Rory Sutherland – Moonshots and Marketing

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (1:21)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:46)
My guest today is Rory Sutherland. Rory is the vice chairman of Ogilvy & Mather Group, which is one of the largest and most renowned advertising agencies in the world. He's also the author of one of my favorite recent books called Alchemy, The Surprising Power of Ideas That Don't Make Sense.
In this conversation, we explore many of his counterintuitive ideas about business. Rory makes you think as much as anyone, so I hope you enjoy this great conversation.
So Rory, I really toyed with where to start in this conversation. I figured a neat place would be this idea that a spreadsheet leaves no room for miracles and that the problem with logic is that it kills off magic. I'd love you to expand on those two great ideas because in my world of finance, we use a lot of spreadsheets.

**Rory Sutherland** (2:29)
I think that actually goes wider in a way which is that most people want maps of the world. In fact, we need them because patently, simple human perception and decision-making in evolutionary terms, in practical terms, requires that we develop these schemers because patently, we have to go from data to decision and the amount of information we have, very large parts of which may be entirely irrelevant by the way, mean that we have to produce this reduced map by which we operate. And I think the problem is that the maps we like to use are always kind of deterministic and they're kind of Newtonian if you like, whereas reality is neither. It's both probabilistic and it's highly complex. So in any kind of deterministic model, whether it be a spreadsheet or a map of the London Underground or whatever map we're using to understand the territory, I think there's a tendency to assume a kind of proportionality.
Once you have a kind of deterministic universe, there's no room for magic, but there are things in complex systems, butterfly effects, where you can achieve spectacular results with tiny interventions.
And that's one thing.
And it's also true to say that's the complexity element of it. Patently human perception is complex, human behavior is complex, mass human behavior is even more complex still. So the deterministic map and the Newtonian map effectively kind of are a quest for laws, which tend to be universal and kind of proportionate. And of course, magic is produced, if you want to slightly stretch the conventional meaning of magic in the dictionary, either by a tiny little tweak that leads to an enormous effect, domino effect or whatever it may be. Butterfly effect. But the possibility of magic exists anywhere where you either have butterfly effects, I think, or where you have highly non-objective perception.
So just an example of this, of a kind of magic, you can double the conversion rate of a call center, if you're asking people to choose between three options of subscription, and you simply add the sentence, most people choose B. The number of people who will go on to buy, when given what to an economist is entirely irrelevant information, because economics assumes perfect information and perfect trust, and as a byproduct of that perfectly objective perception, that should have no effect on what anybody chooses. But of course it does, because anybody who's undecided can go with the flow of social norms there. And in evolutionary terms, it makes obvious sense that we actually base many of our decisions on what other people normally do. Because it's free information. Copy other people is a fairly reliable rule for avoiding catastrophic decisions. May not be perfect, but that's again an economic failing, where they assume we're trying to optimize something. Well, maybe we are, but I think what we're trying to optimize is what economists think we should be trying to optimize.