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Why Businesses Fail To Sell According to Rory Sutherland

Just because logic proved useful in the physical sciences doesn’t mean it’s applicable everywhere, especially in the field of human affairs. We built a logic-run world because it gives us a sense of control. But that’s merely an illusion. The following is a summary of ideas Rory Sutherland shared in 2 of his books on marketing and creativity. To sum it up:


“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.”


Cracking the (human) code

If we allow logical people to run the world, we only discover logical solutions (The world would look similarly to how ChatGPT currently writes - it seems like a good piece but upon closer inspection, it’s clearly written by AI (This statement is not going to age well 😁)). But in real life, things aren’t logical, they are psycho-logical.


There are 2 reasons to people’s behaviour

  1. Ostensibly logical reason.
  2. The real reason.


The real reason is never the logical reason. We just like to pretend it is. Large parts of human behaviour are like cryptic crosswords: things aren’t what they seem on the surface.


Psycho-logic

Humans are deeply social and in fields such as economics, policy, politics etc treating humans as rational agents is being blind to reality.


Sutherland gives an example of the Hilary-Trump candidacy in 2016. Trump’s election was blamed on stupid and uneducated voters. But Rory argues that hyper-dependence on prediction data and mathematical models on Hilary’s side was the issue.


Clinton’s strategist told her to skip Wisconsin because the data predicted it would vote Democrat. But what his data-driven predictions missed out on was real-life observations such as:


  1. Wisconsin has always been an eccentric state politically so it couldn’t offer a guarantee.
  2. Trump was gathering stadiums whereas Hilary had sparse crowds.


One of the promises Trump ran with was ‘We’re gonna build a wall and Mexicans will pay for it.” We all knew he was not going to, right? But the thing is: he doesn’t need to build the wall - he just needs people to believe that he might. Hilary thought like an economist whereas Trump was a game theorist. In the pretend world, we’re playing rational but in the real world, we’re emotional and Trump tapped into that.


Logic in business

In a mechanical system, such as a machine, one thing serves a narrow purpose. The human systems are complex, therefore things can have multiple uses depending on the context.


Rory says that just because we don’t know why something works, we shouldn’t discard it, like religion or silly-looking ad campaigns. If you were a business owner whose product is not selling well which one would you suggest to a board?


A) Reduce the price.

B) Feature more ducks in the ads.

It seems like nonsense, but reality shows that B is the correct answer and it’s been shown time and again. And yet if you stood in front of a board, you’d propose A because that sounds logical.


Board meetings

Bureaucrats or big company executives become risk-averse and therefore begin to demand logic out of fear of losing control. But logical solutions fail because logic requires universally applicable laws that human behaviour does not adhere to.


For example, there are two equally potent, yet contradictory ways to sell a product:

a) Not many people own this so it must be good (scarcity).

b) Many people own this so it must be good (ubiquity).


Or, imagine entering a boardroom with the following pitches:


1. What people want is a really cool vacuum cleaner (Dyson)


2. And the best part of this is that people will write the entire thing for free! (Wikipedia)


3. I confidently predict that the great enduring fashion of the next century will be a coarse, uncomfortable fabric that fades unpleasantly and takes ages to dry. To date, it has been largely popular with indigent labourers. (Jeans)


4. People will be forced to choose between three or four items and love it. (McDonald's)


5. And, best of all, the drink has a taste that consumers say they hate. (Red Bull)


6. Just watch as perfectly sane people pay $5 for a drink they can make at home for a few pence. (Starbucks)


Contrary to physics, in psychology 2 or more things can be true at the same time. Rory claims businesses that fixate on logic and corporate spreadsheets rather than psychology will fail.


Context is everything

In his book Skin in the Game, Taleb gives an example of someone’s seemingly contradictory account of his political position:


‘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.’


This is the most honest account you could find and it’s true for almost everyone in any field of their lives.


Ideas that don’t make sense

Sutherland argues that great marketing ideas are often built around a profoundly irrational core. Here are 11 rules he developed over the years:


  1. The opposite of a good idea can also be a good idea.
  2. Don’t design for the average.
  3. It doesn’t pay to be logical if everyone else is being logical.
  4. The nature of our attention affects the nature of our experience.
  5. A flower is simply a weed with an advertising budget.
  6. The problem with logic is that it kills off magic.
  7. A good guess which stands up to observation is still science. So is a lucky accident.
  8. Test counterintuitive things only because no one else will.
  9. Solving problems using rationality is like playing golf with only one club.
  10. Dare to be trivial.
  11. If there were a logical answer, we would have found it.


