Annotations (23)
“Royal Mail couldn't make sense of the fact that brand perception bore no relation to service levels. Districts with every first-class letter arriving early had low affection. Areas with ropey service seemed to love it. The theory that proved right: the major determinant of whether you liked Royal Mail was whether you liked your postman. People with unreliable service but a postman who did odd favors, left things in the porch, had a chat, thought it was brilliant regardless of metrics.”— Rory Sutherland
Psychology & Behavior · Operations & Execution · Leadership & Management
DUR_ENDURING
Personal interaction trumps operational quality
“Marketing is fat-tailed. 5 to 10% of what you do delivers perhaps 110% of the value. Paying people by the hour and demanding that every quantum of effort be matched to a quantum of value creation in neat proportion is catastrophic. An Australian agency had an idea for a large American consumer goods company that made the company in excess of $1 billion over 10 years. It still runs in 100 markets. The agency got paid $350,000 Australian dollars for it.”— Rory Sutherland
Business & Entrepreneurship · Economics & Markets · Creativity & Innovation
DUR_ENDURING
Marketing follows power law distribution
“The doorman fallacy: A hotel has a doorman who welcomes guests. McKinsey or a tech firm comes in and says your doorman costs $40,000 a year, we've defined his function as opening the door, we'll replace him with an automatic door and save you money. They take credit for the cost saving. Two years later the hotel's a catastrophe.”— Rory Sutherland
Operations & Execution · Strategy & Decision Making · Economics & Markets
DUR_ENDURING
Visible costs, invisible benefits destroyed
“We don't have much evolved experience evaluating postal efficiency. We have a quarter to half a million years of evolved experience deciding who to like and trust. For most of our evolutionary existence, that was one of the 5 most important questions to get right: Do I trust this person? Will they attack me? Are they an ally or foe? If I pay them money, will they deliver? We use our human judgment as a proxy.”— Rory Sutherland
Psychology & Behavior · Biology, Ecology & Systems · Economics & Markets
DUR_ENDURING
We assess people, not products
“Don't purely define problems in psychology-free terminology. In America you have temperature and feels-like temperature, which is intelligent because what makes us feel hot is not just ambient temperature but a combination of temperature, humidity, breeze. When going outside, I don't need to know ambient temperature for chemical experiments. I need to know will I feel hot.”— Rory Sutherland
Psychology & Behavior · Strategy & Decision Making · Operations & Execution
DUR_ENDURING
Optimize experience, not just metrics
“John Ralston Saul wrote Voltaire's Bastards arguing that human brains evolved with a variety of mental capabilities, only one of which is the capacity for reason. There's also imagination, creativity, common sense. We have a variety of different mental mechanisms gifted by a few million years of evolution as a social species. Yet we've made rationality the gold standard. What's weird about advertising is rationality is the bronze standard.”— Rory Sutherland
Philosophy & Reasoning · Psychology & Behavior · Creativity & Innovation
DUR_ENDURING
Rationality is starting point, not endpoint
“The two human default modes are do what everybody else does and do what I've done before. For obvious reasons, what you've done before and what everybody else does is not necessarily optimal, but it's much less likely to be catastrophic than trying something new that nobody else does. We're a herd species and a habitual species. In marketing something genuinely new, like Tesla electric cars, there's extreme anxiety you don't encounter with repeat buying or buying the brand leader.”— Rory Sutherland
Psychology & Behavior · Business & Entrepreneurship · Biology, Ecology & Systems
DUR_ENDURING
Innovation requires more marketing effort
“When buying a house, don't optimize because everybody will want that house. Instead, find something the house has which most people won't like but you don't care about. Next to a pub: most people, particularly older people, hate the idea because of noise and the beer garden. Personally, the noise of a good happy pub is music to me. I don't get to sleep before midnight anyway. Railway line is a bonus to me, to most people it's negative. Go look for those things where you can arbitrage.”— Rory Sutherland
Strategy & Decision Making · Economics & Markets
DUR_ENDURING
Seek what others avoid but you value
“In any service organization, you may interact online 95% of the time, but the one or two occasions where you interact by telephone or face-to-face disproportionately affect your perception of the organization. If I were wholly honest, 50% of the time I would advise a client: take 10 to 20% of your marketing budget and spend it on upgrading the call center. Pay the people too much, get the best practitioners.”— Rory Sutherland
