Alchemy by Rory Sutherland : Summary, quotes, and notes

Summary: Alchemy by Rory Sutherland

Sutherland’s Alchemy is an insightful exploration of what marketing, advertising, and branding are truly about. It’s a bit messy and all over the place at times, but it is packed with great ideas and interesting anecdotes. Branding and advertising are a blind spot for many current tech thinkers, but as Sutherland argues, they pragmatically create a lot of value and are ubiquitous in society, but also in nature in general.

Here is my chapter-by-chapter summary of the book.

Full summary:

Foreword : Challenging Coca-Cola

Summary: Alchemy by Rory Sutherland

How would you compete with Coca-Cola? What kind of product do you believe could be more popular than the most famous soft drink on the planet after water? If you’re a logical person, it might be obvious to you that you need to come up with something that tastes nicer, costs less, and come in a bigger can. And yet, the one company which came the closest to the success of Coca-Cola did the exact opposite. Red Bull is more expensive, comes in a smaller can, and was despised by consumers during the first product testings.

This anecdote is the perfect illustration of the main idea of Alchemy:

Alongside the inarguably valuable products of science and logic, there are also hundreds of seemingly irrational solutions to human problems just waiting to be discovered, if only we dare to abandon standard-issue, naïve logic in the search for answers.

Rory Sutherland

Our narrow ideas about the way the world and people work leads us to overly rely on reductionist, mechanistic logic”. But society isn’t a machine, it’s a complex system. And complex systems allow for magic. And this magic is much needed in a world filled with technocrats.

Introduction: Cracking the (human) code

Summary: Alchemy by Rory Sutherland

The human mind does not run on logic any more than a horse runs on petrol.

Rory Sutherland

Sutherland narrates yet another anecdote to illustrate this idea. Tasked with improving the effectiveness of a charity’s fundraising, his company realized the seemingly optimal solution wasn’t logical”:

Once a year, volunteers for the charity drop envelopes at millions of letterboxes and come back a few weeks later to collect donations. On a particular year, some envelopes were different from the others :

  • Some of them announced that the envelopes had been delivered by volunteers.
  • Some of them reminded people that their donations were boosted by a 25% tax rebate (for every £1 they donated, the government would give a further 25p).
  • Some were in better-quality envelopes.
  • Some were in portrait format.

Basic economic reasoning suggests that the only logical way to improve donations would be the one reminding people of the tax rebate. The other options are irrelevant. And yet, this rational envelope” reduced donations by 30%. All the other ones increased them by more than 10%. The higher-quality paper even increased the donations of £100 or more.

We don’t know for sure why the results are the way they are. This is the magic” Sutherland is talking about. And this is why it’s important to allow ourselves to test solutions that don’t make immediate sense. After all:

if we allow the world to be run by logical people, we will only discover logical things.

Rory Sutherland

Human behavior is cryptic. There’s always a plausible explanation for the way people act, but there’s also a deeper, more fundamental answer hidden behind the simplistic explanations. And for that reason, the kind of methods useful in science and industry are not effective when it comes to designing a tax program or a sales strategy.

Sutherland distinguishes the traditional, narrow, idea of rationality and what he calls psycho-logic” - an alternative logic leading us to take certain decisions.

Not everything that makes sense works, and not everything that works makes sense.

What alchemy refers to, according to Sutherland, is the science of knowing what economists are wrong about”.

Because mechanistic reason has become the preferred tool to solve problems (which is pretty great overall), a large part of the problems we struggle the most with nowadays are logic-proof, in a sense: they require thinking in seemingly irrational ways.

In theory, you can’t be too logical, but in practice, you can.

Rory Sutherland

Obviously, logic is an incredible thing and the book is not arguing against its use. It is, however, making the point that over-reliance on it and data can blind us to unconventional but effective solutions.

It’s also good to keep in mind that logical things are predictable by definition, and so, being occasionally irrational can give us an edge in competitions.

A rational leader suggests changing course to avoid a storm. An irrational one can change the weather.

Rory Sutherland

One of the main flaws of technocratic thinking is assuming that the tools we use to explain and rationalize the past are also effective to predict and build the future. It’s rather easy to rearrange events to fit in a neat logical timeline after they happen, but that’s only post-rationalization. Figuring out what will happen is more difficult precisely because it cannot be found by conventional logic alone.

As an example of one of these strange psycho-logical truths, Sutherland explains:

While in physics the opposite of a good idea is generally a bad idea, in psychology the opposite of a good idea can be a very good idea indeed: both opposites often work.

Rory Sutherland

For example, you can effectively sell things to people by marketing their rarity (like luxury products), but you can also do it by talking about their popularity (like popular movies). It all depends on the context. This is why context-free descriptions of human behavior are mostly irrelevant to marketing efforts.

There are, however, some drives that may lead people to act in seemingly illogical” ways. Sutherland identifies four of them and nicknames them The Four S-es”: Signalling, Subconscious hacking, Satisficing, and Psychophysics.

