Business Lessons From the Bestselling Book “Alchemy”
What startup owners and marketers can learn from Rory Sutherland
“A breakthrough book. Wonderfully applicable to everything in life, and funny as hell.”
— Nassim Nicholas Taleb
Rory Sutherland is probably most famous for his humor-packed TED speeches. So far, they’ve amassed over 7 million views (and counting). What most people don’t know is that he’s also the vice-chairman of Ogilvy, one of the world’s largest advertising agencies.
In other words, Sutherland spent decades of his life running psychological experiments on people, trying to lure customers into buying. Needless to say, he knows a thing or two about how people think.
This is why I picked up a copy of his book Alchemy: The Surprising Power of Ideas That Don’t Make Sense. I wasn’t disappointed. It contains a ton of lessons for policymakers, startup owners, but in particular, marketers.
Let’s dive in.
“The Human Mind Does Not Run on Logic Any More Than a Horse Runs on Petrol”
As Jonathan Haidt writes in The Righteous Mind, “The conscious mind thinks it’s the Oval Office, when in reality it’s the press office.” Although we believe we are issuing executive orders, most of the time we’re just rationalizing decisions taken somewhere else, for reasons we do not understand.
Just because there is a rational answer to something, it doesn’t mean that there isn’t a more interesting, irrational answer to be found in the unconscious. If you want to change people’s behavior, listening to their rational explanation for their behavior may be misleading, because, as Sutherland explains, it isn’t “the real why”.
“For a business to be truly customer-focused, it needs to ignore what people say. Instead it needs to concentrate on what people feel.”
— Rory Sutherland
This reminds me of a guest lecture at my university given by Philips’ Chief Human Resources Officer (CHRO) at the time. The main point of his talk was this: “Don’t ask customers what they want, figure out what they need!”
An interesting case study to illustrate his point is Uber. When you open the app, it shows you a real-time map of nearby Uber drivers. Most importantly, you can see how long it’ll be before your cab gets to you when you request a ride. This neat feature does not reduce the waiting time for a taxi. Instead, it simply makes waiting 90% less frustrating.
It shows that, regardless of what we say, we are much more bothered by the uncertainty of waiting than by the actual duration of the wait. ‘Time flies when you’re having fun’ is essentially an early piece of psychological insight.
To your watch, an hour is always just an hour, regardless of whether you are drinking champagne or being waterboarded. However, as the Uber case demonstrates, the perception of time to our brain is much more elastic.
Inventing the Uber map was probably equivalent to multiplying the number of cabs driving around by a factor of 10 — not because waiting times got any shorter, but because they felt ten times less irritating. The Uber map shows us that it’s easy to achieve massive improvements in perception at a fraction of the cost of equivalent improvements in reality.
Fun sidenote: this insight came to Uber’s co-founder Garrett Camp while watching the James Bond film Casino Royale. Thirty minutes into the movie, Bond is driving in the Bahamas to track down Le Chiffre (the bad guy) as he checks his phone.
What Bond sees on that phone inspired Camp: a graphical icon of Bond’s vehicle moving toward his target in real-time. In other words, that Bond movie starring Daniel Craig effectively led to a transportation revolution and changed how the world hails a taxi!
Other examples to prove that our conscious mind is actually the “press office” and not the “Oval Office” include the following:
- People choose German wine if you first expose them to German background music. Similarly, customers are more likely to purchase a French vintage if they hear a French song playing on the shop’s sound system.
- We experience credit card transactions as being over 15% cheaper than equivalent cash transactions.
- Anchoring — People say they’d be willing to spend more money on dinner when the restaurant is named Studio 97, as opposed to Studio 17.
As Warren Buffett’s business partner Charlie Munger said in his 1995 speech at Harvard University, “If economics isn’t behavioral, I don’t know what the hell is.” It’s true: in a more sensible world, economics would simply be a subdiscipline of psychology.
Halfway through the book, Sutherland makes the case for being unpredictable in business — especially in the field of marketing:
“Most of business is run according to conventional logic. Finance, operations, and logistics all operate through established best practice — there are rules, and you need to have a good reason to break them.
But there are other parts of a business that don’t work this way, and marketing is one of them: in truth, it’s a part of business where there’s never best practice, because if you follow a standard orthodoxy your brand will become more like your competitors’, thus eroding your advantage.”
In other words: conventional logic is often useless in marketing.
Ultimately, you’ll just end up in the same place as your competitors. If you are wholly predictable and always follow the ‘rules’, you destroy any competitive advantage you might have.
“The Nature of Our Attention Affects the Nature of Our Experience”
Finally, Sutherland gives the example of food descriptions to demonstrate the power of semantics. Simply adding some colorful descriptors to food items on a restaurant menu results in higher sales for that item.
A study by researchers from the University of Illinois showed that cultural terms like “Italian” and “Cajun”, and nostalgic terms like “homestyle” and “Grandma’s” raised product sales by as much as 27%, compared to food items without those fancy adjectives.
A fancy label directs your attention towards a feature in a dish, which helps to bring out certain flavors and textures. “Salmon” sounds a lot less interesting than “freshly grilled Atlantic salmon in a crispy coating”, right? Famous brands can help too, explaining why at some restaurants you’ll find “Jack Daniels barbecued ribs” instead of simply “barbecued ribs”.
In other words, we don’t value things as they are; we value their meaning. What these dishes are is determined by the laws of physics, but what they mean is determined by the laws of psychology. And one of those laws is that the nature of our attention affects the nature of our experience. (If you want more on this, definitely check out Pre-Suasion by Dr. Cialdini)
“Nothing in life is as important as you think it is, while you are thinking about it”
— Daniel Kahneman
To summarize this final lesson: objectivity is overrated. Wine tastes better if it’s poured from a heavier bottle. Painkillers work better when people believe they are expensive. Nothing about perception is 100% objective, even though we act as though it is.
There are countless more insights and stories worth exploring, but I’ll leave you with those three. You have to pick up a copy yourself to find out why the opposite of a good idea can also be a good idea, why we prefer stripy toothpaste, and why Red Bull is so popular (even though we all hate its taste).
Hopefully, you’ll enjoy it just as much as I did. It’s an accessible book that blends behavioral science and fun stories, with a touch of branding magic. I guarantee you that after reading Alchemy, you’ll see the world in a completely different light.
Found this article interesting? Follow me (Yannick Bikker) on Medium and have a look at some of my other book-related stories below: