Rory Sutherland: completely legal marketing hacks that always work

Rory Sutherland 0:00 There are two ways of making money. You can either make desirable things or you can make things desirable. And there's not much you can do about the laws of physics, whereas the laws of psychology are magnificently malleable.

Sam Parr 0:13 [upbeat music] We know about you, but do you know, uh-

Rory Sutherland 0:22 [chuckles]

Sam Parr 0:22 ... what you're getting into at all?

Rory Sutherland 0:24 Up to a point. I know of the podcast quite well.

Sam Parr 0:27 I know that you're, like, recently a, uh, a, a kind of a social media star, e-even though you've been killing it for decades. Uh, I heard a story about how someone just started, like, uploading some of your talks and it went viral, and then you said, "Maybe I should do this."

Rory Sutherland 0:39 It happened, I think, accidentally, and I've kinda reversed engineered what happened, which is that most marketing people talk about what they do, and my argument is, of necessity, I started talking about how we think. And consequently, um, you know, the willingness to accept the fact that surprisingly arbitrary-seeming trivial decisions may have a monumental effect or is actually necessary to have a proper understanding of living in a complex inter- in a interconnected system. You know, if you believe there are important strategic things and then there are trivial things which you delegate down to junior people and in which you have no interest whatsoever, fundamentally, I think you're missing the point because, uh, the real world isn't like that. It's, you know, it's full of butterfly effects, silver bullets, you know, str- you know, small things. Alchemy, I call my book, because you can turn lead into gold. You can literally take something which is seen as a product disadvantage and turn it into a strength.

Sam Parr 1:44 I think you had a good example of that with, uh... Have you ever heard, Shaan, the story of how horsepower kinda came to be?

Speaker 1:51 No.

Sam Parr 1:52 Uh, c- tell that story.

Rory Sutherland 1:54 So one of my, one of my great contentions is that when we look at great entrepreneurs or great inventors, Jobs, you know, if you say, uh, Edison, Ford, Watt, Boulton, they tend to be written up as historians as inventors. And my argument is that an invention isn't an innovation until it changes behavior. I think it's Stewart Butterfield of Slack who said something very similar. You know, the only real measure of the effect of you're having on innovation is the extent to which you change behavior. And you can invent anything you like, but if you can't get anybody to adopt it, it's an invention, but it's not an innovation. And Watt was selling steam engines to mine owners, and the purpose of the steam engine was to replace the horses they used to walk round and round in circles, draining the mines so that miners could go in and effectively mine coal, slate, gold, whatever, without drowning. What he realized is that you could, you-- as an engineer, you could talk around, you know, the calorific capacity of the boiler or the length of the s- piston stroke or whatever, and these people didn't wanna know. So Watt and Boulton, amongst themselves, said, "Well, what do these people really wanna know before they're prepared to buy a steam engine?" They said, "They wanna know how many horses they no longer need to feed if they buy a steam engine. How many horses can I get rid of if I buy the steam engine?" So Watt went out and invented a unit we still use today, which is called the horsepower, and the reason it's not named after a famous scientist like the Ohm or the Newton or the Coulomb or the Watt, for that matter, or Celsius or anything of that kind, is because it's a marketing unit. It was invented for marketing purposes because he could then go and say, "If you buy a twenty-five horsepower steam engine, you can actually get rid of seventy-five horses," 'cause I think the horses worked in shifts, so it does the work of twenty-five horses, but it does it twenty-four hours a day, so you can now get rid of twen- of seventy-five horses. And these people would go scribble, scribble, scribble, scribble, scribble, cost of horses, cost of feeding horses-

Sam Parr 3:57 [chuckles]

Rory Sutherland 3:57 ... cost of looking after horses. And, you know, on the back of an envelope, they could then go, "We'll have two of those."

Sam Parr 4:02 [chuckles]

Rory Sutherland 4:03 By the way, it went even further than that. I mean, the Industrial Revolution was a marketing revolution every bit as much as it was an industrial revolution because there was no point in being able to produce things in abundance if you couldn't create corresponding demand. So, you know, one of the things about the 18th and 19th century in England was it was absolutely pioneering period in terms of how people marketed things, and that included the steam engine, where Watt and Boulton would go to a mine owner... Now let me get this right. Some people were already using Newcomen engines, which were less efficient steam engines than the Watt engine. And Watt and Boulton would go along to the people who were already using these inefficient steam engines, and this is how they priced their, their own steam engine. They said, "We'll supply it for free. You pay us a third of the money you save on coal." So it was literally hardware as a service. Bear in mind, this was 1775. I mean, years later, Rolls-Royce started charging airlines for jet engines in the same way, effectively. You pay us for every hour the engine is in service. Now, what was ingenious about that was, of course, it aligned the interests of the people selling the steam engines and the people owning the mines because the people in the country where coal was most expensive most needed to make m- to save money on coal. That was Cornwall, with tin-- where there was, there were tin mines quite a long way away from any available coal field, so coal was more expensive there. And so the first Watt engines tended to be installed in places where coal was most expensive, which meant the mine owners saved more money and Watt and Boulton made more money. So they were actually capturing the upside. Whereas if all you'd done is said, "Yep, it's 100 guineas for a steam engine," you wouldn't have been capturing any of the upside. I, I mean, this was... You know, I have to say, this, this was pretty smart stuff. I mean, o-one, one of the worst mistakes you can make is thinking that people 500 years ago, 300 years ago, 200 years ago were thick. They were very, very clever. And probably they had less time staring at smartphones and more time to be clever, to be absolutely honest. But they... Something I discovered the other day is the Oresund Strait in Denmark. The Danish crown wanted to charge, effectively, customers duty on any cargoes passing through the Straits of Denmark, and they had a kind of stranglehold over it. And the original thing was they'd send people on board and say, "Uh, we'll estimate the value of your cargo, and we'll charge you 10%." And they thought, "This is a lot of bother." So they said, they said to the people passing through the Oresund Strait... This is, like, 1350, okay? They said, "Uh, you tell us what your cargo's worth, okay? Uh, we'll charge you 10% on that. Oh, and by the way, every now and then we'll randomly buy your cargo at the price you quoted."

Sam Parr 6:50 Dude, that's like how we pay taxes.

Rory Sutherland 6:52 It's ingenious, isn't it?

Sam Parr 6:53 [laughs]

Rory Sutherland 6:53 Yeah. You, you, you do property valuation that way, you see. It simply says, "You tell us what your house is worth, and the only deal is we have the right to buy your house for that amount of money."

Sam Parr 7:03 What's funny is, um, I think that in America, I think it's, like, I think .4%. I could be getting the numbers off. It could... But it's, like, between .4 and, like, 2% of Americans get audited every year. And, like, if you do the math, it's like, I don't know, man, it might be worth pushing it and just get audited once every, uh, 30 years or-

Rory Sutherland 7:22 No, no, you're absolutely right. Yeah.

Sam Parr 7:23 [laughs]

Rory Sutherland 7:23 I mean, ha- having said that, an IRS audit, from what I've heard, is a living nightmare, isn't it?

Sam Parr 7:28 Yeah, yeah. Yeah. I'm not actually being serious.

Shaan Puri 7:31 You know who needs the modern-day horsepower is all of the AI products.

Rory Sutherland 7:36 Yeah.

Shaan Puri 7:36 You know, if you, if you, if you have Claude and you have ChatGPT, then you have... Essentially they're all making the same looking product, right? It looks like a chat interface, and then it... You type something, and then it gives you something back. And so they're not differentiated in the experience or the, the, the look and feel of the product, uh, that much. And then they come out with these models, and each one has a different, you know, Opus 3.0 Lite, Heavy-

Rory Sutherland 7:58 [laughs]

Shaan Puri 7:58 ... Expert, Pro, Plus, and you're... You, you've no idea which to use. And then they use benchmarks that are... It's like, "On the crud lightweight benchmark of coding expertise, we're a 3.779." The... Why don't they just have the equivalent of horsepower? Why don't they just write IQ?

Sam Parr 8:16 Yeah, or when, like, Apple was like, uh... The iPhone, instead of saying, like, "It's X amount of megabytes or gigs," they said, "1,000 songs in your pocket."

Rory Sutherland 8:23 1,000 songs-

Sam Parr 8:24 Yeah

Rory Sutherland 8:24 ... in your pocket. Now, this is the classic thing, which is that engineers, whether they know it or not, deep down just want to impress other engineers, okay?