Our behavior has not evolved to make sense, but to improve our evolutionary fitness. And sometimes, to do so, we need to perceive the worlds in a distorted fashion.

Because of their ignorance about their own motivations, people aren’t very reliable when it comes to explaining what they want.

Human nature hasn’t changed for a million years. It won’t even change in the next million years. Only the superficial things have changed. It is fashionable to talk about the changing man. A communicator must be concerned with the unchanging man — what compulsions drive him, what instincts dominate his every action, even though his language too often camouflages what really motivates him.

Bill Bernbach

Part 1: On the uses and abuses of reason

Summary: Alchemy by Rory Sutherland

The hyper-rational” bias when it comes to analyzing most issues regarding human behavior comes from the tendency to look at them through what Sutherland calls the regulation-issue binoculars”. The two parts of this tool are market research and economic theory. As he argued previously, the limits of market research are the lack of insightful introspection from polled individuals.

The trouble with market research is that people don’t think what they feel, they don’t say what they think, and they don’t do what they say.

David Ogilvy

Economic theory on the other hand does not observe nor ask people anything. It uses a reductive model of human behavior. Using these binoculars” is expected for most business and policy decisions. But to understand how people behave, we have to interpret what they say laterally, so to speak, not literally. But because problem-solving is linked to social status, suggesting unconventional solutions can be risky. It’s easy to defend a failure if your decisions seem to have been based on regular logic. But if your more original solution fails, you may appear incompetent or unintelligent. There is a tendency among groups with credentials to hastily dismiss new ideas coming from unlikely sources.

For Sutherland, the biggest progress to come in the next decades is likely to come from improvement in psychology and design thinking over improvement in technology. For example, it may be much easier and even more beneficial, in many cases, to make a train journey 20% more enjoyable instead of making it 20% faster.

A great way to find areas of potential psychological improvement is to ask childish questions. Questions whose answers might appear obvious, but hide a more complex, more meaningful layer: why do people eat at restaurants? Why do people go to university? Why do people retire?

There is no such thing as a rational or irrational belief — there is only rational or irrational behaviour.

Nassim Nicholas Taleb

The best way to encourage rational behavior isn’t to rely on rational arguments. Emotions are a much more effective vehicle to modify behavior. Our instincts have evolved to make us adopt self-preserving behaviors through strong emotions. For example, our aversion to things we consider disgusting (because they smell/taste bad or have an unsettling appearance) protects us from infections because we avoid them. And this behavior appeared much before we truly understood its benefits. Evolution favored the individuals who had a strong disgust for unhealthy elements, and these people are our ancestors.

Simply asking questions in a certain way can also be a clever psychological way to affect the behavior of people.

The way a question is phrased is itself information.

Nassim Nicholas Taleb

On the other hand, rational tools such as statistics can be misleading when used with overconfidence and a failure to take the context into account.

In maths, 10 x 1 is always the same as 1 x 10, but in real life, it rarely is.

Rory Sutherland

People in society do not behave like replaceable, discrete data points. Asking ten person to each hire one person is not the same as asking one person to pick ten people. The latter group of hires will be way more diverse because when people only have a single choice, they look for conformity, but when they have to pick a group, they will favor complementarity.

Data can also lead to poor decisions if it is not carefully contextualized. It can tempt us into designing for average. But innovation happens at the extreme, not in the middle.

It’s true that what gets measured gets managed’, but the concomitant truth is what gets mismeasured gets mismanaged’.

Rory Sutherland

Metrics can force people to pursue the same narrow goals in the same way. It often doesn’t pay to be logical when everybody else is as well.

Bureaucrats tend to care more about the rigor of the methodology than the value of the solution. But even science can attribute quite a lot of its findings to a mixture of luck, experimentation and instinctive guesswork to provide the decisive breakthrough”.

There are two key steps that a mathematician uses. He uses intuition to guess the right problem and the right solution and then logic to prove it.’

Cedric Villani

In business too, the beauty of markets is that they primarily reward and fund the necessary, regardless of the quality of reasoning”. They are not about efficiency but rather variation and luck-based innovation.

Part 2: An alchemist’s tale (or why magic still exists)

Summary: Alchemy by Rory Sutherland

Alchemy may be out of fashion among scientists, but in fields like marketing, the idea of turning basic materials into more valuable ones still makes sense.

We don’t value things; we value their meaning. What they are is determined by the laws of physics, but what they mean is determined by the laws of psychology.

Rory Sutherland

We can create or destroy value either by changing something or by changing people’s perception of that thing.

That’s the idea Frederick the Great used to make potatoes popular in eighteenth-century Prussia, after having failed to try coercion. To make the crop attractive to peasants, the monarch established a (seemingly) guarded royal potato patch. He declared potatoes a property of the royal household exclusively. Of course, the people’s interest started to grow after hearing about this highly exclusive vegetable. Soon, they started to steal some crops and grow them for themselves.

