Do Humans Really Behave Rationally?

We all have seen advertising in various forms by agencies such as Ogilvy, one of the largest advertising and PR companies in the world. Recently I have been following their vice chairman Rory Sutherland, a charming British bloke with very interesting insights on human behaviour and what makes advertising work.

Take an example of Ferrari, the company provides free car delivery, while offering once-in-a-lifetime chance to visit their factory where buyers get to experience driving the car back home for only $500. This is an ingenious way of charging more while avoiding delivery cost! 

Instead of focusing solely on creating a great product / service, he believes it is equally, if not, more important to have some 'innervation' (his term for psychological innovation), where people's perception is the only reality that counts. He said: “Engineers, medical people, scientific people, have an obsession with solving the problems of reality, when actually … once you reach a basic level of wealth in society, most problems are actually problems of perception” and “when you demand logic, you pay a hidden price: you destroy magic”

Then you might wonder why most marketers don't try to do something 'innervative' to create this perception, he beautifully explained: “It is much easier to be fired for being illogical than it is for being unimaginative. The fatal issue is that logic always gets you to exactly the same place as your competitors.”

Humans are driven psychologically, take an example of Uber. Yes their creative idea of enabling everyone to monetize their cars is amazing, yet at the same time “the uber map is a psychological moonshot, because it does not reduce the waiting time for a taxi but simply makes waiting 90% less frustrating” Imagine before Uber, we were simply unsure where our booked-taxi was? Did they cancel on us? Are they still far away? Obviously most people are comfortable uncertainty...

Last year Rory just launched the book Alchemy: The Surprising Power of Ideas that Don't Make Sense. I haven't read it, but have heard snippets of amazing stories inside the book when he was sharing them in this Youtube talk. I have included his magical quotes too, enjoy!

"That when you make a model of something... well there are a few cases or paradigms of the world like Newtonian physics where what's true is universally true regardless of context or time or setting, (but) with a lot of models the more people start using them, the more you'll find gains (from) not looking at what the model tells you, but (more) looking at what the model leaves out." (from 49:20~)

"I would argue that all maps, the map is not the territory as we all know, all maps through overuse create distortion in behaviour. And the opportunity may come in actually saying 'What's interesting here is not what's on map, (but instead) what the map leaves out. Because that's where the market opportunity lies.' (from 50:45~)

"One of the reasons why banking was so trustworthy in the 1950s, if you take the era of 'It's a Wonderful Life' (an American fantasy drama in 1946), not only did the bank manager know all of his customers, and all of his customers know him, but there's a missing link there. (Which is) all of his customers knew each other because he served a local area. And he knew he only had to cheat one person, or maybe two (giving the benefit of the doubt with just one), that he only had to get caught cheating two fairly trivial customers and his reputation was toast throughout the town, game over!" (from 1:02:40~)

"The things is that human respond to human, and emotion is derived from meaning. And meaning is derived from context as much as it is derived from any kind of objective measure of circumstance. And you know, the same thing can be an act of generosity or an insult. Piere Bordieau the anthropologist makes this point. That if you give someone a present, generally you're considered as being generous. It can be so generous of a present that people are wary of accepting it because of the obligation it imposes to reciprocate. Or equally if you return a present it is not actually a gift, it's a massive insult. And so we are so context sensitive in terms of our behaviour. That the attempt to create what you call a single line mapping between the environment and behaviour seems to me to be doomed.

Or to clarify what I am saying, how an advertising can be magical is the same way as how a television is magical, which is TV manufacturers don't bother to produce the whole spectrum of colours, because they know human or higher primate vision is only sensitive to three (colours which are Red Blue Green). We have three types of cone in our eye, and by stimulating those three types of cone at different ratios you can generate the whole visible spectrum of colour in the human head! In addition by the way to colours that don't exist in physics like magenta, which also don't exist in reality.

And since what we care about and what determines our behaviour is a product of perception. And since perception, through evolutionary reasons, has not evolved to give us anything like a close approximation of reality or objectivity, then designing things around stories is as important as designing things (by itself only). the stories that you attach to something is as important in giving it value as the thing itself." (from 1:13:40~)