Marketing Icon: Rory Sutherland (audio only)

Rory Sutherland, Vice Chairman of Ogilvy UK, joins James Pringle and Hector Mason on Riding Unicorns to delve into the fascinating intersection of behavioural science, marketing, and business strategy. With a career dedicated to understanding human decision-making, Rory shares his unique perspective on how psychological insights can unlock growth and create competitive advantages in today's business landscape.

In this episode, Rory explores why even the most brilliant ideas can fail without the right marketing approach and how concepts like the Netflix subscription model and the reliability of brands like McDonald's and Five Guys build customer trust through consistency. He introduces the concept of “inshittification” — when successful companies lose their way by prioritising profits over user experience — and critiques the tech industry’s obsession with automation at the expense of user needs.

Rory’s thought-provoking insights touch on everything from counterintuitive customer behaviour and the hidden power of psychological hacks to why founders need to consider both product and distribution as essential locks to unlocking success. This episode offers practical takeaways for founders, VCs, and creatives on how to better align products with consumer psychology and navigate today’s competitive market.

Listen now for Rory Sutherland’s refreshing take on behavioural science and its unexpected impact on business growth.

Don't forget to like, subscribe, and follow The Riding Unicorns Podcast on your favourite podcast platform and stay connected with us on social media to never miss an episode! 🎙️🦄

Transcript

  Welcome to the riding unicorns podcast. This is a podcast, all about venture capsule and fast-growing startups. Each episode is packed with insights, stories, tips, and advice to help you understand what it takes to build or invest in a rapidly scaling business.  On Jane Springle. My co-host is Hector Mason. 

We're both VCs based in London. Whether you're a founder VC angel investor, or just curious about the startup ecosystem. There's something here for you. Every episode dives into unique topics related to tech and venture capital, offering valuable takeaways and actionable insights. We hope you enjoy the show and find something useful in each discussion. 

Let's get started. 

  Hi Rory, welcome to the Riding Unicorns podcast. You've had a career that's spanned decades in advertising, behavioral science,  Creative strategy and we can't wait to discuss those sort of themes in the context of venture capital and so if you could start by just explaining your career a little bit in your own words your role today And then we can dive in a bit deeper to some other topics as we go I 

mean to call it a career is really to um, I think uh overstate things a little bit Uh in that I started work as a graduate trainee in Ogilvy in 1988 And I was very lucky, actually, to start in what was then called direct marketing.

It was called Ogilvy May The Direct. And it was the direct marketing part of the business, where what you did, it was typically direct mail or off the page selling, but what you did was measurable, quantifiable, and testable. So it was, you know, in a sense, you know, an awful lot of the principles of what is now performance marketing or online marketing were established in physical form in You know, back in the seventies and eighties, it was actually the mainframe computer in the customer database that first made that kind of thing you know, really, really profitable, but it has its origins all the way back to sort of Chicago mail order companies in the late 19th century. 

It's an interesting fact, by the way, that direct marketers. Actually pioneered the randomized control trial of the AB test about 40 years before it made its way into medicine.  So there you go.  But  that made me. of necessity, very, very interested in what you might call counterintuitive aspects of human behavior and decision making. 

And it became pretty rapidly evident that if you actually study experimental empirical data about how people think, choose and decide now, then the sort of mainstream theories of kind of conventional economics, which Heavily permeate, I think, business thinking,  e. g. If we drop the price, demand will go up, maybe. 

 Those kind of confident assertions take a pretty rapid beating.  And so I got more and more interested in this stuff as a kind of sideline, but I couldn't understand why nobody was talking about it or trying to codify it or to classify it until I discovered sometime, I suppose, in the. Early 2000s, middle 2000s, that there was a discipline called behavioral economics, which actually sought to do something absolutely outrageous for economists, which was to actually observe what happened in the real world rather than formulating theories based on outlandish assumptions or convenient assumptions that happened to make economics mathematically tractable. 

And so, I've spent the time subsequently I was president of the IPA, which is like the advertising trade body. When I came back into Ogilby, I founded a behavioral science practice, which now employs about 20 people. And the way I describe it is we're psychological detectives. If someone comes to us with a problem,  we will say to them, maybe, you know, sometimes when we have a situation at the moment like this, which is, I'm sorry, mate, but psychologically, there's just no way you can sell what you're trying to sell. 

Or we will say here are variables which will make a huge difference to your, your success, which you would otherwise perhaps be unaware of.  you know, and this, what's so fascinating about this is it has much wider implications than just the conventional advertising industry, which tends to focus on brand marketing budgets and brand communications and media budgets.

And what we rapidly all discovered in this division was that this is probably explains the TikTok popularity, is there's a massive unsated appetite for this kind of stuff. If you can present it in a vaguely entertaining and accessible format, and also that has monumental importance outside the realm of consumer marketing,  particularly, I think, in areas from private equity, your business, okay, to entrepreneurship,  because it's perfectly possible to have a brilliant idea.

