We spend way too much time in stage one thinking. We are constantly on automatic pilot. We are always distracted. We are losing the ability to dream. We are losing the ability to be bored. We are losing the ability to think. To question. To wonder. That is one of the reasons I wrote “The power of the mind“. You need to get the control back of your mind.
Hence “Alchemy: The Surprising Power of Ideas That Don’t Make Sense”. The book starts with a plea for more magic and less logic. Making a case for irrational solutions. The human mind does not run on logic any more than a horse runs on petrol. If we allow the world to be run by logical people, we will only discover logical things. But in real life, most things aren’t logical – they are psycho-logical. I love this sentence; the mythical ‘butterfly effect’ does exist, but we don’t spend enough time butterfly hunting.
The author introduces what he calls psycho-logic. Some things are dishwasher proof. Others are reason proof. He reminds us that big data all comes from the same place – the past. That irrational people are much more powerful than rational people because their threats are so much more convincing. Being slightly bonkers can be a good negotiating strategy: being rational means you are predictable, and being predictable makes you weak. If you are wholly predictable, people learn to hack you.
We are complex systems
He reminds us that as human beings, we are complex systems. As system dynamics will tell that in a complex system, or in human behaviour, things can have multiple uses depending on the context within which they are viewed, and the butterfly effect does exist. Big data carries with it the promise of certainty, but in truth, it usually provides a huge amount of information about a narrow field of knowledge. In any complex system, an overemphasis on the importance of some metrics will lead to weaknesses developing in other overlooked ones.
The binoculars are broken
There are two separate forms of scientific enquiry – the discovery of what works and the explanation and understanding of why it works. Policy and business decisions are overwhelmingly based on a ‘reason first, discovery later’ methodology, which seems wasteful in the extreme. The models of human behaviour devised and promoted by economists and other conventionally rational. The narrow economic worldview has dominated decision-making for far too long. He refers to ‘regulation-issue binoculars’. These have two lenses – market research and economic theory – that together are supposed to provide a complete view of human motivation. There’s only one problem: the binoculars are broken. Both the lenses are pretty badly cracked, and they distort our view of every issue.
Obsession with rational quantification
In the search for public policy and business solutions, we are in the grip of an obsession with rational quantification. In making decisions, we should at times be wary of paying too much attention to numerical metrics. When buying a house, numbers (such as the number of rooms, floor space or journey time to work) are easy to compare and tend to monopolise our attention. Today, the principal activity of any publicly held company is rarely the creation of products to satisfy a market need. Management attention is instead largely directed towards the invention of plausible-sounding efficiency narratives to satisfy financial analysts, many of whom know nothing about the businesses they claim to analyse, beyond what they can read on a spreadsheet.
Heuristic decision making
Our brains did not evolve to make perfect decisions using mathematical precision – there wasn’t much call for this kind of thing on the African savannah. Instead, we have developed the ability to arrive at pretty good, non-catastrophic decisions based on limited, non-numerical information, some of which may be deceptive.
You can never be fired for being logical
It is much easier to be fired for being illogical than it is for being unimaginative. However, it is perfectly possible to be both rational and wrong. Imagine that you get into financial trouble and ask a rich friend for a loan of £5,000, who patiently explains that you are a much less needy and deserving case for support than a village in Africa to which he plans to donate the same amount. Your friend is behaving perfectly rationally. Unfortunately, he is no longer your friend.
The author moves to the subject of advertising (his profession). In advertising and psychology, it is perfectly possible for behaviour to become entirely contradictory. For example, scarcity and ubiquity can both matter, depending on the context. We derive pleasure from ‘expensive treats’ and also enjoy finding ‘bargains’. By contrast, the mid-range retailer offers far less of an emotional hit; you don’t get a dopamine rush from mid-market purchases.
Context is everything
The way to lose money to go on holiday to some exotic locale, fall in love with the local speciality alcoholic drink and decide to import it to your home country. Our very perception of the world is affected by context, which is why the rational attempt to contrive universal, context-free laws for human behaviour may be largely doomed. Someone explains how, depending on the context, he has entirely different political preferences: ‘At the federal level I am a Libertarian. At the state level, I am a Republican. At the town level, I am a Democrat. In my family, I am a socialist. And with my dog, I am a Marxist – from each according to his abilities, to each according to his needs.’