Sam Parr 8:33 [laughs]

Rory Sutherland 8:34 And so a psychological solution in their engineering community will be seen as cheating. So I make the same point about electric cars, which is you have this thing called range anxiety, and we're spending billions and billions of dollars a year trying to produce batteries with a higher energy density. It's a really good thing. I'm not com- ... I'm not saying, "Hey, engineers, you're wasting your time." But isn't it cheaper just to reduce anxiety rather than to increase range? Because if the way to reduce range anxiety is always to increase range, we'll end up with electric cars being heavier than they need to be, more expensive than they need to be, and, you know, with 50 kilowatt hours sitting outside your house 95% of the time effectively doing nothing. So reducing anxiety... And I realize, by the way, how irrational this is. And I'll explain the story, which is... It, it fascinates me because one of the things I think that helps if you want to do this is to have some degree of metacognition, which is you don't just think. You think about your own thinking. It, it apparently true of fi- fighter pilots. The really good fighter pilots have good cognitive skills, but they also have good metacognitive skills. They don't just go, "I'm gonna do that instinctively," but they also ask, "Is there a reason why I shouldn't be doing that in this instance," okay? Or, "This time it's different," as it were. And so my wife's car is a MINI Cooper Electric, and it's got about a... I, I guess it's about a 28, 30 kilowatt hour battery and a range of about 100 miles. And I've got the Lotus Eletre, which is 112 kilowatt hour battery, range of about 300 miles. And I got back from quite a lot of driving. I'd been down to Wales and back, and the car's down to 16%, okay? And I'm going... And all the lights have gone amber 'cause it's at 16%, so I'm g- I'm, I'm going white knuckle on this. I'm going, "God, I'm down to... I'm 16%. Uh, oh, my goodness, I'm down to 16%." Then I look at the actual range, and it's about 58 miles. Now, my wife's car, that's 56%. [laughs] Okay. In my wife's car, we drive around at 56%, i.e., with a range of 56 miles, all the time without the slightest smidgen of anxiety. But when that's expressed as 16%, not 56 miles, okay, I'm suddenly having conniptions and really panicking. Now, what that suggests is that range anxiety is much more a factor of psychology than it is of physics. And the problem with trying to increase battery range is that laws of physics are actually kinda set in stone to a large part, okay? There's not much you can do about the laws of physics, whereas the laws of psychology are magnificently malleable. And so that's the thing that really interests me because we spend a lot of time effectively trying to, uh, work within the laws of physics, which are immutable, when it would be a lot easier just to say, "Actually, you know, why don't we, why don't we take this undesirable thing and make it cool," right? [laughs] You know.

Shaan Puri 11:34 This is the, uh, "elevators need to go faster." No, no, no. Just put a mirror in the elevator.

Rory Sutherland 11:38 Just, just put a mirror. Just put a mirror in the-

Shaan Puri 11:39 People will be happy looking at themselves happy

Rory Sutherland 11:41 ... p- people will be happy. And it's actually, by the way, it gets quite philosophical, this, because you suddenly realize that literally trillions of dollars of effort are invested by businesses every year in pursuit of metrics which the customer may not notice or care about. Whereas, at the same time, no money is spent- On things which would actually make a huge difference. There are relatively easy wins here for both government and the private sector in saying, uh, I'll give you an example of this.

Rory Sutherland 12:15 So I call this reverse benchmarking. In other words, you look at all the metrics that everybody cares about in the category, you find a metric that's been completely and ridiculously neglected, and you double down on that thing. Now, I first came across this in Will Guidara's fantastic book, Unreasonable Hospitality. He goes to the number one restaurant in the world. All of his team say, "We ought to copy this. We ought to do that thing with the napkins. I really like what they do in the bathrooms with the scented josticks. Let's copy that." And Guidara goes, "Not gonna copy any of that because, two... one, we can't afford to, and two, they're already doing it. What I want to know from you is what out of this evening at the world's best restaurant," a Michelin three-star restaurant somewhere, "what was a bit disappointing? What was a bit meh?" And they said the coffee was a bit average. You know, it was nothing special. And the beer drinkers, probably the chefs who'd gone along, got treated really crappily, shabbily compared to the wine drinkers. So he goes back to his own restaurant and he appoints a coffee sommelier and a beer sommelier, and he says, "Your job is not just to benchmark against these people, it's to hit it out of the park." Now, if you think about it, taking something that's bad about the category, not, not saying we need to raise our level to the category average, but instead doing it spectacularly well, something that nobody's expecting. That was what Apple did, I would argue. Okay? That's what Buc-ee's did. I don't know if you're a Buc-ee's... Where, where are you in the US?

Sam Parr 13:45 Yeah. Yeah, I lived in Texas. We-

Rory Sutherland 13:46 You-

Sam Parr 13:46 We were big Buc-ee guys.

Rory Sutherland 13:47 Yeah. Okay. It, it basically started with an insight around women's restrooms. Now, you could have just had averagely clean women's restrooms and you would've benchmarked. No, no. They're like the bloody hall of mirrors at Versailles, right? I mean, I haven't been in them, but I... the men's restrooms are pretty good, but the women's ones are apparently sensational. And my argument is that, you know, if you... let's say you're a hotel, okay? Everybody will focus on the rack rate and the this and the size of the room and, you know, so on and so forth. Have you ever had a ho- e- even in a really expensive hotel, a laundry experience that isn't a bit of a pain in the ass? You know, you've gotta fill in a form. You've gotta put it in a bag. By the way, if you get your laundry back, they never replace the bag the second day, so if you want a second lot of laundry, you've gotta ring up and ask for another bag and another form. Okay? Now, what would happen if a hotel... If I stayed in a hotel, which was... I'm not saying you could be totally shit, okay, as a hotel, as long as you have a brilliant laundry service. You know, Apple is, you know, on a par technologically with other entities, but it's sensationally good at the emotional component. You know, Buc-ee's is what... But it's, it's a thing apart. You know, U- Uber doesn't have cabs that smell of urine. I'm not suggesting you can neglect the other stuff. But I think what you can do is that when you cause the c- customer to pay attention to something, it consequently becomes more important. Because it's surprising and because it, it's attention grabbing, it therefore suddenly, uh, uh, causes the consumer to completely re-weight their utility function. Now, one of my examples would be car rental. I don't, I don't know if you rent cars at airports, presumably occasionally.

Shaan Puri 15:31 Hate doing it, yeah.

Rory Sutherland 15:31 Yeah, exactly. Hate doing it. Now, once you've driven out of the car park, it's the same shit. It doesn't really matter.

Shaan Puri 15:37 Right.

Rory Sutherland 15:37 May- maybe you can make rental return a bit better, but let's not worry about that, okay? I just ask the question, why is it that when I book a taxi for $100 to pick me up from the airport here in London, they meet me at arrivals and even push my trolley with luggage to the car park? Okay? But if I rent a car for $600, I've gotta find and queue at the car rental desk. Then I've gotta go and find, often in like 110-degree heat, I've gotta go and find the car. And then, by the way, there is... there isn't even a laminated sheet of A4 paper in the car saying, "This is how you open the fuel filler cap. This is how you release the handbrake." You know, there's nothing, right? Once you're in the car, about 10, 20 minutes in, you start to enjoy it. But that initial bit, which nobody seems to be measuring, is the bit that's terrible. Now, in some cases, I would literally happily pay 100 quid if the deal is we meet you at arrivals, okay, we take the luggage to the car, we hand you the keys, we answer your questions about how the car works. If, by the way, they also turn the air... Now, you could do this with electric cars. If they also turn the air conditioning on 10 minutes in advance, okay, now you've done something which is... Now, there's that thing, what, what, what's that funny thing? Turo, isn't it, I think.

Sam Parr 16:55 Yeah.

Rory Sutherland 16:55 Which because it's humans might, might be able to create something a bit like that.

Sam Parr 16:59 Yeah, they... I, I use Turo all the time. They have a thing where it will... the, the loaner will drive y- to your home.

Rory Sutherland 17:06 And because of that, by the way, when I rent cars at large American airports, say Phoenix or somewhere like that, I actually arrive at Phoenix, take a taxi to the hotel, and then book the car the next day because the downtown experience of car rental with no luggage is so much better than the airport experience with luggage.

