In today’s business world, we are obsessed with big data, economic and financial models, everything is data-driven or model-driven, and every decision is made based on logical, analytical and rational thinking. But the problem is we live on a planet of 7.75 billion human beings whose thinking and behaviors are often driven by emotions and feelings rather than logic and rationality.
It’s true that logic and rationality are usually the best way to succeed in debate, engineering and accounting, but if you want to succeed in life, it is not necessarily all that useful; entrepreneurs are disproportionately valuable precisely because they are not confined to doing only those things that make sense to the public, they defy the odds by being unconventional, such as Steve Jobs, James Dyson, Elon Musk, and Peter Thiel.
They understand that it doesn’t always pay to be logical if everyone else is also being logical because it gets you to the exact same place as everyone else including your competitors. Logic may be a good way to defend or explain a decision, but it is not always a good way to reach one.
Because in reality, context is often the most important thing in determining how people think, behave, and react. The situation or place we find ourselves in may completely change our perception and judgment.
Logical ideas often require universal applicable laws but humans, unlike atoms or numbers, are not consistent enough in their behavior for such laws to hold very broadly. Our thinking, feeling, and behavior might change from time to time, place to place. There’s no E=mc2 in human nature.
If we expose every one of the world’s problems to apparently logical solutions, it would be like playing golf with only one club. Most political, business, foreign policy and marital problems seem to be more illogical and irrational than logical and rational.
There are thousands of seemingly irrational, counterintuitive solutions to human problems just waiting to be discovered, but nobody is looking for them because everyone is too preoccupied with logic to look anywhere else. The mythical butterfly effect does exist only if we dare to abandon standard-issue, naïve logic in the search for answers.
This brings us to the concept of Psycho-logic, an idea coined by Rory Sutherland, the Vice-Chairman of Ogilvy & Mather Group, one of the most renowned advertising agencies in the world, where he founded a division that employs psychology graduates to look at behavioral change problems through a new lens. Their mantra is “Test counter-intuition things because no one else ever does.” Why is this necessary? In short, the world runs on two operating systems. The much smaller of them runs on conventional logic, such as building a bridge, writing computer codes, or compiling financial statements.
But there is psycho-logical one, Sutherland uses a hyphen to distinguish between logical and psycho-logical approaches which run on different operating systems and requires different software. Because logic is self-explanatory, our preference is to use it in all social and institutional settings, even where it has no place. The result is that we end up using inappropriate software for the operating system, neglecting the psycho-logical approach.
In his book Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life, Sutherland argues that there are often two reasons behind people’s behaviors: the apparently logical reason, and the real or hidden reason – he calls it the Unconscious Motivation.
While we know how we feel, we cannot accurately explain why. What we think about how we feel may have little to do with our real reasons for feeling it, so it pays often to ask naïve questions to which the answer seems completely self-evident as feelings, not logic, largely drive what we do. “Why do people go to restaurants?” “Why do people hate standing on overcrowded trains?” “Why do people hate paying taxes?”
If you want to find out the real why – the unconscious motivation, begin by asking these seemingly childish or foolish questions – the fact that many people never ask questions of this kind is exactly why you need to ask them in order to unearth the hidden or real reasons between those who believe in rational explanation and those who believe in unconscious motivation; between logic and psycho-logic.
If you want to change people’s behaviors, listening to their rational explanation for their behavior may be misleading, because it isn’t the real why. This means that attempting to change behaviors through rational argument may be ineffective, and even counterproductive. There are many spheres of human action in which reason plays a very small part. Understanding the unconscious obstacle to new behavior and then removing it, or else creating a new context for a decision, will generally work much more effectively.
Alphabet, the parent company of Google, runs a division now simply called X. It was founded as Google X with the single aim of developing what the company calls “moonshots”.
Moonshot is not the same as an innovation – instead of pursuing change in increments, it aims to change something by a factor of ten. So, for instance, the research into driverless cars is funded by X with the explicit aim of reducing road accident fatalities by at least 90%, making roads ten times safer.
The argument for X is that the really major advances in human life have come from things that were not merely a sequence of modest improvements. As Google co-founder Larry Page puts it, “A ten percent improvement means that you’re doing the same things as everybody else.” X wants game-changers – Steam versus horse, train versus canal, electricity versus gaslight, rocket vs airplane.
But all of these moonshots require huge amounts of funding, effort and many years to develop and complete if they are completed at all. By contrast, psychological moonshots are comparatively much easier, cheaper and faster.
Killer features are often psychological moonshots: creative solutions to overlooked human emotions. Let’s look at some examples.
The Uber map is a psychological moonshot. It does not reduce the objective waiting time for a taxi but simply makes waiting 90% less frustrating. This comes from the founder’s flash of insight that we are much more bothered by the uncertainty of waiting than by the absolute duration of a wait. The invention of the map was perhaps equivalent to multiplying the number of cabs on the road by a factor of ten – not because waiting times got any shorter, but because they felt then times less irritating.
Another example: Making Amtrak’s Acela train that runs between Washington, D.C., and Boston 25% faster may cost hundreds of millions of dollars — but making a train journey 100% more enjoyable may cost much less. It isn’t hard to achieve improvements in perception at 10% of the cost of improvements in reality. Making a train 20% faster may cost millions – making a train journey 20% more enjoyable may cost much much less.
Put simply, it’s easy to achieve massive improvements in perception at a fraction of the cost of equivalent improvement in reality.
The reason this opportunity exists is that we are much more wrong about psychology than we are about physics. And also because we have a business and economic culture which prizes measuring things over understanding people. In fact, Sutherland argues that the biggest scope for progress in the next 50 years will come not from improvements in technology but from improvements in psychology and design thinking.