Business & Entrepreneurship · Psychology & Behavior · Leadership & Management
DUR_ENDURING
Rare human interactions dominate perception
“Dyson presenting call center statistics to James Dyson: average call time, average wait time, standard metrics about how quickly to get people off the phone. Dyson said stop, you've got this all wrong. We should treat it as an honor if one of our customers chooses to get in touch with us. We should respond accordingly, as if we are flattered by the contact, not bothered by the interruption.”— Rory Sutherland
Leadership & Management · Psychology & Behavior · Business & Entrepreneurship
DUR_ENDURING
Contact is honor, not interruption
“You don't find entrepreneurs in chess clubs. You find entrepreneurs in casinos, playing poker, playing backgammon, games of chance with an occasional very high payoff. People running organizations for financial predictability are trying to make it chess, trying to turn it into a reductionist game where the most you can score is one for a win. They're putting a ceiling on it, pretending it's a low variance mechanistic predictable process.”— Rory Sutherland
Business & Entrepreneurship · Strategy & Decision Making · Psychology & Behavior
DUR_ENDURING
Entrepreneurs seek variance, not certainty
“Real estate agents do their utmost to make sure that until things are signed and sealed, the vendor never meets the buyer. If one of them doesn't like the other, they won't buy or sell. When you meet the vendor and don't trust them or think they're shifty, it doesn't matter what the price is or the condition of the house, you revise your valuation downwards. I once didn't buy a house because the guy was being an asshole about the fridge. The fridge was worth 0.”— Rory Sutherland
Psychology & Behavior · Economics & Markets
DUR_ENDURING
Trivial behavior signals character
“On a first date, women turn up late or do something annoying as a psychopath detection test. If you bribe the waiter to tip soup on someone, the psychopath will lose it. A normal person will be understanding. The psychopath can't control their reaction. If you turn up late to a date, the psychopath will say 'I've been sitting here like an idiot for 15 minutes,' whereas a normal person will say 'I only just got here myself, traffic's terrible.”— Rory Sutherland
Psychology & Behavior · Biology, Ecology & Systems
DUR_ENDURING
Stress reveals character, reduces risk
“PLCs or companies on NASDAQ or NYSE are incentivized to behave like psychopaths because they're optimized around short-term transactional value, not long-term relationship building. Private companies led by founders are not run by the finance department. Short-term optimization and long-term effectiveness are two completely different things. It's short-term money off versus long-term value on.”— Rory Sutherland
Business & Entrepreneurship · Strategy & Decision Making · Economics & Markets
DUR_ENDURING
Public companies optimize quarters, not decades
“Richard Thaler's transaction utility thought experiment: You're on a beach, parched, a quarter mile down is a place selling ice cold beer. Your friend asks what maximum you'd pay. The price changes based on whether it's a boutique hotel or a shack selling the beer, even though the utility of the cold beer consumed back at your spot is identical. Your readiness to pay changes partly in accordance with what you imagine to be the overheads of the establishment selling the good.”— Rory Sutherland
Economics & Markets · Psychology & Behavior
DUR_ENDURING
Transaction feels matter beyond utility
“When you pursue efficiency, you start looking at numerical or mechanical factors and disregard psychological factors where the greater gains may be found. You focus too heavily on cost reduction and too little on value creation. One of the greatest forms of efficiency is employing a human being who's really, really nice. Tech people love to define business processes to make them susceptible to automation, replacing person X with algorithm Y.”— Rory Sutherland
Operations & Execution · Psychology & Behavior · Strategy & Decision Making
DUR_ENDURING
Efficiency pursuit destroys unmeasured value
“People can't really choose in the absence of comparison. It's a freakish element of free market capitalism: we can only like something if we choose it in preference to something else. Among real estate agents, there's a trick where you always show someone a less appropriate house first, ideally slightly more expensive, so when they see the house you want to sell them, it's now clear-cut because they can say it's cheaper and it's got a conservatory.”— Rory Sutherland
Psychology & Behavior · Economics & Markets · Strategy & Decision Making
DUR_ENDURING
Choice requires context, not optimization