Shaan Puri 17:26 You know, we asked you a question earlier of like, so how do you do it? And it sounds like one thing that I'm picking up is, you know, you pay attention to what irritates you, and instead of just complaining about it, that's a great source material.

Shaan Puri 17:38 I think Jerry Seinfeld says ir- irritation is innovation. He... I think when he was creating his, uh, his talk show, it's because he had been... For years, he'd been famous. He got invited on late night talk shows and he would go, and it's just every... if you look at every late night talk show, it's the exact same. There's the guy at the desk. There's the cheesy music. There's the band guy that they have, you know, sort of forced laughter with. And when he created Comedians in Cars Getting Coffee, it was the equivalent of a talk show, but he's like, "What's the opposite of everything I hate about those things?" And then he created something and I think licensed it for like $100 million to Netflix, starting with irritation at the way that this thing always works.

Rory Sutherland 18:11 There, there, there's a British show, I don't know if this exists in the US, called Room 101.

Shaan Puri 18:15 I don't know it.

Rory Sutherland 18:16 Room 101 is, I think it's from Orwell. It's the room to which you banish things that you really want to get rid of.

Sam Parr 18:22 [laughs]

Rory Sutherland 18:23 And people will come in and just have a rant, and it will be everything from, you know, uh, potholes, slightly boring choice, to cummerbunds or something similar like that, you know. P- some- something that people just think is utterly unnecessary and needs to be eradicated. And you're absolutely right, irritation is innovation. And so one of the things is that I would argue that, um, there are, in a sense, there are two really valuable things, one of which is what you might call the meta stuff, which is what are you really in the business of? Now, you know, Nassim Taleb and I had this conversation about why you actually buy the things you buy, and my joke is, you know, my jokes were, the reason you have a swimming pool isn't to swim in it, it's so that you can walk around your garden in a bathing costume without feeling like an idiot. Okay? So on a hot day, you can walk outside and s- and lie outside without wearing many clothes, without feeling stupid. Okay? And a dishwasher isn't principally valuable 'cause it washes your crockery and plates, it's valuable 'cause it keeps them out of sight. But when you, when you look at these things and go, "Maybe it's not about this. Maybe it's all about that," what you have to acknowledge is two things, I think. One, you've gotta let go of two handholds at once, which is what makes it difficult. One is economic logic. You know, if we reduce the price, more people will buy it. Economic logic is, has very bad predictive value, I think, in the, in, you know, in consumer behavior. And the other thing you've gotta, you've gotta partly abandon is conventional approaches to market research, where you, you think that we've asked the customer what it is they want, and they will tell us, because most of what we feel isn't even thought, let alone spoken. And, and also there are very, very large areas of consumer behavior which are... They may be meta-rational at some level, but nobody will ever tell you, "I would buy that product if it were more expensive." But there are plenty of documented cases of exactly that happening.

Sam Parr 20:30 I think you, you're, you're buddies with the, uh, Daniel K., uh, thinking-

Rory Sutherland 20:33 Kahneman. I d-

Sam Parr 20:34 Yes

Rory Sutherland 20:34 ... uh, uh, yeah.

Sam Parr 20:36 And he, in his book, Thinking Fast and Slow, I don't know if you've read that, Shaan, but one of his, like, one of the famous examples was The Economist, I think it was, or something like that.

Rory Sutherland 20:43 Yes, that's right. The, the, the decoy, the decoy effect.

Sam Parr 20:46 Yeah. They, like, do, uh, this thing where they say, "You can get The Economist for $20 a month, and you get all of these things. And if you get the other version of The Economist, you get all of these things plus digital access."

Rory Sutherland 20:58 Paper, paper only, paper plus digital, and digital only. And paper only and paper plus digital were the same price. So you looked at that, and your mental frame was, "If I get the, if I get the paper version, I'm getting the digital one for free." Vanishingly few people ordered paper only. Now, if you remove the paper only one, so you, you know, effectively you had digital or digital plus paper, vanishingly few people chose the one in the middle, but the presence of the middle option increased by about 2 or 300% the number of people who subscribed to paper plus digital instead of digital. It c-i th- I think it shifted the ratio from one direction to the other. And by the way, that's pretty valuable to The Economist because my hunch is that their, uh, paper circulation is much more valuable in terms of advertising revenue than their digital circulation

Rory Sutherland 21:47 is.

Sam Parr 21:47 One of the best Ogilvy ads, my favorite ad, is, uh... David Ogilvy writes this letter and it's, I think it's called How We Write Ads at Ogilvy, and he, like, has this, like, long maybe 1,000 or 2,000-word essay on, like, the 18 points on how they create ads that are effective. And some people might be like, "Well, why would you give your secret away?" And he was like, "Well, I'm gonna teach them how we think."

Rory Sutherland 22:11 There, there's also a really interesting aspect in, um, business, which is if you give your secrets away, you assume that people will copy you. And the odd thing is they don't, and quite often the reason is they're just culturally incapable of doing it. So for example, if you point out that physical direct mail is very successful for a business, you'd think that your competitors would go, "Well, that's a useful learning. I must do some more of that." What you then discover is no, actually, they're culturally... They just find using, for example, an old-fashioned, um, advertising medium simply too difficult to justify or too unfashionable or whatever it may be to be comfortable with it. And so even if you just give away the evidence of how you do what you do, what you find is that you're copied much less than you'd expect.

Shaan Puri 23:02 You said you study how we think or you like to talk about how we think versus what you do. Let's break that down. Okay, so if I just asked you a very simple question that's probably very broad, and you could take it any direction you want, how do we think?

Rory Sutherland 23:17 I think what happens is that small businesses, family-owned businesses to some extent, founder-led businesses are an exception here. What's interesting is simply being able to understand that value is not really produced in the factory, it's produced in the mind, and that there are two ways of making money. You can either make desirable things or you can make things desirable, and each of them is as profitable as the other. For some reason, once a business fit hits a certain size, it gets focused on what it does, not what it means, and I think there's a kind of invisible loss there. Now, similarly, at the same time, I think those businesses lose the capacity to innovate as well. Something, something rather depressing happens, which is, uh, you effectively get caught in a mindset where you probably have a mental metaphor for your business You're looking at it as if you're an engineer looking at a piece of machinery, and it's reductionist. It's about optimizing the parts rather than optimizing the whole. And at some level, I think, uh, that model becomes unhelpful. But also what happens, I think, is that you become more and more uncomfortable with uncertainty. And this is where it gets quite interesting. There's a wonderful story I always tell, which is Richard Thaler, the Nobel Prize-winning economist and behavioral economist, the author of Nudge. He once spoke to a board of about 10 people, very large company, and he goes to the eight heads of the largest divisions of this company, and he asked them all simultaneously a question, "Would you take a decision if it had a fifty percent chance of increasing your profits next year by fifty percent and a twenty percent chance of reducing your profits by thirty percent?" And six out of the eight of them said no. And Thaler goes back and says, "Well, you know, you're all good enough mathematicians, I assume, to realize these are highly favorable odds. To a gambling man, you know, this is a very, very good bet, and yet you decline to take part. Why is that?" And they reply, six out of the eight of them, uh, "Because, uh, twenty percent of the time or thirty percent of the time, I'd lose my job." And then the interesting thing happens, which is the chief executive is sitting at the end of the table and looks aghast at the eight people and goes, "But I want all of you to take those odds because net-net, in aggregate, we'd almost certainly end up massively better off. Yes, two divisions, one division might have a slightly disappointing year, but four of them would perform spectacularly." And you realize that the way that businesses are structured, as you push responsibility and accountability further and further down the organization, they become more and more risk averse, and they become more and more uncertainty adverse. So they would prefer a definite five to ten percent to a probabilistic, a fifty percent chance of fifty percent. And what happens then is that you, fundamentally, you become highly conservative. You're more worried about downside avoidance than you are upside opportunity. And as a result, obviously, both innovation and marketing, I would argue, are fat-tailed activities where ten percent of what you do is probably more valuable than everything else. You know, you can't tell in advance which ten percent it's going to be. They are processes of exploration and discovery. And what you do is you get rid of the discovery layer in the pursuit of efficiency. And in the short term, it looks like a great idea. But in the longer term, it's, it, it proves fatal, I think. Because you've lost the capacity to adapt, to reinvent, to reposition in pursuit of the occasional, um, the occasional breakthrough.