Which objectively is a brilliant idea and entirely failed to work out how to sell it.  Or, I think what often happens is someone has a brilliant idea and it doesn't sell very quickly and they abandon it. By failing to realize that actually the adoption of most new human behaviors and the adoption of most technologies actually follows a sigmoid curve. 

Which is that people are very reluctant to be the first into any category,  and they will wait until there is a certain level of market penetration or wider adoption before they feel comfortable making a foray into that territory. Electric cars would be a case in point. It'll, you know, once everybody has a neighbor with an electric car, or there's someone in their street with an electric car, the same goes for solar panels, the same goes for Guinness.

If you walk into a pub and there's someone already there visibly drinking Guinness, the chance that you'll order Guinness goes up by. It's a double digit percentage. I can't remember the exact, the exact figure. And so we're social animals. We're herd animals. We look for reassurance in the behaviors of people around us.

We're very uncomfortable doing something that most other people don't do.  And I had a wonderful conversation yesterday with some colleagues about folding mobile phones.  Kind of, they're obviously kind of a pretty good idea. Everybody kind of wants one, but nobody's buying them.  And, you know, asking the question, what's the real why that explains that?

Not the official why, because if you ask people, they'll always say they're too expensive, or I don't like the seam, or whatever. You know, they'll always post rationalize their emotional predisposition. And our job as detectives is to get to the heart of that emotional predisposition and see if there's anything we can do to I think just to understand it, I mean, to understand, in other words, what's going on beneath the hood in human behavior, because very large parts of human emotion and consequently decision making take place in parts of the brain, which are opaque to introspection. 

So, in other words, we think we know why we do the things we do, but actually it's probably a story we've constructed or we've post rationalized or confabulated after the event. In many cases and you know, a large part of our kind of emotional machinery effectively as a kind of,  it's not quite a black box, but it's, it's a pretty opaque box.

 And I would argue, I would argue there is huge, huge commercial importance.  Not necessarily to understanding this perfectly,  but to understanding it a lot better.  And sometimes I think the best we can ever do is to say, I don't know if this is what the problem is, but let's test it.  That may be the best we can do.

I'll be absolutely honest with you. What is the problem we're up against is in business. There's a huge value attached to being like instantaneously right, which means that disciplines like economics, which can give you a seemingly logical answer to your question, enjoy disproportionate influence because of their confidence, their overconfidence. 

The, I think there's a really interesting conversation here around the two kind of polar opposite startup methodologies that we hear about. And you have on, on either end of the spectrum Really the sort of lean startup methodology where you speak to customers, learn about their problems and build exactly the thing that they tell you they need to solve their problems.

And then on the other end of the spectrum, you have more the Steve Jobs approach where it's you know, people don't know what they want until you give it to them. And clearly there are examples where both have worked, you know, Apple's been an enormous success and many, many companies that have followed the the more build, build to people's needs approach have also worked.

But how, how would you suggest that founders today? Decide on which methodology to follow.  

I think that Steve Jobs, it's very interesting because consumers can't always tell you what they want and they frequently mislead you. Because if you suggest something that is rational, they will say, yes, I will buy that thing  because to contradict you would appear wrong.

So you can get totally false buying signals. Because what they're saying is in a theoretical world where I could press a button and acquire that superpower. Yes, indeed, I would buy that thing. But in reality, it means I've got to have a conversation with procurement. I've got to go and talk to the finance director.

And then what happens if the installation goes badly wrong? Okay, it's a bit like in a theoretical world, we'd all have solar panels. Okay. If I could press a button and there were solar panels on the roof instantaneously, and I had the little app and I could watch it all, I'd be as happy as Larry and I would have written the check years ago.

Okay. The truth of the matter is that in order to get from my current state to that future state, there's a whole load of grief, friction, pain, fear.  What happens if my local electricity provider tells me they won't accept electricity fed into the grid? What happens if the people damage the structure of my roof?

Why do I have to pay 20, 000 up front? Why can't I do this in a modular fashion where I try before I buy? All these kind of things I think need to factor in. It always fascinated me.  I had a broken washbasin in my bathroom at home and it had a bloody crack, which meant that if you put more than an inch of water in the bottom of the thing, it started to leak. 

And if you could have offered me an instantaneous solution where the washbasin was transformed into a spanking new washbasin and I wrote a cheque for 400 quid, let's say, I would have done it instantaneously. It was actually broken for a year and a half. Before we finally got around to deciding which taps would go on the replacement water basin and whether we needed to make it coincide with the reinstallation of a carpet or a shower.

Okay. So, so  the, the it's very, very difficult.  I once had an idea for a product. Okay. And anybody's free to steal this. Okay. Which is simply a product for people driving a British car to France or a French car to the and you plug it into the cigarette lighter or into the USB C USB C  And every time you start the car, a voice just says, remember to drive on the right. 