5S and GPS
There are five main reasons why we have evolved to behave in seemingly illogical ways, and they conveniently all begin with the letter S.They are: Signalling, Subconscious hacking, Satisficing and Psychophysics. A GPS will confidently instruct you to take a particular route, based on a perfect understanding of a very narrow set of data points and a simplistic model of your motivation. It exhibits no sensitivity to the context or to the varying priorities you may have. GPS devices know everything about what they know and nothing about anything else. GPS devices also have no notion of trade-offs, particularly relating to optimising ‘average, expected journey time’ and minimising ‘variance’ – the difference between the best and the worst journey time for a given route. The GPS knows only what it knows, and is blind to solutions outside its frame of reference.
The heart has reasons of which reason knows nothing
There is a duality in the human brain that is rather similar to the relationship between the logic of the GPS and the wider wisdom of the driver, between logic and psycho-logic. Sometimes it is best to obey your GPS slavishly, but at other times you should ignore it completely and use the wider parameters of judgement. ‘The heart has reasons of which reason knows nothing,’ as Pascal put it. Just as your GPS has not yet been configured to understand a wider set of human motivations, our conscious brain has not evolved to be aware of many of the instinctive factors that drive our actions.
‘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.’ For a business to be truly customer-focused, it needs to ignore what people say. Instead, it needs to concentrate on what people feel. Not USP but EPOD (Emotional Points Of Difference).
The book is full of nuggets
- Create a culture in which it is acceptable to ask daft questions. You will never uncover unconscious motivations unless you create an atmosphere in which people can ask apparently fatuous questions without fear of shame. As Nassim Nicholas Taleb remarks, ‘the way a question is phrased is itself information’.
- What’s interesting is that we adopted the behaviour many thousands of years before we knew the reasons for it. Instincts are heritable, whereas reasons have to be taught; what is important is how you behave, not knowing why you do.
- The great thing about Walmart, which investors tend to overlook, is that people turn up, buy 47 different things and then transport them home at their own expense. Amazon can be a very big business selling one thing to 47 people, but if it can’t sell 47 things to one person, there’s a ceiling to how large it can be.
- There is an inevitable trade-off between fairness and variety. By applying identical criteria to everyone in the name of fairness, you end up recruiting identical people.
- Metrics, and especially averages, encourage you to focus on the middle of a market, but innovation happens at the extremes. Weird consumers drive more innovation than normal ones.
- Most valuable discoveries don’t make sense at first; if they did, somebody would have discovered them already. And ideas which people hate may be more powerful than those that people like, the popular and obvious ideas having all been tried already.
- In coming up with anything genuinely new, unconscious instinct, luck and simple random experimentation play a far greater part in the problem-solving process than we ever admit. Read “Metaksills“.
- The process of discovery is not the same as the process of justification. As with ‘GPS logic’ it is possible to construct a plausible reason for any course of action, by cherry-picking the data you choose to include in your model and ignoring inconvenient facts.
- Never forget this: the nature of our attention affects the nature of our experience.
- Create a name, and you’ve created a norm.
- Knowledge of the human physique is considered essential in designing a chair, but a knowledge of human psychology is rarely considered useful, never mind a requirement, when someone is asked to design a pension scheme, a portable music player or a railway.
- By reducing the possible applications of a device to a single-use, it clarifies what the device is for. The technical design term for this is an ‘affordance’, a word that deserves to be more widely known.
- Reciprocation, reputation and pre-commitment signalling are the three big mechanisms that underpin trust.
- Bits deliver information, but costliness carries meaning. Signalling has to have a price.
- ‘Credo quia absurdum est’, said Saint Augustine, supposedly – ‘I believe it because it is ridiculous.’
- The psychophysicist Mark Changizi has a simple evolutionary explanation for why water ‘doesn’t taste of anything’: he thinks that the human taste mechanism has been calibrated not to notice the taste of water, so it is optimally attuned to the taste of anything that might be polluting it.
- We draw unconscious inferences from environmental cues everywhere we go, without having the slightest awareness that we are doing so – it is thinking without thinking that we are thinking. ‘I knew the coffee was going to be good because of the chairs,’
- The ‘door close’ button, is quite interesting because on many (and perhaps most) elevators, it is actually a placebo button – it is connected to nothing at all. It is there simply to make impatient people feel better by giving them something to do and the illusion of control. The use of placebo buttons is more common than we realise. This is because the mammalian brain has a deep-set preference for control and certainty.
- Never call a behaviour irrational until you really know what the person is trying to do.
- People do not choose Brand A over Brand B because they think Brand A is better, but because they are more certain that it is good. We will pay a disproportionately high premium for the elimination of a small degree of uncertainty.
- Third-party recommendations are not perfect or remotely scientific, but they are rarely catastrophic. Many apparent paradoxes of consumer behaviour are best explained by similar mental mechanisms.
- You may have never heard the term ‘psychophysics’, which is essentially the study of how the neurobiology of perception varies among different species. How what we see, hear, taste and feel differs from ‘objective’ reality.