Sam Parr 27:21 We, we have, um, a very startup-oriented, uh-

Rory Sutherland 27:24 Yeah

Sam Parr 27:24 ... audience, of which a lot of people are founder-led businesses or, or they

Sam Parr 27:28 wanna be. So we could talk about, like, how big companies turned around, but what's an example of a startup or small company that you look at and you're like, "Oh, they nailed it, and here's why they nailed it. Even though if, if this was pitched at a big company, this would never have worked, but here it is kicking ass."

Rory Sutherland 27:43 I mean, the example that I always feature in my book is Red Bull, which is an example of a business that makes no sense. In other words, you could only really justify Red Bull on the basis of intuition. There was some preexisting popularity in Thailand, where I th- I think it was bought by lorry drivers to keep awake at night, okay? But someone there was capable of making the leap of imagination into, into an uncertain future, where a drink which cost a lot of money came in a tiny can, and research told them consumers basically found mildly repellent, okay? In defiance of all the rational odds, this had potential. And it's worth noting that generally, there's always a lot of data from the past because all big data comes from the past. There generally isn't much data about the future. There are two problems there, one of which is if you insist that every single decision is based on data, all your decision-making has a status quo bias because all your data comes from the past. There isn't any data about the future. The second problem that happens is that the, the things you tend to focus on tend to be the same things that all your competitors are focused on, which means that you, unwittingly perhaps, become more and more similar to every other business in your category, which means you become more and more i- i- indistinguishable and less and less distinctive, which effectively means you get involved in a kind of race to the bottom. You create kind of red water competition. And one of the things I would say is an almost unfailing trick to innovate, both to innovation and to brand building actually, is to find the metric which your competitors have neglected, which they don't even bother to measure or which is difficult to measure. Quite often, it's an emotional metric rather than a, you know, a time, space, cost, price, distance metric.

Sam Parr 29:40 What's an example of that?

Rory Sutherland 29:41 Well, Apple, uh, in that everybody was asking the question, "What can a computer do?" in Silicon Valley, you know, in the, uh, 1970s. And Steve asked the question, "Yeah, but what does it feel like while you're doing it?" He asked aesthetic and emotional questions in an industry where everybody was focused on technological questions. But another example, the Uber map is an example of that, where riding in an Uber is more or less the same as riding in any other taxi. What Uber completely transformed was the experience of booking and waiting for a taxi.

Sam Parr 30:16 Mm.

Rory Sutherland 30:16 And by the way, at the other end of the journey, the experience of paying for it. So the Uber map, whether this was intentional or whether it was just some software guys thinking it'd be a cute thing to do, when you booked a taxi by telephone, you rang up having no idea of what the likely availability or wait time would be. In many, in many cases, they say, "Yeah, we'll have a car for you in 10 minutes." And you kind of go, "It's too early." You know? You had no idea. You had no expectation of car availability. And then when you'd book the car, you had no idea when the car was gonna show up, and you'd have to hover around on the sidewalk, you know, waving at any likely looking passing car that appeared to be looking for your address. Suddenly, Uber changed all that because it gave you an estimate of availability. It gave you an estimate of price. Uh, it approved your payment in advance, and then it showed you on a cute map what the license plate number was of the car and where it was and how long it was gonna take to get there.

Sam Parr 31:09 The funny part is, I think, uh, well, I remember Shaan and I lived in San Francisco when U- Uber first came out, and, uh, you would pull up your app, and it'd be like, all right, you'd see the cars driving around you, and you'd be like, "Oh, there's one nearby. Maybe I could snag it." And I don't think that was even real.

Rory Sutherland 31:23 [laughs]

Sam Parr 31:24 I think those were fake. [laughs]

Rory Sutherland 31:25 I've also heard the same thing about pizza delivery, uh, which is when they say it's in the oven, you know, it's be- you know, it's being prepared. It's in the oven.

Sam Parr 31:35 You just have to add probably. It's probably in the oven. [laughs]

Rory Sutherland 31:38 Uh, it-- to be honest, I don't think they're actually scanning a barcode on every pizza that goes in. There is a component to it, however, which is that if you feel that progress is being made... McDonald's probably ma- and KFC probably make a mistake here in that if you order on screen at McDonald's, it basically says, uh, "In preparation, ready for collection." And they could probably play a game there where they say, uh, you know, being prepared, uh, you know, on the, you know, on the tray. They could give you an impression of forward movement because it's all to do with dopamine and, and sort of, uh, effort and reward. And consequently, it's a little like if you imagine a chimp hacking away at a termite mound. If it comes across one or two little termites, you know, just small pieces of reward, it'll keep going. It'll feel content to keep on going. Whereas if you have a long period of effort without any, any seeming reward, fundamentally, the experience is very, very different. I mean, I remember a brilliant case of this, and it's simply, you know, it's, it's, it's mind hacking. I, I make no apology for it. I probably would defend in court the practice of Domino's creating, uh, somewhat fictitious delivery cycles on the grounds that it simply makes people feel better. Now, the, the, the having the cars circling around, I've heard both stories, that they are to some extent accurate or they're kind of what you might call they're figurative. So they, they, they show you car density without actually showing you the accurate, accurate lo- location of a car. I've heard various stories about this. There are also, by the way, elevator buttons, uh, door close, which are placebo buttons. So they don't actually speed up the closing of the doors of the elevators at all, but they give impatient people in the elevator something to do.

Sam Parr 33:31 Is that true, or is that a rumor?

Rory Sutherland 33:32 Yeah. Uh, no, no. The, the... It, it's effectively the illusion of agency. [laughs]

Sam Parr 33:37 [laughs]

Rory Sutherland 33:38 And I'm, I'm, I'm kinda mixed on this because my argument... Th- this gets very complicated. I mention this in my book, which is that Nurofen, which is, um, kind of like Advil, and there were various variants more expensive than the standard variant, which were, you know, Nurofen for period pain, Nurofen for cold and flu. And these were formulaically, in some cases, identical to the base product. And my problem there is that the psychology of pain relief is so full of placebo effects that taking something that says for period pain and costs a little bit more will actually reduce your period pain more, even though the chemical constituents of the drug are more or less the same. But there are debates about the placebo effect and, you know, y- all the way from people who claim that you can do placebo surgery. I mean, there are people who claim that if you actually attempt to fit a gastric band, then you don't fit the gastric band for whatever reason. And the person will still lose weight. I mean, uh, so there are people who are absolute placebo effect, um, fundamentalists all the way to people who are fairly skeptical. But where it's universally agreed is in the area of kind of analgesics and pain relief. Psychological factors, perception plays a massive, uh, role. And of course, there are forms of pain which are enjoyable. This is where it gets stranger still. So if you have, if you have a cut on your, um, your shin, say, and you put some sort of, um, uh, antiseptic on it, you want it to sting in a way because the sting is evidence of efficacy. The fact that it's hurting proves it's working. And so your reaction to this stinging pain is not entirely discomfort because you've reframed it as this is proof that it's doing its job.

Sam Parr 35:33 Yeah, it's like burning off the, the germs.

Rory Sutherland 35:35 It's burning off the bad things, et cetera. And so, you know, th- this is where it gets really strange. But my argument is that nearly all organizations, and this is where innovators and, and, and family-owned businesses have an advantage because family-owned businesses are, for example, privately owned businesses, founder-led businesses are free to use intuition in a way that publicly held companies aren't because most people in a publicly held organization feel that everything they do has to be rationally justifiable from the get-go. Now, what you do has to be justifiable eventually, okay? There's no point in doing something which fails decade after decade. I get that. But the freedom to actually act on hunches, to act on intuition, to place bets for which there isn't much preexisting evidence Is an advantage to the entrepreneurial business over the established business because they can explore a much larger solution space.

Sam Parr 36:35 Hey, can I ask you a question on how you got good at this stuff? Because I know that you're a thought leader when it comes to this stuff, but you were a practitioner for years, and I think you're a dr- direct response copywriter.

Shaan Puri 36:46 Well, well, the story's even better. I think you were not in copywriting, got fired, and came back into the copywriting department and went to the top, which is probably a lesson in fit and, uh, knowing your strengths and your nature rather than, uh, uh, just thinking I'm good or bad.