Food is a field where the perception of the dishes has a large influence on their attractiveness. Rebranding food by adding exotic geographical adjectives can make them more popular. As Sutherland explains, a gelateria can charge more than an ice-cream parlour.”

Never forget this: the nature of our attention affects the nature of our experience.

Rory Sutherland

These ideas may appear disingenuous and manipulative, but they can be used for good. A lot of successful public health programs used nothing more than clever marketing.

A lot of popular objects work particularly well for our use because they have been first thought for disabled individuals.

In reality, all of us are disabled some of the time. If you are carrying heavy luggage, staircases are almost unusable. If you are carrying a cup of coffee, you have effectively lost the use of a hand. If you wear glasses but do not have them on, you are visually impaired. Even when you are designing for the able-bodied, it is a good principle to assume that the user is operating under constraints.

Rory Sutherland

Great design involves great marketing. When engineers at Sony came up with the walkman, they managed to include a recording function alongside the cassette player. But the CEO shut the functionality down, afraid it might confuse early adopters about the point of this brand new, still weird mobile device. This great insight to consider the clarity of the purpose probably made the walkman more attractive.

But this type of thinking may be tough to defend in a corporate environment where the safest path is conventional logic.

Although you may think that people instinctively want to make the best possible decision, there is a stronger force that animates business decision-making: the desire not to get blamed or fired.

Rory Sutherland

Part 3: Signalling

Summary: Alchemy by Rory Sutherland

Signalling is the first of the inner drives Sutherland identifies as being the reason why human behavior departs from conventional logic. He describes it as the need to send reliable indications of commitment and intent, which can inspire confidence and trust.”

Many seemingly irrational behavior can be linked to our need to signal something to other people. An expensive wedding ring does not have any purpose, but it signals trust in a relationship.

Nowadays, sending invitations or commercial prospecting through physical mail rather than internet communication carries meaning: the sender is signalling his commitment.

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 flavour.

Rory Sutherland

Signalling is often about making choices that aren’t effectively beneficial to us in the short term. Doing difficult things to create meaningful communication and genuine emotions.

These investments are powerful because we instinctively, and often unconsciously judge situations based on tiny clues.

For example, when we walk past a charming café with lovely furniture, we tend to assume that these efforts match the quality of the milk the grains and the machines.

Humans are far from being the only living creatures to signal: flowers spend resources on scent and coloration to attract pollinators like bees. This is how advertising and branding is useful to clients”; it helps them choose how to devote their time and attention. Bees can directly spot flowers instead of wasting time trying to get pollen from all kinds of unfit plants.

The advertisements which bees find useful are flowers — and if you think about it, a flower is simply a weed with an advertising budget.

Rory Sutherland

Some useless” features evolution favored in some species are only useful as signalling devices, like feathers of male peacocks. The vivid colors of some toxic animals are also used to express their danger to predators. Animals with predators tend to try to hide and be less visible, so displaying bright colors signals another defense mechanism.

Brands matter to help us make choices. Without the assurance of quality, there isn’t enough trust for markets to work effectively.

Branding isn’t just something to add to great products — it’s essential to their existence.

Rory Sutherland

Part 4: Subconscious hacking: signalling to ourselves

Summary: Alchemy by Rory Sutherland

In the same way we cannot directly control every part of our body (pupils dilatation, heart rate, digestion, etc.), we do not have access to every part of our minds
But we can exploit our minds’ peculiar logic to change our own perception and behavior. The placebo effect, for example, is a powerful way to influence our subconscious. Even though placebos do not have direct medical benefits, they do appear to provide relief and even faster recovery time in many cases. Sutherland points out that aspirin brands often get in legal and PR troubles for selling the same exact product under different brands (Nurofen Migraine Pain, Nurofen Tension Headache, Nurofen Period Pain, etc…) but research indicates that branded analgesics are more effective. Even parameters like price or pill color influence users’ perception of their potency.

Things like this are not under our direct control, but are rather the product of instinctive and automatic emotions. There is a good evolutionary reason why we are imbued with these strong, involuntary feelings: feelings can be inherited, whereas reasons have to be taught, which means that evolution can select for emotions much more reliably than for reasons.

Rory Sutherland

Many popular products use placebos to streamline our experience using them. Door close” buttons on elevators and walk buttons at pedestrian crossings are often fake but serve the purpose of giving users’ an illusion of control. Minor details in the functioning of some products can also induce much different perceptions. One distinct early feature of Uber compared to regular cabs was that there was no physical exchange of money between the riders and the drivers, making it feels more like a service rather than a transaction. The greatest improvement in satisfaction for London Underground passengers was not so much faster and more frequent trains but the installation of displays to inform them of the arrival time of next trains.

Red Bull’s weird taste, small doses, and health controversies also work in its favor by generating some sort of placebo effect, like the aspirin brands.

My contention is that placebos need to be slightly absurd to work.

Rory Sutherland

Part 5: Satisficing

[Coming soon]

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