The $300M Button
The story of the $300M button made a big splash over a decade ago. It’s a great example of how psychology and design thinking, not technology, can make a huge impact on business, in this case to the tune of $300M. The combination of 28 words and a button in the below picture first appeared on an unnamed retail website, which many experts believe to be Best Buy.
There were only two buttons: Log in and Register. What could go wrong? In isolation, the buttons were innocent enough. But the first red flag was they showed up right after a user clicked “Checkout”.
The first-time users were annoyed they had to register to complete their purchase: “I’m not here to be in a relationship. I just want to buy something.” Many vocalized how the retailer only wanted their information to pester them with marketing messages they didn’t want. Repeat users were also annoyed. Most of them couldn’t remember their login and password.
The site’s designers fixed the problem simply by replacing the ‘Register’ button with a ‘Continue as Guest’ button and a single sentence.
The number of customers completing purchases increased by 45 percent almost immediately, which resulted in an extra $15 million in the first month; in the first year, the site saw an additional $300 million attributable simply to this change. Even better, 90% of the customers ended up creating an account as part of the checkout completion process.
The logical approaches to boosting sales typically involve increasing marketing spending, running promotions, increasing product selections, setting up a loyalty program, and providing better customer services, all of these approaches cost a lot of money or effort. A change of a button, on the other hand, costs almost nothing.
This shows paying attention to psycho-logical things is not necessarily a waste of time, because the most important clues many often seem irrelevant and a lot of life is best understood by observing trivial details of human behavior. The smallest change in context or meaning can have immense effects on behavior.
Success is Rarely Scientific
For all we obsess about logical and scientific methodology, scientists know it is far more common for a mixture of luck, experimentation and instinctive guesswork to provide the decisive breakthrough; scientific reasoning only comes into play afterward.
Brilliant American physicist Richard Feynman describes his method: “In general, we look for a new law by the following process. First, we guess it…then we compute the consequences of the guess, to see what, if this law we guess is right, to see what it would imply and then we compare the computation results to experience, compare it directly with observations to see if it works. If it disagrees with the experiment or observation, it’s wrong.”
A good guess which stands up to observation is still science. So it was a lucky accident.
There are two key steps that a scientist uses. He uses intuition to guess the right problem and the right solution and then uses logic and observation to prove them – the process of discovery is not the same as the process of justification. But we often misuse our powers of reason, setting too low a bar in how we evaluate or verify solutions, but too high a bar in our conditions for how we discover or reach solutions in the first place. If it is true in science, it is probably even truer in questions of human behavior.
In math, it is a rule that 2 + 2 = 4. In psychology, 2 + 2 can equal more or less than 4. It’s up to you.
Humans don’t value things; we value their meaning. Humans don’t see things as what they are; we see things as what we think they should be. What things are is determined by the laws of physics, but what they mean is determined by the laws of psychology.
Many things which don’t make sense in a logical context suddenly make perfect sense if you consider what they mean rather than what they are.
Wine tastes better when poured from a heavier bottle. Medicines are more effective when people believe they are expensive. Almost everything becomes more desirable when people believe it is in scarce supply, and possessions become more enjoyable when they have a famous brand name attached.
All you need to do is to tinker with human psychology so that it feels as valuable as gold. If you think that’s impossible, look at the paper money in your wallet; the value is exclusively psychological. Value resides not in the thing itself, but in the minds of those who value it. You can therefore create or destroy value in two ways – either by changing the thing or by changing minds about what it is.
Nearly all really successful businesses, as much as they pretend to be popular for rational reasons, owe most of their success to having stumbled on a psychology magic trick. Apple, Dyson, Google, Red Bull, Starbucks, Disney and Amazon.
Psychophysics is essentially the study of how the neurobiology of perception varies among different species, and how what we see, hear, taste and feel differs from objective reality.
‘Time flies when you are having fun’ is an early piece of psychophysical insight. In some businesses, psychophysics is a more valuable discipline than physics, and in many industries, you need to master both. The airline industry is a good example: along with the physics of flight, you need to understand the psychophysics of taste, because food tastes very different at altitude, meaning that meals that are pleasant on the ground can be boring in the air. It’s about looking for things that people really couldn’t articulate that might improve the experience. No one actually knows the humidity and air pressure inside an airliner, but these things have a large effect on how people feel.
If you are designing anything where human perception plays a part, you need to play by a different set of rules. Like designing a train service or a tax system, or a checkout process on e-commerce websites, it’s impossible to define success except in terms of human behavior since perception, rather than reality, is what determines success.
Psycho-logic and psychophysics need to be applied not just to the design of train service but also to welfare programs, tax, transportation, healthcare, market research, the pricing of products and the design of democracy. There’s no point in struggling to create changes in objective reality if human perception can’t see it, so all these things need to be perception optimized for humans.
What really is and what we perceive can be very different. This is where physical laws diverge from psychological ones. And it is this very divergence that makes the magic of psycho-logic possible.
Ten Rules of Psycho-logic:
- It doesn’t pay to be logical if everyone else is also being logical because it gets you to the exact same place as everyone else.
- Solving human problems using rationality is like playing golf with only one club.
- It’s much easier and cheaper to achieve a massive improvement in perception than actually physical improvement.
- A good guess or luck accident that stands up to observation is still science.
- Test counterintuitive ideas because one else does.
- We don’t value things, we value their meaning. And what things mean is determined by psychology, not physics.
- The process of discovery is not the same as the process of justification. The former is an educated guess, and the latter is a rigorous verification.
- Ask seemingly childish or foolish questions to unearth real hidden truths.
- Context is everything. The situation or place we find ourselves in may completely change our perception and judgment.
- Change behaviors through rational argument is ineffective at best and counterproductive at worst.