Rory Sutherland 37:00 Now, I have to admit, it wasn't an accident in that from about week three working as a graduate trainee in Ogilvy & Mather Direct, which was the direct response wing of Ogilvy. David Ogilvy was a massive advocate of direct response advertising-

Shaan Puri 37:16 Yeah

Rory Sutherland 37:17 ... because he believed that you learnt what works, and he was absolutely right.

Sam Parr 37:22 To-- Really quick, define direct response to people who don't understand it.

Rory Sutherland 37:24 Okay. So historically, and back in 1988 when I started work, when there was, there was an internet technically, but there was no web, it typically meant direct mail and couponed press advertisements or more la-- uh, or later advertisements with a coupon or a phone number. But it was an advertisement which invited the consumer, buyer, customer, interested party to respond directly to an identifiable advertisement.

Sam Parr 37:54 So for example, like, here's one. It's like an ad for something and, and there'll be a letter, and at the end there's like a coupon and it says, "Fill this out and tell us you wanna buy, uh, this vacuum."

Rory Sutherland 38:04 And the coupon would have a dotted line around it with a pair of scissors to encourage people to cut it out or indeed to rip it out and put it in their pocket. What would happen is on that coupon there would also be a code, uh, you'd be asked to quote the code if you telephoned, which related both to the creative, um, execution and the media placement of the ad. Now bear in mind, in I think certainly in the 1920s, possibly in the 19th century, long before medicine and science had grasped that there was such a thing as a randomized control trial, the advertising industry had started testing this kind of thing ages ago. Direct response copywriters would, for example, test headlines by running small classified advertisements at very low cost, each with a different little headline in a, you know, in an ad the size of a couple of postage stamps. And they would l- they would learn which one got more responses and, uh, they would therefore, when it came to doing more expensive, large full-page advertisements, they'd use the headline that had worked in miniature. But what had happened, and I s- assume this was at the behest of advertisers, but I don't know for sure, is that newspapers in the United States and the United Kingdom, when they produced newspapers, they were printed on two or sometimes four parallel presses just to produce the number of newspapers you needed. Now, when these newspapers came off the presses, they were interleaved. So it wasn't all the newspapers from, from printing press A went to North Boston and all the, uh, uh, all the newspapers from printing press B went to South Boston. The output from the two presses was interleaved, a bit like shuffling a deck of cards. What that meant was you could run one advertisement in, on press A and a different advertisement on press B, and you'd created a randomized control trial where effectively which of the two advertisements you saw, uh, was effectively random. In other words, you and your neighbor might well get a different advertisement. But it solved that problem where had you not done that interleaving, you might have had a case where all the rich people got one advertisement and all the poor people got another, and of course, statistically then the result wouldn't be very, very valid. And because of this, direct response advertisers endlessly tested both creative changes and indeed media selection. They'd find that one medium would work, you know, four times better than another, and one creative execution would work twice as well as another. And sometimes very, very small changes would make enormous differences. So for years, this would've run from something like the 1930s to the 1950s. There was a, an advertisement for a correspondence course which basically taught people to write more grammatically, and the headline was originally, "Do you make mistakes in English?" Then someone added the word "these," "Do you make these mistakes in English?" Which then piques the curiosity of the reader, so they want to know whether the, whether they're the mistakes that they're making. And then somebody else added the word, "Do you make these common mistakes in English?" Which destigmatized the idea that if you're making these mistakes, you're an ignoramus. And so you would actually have in direct response businesses levels of testing at that level of kind of d-- uh, of detail. And the reason that's so important is that what you realize is that in psychology there are butterfly effects all over the place. You can do surprisingly small trivial things, and they make an inordinate difference to how people respond, how they emotionally respond, and consequently how they behave, and in many cases that means whether they buy or whether they don't buy. And so consequently, long before there was behavioral economics, there was direct response advertising. And in fact, anybody who'd worked in direct response advertising would have gone to one of those early practitioners i- in behavioral economics and said, "Yeah, we've known that for years."

Sam Parr 42:19 [chuckles]

Rory Sutherland 42:20 Right? Um, and I'll g- I'll give you an example. This is... It's something like 1991, 1992, and I'm working on direct response advertising for the phone company. And- We simply, um, were offering people the chance to pay a couple of pounds a month extra to receive what, what we called star services, I think in the United States. Network services, which is you could have call diversion, you could have call waiting on your phone, and you could have something else. Wake-up call or something like that. And, and if you've paid a certain amount monthly, these facilities were added to your home phone line. And we wrote people letters, and it said, "Either send back the pre-lasered coupon below in the, in the postage-paid envelope or call this number and quote this code." We gave them a choice of post or phone. And we had a slightly bonkers client who didn't want to offer the postal response. I don't know why. I've no idea why to this day. Okay. And so we said, "Well, let's test it." Um, let-let's not just get rid of a coupon response because that's dangerous because, you know, if, you know, if you don't test this rigorously, you could end up effectively damaging your business quite significantly on a whim. And so we tested three kinds of letters, fifty thousand people each, randomized, completely randomized selection, as with the newspapers. And one lot got postal only, one lot got phone only, and one lot, as before, got the choice of phone or post. Post only, five percent response rate. Phone only, two percent response rate. When you offer people a choice, it was just... It was seven percent. Not quite, but almost nearly, I think, the sum total of the, of the two independent response rates. That, that may not surprise-- strike you as all that weird, but to an economist, this would be completely baffling because it would suggest that the more important factor e-affecting whether you bought the product was not what the product was or how much it cost, but how you were able to actually order it. And from that moment on, I remember thinking, "Okay, this is extraordinary," because every now and then, there are almost certainly brilliant businesses which are failing because they've failed to unblock some sort of psychological bottleneck. In this case, the psychological bottleneck mi-might have been that, you know, all, you know, people just hated using the phone to order something. [chuckles] And you could have rationally spent millions and millions and millions of pounds trying to improve the product or to spend ages demonstrating what a great product it was, and yet if you fail at one psychological hurdle, you can doom yourself. And so it's very painful. I... When people say, "How do you get good at this stuff?" I'll tell you, I'll tell you my one trick, which is I think I have ADHD. Broadly speaking, I'm not very interested in the middle of things. So I'm interested in looking at a question from a deep philosophical level, and I'm interested in trivia. I'm not really interested in what's in the, in the middle because I think i-in complex systems, there are two things you can do. You can tinker with the details and achieve surprisingly valuable responses, or you can effectively come up with a new paradigm for what you're doing. It's very similar to direct response advertising, where the rule is you either test one thing or you test everything. So in direct response advertising, this would go back to the nineteen twenties, the nineteen thirties, people like, you know, uh, Claude Hopkins and the early kind of practitioners of scientific advertising, as they like to call it, which is, you know, you either test the single word or you come up with a completely different advertisement with a different visual. If you test five things, you can't be sure which one of the five is making a difference.

Shaan Puri 46:08 Right. You know, you've said a couple of things that I, I think are pretty fascinating. The first one that I wrote down was competing on a different dimension. So you mentioned the taxi versus UBER example, and I love this because if you just sat down with a piece of paper, you gave somebody a creative assignment, you said, "Hey, make a better taxi," they would almost always focus on the ride.

Rory Sutherland 46:28 Yeah.

Shaan Puri 46:28 The cost of the ride would be the first. If I could make it way cheaper, that would be great. If I could make it way faster, that would be great. If I could make it way more premium in some way, the ride. And what you pointed out was that there was a psychological bottleneck that was preventing people from doing it. When UBER first came out, I remember people thought it was overvalued. And I was living in San Francisco. They were raising money, and they were doing this analysis of what percentage of the taxi market, if UBER made up twenty-five percent, if it, if it took fifty percent market share of the taxi market. And what ended up happening was in San Francisco alone, UBER tripled the taxi market, uh, within a couple of years.

Rory Sutherland 47:04 I have a very brilliant friend who had the idea for effectively a dynamic market in transportation before UBER. Actually, he patented something before UBER did. And he has a letter responding to his idea from Guy Kawasaki, which said, "I can't really see this working in the United States." He said, "Americans don't take taxis very much. Maybe in New York." And actually, when you think about it, pre-UBER, you know, LA was a motorist market if you were, if you had a car, and it was a public transport market if you didn't. It, it... The taxi market was, was relatively small. New York was an outlier. New York, obviously, the New York cabs were a major thing. But you're absolutely right. Everybody was looking at it as if it was purely cannibalizing an existing market. Now, what the economists and what the Harvard Business Review would say is that they achieved this through lower prices. I don't think they did. I don't think UBER's actually reliably cheaper necessarily.