“Dyson, privately owned, had fanatical customer loyalty. When someone's father, a parsimonious Scottish man, died, he had 3 or 4 Dyson devices bought new, one on each floor to save carrying them upstairs. These are expensive vacuum cleaners by any measure. The reason for loyalty: every time he rang them up, maybe once a year, they did something astonishing. They were really helpful, solved the problem, the part arrived next day. Sometimes they didn't charge for replacement.”— Rory Sutherland
Business & Entrepreneurship · Psychology & Behavior · Leadership & Management
DUR_ENDURING
Rare excellent service creates loyalty
“When tech bros are given too much power over decision-making, along with management consultancy, you're optimizing for something very distant from what real-world customers care about. They're not representative of the whole human population. Anyone in advertising is overweighted toward belief in advertising's ability to solve all problems. Tech people and consultants have taken over the finance department through technoplasmosis.”— Rory Sutherland
Strategy & Decision Making · Business & Entrepreneurship · Psychology & Behavior
DUR_CONTEXTUAL
Tech metrics colonize marketing decisions
“Management consulting firms run a scam called gainshare agreements, where they claim a percentage of the cost savings they identify in year 1. Any idiot can cut costs. What takes real skill is cutting costs in a way that doesn't destroy value. If management consultants come in, ask: are they on a gainshare agreement?”— Rory Sutherland
Strategy & Decision Making · Business & Entrepreneurship · Economics & Markets
DUR_ENDURING
Gainshare rewards destruction, not value
Frameworks (3)
The Doorman Fallacy Framework
Evaluating Cost Cuts Without Destroying Unmeasured Value
A framework for identifying and preserving value that is real but unmeasured when evaluating cost-cutting proposals. Named for the hotel doorman whose visible cost (opening doors) obscures multiple sources of unmeasured value (security, taxi hailing, guest recognition, status signaling). The framework prevents value destruction by forcing explicit identification of all functions before elimination.
Components
- List All Visible Costs
- Enumerate All Actual Functions
- Identify Human and Tacit Elements
- Calculate Replacement Cost
- Assess Long-Term Value Impact
Preference Arbitrage Framework
Finding Value by Exploiting Taste Asymmetries
A framework for identifying and exploiting situations where your preferences differ from the majority, allowing you to acquire assets or experiences at a discount. Works by identifying attributes that most people disvalue but that you are neutral about or actively value. Applicable to real estate, hiring, partnerships, and strategic positioning.
Components
- Identify Your True Preferences
- Map Market Consensus
- Seek Inverse Assets
Ogilvy-Doyle Writing Framework
Clarity with Occasional Complexity
A framework for effective writing that balances conversational clarity with occasional sophisticated vocabulary. Based on the observation that David Ogilvy and Arthur Conan Doyle wrote in extremely plain prose punctuated by rare complex words, creating both readability and respect for the reader's intelligence.
Components
- Write Conversationally
- Prefer Verbs Over Adjectives
- Convert Features to Benefits
- Add Strategic Complexity
Mental Models (16)
Power Law Distribution
MathematicsA distribution where a small number of events account for the majority of total impact. In marketing, 5-10% of efforts deliver 110% of value. Implies different strategy than normal distributions: maximize exposure to tail events rather than optimizing average outcomes.
In Practice: Discussion of fat-tailed nature of marketing returns
Demonstrated by Leg-jdr-001
Evolutionary Mismatch
Biology & EvolutionBehaviors or traits that were adaptive in ancestral environments but are mismatched to modern environments. Humans evolved to assess individual trustworthiness, not abstract service quality, leading to reliance on human proxies in modern service evaluation.
In Practice: Discussion of evolved trust assessment mechanisms applied to modern service contexts
Demonstrated by Leg-jdr-001
Herding Instinct
Biology & EvolutionThe evolutionary tendency to follow group behavior as a risk-reduction strategy. Following the group is rarely optimal but is less likely to be catastrophic than trying something nobody else does. Creates innovation resistance and explains why new products require more marketing.
In Practice: Explanation of why innovative products face adoption resistance
Demonstrated by Leg-jdr-001
Opportunity Cost
EconomicsThe value of the next best alternative foregone when making a choice. When evaluating efficiency improvements, the opportunity cost is the alternative use of those resources, often value creation through human investment.
In Practice: Discussion of choosing cost reduction over value creation
Demonstrated by Leg-jdr-001
Principal-Agent Problem
EconomicsWhen one party (agent) makes decisions on behalf of another party (principal), the agent's incentives may not align with the principal's interests. Management consultants on gainshare agreements have incentive to identify cost savings regardless of value destruction.