Why human behaviour defies logic

There are four reasons we have evolved to behave illogically:


  1. Signalling
  2. Subconscious hacking
  3. Satisficing
  4. Psychophysics


We don’t have access to our genuine motivations because it is not in our interest to know. Humans are designed to self-deceive. Evolution made us that way so we could protect ourselves. The argumentative hypothesis suggests that human reason arose not to inform our actions and beliefs but to explain and defend them to others. It’s an adaptation strategy since we’re a social species.


Feelings

What people say they want and what they actually want are two different things. We know how we feel yet we cannot accurately explain why. Nature cares about feelings, feelings drive our behaviour but feelings don’t come with explanations attached - because we’re better off not knowing them. If you asked someone why they go to restaurants they’d say ‘Because I’m hungry’. But we know that someone hungry could satisfy the urge to eat far more economically elsewhere. The real reason people go to restaurants are social connection and status.


Problems and decisions

We learn about problem-solving and decision-making through 2 lenses: market research and economic theory. Both are problematic in understanding underlying human motivation says Rory.


Market research - asking people what they want


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


People don’t have access to their motivations. The issue with economic theory is that it assumes a narrow and rational view of human motivation of what it believes humans should do. The problem is that this doesn’t match reality. Rory argues that rationalists refuse to admit there’s psychology behind human behaviour so their logic appears to be ‘Yes it works in practice, but does it work in theory (aka can we fit it on a spreadsheet)?’ As Upton Sinclair once said,


“It is difficult to get a man to understand something when his salary depends on his not understanding it”


How people make decisions

The context and order of choosing affect things in ways we wouldn’t expect. For example, Dan Ariely highlights the decoy effect - a phenomenon where consumers have a change in preference when presented with a 3rd option.


There usually are 3 options with one option being a decoy. The decoy option is more expensive and less valuable compared to the other two. The remaining two will seem similar but one will be a tad more expensive but infinitely more valuable (Most subscriptions are structured that way).


For example, real estate agents will show you 3 houses by first showing a decoy house to make the other 2 look better. One of the remaining two will be better value than the other and that’s the one they actually want to sell. The other house is there just to confirm your suspicion that the second house is similar but better.


Emotions

Morality works on an instinctual/emotional level yet we hastily cast rationalisation for it. For example, most people feel it’s repulsive to eat dogs or horses yet they’ve no problem eating beef. If you ask people why, they will come up with a series of rationalisations and arguments to defend a socially constructed belief.


Evolution equipped us with the right emotional responses. Putting rationale on top of it is a joke. If you came back home and saw a dog’s turd on the kitchen floor, you’d clean it up immediately. When asked why you’d say well it’s unhygienic, germs etc. But that’s a rationalisation. Someone in the Victorian age didn’t know about germs but they wouldn’t have left it there would they?


Britain has no poisonous spider species and yet most people are afraid of them. That’s not rational, that’s instinctual. We adopted most behaviours thousands of years before we knew the reasons for it. Instincts are heritable whereas reason has to be taught.


Innovation

Sutherland predicts that we’ve come far technologically therefore the progress in the next 50 years will come mostly from improvements in psychology and design thinking over technology.


As an example, making a train journey 20% faster will cost hundreds of millions whereas making it 20% more enjoyable will cost almost nothing. It’s easier to achieve improvements in perception at a cheap price compared to improvements in reality (physics). Logic rules out the former and focuses on the latter. Take Uber as an example. It didn’t make the car get there anywhere faster but it reduced the frustration of waiting for the driver to pick you up while watching it on the little map.


Which would you prefer? Flight to London delayed or flight to London delayed by 30 minutes? We are more bothered by the uncertainty rather than waiting. The only way to uncover unconscious motivations is to be willing to ask stupid and obvious questions. Such as:


  • Why do people hate standing on trains?
  • Why do people not like it when their plane is delayed?
  • Why do people hate waiting for an engineer’s appointment?


Sutherland says that the business that asks the stupid, irrational questions is the one that survives the future.


To sum up


  • Being rational is about pretending you’re solving the problem whilst being unreasonable is about actually solving the problem.
  • The process of discovery is not the same as the process of justification. We tend to blaze a path and in hindsight, reason our way of getting there. With the boring, unlucky and ‘irrational’ parts edited out of our memory.
  • The modern world has it backwards: it requires the discovery process to be just as neat as the solution. The space for intuition and creativity is killed at the expense of logic and rationality.
  • Novel ideas don’t come through reasoning and logic they come through playing, intuition and experimenting.
  • Humans are not logical; we're psychological.

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