Shaan Puri 48:04 Right.

Rory Sutherland 48:04 Okay. I think they achieved it through better psychology. And the example I had of what I call, uh, uh, th-these are the sort of fat-tailed... Jeff Bezos puts it very well. He says, "You know, in baseball, the most you can score is four, but in business, you can hit a thousand." And I think that the fear of uncertainty and the, and the unwillingness to experiment in business is causing people to endlessly try and sort of hit singles, and at the expense of occasionally trying to hit a thousand.

Sam Parr 48:37 But how do I-- Like, Shaan and I are both business owners. Like, how do we go from being academic and also looking at past results to-- and analyzing past results? Because what's interesting is, like, you guys were talking about Uber. If you read their seed deck, even they said, they're like, "We think that, you know, if we knock it out the park, this might make a hundred million dollars a year." You know? Now they make hundreds of millions every week. What can you tell me where for the next week or two weeks I can shift my thinking and create a framework or something like that where I can go and deploy this stuff on my team or-

Shaan Puri 49:11 Yeah. M-m-maybe a habit or a question I can start asking myself, an action I can take to get this sort of different type of thinking.

Rory Sutherland 49:19 I'll give you a real world example. I worked on American Express, which is probably... David Ogilvy always said, "If you want to be a copywriter, spend the first five or six years of your life working in direct response because you learn what works, you also learn what matters." You also learn what not to leave out. I'll give you an example of that. You know, if you are selling a product by mail order and the coupon did not say somewhere, "Expect your product within twenty-eight days," or, "It will be sent to you by post within twenty-eight days," you'd probably halve the number of people ordering because you've now created uncertainty. You've now created a degree of ambiguity. So it also, it also taught you attention to detail actually in advertising, which I think a lot of mainstream advertising misses. Which is, that's all very well and good. You've made a wonderful claim. You've changed people's minds about something. But actually if you want them to act, they require a far greater degree of certainty than can often be achieved in just a poster or a TV ad. So i-i-i-it was a bri-- it was a brilliant training. Working on American Express was probably the best account you could possibly work on, um, in the sense that they do a bit of everything. It's a brilliant brand, but it also is a very, very professional direct marketing operation. And they do everything. They do member, get member, they do card member communications, they do acquisition communications, you know, et cetera. You know, uh, y- you know, all manner of stuff. Um, David Ogilvy, by the way, always wanted American Express to do a very simple thing which they never had the courage to do, which was, uh, to write a letter which basically said, "Take out the American Express card and if you aren't happy, if you don't want to keep it after your first year, we'll refund you double the fee." And nobody ever had the courage to do it. I still think it would actu-- it would work. But here was the interesting thing working on American Express. There are little things that American Express did, like putting member since on the card, which cost nothing but have been worth, and American Express people have told me this, have been worth billions of dollars to American Express since the card was started. People are more reluctant to cancel, uh, because they don't want to, you know, rejoin and go back to year zero, if you like. You know, you know, I'm sixty years old. If I had a card with member since twenty-four on it, it doesn't quite say the same thing as member since ninety-three or whatever, ninety-five I think. Okay. So that was a tiny little bit of psychology which cost absolutely nothing. But it also is a testament to the kind of relationship they have, which is wh- you know, you are a card member. We don't just issue you a card from one year to the next. You know, we can s-- you know, it's, it's an intimation that they're in a relationship with you. But here's something that was a, it was client idea. Not, I'm, uh, um, although the agency helped, but it was a client idea. This is the late eighties, early nineties. We're encouraging people to get the American Express Gold card, which was pretty expensive. I mean, you know, it was something like eighty pounds back in the eighties. And we wrote long, long letters explaining all the rational reasons why you want the Gold card, you know. And, um, this client, I think, had the leap of intuition, which was people wanted the bloody Gold card anyway. Okay? It's the late eighties, right? You know, it's a, you know, an area, a, a period of fairly conspicuous consumption. And he said they want this card anyway. You know, to be honest, we could just say, "It's a great looking card," [chuckles] you know, a-and people would apply. The reason they're not applying is fear of rejection. And so he managed to find a way in which you could actually say, "All you need do to receive your card," not apply for your card, but receive your card, "is sign your name on this form. What we know about you suggests you're virtually pre-approved for membership, and the reason we've made this so simple is we want you as a card member." Now, think about the difference there psychologically between applying to Yale and getting a letter from Yale saying, "We want you to apply." [laughs] Right? Okay. Or, or think of it in dating terms. You're interested in a girl or a bloke, okay? And the difference in terms of your thought patterns if you thought that person was interested in you. By, by the way, there is... I don't know if you've read The Rules by, um, I th- I think it's called The Game by Neil Strauss actually-

Sam Parr 53:36 Yep

Rory Sutherland 53:36 ... about the pickup artist community. It's quite an interesting book.

Sam Parr 53:40 Brother, look at us.

Rory Sutherland 53:41 [laughs]

Sam Parr 53:41 We've been, we studied... I... You should see us when we were fourteen, okay? We-- Not only did we read that, there's more highlighted parts than there aren't. [laughs]

Rory Sutherland 53:50 But the interesting thing is, it's actually for most guys, effectively propositioning everybody you fancy is a workable strategy. Most people can't bring themselves to do it because of fear of rejection. You know, fundamentally. Most people haven't got the, you know, the chutzpah to just chat up and proposition everybody they fancy because, uh, you know, you'll get a ten percent hit, maybe a five percent, ten percent hit rate, which is of course all you need, but nonetheless, it comes at the cost of, you know, significant, uh, dents to the, uh, uh, the ego.

Sam Parr 54:27 I'm, I'm very much, uh, an amateur historian, and like two major takeaways I've had from reading hundreds of history books is human nature has been the same and will always be the same.