In Practice: Gainshare agreements incentivizing consultants to cut costs without regard to value
Demonstrated by Leg-jdr-001
Transaction Utility
EconomicsThe pleasure or displeasure from the perceived value of a transaction, independent of the utility of the good itself. Willingness to pay for identical beer differs based on whether it's from a boutique hotel versus a shack, reflecting fairness perception.
In Practice: Richard Thaler beer on the beach thought experiment
Demonstrated by Leg-jdr-001
Preference Arbitrage
EconomicsExploiting situations where your preferences differ from consensus to acquire undervalued assets. If you genuinely don't mind attributes others disvalue, you can buy those assets at a discount. Requires honest self-knowledge of true preferences.
In Practice: House buying strategy of seeking attributes others avoid
Demonstrated by Leg-jdr-001
Decoy Effect
PsychologyThe introduction of a third option (decoy) makes one of the original two options more attractive. The decoy is designed to be inferior to one option but similar enough to shift preference. In real estate, showing a less desirable house first makes the target house appear more attractive by contrast.
In Practice: Real estate agent trick of showing inferior house before target house
Demonstrated by Leg-jdr-001
Halo Effect
PsychologyA cognitive bias where one positive trait influences perception of other unrelated traits. A likeable postman causes customers to perceive the entire postal service as good, regardless of actual delivery metrics.
In Practice: Royal Mail case study showing postman likeability overriding service metrics
Demonstrated by Leg-jdr-001
Trust Heuristic
PsychologyUsing trustworthiness of a person as a proxy for quality of a product or service. When technical evaluation is difficult, humans default to evaluating the seller's character as a stand-in for product quality.
In Practice: Secondhand car buying example and real estate vendor trust assessment
Demonstrated by Leg-jdr-001
Stress Testing for Character
PsychologyDeliberately creating mild stress or inconvenience to observe how someone responds, revealing character traits that are hidden under normal conditions. Used unconsciously in dating and hiring to identify psychopathy or poor temperament.
In Practice: First date lateness as psychopath detection mechanism
Demonstrated by Leg-jdr-001
Perception versus Reality
PsychologyFor human-serving systems, subjective experience matters more than objective metrics. The 'feels-like' temperature is more useful than actual temperature for deciding what to wear. Problems should be defined in terms of human perception, not mechanical measurement.
In Practice: Feels-like temperature versus actual temperature analogy
Demonstrated by Leg-jdr-001
Status Quo Bias
PsychologyThe tendency to prefer the current state of affairs. Change is resisted not because the new state is worse, but because it's different. Human default modes are 'do what I did before' and 'do what everyone else does' because these minimize catastrophic risk.
In Practice: Discussion of human default modes and innovation resistance
Demonstrated by Leg-jdr-001
Optionality
Strategic ThinkingThe value of having choices without obligation. Entrepreneurs seek high variance environments where occasional huge wins offset many small losses. Chess has capped upside; poker has uncapped upside. Strategy should increase surface area for positive surprises.
In Practice: Entrepreneurs in casinos versus chess clubs metaphor
Demonstrated by Leg-jdr-001
Hidden Interdependencies
Systems ThinkingComponents in a system have relationships that are not obvious from looking at individual parts. Removing one component can degrade system function in unexpected ways because the interdependencies were unmapped.
In Practice: Doorman fallacy showing multiple hidden functions of a single role
Demonstrated by Leg-jdr-001
Time Horizon Mismatch
TimeWhen decision-makers optimize for a different time period than the actual consequences unfold over. Public companies optimize quarterly performance while customer relationships develop over years, creating systematic underinvestment in long-term value.
In Practice: Public versus private company incentive structures
Demonstrated by Leg-jdr-001
Connective Tissue (5)
Evolutionary mismatch between ancient trust mechanisms and modern service evaluation
Human brains evolved to assess trustworthiness in direct interpersonal interactions, but we have minimal evolved capacity to evaluate abstract service quality like postal efficiency. We default to the ancient mechanism: assessing the human we interact with. Royal Mail customers judged the entire organization based on their relationship with their individual postman. For 99% of human history, trusting the right person was more survival-critical than optimizing abstract service quality.
Discussion of Royal Mail brand perception study and secondhand car buying behavior
Geometry puzzle requiring one additional line to solve
Certain geometry puzzles appear impossibly complex until you draw one additional construction line, at which point the solution becomes trivial. Sometimes the solution isn't persuasion or complex strategy, but simply providing one additional piece of information that changes the problem from impossible to obvious. Problem difficulty is often about problem representation, not inherent complexity.
