Rory Week – Illogic (1/5)

Supported by Greenhaven Road Capital, finding value off the beaten path.

This post was part of a week of posts about Rory Sutherland. I learned many things, but broadly Sutherland speaks about four big ideas; creative thinking is hard but worth it, rationality is the wrong model, framing and choice architecture change decisions, and butterfly effects are easiest using psychology. There’s also a Rory’s reads post.

Ready?

Be Illogical.

Rory Sutherland wants you to think different. No, that’s a slogan. Hmm, Rory Sutherland wants you to think in new ways. No, that’s not right either. Rory Sutherland wants you to be illogical. Yes, that’s the sweet spot. How so?

Think about Coca-Cola, says Sutherland. Here you have this one-hundred plus year old company that’s weathered World Wars, Cola Wars, and sugar wars. It’s the best brand in the world. It has Warren Buffett’s stamp of approval. Here’s the challenge, how do you defeat Coca-Cola?

A logical answer looks like this. Coke’s cheap so you’d need to be cheaper. It also tastes good, so your cola would need to taste better. There’s also distribution, diet flavors, and other decisions. Unfortunately for you, none of these things will work says Sutherland. There’s only one drink that’s bumped Coca-Cola from its stand of domination – Red Bull.

“Genuinely, Red Bull makes no rational sense whatsoever. Nobody likes the taste very much. When you research it, people hate the taste. It costs a lot of money. It comes in a tiny can.”

Logically an off taste shouldn’t help – but it does. We associate it as having something extra. It’s why we want our cleaners to smell slightly repugnant.

“If it smells a bit crap to me it must be a bastard to the fly.”

That’s why irrationality makes sense. You can’t make Coca-Cola better than Coca-Cola. You have to be different. But weird ideas don’t get much support.

“When solving problems we are biased toward certain solutions and against other ones.”

Part of this stems from our reliance on what Rory calls “a dangerous technology” – the spreadsheet. This innovation corroborated calculation. It’s “given disproportionate power to anybody who can actually contrive a metric that is numerically expressible. The problem with that is that not all things that matter to people are numerically expressible in the first place.”

Spreadsheets to adults are like blankets to children. They comfort us against what we fear – being wrong or monsters in closets. We may be wrong but at least we were rational and precise.

Here’s another one, how do you make transportation better? Rory loves to rail against trains. He thinks people focus on the wrong thing. This starts with the spreadsheet infestation.

“It’s much easier to have a metric for how fast a train is versus how how comfortable it is, or how enjoyable the journey is.”

Time is an easier measure than pleasure. Yet they are not equal. A two hour flight in the middle of the last row in coach is worse than a six hour flight in first class. The same is true for train rides.

“It doesn’t matter if your journey is three hours or two and a half if it’s useful time.”

“There is no aircraft as fast as a sleeper train.”

Plus, faster has to fight physics. Tracks need laid and maintained. Engines need oil and toil. Cars need cooled as a rule. Psychology though, is pliable. Which would you prefer? A two and a half hour train ride without wifi or a three hour train ride with wifi.

Sutherland wants wifi, a seat, and table.

“What really annoys me is that they make faster trains — like the high speed link through Kent for example — but there are very few tables on those trains. If I don’t have a table then I can’t use my laptop, I can’t have a cup of coffee, I can’t have a newspaper; the whole advantage of the train has been practically eradicated.”

The answers are so obvious they’ve been memed.

Wifi – like bacon – makes everything better. That’s an easy comparison. Coming up with really different things – like Red Bull – is more difficult. We suck at figuring out opportunity cost. Sutherland was at the Royal Automobile Club to meet someone and:

“I asked him, ‘How much does it cost to join this club?’ and he said it was fifteen hundred pounds a year. I said, ‘God that’s incredibly expensive.’

“But on the other hand, as an alternative to buying a flat in London it’s about half the price of the council tax. You can stay there for eight pounds a night, it’s got a swimming pool, a Turkish bath, three restaurants, two bars, a garden and a staff of twenty.

“Nobody ever looks, do I join a flat or do I join a club because that’s a little too wide to set the comparative net.”

Netflix CEO Reed Hastings understands opportunity cost. When asked what his competition was, Hastings said “sleep.” This surprised people because “that’s a little too wide to set the comparative net.” Sutherland has another story about this, this time involving his wife.

“My wife doesn’t like this because she sent me out to buy a fat toaster and I came back with a bread slicing machine instead, on the argument that we didn’t need a fatter toaster, we needed thinner bread.”

“It’s amazing to me,” Sutherland said, “how bad at this exercise we are.” Yet this is how we get Red Bull and better trains. It’s also the antithesis of the spreadsheet.

“One of the reasons stupid, or pigheaded people do well, and when they do well they do really well, is because they are ignoring all the category norms everybody else thinks are important and they’re emphasizing something completely different.”

It’s logical to be illogical. Small ideas can have large effects. We just need to try to think this way.

“I don’t think there’s any huge amount of intelligence required to look at the world through different lenses. The difficulty lies in that you have to abandon four or five assumptions about the world simultaneously. That’s what probably makes it difficult.”

“I like to think of myself as being involved within the indecision making process…the first way to add value is to say: ‘don’t assume it’s like this, it might be like that.’”

Rory has an advantage. He’s got career capital in an industry that values creativity. Organizations typically incentive mistake avoidance over creative genius.

“It’s much easier to get fired for being illogical than unimaginative…If you pretend economists are right you’ll never get fired – but equally, you’ll never discover anything that interesting.”

Organizations, like ecosystems, reward certain behavior. A cost-benefit analysis appears thorough and thoughtful. Your boss will read it, nod, ignore the parts they fail to grasp, and say things like ‘yes yes yes.’ It may be fine, but as Sutherland wonders, did you cast your net wide enough and what do those numbers mean anyway?

“Certainly there’s a problem with numbers in that there are sophisticated things in life that we all understand perfectly well when verbally described. Should psychology be constrained by math? I mean, who has the better understanding of human behavior—Shakespeare or Eugene Fama?”

How to circumvent this? You have to, says Sutherland, “give permission for people to be a bit weird.” A good manager encourages many small, digital, experiments and takes the blame when they don’t work.

“The returns to weirdness are higher in a digital world. Therefore, we should be weirder.”

Managers can cultivate creative thinking with a better incentive structure. As Sutherland likes to say, “no one got fired for buying IBM.” Conventional failure has few repercussions. Professional sports are filled with these coaches. If people fail in unconventional ways they lose their jobs. Sutherland calls this asymmetrical reward mechanism an essential problem of organizations.

Creativity is many things, but it’s not a silver bullet. There will be bad ideas. Sutherland still has bad ideas – but they’re allowed.

“The most vital thing in an ad agency is you have a culture where it’s okay to fail or be silly. Creating a culture wherein you can still make stupid suggestions and still get promoted.”

“Give permission to test counterintuitive things,” says Sutherland. If you want new ideas, be irrational, test odd things, and cast a wide net. You’ll never know what you may catch.

Thanks for reading.