Rory Sutherland 54:38 And so you can just copy other people who have done something or be, be heavily inspired by them. And the second thing is that, um, when humans talk to each other, we use these phrases like, "Well, just be rational. Just be this. Like, don't be an animal. Like, just be rational." And it's like, well, we are animals. We are not rational people, and therefore you can't use logic in order to build something, or you can't use too much logic in order to, like, build something great. Humans are, like, very irrational beings. It, it's very interesting because this idea that you should-- this is not to say that rationality isn't valuable. It's a question of when you deploy it. And, um, David Hume, the philosopher, said, "Reason is and should only be the slave of the passions." Now, there's a great book by a French mathematician called David Bessis called Mathematica, where he argues that very little progress in mathematics is actually made logically. What mathematicians do is they use maths to sense check their dreaming effectively. It's brought in to correct your emotional behavior when it goes wrong. But actually, the idea that in business that the explanation of a decision is more important than the outcome of a decision to your career, okay? That the defensibility of a decision is what you're really focused on, not the act-- the quality of the outcome of the decision. What that means is that you're effectively saying you cannot use intuition, which is a bit like going to a detective and saying, "You can only use information which has evidential value." You can't use gossip. You can't use anecdote. You can't use intuition. You can't use a hunch. You can't use, um, you know, your sense of smell, as it were. You can only use evidential value to arrive at, to, to actually, um, solve a crime. And it massively limits your ability to solve complex problems because what, what your intuition is telling you to do is where to focus your attention. And in the case of, you know, in the case of crime, you might ask a very open-ended question, "Did anybody notice anything unusual last night between the hours of eight and ten PM?" Now, very open question. All someone will say is a weird man drove past in a white van or something. Okay? Doesn't... You know, no evidential value, but it tells you what to investigate next. And if you demand that every single business decision is based on stepping stones of, of pure preexisting data and logic, you can only get to about five of the possible twenty-five places where a solution might be found, and the places you'll get to will al-already be occupied by your closest competitors because they're using the same stepping stones you are. Why, why didn't you ever wanna start, uh, your own company? You, you, you have all these, like, crazy, cool ideas. Well, there is one which I did inspire, which is a coffee brand called Flat White or [censored] Off. [laughs] Wait, wait, wait, hold on. Did you say you created a coffee called [censored] Off? Yeah. It exists. It, it might currently be in some sort of legal dispute about the trademark. Not with me. I'm happy for them to take my idea rather than- Somebody trademarked, uh, [censored] Off? Somebody else had this idea? [laughs] Le-let me ex- let me explain the idea. Okay. It, it struck me that there were places where you wanted a high-quality cup of coffee, but you didn't want to queue behind people who are all customizing their own bloody drinks. And the technology with contactless payment now allows you to basically tap, pick up a coffee which has been made in advance, and walk off. And my argument is that the flat white, which is a New Zealand/Australian invention with... which is, I think, the right ratio of coffee to milk and with microfoam as well. I think, I think it's basically the, you know... It, it's the happy medium of sensible coffee drinking. And this is quite interesting because my assumption was that the place to put this is they only have two versions. For the vegans, there's an oat flat white, and there's a regular milk flat white. You walk up, you tap your card, you pay £4, you pick up a pre-made coffee, and you walk off. And my logic was, at the time, train stations and, um, airports were the natural home for this thing. Uh, they're expensive real estate, so the fact that you can sell more coffees in a given time, it's Henry Ford applied to coffee, basically. Okay? The argument is that Starbucks and the customization and the time is absolutely wonderful if you're in downtown Santa Fe and you're meeting a friend for two hours, but it's not suited to airports and railway stations. So anyway, this thing launches. It's only, it's only at the trial stage at the moment. But something really interesting happened, which is shortly after we launched and got some publicity, someone came to us and said, "Actually, the natural market for this isn't even train stations and railway stations. It's conferences." Quite often, the coffee at a business conference is rubbish because it's, it's badly made filter coffee because you have to serve a lot of people simultaneously. Or you have a customizable coffee thing, right? Where there's a massive queue, 'cause everybody comes out of the plenary session. They all want a coffee, so they've got something to hold in their hand and not look like an idiot, which is one of the reasons we buy coffee, by the way. Nothing to do with drinking it. It's effectively accessorizing ourselves. Okay? And the point about Flat White or [censored] Off is it's high-quality coffee, not crappy filter coffee, that you can produce at scale by simply reducing the customization level. Now, here's where it gets interesting. Henry Ford was a brilliant marketer. Why did he say you can have every, any color as long as it's black? Because at the time, paint dried at differing speeds depending on the color. And therefore, if you had a variety of paint colors on the Ford production line, it completely messed up the flow of the production line because some cars would take longer to dry than others, and it turned out that black was the fastest drying color, so they basically imposed black on the whole Ford fleet. So it's absolutely fine not to give people something- To ask people to make a trade-off, so long as you make them aware of the trade-off in advance, okay? That's why it's called flat white or [beep] off. It doesn't... You, you... If you turned up at a branch of Starbucks and they said, "We, we only serve flat whites," right? You'd go, "What the hell are you talking about? No, no, I want a Frappuccino with, you know, almond milk and blah, blah, blah." "No, no, okay, no you can't have that." It's, you know. Now, the reason it's called flat white or [beep] off is it makes explicit the trade-off before someone turns up. So you said... If anybody... Uh, the joke is, if anybody turns up and asks for a cappuccino, you point at the logo and you say, "The answer's in the name." Right?

Shaan Puri 1:01:20 [laughs]

Rory Sutherland 1:01:21 Now, there's an example of this which always fascinates me. Are you a fan of the Moxy hotel chain?

Shaan Puri 1:01:27 Oh, I stayed at one in New York. Uh, they, they're like a kind of upscale, uh, like, kind of more modern, contemporary type of chain.

Rory Sutherland 1:01:34 Mm. So it's quite interesting because the rooms are tiny. There's no room service. There's no laundry, okay? But the ground floor's kind of a bit like a... well, a, a solvent WeWork, [laughs] right? Okay. And there's a 24-hour barista. There's a, you know, the, you know, uh, there's a, um, uh, usually there's someone making really quite good cocktails. You check in at the bar. You don't check in at the con- at the check-in desk. There isn't a concierge, none of that bollocks, okay? Don't go to stay there on your honeymoon. Don't go to stay there for a week. But if you've got one or two nights to stay in a place, it's exactly what you want, okay? It's small room, very good TV, very good Wi-Fi. The other great advantage is after you've checked out in the morning and had breakfast, to be honest, you can hang out there for another five hours if you want to, you know. Whereas if you tried doing that in a conventional hotel, you'd, you'd feel a bit unwanted. It's a, it's, it's basically a brilliant, brilliant explicit trade-off, and they always said when I spoke to them, they said, "Basically, 90% of our customers love this, and the reason they love us is either 'cause they've stayed before, they understand the trade-off, and they buy into it, or else they know about how the Moxy works and they get the deal and they've decided in advance, 'That's the trade-off I want.'" 10% of their customers are expecting the Marriott, and they're pissed off as hell, and it's a classic example of actually, you know, expectation minus reality, you know, is the formula that matters. You can provide less of something, so long as you don't actually disappoint.

Shaan Puri 1:03:06 Right. Have you seen the Slate truck?

Rory Sutherland 1:03:09 Yes.

Shaan Puri 1:03:10 What is it?

Rory Sutherland 1:03:12 So it's an absolutely minimalist electric vehicle. It's about $25,000, and you can effectively customize it with all manner of sort of automotive bling.

Shaan Puri 1:03:24 But, but, but the, the core trade-off is up front. They're like, "There's no heat seaters. There's no screens. There's just knobs. You gotta crank the window yourself. Um, it's basic. We're not filling it up with stuff, but it's... If you want simplicity and you want the price to be... It's a $25,000 electric pickup, and you're just not gonna get all this random junk that every car company puts in. We're not doing that."

Rory Sutherland 1:03:46 So it was absolutely explicit, and in a sense that's what, you know, Avis did with, "We're number two, so we try harder." This is, you know, don't... Uh, okay, we don't have the scale of the other guys, but we make up for it somewhere else. And the consumer's very happy making trade-offs, so long as they're explicit. The problem with a lot of kind of cost reduction and, um, you know, and, uh, efficiency pursuit in business is it isn't chosen by the consumer. It's imposed on them.

Shaan Puri 1:04:13 Hmm.

Rory Sutherland 1:04:13 Which is a very, very different thing. But no, the Slate truck is a brilliant example of what you might call explicit minimalism.

Shaan Puri 1:04:20 But it, but it's brilliant. They, they underdid the competition where everybody else tries to overdo the competition, and they were just very explicit about it and it resonated like crazy. I mean, I put... I mean, I've never... I would have never bought a pickup truck, and I put a deposit in-

Rory Sutherland 1:04:34 You put a deposit down

Shaan Puri 1:04:34 ... just because I-

Rory Sutherland 1:04:35 Did you really?

Shaan Puri 1:04:35 I couldn't, I couldn't help it.

Rory Sutherland 1:04:36 [laughs]

Shaan Puri 1:04:36 I, I loved what they, I loved what they were all about.

Rory Sutherland 1:04:38 And I've... If I'm right, I think they'll discover something really valuable, interestingly, which is everybody's talking about the idea that cars become shareable. Now, I would share my Slate truck with anybody else, right? You know, what's the worst that happens? They vomit in it and I have to hose it down, [laughs] right? I'm not gonna share my m- my existing car with anybody, right? I don't even, don't even let my wife drive it, [laughs] right?

