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

by Rory Sutherland

In Alchemy—published simultaneously in the U.K. with a punchier subtitle: The Surprising Power of Ideas that Don’t Make Sense—Sutherland writes with a humorous style filled with wisdom about consumer behavior, innovation, branding, hiring, the weakness of market research, and more.

“Marketing is… a part of business where there’s never best practice, because if you follow a standard orthodoxy your brand will become more like your competitors’, thus eroding your advantage… At Ogilvy, I founded a division that employs psychology graduates to look at behavioral change problems through a new lens. Our mantra is ‘Test counterintuitive things, because no one else ever does.’”

“Reasoning is a priceless tool for evaluating solutions, and essential if you wish to defend them, but it does not always do a very good job of finding those solutions in the first place.”

“The economy is not a machine—it is a highly complex system. Machines don’t allow for magic, but complex systems do… The missing metric here is semi-random variation. Truly free markets trade efficiency for market-tested innovation that is heavily reliant on luck. The reason this inefficient process is necessary is because most of the achievements of consumer capitalism were never planned and are explicable only in retrospect, if at all.”

Sutherland coined the term Psycho-Logic. Too often, “the psychological complexity of human behavior is reduced to a narrow set of assumptions about what people want, which means they design a world for logical rather than psycho-logical people… Strangely… the more data we have, the less room there is for things that can’t easily be used in computation. Far from reducing our problems, technology may have equipped us with a rational straitjacket that limits our freedom to solve them.”

“The new Boeing 787 Dreamliner is… a triumph of psychophysics. Lighting, pressurization, and humidity, all mitigate the effects of jet lag. Moreover, visual illusions—in particular a spacious entranceway—create an impression of spaciousness; it is actually 16 narrower than a Boeing 777, but to many passengers it feels significantly wider.”

“Effective communication will always require some degree of irrationality in its creation because if it’s perfectly rational it becomes, like water, entirely lacking in flavor… Quite simply, all powerful messages must contain an element of absurdity, illogicality, costliness, disproportion, inefficiency, scarcity, difficulty or extravagance—because rational behavior and talk, for all their strengths, convey no meaning.”

“Weird consumers drive more innovation than normal ones. By contrast, it is perfectly possible that conventional market research has, over the past fifty years, killed more good ideas than it has spawned, by obsessing with a false idea of representativeness… Metrics, and especially averages, encourage you to focus on the middle of the market, but innovation happens at the extremes.”

“I once attended a presentation on the worldwide beauty industry, which includes clothing, perfume, and cosmetics… the annual expenditure we were discussing ran into trillions of US dollars. It turns out that more is spent on female beauty than on education… It seems likely that a significant part of what you’re doing when you spend two hours on self-grooming is self-administering a confidence placebo to produce emotions that you can’t generate through a conscious act or will.”

“My contention is that placebos need to be slightly absurd to work. All three elements that seem to make Red Bull such a potent mental hack make no sense from a logical point of view. People want cheap, abundant, and nice-tasting drinks, surely? And yet the success of Red Bull proves that they don’t.”

Sutherland helped a client solve a customer dissatisfaction problem by interpreting “laterally rather than literally. People clearly found something about the length of the appointment window annoying, but maybe it was the degree of uncertainty involved in waiting for the engineer to show up rather than the length of the appointment window… you can’t have a bath or pop out for a pint of milk because you fear that the second you do, the engineer will turn up…  How different might the experience feel if the engineer agreed to text you half an hour before showing up at your door? Suddenly you’d be free to get on with your day… with your only obligation being to keep an eye on your phone… Is it as good as offering one-hour appointments? Not quite, but it might offer 90 percent of the emotional and perceptual improvements, at 1 percent of the cost.”

“The single best investment ever made by the London Underground in terms of increasing passenger satisfaction was not to do with money spent on faster, more frequent trains—it was the additional of dot matrix displays on platforms to inform travelers of the time outstanding before the next train arrived… People hate uncertainty… Making a train journey 20 percent faster might cost hundreds of millions, but making it 20 percent more enjoyable may cost almost nothing.”

“The problems occur when people try to solve ‘wide’ problems using ‘narrow’ thinking… We fetishize precise numerical answers because they make us look scientific –and we crave the illusion of certainty. But the real genius of humanity lies in being vaguely right.”

“We should also remember that all big data comes from the same place: the past. Yet a single change in context can change human behavior significantly. For instance, all the behavioral data in 1993 would have predicted a great future for the fax machine… Supermarkets may know every single item that their customers buy from them, but they don’t know what these people are buying elsewhere. And, perhaps more importantly, they don’t know why these people are buying these things from them.”

“In reality ‘context’ is often the most important thing in determining how people think, behave and act: this simple fact dooms many universal models from the start. Because in order to form universal laws, naïve rationalists have to pretend that context doesn’t matter.”

“Every day, companies or governments wrongly make highly simplistic assumptions about what people care about. Two major US retailers, JCPenney and Macy’s… tried to reduce their reliance on couponing and sales, and instead simply reduced their permanent prices. In both case, the strategy was a commercial disaster. People didn’t want low prices—they wanted concrete savings… It is worth remembering that costly signaling may also play a role in this: certain things need to be expensive for symbolic reasons. A £200 dress reduced to £75 is fine, but women may not feel happy wearing a £75 dress to a wedding.”

“The error of the environmental movement seems to me to be assuming that it is not only necessary for people to do the right thing, but that they must do the right thing for the right reasons… Under the slogan ‘One bin is rubbish’ we focused our campaign entirely around encouraging people to have more than one bin in their household—avoiding the issue of how to convert people to be card-carrying members of the green movement… We were just solving the problem backwards. Conventional wisdom about human decision-making has always held that our attitudes drive our behavior, but evidence strongly suggests that the process mostly works in reverse: the behaviors we adopt shape our attitudes… just as Tesla drivers will wax enthusiastically about the environmental purity of their vehicles, regardless of their initial reasons for buying the car.”

“If you hire one person and they go rogue, you have visibly failed. So individuals who are hiring individuals may be needlessly risk averse… while people hiring a group of employees are much more likely to take a risk on some less conventional candidates… Once you understand this, the potential to increase the level of diversity in employment, education, or politics, without imposing quotas, rises as people are chosen in batches… By applying identical criteria to everyone in the name of fairness, you end up recruiting identical people… Complementary talent is far more valuable than conformist talent.”

“Entrepreneurs are disproportionately valuable precisely because they are not confined to doing only those things that make sense to a committee… Large organizations are not set up to reward creative thinking.”

“If this book provides you with nothing else, I hope it gives you permission to suggest slightly silly things from time to time. To fail a little more often. To think unlike an economist.”

Disclosure: I received a review copy of this book.  In this summary, I have changed the British spelling to appease my American spellchecker.


Sutherland, Rory. Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life. New York: William Morrow, an Imprint of HarperCollins Publishers, 2019. Buy from Amazon.com


 

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