Alchemy by Rory Sutherland [Actionable Summary]

The Book In Three Or More Sentences:

Alchemy offers a refreshingly different way of doing business and solving problems. Instead of relying on what is visible and rational, if we want to make our product seem magical in the eyes of others, we should focus more on the unspoken and the irrational. Rory Sutherland, the vice-chairman of Ogilvy, argues that we all frantically pursue the logical solutions to the problems we encounter. However, this makes us blind to the best solutions because we live in an irrational world. A lot of times, especially in business, the less obvious, illogical solution is the best approach to reach a wider audience and make your product more appealing.

The Core Idea:

Just because something doesn’t look good in a spreadsheet doesn’t mean that it’s not good. Not every solution needs to have a convincing rationale argument to be considered. Humans make judgments not always based on careful investigation and deductive logic. They, we, decide what to buy, what to consume by relying on something much more primitive – emotion and intuition. Both things that cannot be measured nor placed on a graph. That’s why, paying attention to the psycho-logical, as Rory Sutherland calls it, and going with what most consider to be a silly solution often works best.

7 Key Lessons from Alchemy:

Lesson #1: Spend Time Figuring Out Why Things Work

Just because something seems logical doesn’t mean that it’s the best solution.

Economically speaking, offering people money when they do something for you makes perfect sense. However, this doesn’t mean that you should hand money to your spouse every time she’s preparing dinner. Or send a check to your friends when they help you move the couch.

The trick to becoming a marketing alchemist, versatile salesperson, according to Rory Sutherland, is knowing the universal laws and spotting where these laws do not apply. And instead, different, anti-logical solutions should be proposed.

Put differently, not everything that makes sense works, and not everything that works makes sense.

Human evolution, mentioned in one of the examples in the book, perfectly describes the above statement. How we evolved and how we became what we are today is not guided by some mysterious logical algorithm that is mathematically faultless. This happened mainly through trial and error. After thousands of years of mistakes, we became the walking, thinking, grabbing individuals we are today.

Our rise, human evolution more precisely, to use the words of the author, “is like a brilliant uneducated craftsman: what it lacks in intellect it makes up for in experience.”

The important thing here to consider is that knowing why something works is much more important than knowing what works.

Building an ugly, but strong and reliable bridge makes perfect logical sense. But spending more on transforming this construction into a piece of art will provoke emotion. It will “work” better because people, by nature, are drawn to beautiful shapes.

“Logical ideas often fail because logic demands universally applicable laws but humans, unlike atoms, are not consistent enough in their behaviour for such laws to hold very broadly.” Rory Sutherland

Lesson #2: The Opposite Of a Good Idea Is a Good Idea

If you want to challenge the market leader in a specific segment, it makes perfect sense to create a bigger, cheaper alternative to the product you wish to go against. After all, who doesn’t like more bang for his buck?

But Red Bull, the provocative drink that outshined Coca-Cola did completely the opposite. Instead of creating something that comes in a bigger bottle and can potentially taste nicer than Coke, they created a kind of shitty-tasting drink that is really expensive and comes in a tiny can.

How the world responded?

The beverage became one of the best soft-drinks in the world. Consumed by millions. So successful that it funds sports all over the world and most notably Formula 1.

The author explains this phenomenon by providing us with two ways to think about selling a product: “Not many people own one of these, so it must be good’ and ‘Lots of people already own one of these, so it must be good.”

Coke is relatively cheap. Comes in big sizes and it tastes good. People love it.

Red Bull, on the other hand. Tastes funny. It’s available in a small can. Expensive. And often mentioned in the news because of the “strange” effect it has on people.

The two products come with completely different ideologies. If you are in a bar, it would make perfect sense to order Coca-Cola. But you’ll be perceived as ordinary. If you drink Red Bull, however, you’ll be considered extraordinary. Illogical. Impulsive. Wild even. Getting Red Bull in this setting is a conscious choice that comes with a message. A message to everyone looking: “I’m different.” And in a bar, being considered wild and different is probably better than being considered ordinary.

That’s the power of a luxury good. The power of “not many people own one of these, so it must be good.”

“On the one hand, luxury goods would be destroyed if they were too widespread – no one would want a designer bag that was owned by five million other people. On the other hand, many foodstuffs seem to be popular only because they are popular.” Rory Sutherland

Lesson #3: Abandon Logic So You Can Better Understand People and The Market

The choices people, we, make are not governed by rationality. We tell ourselves that what we do is rational, guided by logic, and following a perfectly linear path, but in reality, we’re deciding things based on something else.

Rory Sutherland describes the way we make decisions as “psycho-logic.”

If logic can help us become mathematicians, psycho-logic is the thing that helped us escape the jungle, allowed us to writes stories, build cities, and basically dominate the world we live in.

Understanding how psycho-logic works will help you understand the underlying desires of people. Allow you to add a sip of rare originality to everything you do. In a sense, it will help you spot and understand the non-rational behavior of species. Something far more important in the current economic climate – and not only.

An interesting example mentioned in the book to understand the power of non-rationality is the GPS system.

GPS operates with perfect knowledge and perfect information. The algorithm that powers the device aims to get you from point A to point B through the fastest possible route. Still, a lot of people are regularly ignoring the advice of their GPS for a reason. As stated in the book, “GPS devices know everything about what they know and nothing about anything else.”

What you know about the city you live in can help you tremendously to avoid routes with traffic jams. Things the GPS still can’t predict. Or in other words, “The GPS knows only what it knows, and is blind to solutions outside its frame of reference.”

The GPS can’t comprehend the full picture and that’s why it’s something we shouldn’t always trust.

The same applies to your everyday decisions whether in business or not.

If we only obey the visible. The logical. We’ll end up running an ordinary and unexciting business. We’ll make half-baked decisions. Moreover, unknowingly and sadly for us, we’ll be blind to the alternative solutions – that often work better.

To get the full picture. We should consider the non-visible factors. The emotional patterns and clues that can help us gain the upper hand.

Because, as perfectly described in the book:

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