lifetime tax allowance.
- 1:06:27 – 1:16:18
How to Market the UK to Be More Attractive
- CWChris Williamson
back to the UK for a second, let's say that Starmer brought you in, or whoever it is that does tourism, brought you in to improve UK culture, sort of tourist destination type thing. Have you got any sort of branding or psychological interventions which would maybe be low cost that could make the UK more attractive across the board?
- RSRory Sutherland
For tourists?
- CWChris Williamson
Yeah, for tourists, or for people to stay. We've got the, you know, second in the world, the UK is second in the world for millionaire exits in 2024. China-... fucking literal communist dictatorship authoritarian hellscape was first, with about th- between f-
- RSRory Sutherland
You gotta wa- you gotta watch the super rich, because the super rich don't give a shit about democracy, okay, because they can capture power using money-
- CWChris Williamson
Yep.
- RSRory Sutherland
... rather than using rights. And the super rich, I mean, if you look at Dubai, which has done a fantastic job of effectively saying, "Um, we're just gonna make this place unbelievably attractive for wealthy people to live here, in terms of low taxes, okay, uh, very low crime rate, okay? Uh, you have, um, uh, cheap labor, which rich people really love." You know, most of us aren't, you know ... Uh, you know, in other words, you get lots of people doing stuff for you, so the service industries are fantastic. And, to be honest, very rich people aren't that bothered about being able to vote, because they only get one vote, which is the same as the, you know, the teacher down the street.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
Why would I want something I can't have more of than somebody else?
- CWChris Williamson
Yeah.
- RSRory Sutherland
So, it doesn't surprise me, by the way, that actually very rich people are often quite drawn to authoritarian spaces, because they don't suffer the downside, okay?
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
But, but they gain, you know, in some respects, they, they can profit from the upside.
- CWChris Williamson
China lost about 13 to 15,000 this year. The UK lost 10,000-ish millionaires leaving-
- RSRory Sutherland
Yeah.
- CWChris Williamson
... but we have 3% of the population of China. We have about 5% the population of India, and more millionaires left the UK. Second in the world in millionaire exits. We have the same number of universities in the top 10 as America do, but only 20% of the number of startup founders and entrepreneurs. So, why? What, w- w- what is it that's going on and ...
- RSRory Sutherland
Uh, one thing you could do, and the Portuguese are playing this game. I mean, a lot of people have ... I, I mean, I had an interesting conversation, okay, which is that the, where people spend wealth is increasingly, and I think slightly undesirably, okay, uh, being detached from where people earn it. Now, in, you know, I grew up in the Welsh Valleys. My Scottish ancestors moved down to South Wales 'cause it was the Dubai of the (laughs) late 19th century. It had coal money. It was, it was, it was actually, you know, it was actually, you know, booming. I mean, my great-grandfather, I think, moved down to Edinburgh intending to join, from Accraft intending to join the police force, and, uh, was told, um, "Don't bother here. South Wales is where you need to go (laughs) to make money." But, the people, i- including the coal owners, lived somewhere withi- uh, they didn't live in, (laughs) next to the mine, but they lived somewhere within the proximity of that thing. And I remember my grandmother, who's not remotely left wing, okay, quite the opposite, standing on Cardiff Station looking around, and b- by the way, Cardiff was a lot grimmer then, back then, this was in the '70s, than it is now. It's rather nice now, lovely, okay, and saying, "Just think of the money that's been made here and spent in more exotic places." Always remember that. It was a kind of strangely kind of socialistic sentiment from a (laughs) pretty right-wing grandmother.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
And what you see, and I remember having this conversation with the people who are responsible for Invest in Kent, and I said, "To be honest, it doesn't really matter whether you attract businesses to Kent. If you can get people who earn money in London to come and live in Kent, and their families all spend their money here, okay, that's good enough." And so when you have this detachment of where people make money and where people spend it, one thing the Portuguese are doing, they're, they're proposing lower tax rates for people under 30. They're proposing these nomad visas.
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
Uh, Lisbon, very cool, very attractive city, likewise Porto, um, you know, attracts people who like kite surfing and other excitement.
- CWChris Williamson
Italy's got this new flat tax. You pay 100 grand, and that's all the tax that you pay for the entire year, and that's a new one from them.
- RSRory Sutherland
So, I mean, f- we don't seem ... And now, the other thing you can do is just make the place one hell of an entertaining place. Now, I've always (laughs) argued, uh, I can't get anybody to disagree with this, I don't think pubs, cafes, and restaurants should be, should pay rates or taxes-
- CWChris Williamson
Mm-hmm.
- RSRory Sutherland
... because they're actually a social space. When you spend money ... Th- this, this is interesting, which is that economics holds it as kind of, this is an- this is my Gary Steve ...
- CWChris Williamson
Yeah, yeah, yeah, yeah.
- RSRory Sutherland
... which is, as well as these kind of, uh, single representative agent models which don't understand inequality, um, you know, by the, by the way, uh, really bad inequality is bad for everybody. It's bad for the very rich, okay? You want people, the ideal place in which you live is one in which you're surrounded by a few people who are richer than you and quite a few people who are a bit poorer than you, but not so poor-
- CWChris Williamson
Not so much that they cause a ton of havoc.
- RSRory Sutherland
... that, well, uh, it's not, it's not just the havoc. You want actually social spaces to be roughly commensurate with where you are.
- CWChris Williamson
Cohesive.
- RSRory Sutherland
And if you, if you live in a place where you have 10 rich people, okay, and everybody else is massively poor, the 10 rich people got nowhere to go to eat. Okay?
- 1:16:18 – 1:27:13
Where the Democrat Campaign Went Wrong
- CWChris Williamson
Uh, talk to me about your assessment of Trump's marketing campaign.
- RSRory Sutherland
Um, I didn't think you need to do that because actually what he did was, um, fairly consistent, uh, with what he'd done before. He had probably, Elon was a little bit of a, um, uh, clever-
- CWChris Williamson
Signal boost.
- RSRory Sutherland
Sig- signal boost. I think what you really have to analyze is the Democrats as a marketing entity and how spectacularly bad they are, in that ... (laughs) you end up th- the problem with living in a very tight urban bu- bubble, I did a talk with Rick Rubin for the Christmas edition of The Spectator.
- CWChris Williamson
He's great.
- RSRory Sutherland
Absolutely glorious man, and he made the interesting point that he had a kind of interestingly bipolar childhood and that he spent weeks on Long Island, which was effectively a blue-collar existence, and then he spent his weekends in Manhattan with an aunt who was a kind of creative services director for Estee Lauder, was taken to concerts, you know, the usual cultural events, books, poetry, et cetera. And the interesting observation, he said, is there was a downside to that, which is that the cultural life in New York was entirely driven, and hence constrained, by what other people thought of your tastes-
Episode duration: 2:09:02
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