Another way of saying it is that we're predictably irrational. Social scientists from five or six interrelated fields have developed theories as to why—but we need marketers and strategists to make sure those insights are widely known, appreciated and understood. Ad man Rory Sutherland is one such impresario to do that.
In a lengthy conversation with the Edge, Sutherland talks about why we're not so interested in economics —hint: it has to do with math and the belief that neoclassical economics is all there is— and the value of behavioral economics to business.
Understanding human behavior is always, in my view, going to be slightly messy, imperfect, and so forth. Different people, by the way, will always use different heuristics in order to make decisions. No group of people will ever behave in an identical or predictable way, nor will they always maintain those behaviors or proxies for a long time.
For a long time companies that sold digital cameras advertised the number of megapixels, with more being better. But it became ridiculous to try to understand the differences in how our travel and family photos would look if we bought a higher number. Photographers would say that at some point the differences are trivial to quality.
Then of course came the smartphones, which at first delivered good enough photos. As the smartphone cameras got better, we got rid of the additional camera altogether. To compete, smart camera companies focused on specific uses. GoPro's value is the ability to take photos during extreme activities like sky diving and scuba diving.
Instead of trying to be right all the time businesses should learn to be “less wrong,” says Sutherland. This is why marketers and strategists need to be experimenting all the time to find that space of opportunity between, for example, what a customer is willing to pay for a product or service and the cost of all inputs needed to make it, then create experiences that help nudge the purchase.
But this is not about manipulating:
When people say, “Nudging is unethical because it's effectively exploiting innate, unconscious biases to get people to do things that consciously they wouldn't want to do.” The simplest example I always give is that we live on the second floor, the bag of trash gets too heavy for my wife to carry downstairs. Now, if she wants to carry the rubbish downstairs because the bag is now too heavy to manage, there are basically two approaches she can adopt.
There's the first approach which is wait until I'm sitting half-dressed with no shoes on, watching a television program, and say, “Rory, can you take the rubbish downstairs?” This is mistimed, slightly annoying, irritating, and at a moment when I will now have to get up from the chair, put shoes on, and perform this slightly tedious activity.
The alternative is that, without saying a word, she simply leave the rubbish by the back door. The next time I'm headed downstairs I'll carry it down without even thinking about it at all.
German psychologist Gerd Gigerenzer says, “how we present true things has a huge effect on how we perceive and understand and act on those true things.” How much we know about the world, and many other things, including current affairs, thus depends on the gap between how information is presented and our ability to figure out what is true.
It's the job of organizations and associations around the world to collect the facts. Hans Rosling is a professor of global health at Sweden's Karolinska Institute who set out to dispel common myths about the so-called developing world, which (he points out) is no longer worlds away from the West. Rosling developed the software behind his visualizations through his nonprofit Gapminder, founded with his son and daughter-in-law.
In a presentation with his son Ola, Rosling shows how we can close that gap by using our intuition as a strength and use it to question statements. For example:
This is very widespread. Everything is getting worse. You heard it. You thought it yourself. The other way to think is, most things improve. So you're sitting with a question in front of you and you're unsure. You should guess “improve.” Don't go for the worse. That will help you score better on our tests. That was the first one.<
The idea is to be “less wrong,” so we should hedge in favor of what looks reasonable and discount things like fear. Say we rad a headline about sharks and we're afraid of sharks, what we should focus on is the probability that we will meet one rather than the fear a shark elicits in us.
We do better in the physical world because we can use heuristics, which are proxies for what works for us. We also call them rules of thumb and they're useful in business situations when we can tap into our experience and observation about what works. Say Sutherland:
In the physical world we're very good at designing things that work well with our evolved physique. If you take the psychological world, we're much, much worse. We are, in many cases, doing the equivalent of designing a car you have to try and steer with your nose.
Because our understanding and our appreciation of evolved psychology is much worse. First of all, we think there is such a thing called perfect reason. That we should be able to deploy reason and logic in every decision we make, when most of the time we simply don't have enough information to do so or the cost of acquiring that information will be absurd, or the information is not available in a comparable form.
Weighing pros and cons is rather difficult to do in practice. Say we're thinking about a few variables like 3-4 when we buy a car, which one comes first rationally? Is there a linear sequences? Chances are very slim that would be the case. When we design programs and policies in an attempt to predict behavior we make the same mistake of assuming rational and linear choices.
The fields important to understanding human social behavior include evolutionary psychology, game theory, behavioral economics, and psychophysics. “It's not in our evolutionary interests to perceive objective reality. It would be computationally very wasteful and in survival terms, it would be extraordinarily ineffective,” says Sutherland.
Heuristics explain our brand preferences:
Our preference for brands, if you look at the reputational game theory, if such a field exists, there's nothing particularly irrational or foolish, and it's a basic proxy. I want to buy something, I'm happy to pay a little bit more for a feeling of reassurance and the unlikeliness of the product being a disaster or a rip-off, so I will buy from someone who is well-known—and has a reputation to lose.
The fact that we do this instinctively is not irrational—it's fallible, yes, but it's remarkably clever.
When available, we should use the reliable signals we have to make decisions fast and when something more reliable comes along, we should use that. And that's how we function based on our encoded survival skills.
If you enjoyed these ideas, you might also find the power of reframing things and the next big thing is not a technology at all stimulating. Rory Sutherland's reading list includes many favorites on the art of persuasion.