Shaan Puri 1:05:04 [laughs]

Rory Sutherland 1:05:05 And so, you know, one of the, uh... What they'll do, when you do these eccentric things, as with discovering that FW or FO is a, is a, is an absolute godsend for conference organizers, what you often do when you do something eccentric is that you plan and you do your, you know, cost-benefit analysis and your feasibility study. But generally, when you do something unusual, you discover that your target audience is actually bigger than you expected, and also it's bigger than you expected because you don't have the same competitors that everybody else does. You know, if you think about the Marriott versus the Hampton Inn versus the DoubleTree versus the Hilton, it's all kind of like, eh, okay, right. Whereas the distinct... Do you know what Moxy... why the Moxy's called the Moxy? It's because the project was called Marriott on Generation X and Y, and so it was called Project Moxy, and they never got around to [laughs] coming up with a new name for it, by the way. But the interesting thing is I'm old, right? I'm 60. But my wife and I, my wife's 61, eh, cradle snatcher, and, um, uh, she, you know, we both-

Shaan Puri 1:06:12 [laughs]

Rory Sutherland 1:06:13 ... we both choose... Uh, as I said, you know, five days, you know, uh, uh, you know, m- maybe five days is a bit too long to stay at a Moxy. If you've got any one or two or three-night stay, it's what we go for, because a- actually, I'm not quite a Boomer. I think I... What am I? I'm probably Gen... between Gen X and Boomer or something. Anyway, but I'm, you know, I'm way outside their intended target audience. And so, you know, it's very interesting. If you focus on one target audience, you'll gener- generally find that as a byproduct of your focus, you'll find incremental target audiences who, by the way, [laughs] are... This is very interesting in terms of tech. Because there's a lot of tech out there which is really valuable to the old, okay? But the problem is you can't market explicitly to old people because then young people won't buy it. So cars from you, if you take something out of the Volkswagen Golf, the average age of a Volkswagen Golf buyer who's buying a new Golf is probably about fifty-nine. But when they advertise it, they don't show a fifty-nine-year-old, they show, you know, a twenty-eight-year-old or a thirty-three-year-old or whatever. And so quite often you have this very interesting thing that old people are quite badly served by marketing because marketing is always really eager to show the product in the hands of young people. And there are a couple-- several examples of this, one of which is, um, bone conducting headphones. I don't... Now, they're marketed at joggers and swimmers, and the idea is that if you have bone conducting headphones, when you go jogging, you don't lose all spatial awareness and run in front of a bus because your ear lu- your ear holes are still open and all the sound is transmitted through effectively the bones. It's transmitted to the bones in your inner ear. Absolutely brilliant for people with hearing loss because it bypasses the stirrup and the anvil and whatever it is inside the ear, which are the bits that deteriorate when you get older, and the sound goes straight basically to your oral nerves. Absolute godsend to old people. No old people know about this. And the other one is, um, actually I've got one here, uh, the Samsung folding phone, okay? Sorry, bloody camera's wandered off. There we are.

Sam Parr 1:08:20 [laughs]

Rory Sutherland 1:08:21 It's zooming in like some-- Okay. But this folding phone, okay. There's a secondary market there in anybody over sixty because the standard mobile phone s- handset is too [beep] small. You know, once your eyesight is, you know, goes a bit. I've had a cataract operation, okay. Your standard phone handset is pretty much unusable. So there's a whole load of tech out there which really intrigues me because it's actually brilliant for older people, but they just aren't told about it. [laughs]

Sam Parr 1:08:50 Hey, can I ask you one last question? You-

Rory Sutherland 1:08:52 Mm-hmm.

Sam Parr 1:08:52 You're, you seem very well-read, uh, very eclectic. Um, I have this Ogilvy on Advertising book, but if I wanted to get better at writing copy but also coming up with ideas and frameworks, can you suggest a few books that I could read?

Rory Sutherland 1:09:08 Some of th- Okay, some of them are very old. Obvious Adams, Robert Updegraff, published in nineteen sixteen, where it-- you can read it basically on a single toilet visit. It's about fifty, sixty pages. Um, I'm delighted to say I think Amazon keep reprinting it, or somebody keeps reprinting it.

Sam Parr 1:09:26 Obvious Adams-

Rory Sutherland 1:09:27 Yeah

Sam Parr 1:09:27 ... The Story of a Successful Businessman.

Rory Sutherland 1:09:29 You got it.

Sam Parr 1:09:29 [laughs]

Rory Sutherland 1:09:30 Now, when you first start reading it, you'll think, "Jesus, this is a bit corny." Okay? But it was one of David Ogilvy's favorite books, and it's actually about an advertising man and his approach to problem-solving. And everybody-- It really delights me because every now and then I mention it on a podcast, and it goes to, like, number one in advertising books on Amazon in the UK. [laughs] And I always, I always take a bit of a thrill from this because this guy died in about nineteen forty-eight, you know.

Sam Parr 1:09:57 [laughs]

Rory Sutherland 1:09:57 And his book's still influencing people. And, um, there's another great one called The Specialist by, I think, Charles Sale. These are some of these old American business books which are absolutely priceless. Scientific Advertising by Claude Hopkins, for example. There's a book called How to Become an Advertising Man by James Webb Young, who was at J. Walter Thompson in Chicago for many years. Now, there are other great books. Obviously, in behavioral science, Richard Shotton has written some superb books called, for example, The Choice Factory or The Illusion of Choice, and they're really, really worth reading in terms of understanding the, uh, counterintuitive aspects of human psychology, if you like. Okay? They're-- I really, really recommend them. Um, I also recommend you just read widely. I mean, Nassim Taleb is one of my biggest influences because I think differently about statistical things now. I realize that the real world is actually fat-tailed, it's not a normal distribution, and that, you know, a small number of things have a disproportionate amount of power. I-in terms of writing, David Ogilvy's, o-obviously anything by him is very, very good, not least because he's a very, very good writer of books as well as a very good writer of advertisements. There's also a thing which is desperately difficult to get a hold of called The Copy Handbook, published by D&AD in the UK. But unfortunately, I think you have to buy it on eBay, and they never did a reprint, and it's about three hundred quid. But see if you can find that, because it's great copywriters describing how they write. Drayton Bird, um, a, a British, uh... He's kind of the British version of Lester Wunderman in direct marketing. Various books, for example, Common Sense Direct Marketing. There's a great book published by Ogilvy called... I think it's called How to Write. This is how to write in business from one business person to another. It's not so much about copywriting, but the guy there was Joel Raffleson and Ken Roman wrote it. They were two Ogilvy, very senior people. I knew Joel. Th-The other reason I'm really-- I'm suggesting old books is that an awful lot of things in advertising stop being used. N-This is why I suggest to anybody here listening to this who's an entrepreneur, go and look at some advertising archeology. And the reason is that advertising people, just as engineers want to impress other engineers, advertising creatives want to impress other advertising creatives, which means they want to do something that's brand new, never been done before, da, da, da, da, da. Actually, loads of things get discarded by the advertising industry which never stop working. Long copy press advertising never stop working. Direct mail never stop working. Jingles never stop working, although you have to call it sonic branding now. And one thing that's fascinated me which never stopped working, it just became unfashionable. If you go back to the nineteen fifties, there are a lot of advertisements which are cartoon strips, right? You know, they're like half page, quarter page cartoon stories with people speaking in speech bubbles. David Ogilvy always said, "Look, that is the single most readable form of print. If you put anybody down with a newspaper, they'll read the comic strips first." And yet for some reason, it was massive until the 1950s and even the 1960s, lots of advertising took that form where you told a story in print. And for whatever reason, nobody's doing it. Now, here's what's interesting, okay? What are kids into now? Manga, right? If you actually wanted to reach young people, uh, uh, uh, ironically, reverting to this 1950s form of advertising where it's effectively, okay, it'll have to be, you know, differently illustrated maybe, but it's effectively manga, would be about the coolest thing you could do. This is the fascinating thing, and as David Ogilvy said, "You're not advertising to a standing army, you're advertising to a moving parade." And new, new customers, you know, new members of new target audiences are, are, are appearing all the time who aren't aware of the things that the people born 10 years earlier already know. And so the opportunity, I think, to, uh, literally be innovative by simply learning from the past, because the advertising industry is very bad at it. Now, as David Ogilvy would say, you had to-- y- you-- sometimes you had to break the rules, but you had to know the rules in order to break them, if you see what I mean. You had to be aware of the fact you're breaking a rule, and you had to have a good reason to do it. That was fine.

Sam Parr 1:14:28 You, uh, you're a fun-ass hang.

Rory Sutherland 1:14:31 [laughs] Well, I hope it's been useful.

Shaan Puri 1:14:34 Well, I feel like we did maybe 20% of what, what I think we could have talked about. And so, uh, I think that ending part two-

Rory Sutherland 1:14:42 Well, we'll do, we'll do a repeat. I'm very happy to do a repeat.

Sam Parr 1:14:45 Dude, I have, like, all these notes. I'm about to, like, run to my marketing team and be like-

Rory Sutherland 1:14:48 [laughs]

Sam Parr 1:14:50 "... Do all this. Bye." [laughs]

Shaan Puri 1:14:53 [laughs] That was awesome.

Rory Sutherland 1:14:56 Total pleasure, and anytime. Really delighted. [upbeat music]