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.
The way choices are presented to people influences the choices they make.
“The power of reframing things cannot be overstated.”
“The interface fundamentally determines the behavior.”
“If you make making a decision really difficult people do two things. They either decide really badly or they don’t do anything at all.”
“The idea that we value things objectively, free of the context and expectation which we bring to them is completely wrong.”
What does that look like? Rory says to imagine a restaurant with great food but that’s had a sewage backup. No matter how good the food, you aren’t eating there tonight. Even if the maitre d offered half off, you’d back off.
We can frame good things in bad ways to change behavior. Two Australian radio personalities convinced Ed Sheeran to help them with a bit. The plan was to offer a peep show – starring Sheeran. One guy would hawk the show on the sidewalk, the other would take the money and guide people to their seats for the thirty-second peep.
It took them two hours to get anyone interested. Sutherland said, “It doesn’t matter how good your product is if your marketing is terrible.” An ‘Ed Sheeran peep’ is great for a radio stunt but horrible for fans.
Another example of good and bad framing is dietary guidelines. Successful diets prioritize easy, not logical, decisions.
“If you’re a dietary advisor or nutritionist the logical thing to say is ‘this is your caloric intake for the day and you should stick to that.’ That’s a very difficult thing to do because it requires you to invoke System Two to eat meals that are smaller than the one you want to eat.
“It’s tiring, cognitively difficult and requires a huge amount of self-policing. If you just say ‘Don’t eat carbohydrates.’ Once a week you go to a shop and don’t buy carbohydrates. You need no extra self-control because there aren’t any carbohydrates in the house.”
Forget about counting units says Sutherland. It’s not hard to do but it’s hard to start. Make it easier, and don’t count at all. “When it’s abstinence you can’t con yourself.” And how are you supposed to count how much you’ve drunk when “you’re already a bit pissed”?
Rory likes the work that Richard Thaler and Cass Sunstein wrote about in Nudge. For people that get worked up about ‘being told what to do.’
“Nudging can be nothing more than the act of painting white lines in the middle of the road or painting a pattern in a car park so that people all park in a way which allows more cars to fit into a given space.
“You know, as an absolutely purist libertarian, I could get really angry and say, ‘I hate car parking lines because they interfere with my right to park at the diagonal.’ But you’d have to be a fairly deranged libertarian purist to take that view, to protest against the lines in car parks.”
Thaler and Sunstein address this in their book. Everything has some design, why not be thoughtful about it. Sutherland suggests designs for people’s psychology.
“If you look at the world of physical design—I drove you here today and I steered the car with my hands; every single car I know, including Formula 1 cars, has a steering wheel. Now, our hands didn’t evolve to steer cars. What we do very sensibly is we design cars in such a way as some evolved equipment that we have is quite good at steering, which is why nobody’s attempting to devise an interface where you steer your car with your nose.”
“What fascinates me is that when we design physical things, no one’s so dumb as to design a car that you steer with your little toe. When we design programs and government policies and things, we commit that error all the time. And the reason we commit the error is because, first of all, nearly all the decisions where we attempt to predict or understand human behavior are based on, as I said, this broken pair of binoculars. One lens is neoclassical economic theory and the idea of perfect rationality, perfect information, perfect trust. That’s obviously wrong.”
How do people actually make decisions? In businesses they use spreadsheets. We buy fat toasters rather than consider bread slicers. We often satisfice and rationalize even more. Those are the things to consider. Focusing matters too.
As Sutherland observed about being on the airplane that unloaded to a bus, focusing matters. Danny Kahneman said this to Sutherland:
“Nothing in life is as important as you think it is while you’re thinking about it. So just thinking about anything makes it look bigger.”
Sutherland rephrased it this way.
“If you can change people’s focus, attention, and their status currencies so they derive more pleasure from what already exists, rather than from what has to be created to sate their demands, you can essentially increase wealth without increasing consumption.”
Think about this. If we change the way people look at a situation it changes how they feel about it. What does it take to change the way people look at a situation? Almost nothing! Just words.
Four words will sometimes be all you need. When Sutherland helped a company figure out why people didn’t renew their subscriptions, they found that four words increased renewals by thirty percent. “Most people like you…” This design is called choice architecture.
“In many cases instead of persuasion, you want to ask ‘How could we change the situation to make it easier for people to do what we want them to do'”
“When you want to change behavior, try to change the environment rather than try to persuade people.”
“I think the first role of marketing is to make a decision easy to make. And that means clarity of choice and lack of anxiety.”
Sutherland says that we are blind to the path-dependent nature of decision-making. How did you decide on your last meal? Often we choose ‘how’ not ‘what’. Stay in or go out? Cook or be fed? Fast or slow? Those are the initial questions, not, Italian or Greek.
The same is true for buying houses says Sutherland.
“When we buy a property, the order in which we look at things matters. Location is the highest priority. Next, In the UK, it might be the number of bedrooms it has (in the US, it might be the floor area, by square footage). We might then look at the size of the garden, a few other features, and whether it has a pool. But architecture generally comes pretty low down the list. We only look at architectural aesthetics when we’ve got down to a final selection of four or five.”
Rory recalled a business example of this too.
“Here’s a really interesting thing, a lot of people at Ogilvy, senior people at Ogilvy…used to say: ‘look, Amazon’s a really successful online book seller, but once Barnes & Noble get serious about selling books online, people are going to choose Barnes & Noble.’
“Quite a few intelligent people said this, and I always remember thinking that they were wrong. What those people weren’t realising was path dependency, which is about how I want a book or I hear about a book or someone mentions a book or I read about a book or I think about a book or my course professor tells me I need a book.
“The next decision is which channel I should buy it in — shall I go to a shop or shall I go online? And then the third decision is, in that channel, which branch shall I go to? Now, within the bookshop channel, Barnes & Noble were strong, but once you’ve made the decision that you’re buying that book online the strongest brand in the online channel was Amazon.”
Amazon still benefits from this path dependent thinking. If I want to buy something online, I check Amazon rather than if my local WalMart could deliver it cheaper, quicker, or both.
Another example – one that Sutherland dislikes – is the the placebo choice. ‘Red or white?’ wine is a placebo choice. You feel like you’re getting to make a choice but really you aren’t. This fundamental human quirk even works on toddlers. Never give a child infinite choice. Give them placebo choice instead.
This works because people prefer to adapt rather than work. Besides the Placebo Choice here are some other choice designs.
- People tend to choose the middle of three options. “There are huge, huge comparative forces in how we actually exercise judgment.”
- People tend to do what others also do. “Making something seem like a social norm massively decreases the stigma of doing it yourself.”
- People tend to believe complicated things do more. “Because it’s complicated we think it’s really good.”
The way people see a situation affects what people believe and how they will act.
“The context, the medium, and the interface within which a decision is taken may have a far greater effect on the decision we make than the long-term consequences of the decision.”
This can be incredibly helpful. Good framing has butterfly effects.
Thanks for reading, one more set of notes tomorrow.