Discussion of how providing a single fact can solve a marketing problem
Feels-like temperature versus actual temperature as model for human-centered metrics
Weather services provide actual temperature (objective) and feels-like temperature (subjective combining temperature, humidity, wind, sun). Most business metrics resemble actual temperature: objective reality divorced from human perception. Effective marketing requires feels-like metrics incorporating psychological factors. When the purpose of a system is to serve human needs, optimize for subjective experience, not objective metrics.
Discussion of how to incorporate psychological factors into problem definition
Casino games versus chess as entrepreneurship metaphor
In chess, maximum payoff is binary: win, lose, or draw. Casino games like poker have unbounded upside: a single hand can yield 100x return. Entrepreneurs are found in casinos, not chess clubs, because entrepreneurship is structurally a casino game: most ventures fail, but wins are asymmetrically large. Corporate managers try to turn entrepreneurship into chess by demanding predictable quarterly returns, but this caps the upside. In chess, minimize errors; in casinos, maximize exposure to rare huge wins.
Discussion of fat-tailed distributions in marketing and entrepreneurship
Toxoplasmosis as metaphor for ideological capture of institutions
Toxoplasmosis alters host behavior: infected rodents lose fear of cats, leading them toward the predator completing the parasite's life cycle. Sutherland coins technoplasmosis by analogy: technology consultants have infected corporate finance departments, causing them to demand marketing metrics serving consultants' interests rather than company interests. The infected finance departments lose natural skepticism of tech solutions and begin advocating for them, completing the vendors' sales cycle.
Discussion of how tech vendors and consultants have captured corporate finance functions
Key Figures (11)
Roger L. Martin
2 mentionsManagement Thinker and Dean Emeritus, Rotman School of Management
James Dyson
2 mentionsFounder, Dyson
Richard Thaler
1 mentionsBehavioral Economist, Nobel Laureate
Geoffrey Miller
1 mentionsEvolutionary Psychologist
Kevin Dutton
1 mentionsPsychologist, Author
Adel Borki
1 mentionsMarketing Writer, Former Boxer
John Ralston Saul
1 mentionsCanadian Philosopher and Author
David Ogilvy
1 mentionsAdvertising Legend
Philip K. Howard
1 mentionsAttorney, Author
Arthur Conan Doyle
1 mentionsAuthor, Creator of Sherlock Holmes
Alex Batchelor
1 mentionsFormer Marketing Director, Royal Mail
Glossary (3)
gainshare
DOMAIN_JARGONCompensation where consultant receives percentage of client cost savings identified
“Management consulting firms run a scam called gainshare agreements.”
technoplasmosis
VOCABULARYTech consultants capturing finance departments like toxoplasmosis parasite captures host
“Tech people and consultants have taken over the finance department through technoplasmosis.”
sesquipedalian
VOCABULARYCharacterized by long words; given to using long words
“Throw in the odd sesquipedalian long word to remind the reader you're not an idiot.”
Key People (11)
McKinsey
Global management consulting firm
Roger L. Martin
(1956–)Canadian management thinker, former Dean of Rotman School
Alex Batchelor
Former Marketing Director of Royal Mail who discovered postman loyalty effect
Richard Thaler
(1945–)Behavioral economist, Nobel laureate, pioneered transaction utility concept
Kevin Dutton
(1967–)Psychologist who writes about psychopathy
Geoffrey Miller
(1965–)Evolutionary psychologist, author of The Mating Mind and Spent
Adel Borki
Self-taught Libyan marketing writer, former boxer, coined technoplasmosis
Philip K. Howard
(1948–)Attorney and author of Life Without Lawyers and Can Do
John Ralston Saul
(1947–)Canadian philosopher, author of Voltaire's Bastards
David Ogilvy
(1911–1999)Advertising legend, founder of Ogilvy, known for clear prose style
Arthur Conan Doyle
(1859–1930)Author of Sherlock Holmes stories, exemplar of prose clarity
Concepts (3)
Decoy Effect
CL_PSYCHOLOGYAdding inferior third option makes one original option more attractive by contrast
Quantification Bias
CL_PSYCHOLOGYTendency to focus on measurable factors while ignoring unmeasured but important factors
Evolutionary Mismatch
CL_SCIENCEAdaptive ancestral behaviors that are maladaptive in modern environments