- In the real world, where we have limited trustworthy data, time and calculating power, the heuristic approach is better than any other alternative.
- Economists tend to dislike the idea of branding and are inclined to see it as an inefficiency, but then they might view a flower as an inefficient form of weed.
- Value resides not in the thing itself, but in the minds of those who value it.
- A 1 per cent chance of a nightmarish experience dwarfs a 99% chance of a 5% gain.
- The conscious mind thinks it’s the oval office when in reality, it’s the press office. Our conscious mind tries hard to preserve the illusion that it deliberately chose every action you have ever taken; in reality, in many of these decisions it was a bystander at best, and much of the time it did not even notice the decision being made.
- We all spend a considerable amount of time and money essentially signalling to ourselves: The evolutionary psychologist Jonathan Haidt refers to such activities as ‘self-placeboing.’
- We drive our cars heuristically, we choose our houses heuristically – and we probably also choose our partners heuristically. Even when a solution might be calculable, heuristics are easy, quick and well-aligned with our perceptual equipment. In the majority of occasions where the right solution is incalculable, they are all we’ve got.
- In translation, it is an enormous mistake to assume that what the translator conveys is what the speaker intended.
- Big data makes the assumption that reality maps neatly on to behaviour, but it doesn’t. Context changes everything.
- The focusing illusion is indeed an illusion, but so is almost all our perception, because an objective animal would not survive for long.
- The behaviours we adopt shape our attitudes. Behaviour comes first; attitude changes to keep up. Give people a behaviour, and they’ll have no problem supplying the reasons themselves.
- Add unconscious emotional appeal to a rational behaviour by changing not what it is but how it feels.
The book is well worth a read for a lot of reasons. For its view on heuristics, economics, data, signalling, the importance of context and the placebo effect (marketing is to get you too self-placebo) alone.
The author finishes the book with a number of tips.
- Deploy the ‘Goldilocks effect’ – the natural human bias that means that, when presented with three options, we are most likely to choose the one in the middle.
- Change the format: it is hard to believe that a lower amount of powder or liquid will do the same job as before, but if the formulation is changed to a gel or tablets we are more likely to believe it.
- Add intricacy: simply adding coloured flecks to a plain white powder will make people believe it is more effective, even if they do not know what role these flecks perform.
- Add effort. If a concentrated product requires you to mix it with water first or to mix together two separate ingredients before using it, our belief in its potency is restored by this small amount of extra bother.
- Find the real why: talk about unconscious motivations.
And a number of lessons
- Alchemy lesson one: given enough material to work on, people often try to be optimistic. One characteristic of humans is that we naturally direct our attention to the upside of any situation if an alternative narrative is available, minimising the downside. As you are closing a sale, the admission of a downside oddly adds persuasive power.
- Alchemy lesson two: what works at a small scale works on a large scale. We would rather make a suboptimal decision in company than a perfect decision alone. This is also sensible, even if it isn’t conventionally ‘rational.’
- Alchemy lesson three: find different expressions for the same thing. The job of the alchemist is to find out which framing works best.
- Alchemy lesson four: create gratuitous choices. Provided it is mentally painless, we tend to like choice for its own sake.
- Alchemy lesson five: be unpredictable. If you follow a standard orthodoxy, your brand will become more like your competitors’, thus eroding your advantage. Conventional logic is hopeless in marketing – as you end up in the same place as your competitors. Read Different. https://www.ronimmink.com/go-for-the-extreme-differentiation/
- Alchemy lesson six: dare to be trivial. The very people who had baulked at registering before completing the purchase were only too happy to leave their details and create an account at the end of the process. This shows that what mattered was not the actions we asked them to perform, but the order in which they were asked to make them.
- Alchemy lesson seven: in defence of trivia. The mentality of the physicist or the economist assumes that large effects are only obtained by large inputs. The mind of the alchemist understands that the smallest change in context or meaning can have immense effects on behaviour.
- Alchemy lesson eight: Alchemy is not only something you do – it’s what you don’t do.
Conclusion: on being a little less logical
De we have more faith in a theoretical mathematical model than in what we can see in front of us? Are we bizarrely cherishing numbers or models over simple observation, because the former look more objective? Remember that what often matters most to those making a decision in business or government is not a successful outcome, but their ability to defend their decision, whatever the outcome may be.
Logic should be a tool, not a rule
Also remember, if you never do anything differently, you’ll reduce your chances of enjoying lucky accidents. If we could resist the urge to be logical just some of the time, and devote that time instead to the pursuit of alchemy, what might we discover? Quite a lot of lead, I suspect. But a surprising amount of gold.