I don't know if you've ever done this, but most people of my age who've driven a right hand drive car in France, even a left hand drive car in France, a higher car, although it's less likely. Okay, have made this mistake once or twice. There are two situations where it happens. It doesn't happen while you're driving down a road.

Once you're on the right hand side of the road, you don't sway over to the left. Once you're on the right hand side of the road, you stick where you are. You don't make the mistake. But early morning, no traffic. You set off in your British car from France on an empty road. You start driving down the left  and you need a reminder to tell you not to do it.

Now, the reason I thought that was a good idea was not just that it was a good idea. It was that it was really easy to know where and when and to whom to sell it, which is you go to ferry companies, you go to the AA who are selling overseas breakdown cover. You go to Euro tunnel. Okay. Right. And you go to Avis and Hertz and say, you really ought to provide one of these.

Or you can offer it as an optional extra and charge 50p a day and plug it in, and most people being risk averse, certainly anybody like me who's made that mistake once, which is having a French person driving straight towards you gesticulating furiously, fortunately it didn't happen on a bend, okay, anybody would pay more or less anything.

The point about that thing isn't necessarily that it's a good idea, although I think it is quite a good idea, it's that it's really easy to sell.  There's a moment, it's an individual decision. Et cetera.  And  equally, there are products which I'll tell you a lovely entrepreneurial story, which I think is great.

I didn't realize this until I watched him on a podcast, but the co founder of Netflix is actually the great nephew of Edward Bernays,  who's the kind of founder of modern public relations. He's Freud's Both nephew and son in law if that's possible. I don't know if that's legal. It's something like that.

Anyway,  and the fascinating story they have with Netflix, you've got to remember before Netflix was a streaming service. You young things won't realize this. It did DVD rental by post and blockbuster video was always ridiculed for refusing to buy Netflix for 50 million.  My contention was that if they had bought Netflix for 50 million dollars, actually they would probably would have just driven it into the ground or failed to treat it properly and it would have, we never would have heard of Netflix if they'd bought it.

Okay, that's the first thing large companies tend to crap on the smaller companies they buy. But also in desperation, After they failed to sell the blockbuster, they were just a company where you said, I'd like this DVD and two days later, because it's the U. S. It arrived in your mailbox with a little flag.

Okay. And then you watched it. Then you posted it back or put it in your mailbox and you returned it. It was DVD rental by post.  So when the When blockbuster refused to pay 50 million for Netflix, it wasn't worth 50 million and reason was anybody can replicate that business anyway, who had a laser printer and some envelopes.

But the other reason that it wasn't worth buying was they hadn't cracked out how to sell it, how to sell it.  Fortunately, this Bernays guy, the co founder was one of the early experts in understanding subscription models. I think there are too many of them now, but there weren't that many of them back then. 

And he said, they were looking at a warehouse and they said, really all these DVDs, we've got in this warehouse. They shouldn't be here. They should be in people's homes. And he had the idea. What if we let people just keep three DVDs at any one time, it'll save our storage costs, and they can change them as often as they like, okay, they get the DVDs in advance of watching them, so they don't have to wait two days to watch a film they've chosen, instead you go, ooh, I'm in the mood for watching that now,  and they came up with a proposition DVDs at any at any time you like, change them as often as you want, Three DVDs in your house all the time, change them as often as you'd like, 19.

95 a month, no late fees ever.  And suddenly, what they'd cracked was not the product, it was how to sell, position, and package and price the product. It was the marketing converter, which was actually  the last hurdle that they had yet to clear,  and it was their desperation of failing to sell to Blockbuster that caused them to try that, because you can imagine it probably gave the finance director the heebie jeebies, because he'd be saying, what if people watch 20 films a month?

We're going to lose a fortune. Okay. And I suspect in the first month, quite a few people did watch about eight films, but then people inertia sits, you know, sets in and you probably settled down to watching two or three.  And as they say, the rest is history. Now, my point is there are great, great ideas in principle, but business success is a door with two locks.

 You have to unlock the product and technology door and the sales and marketing lock. if they're not both unlocked, the door doesn't open.  Okay. it's fascinating to me, absolutely fascinating that one of the smartest companies in the world has literally spent billions developing the Apple Vision Pro and they have absolutely no idea whether it's the future of computing or whether it's a complete dog because the answer really comes down to psychological factors.

 and may may well come down to psychological factors, like if the early users of this product walk around in the streets looking like dickheads, okay, the user imagery will do that sort of happened with Google Glass, which I still think, by the way, is a brilliant product.  I still think Google Glass is a necessary product and they should have stuck with it.

And that, but the user imagery undoubtedly didn't help because they gave the first glasses away. They were made available to developers who were the best will in the world, probably, you know, aren't the coolest people in the world or the most, you know, the most socially adept. So my hunch was there were loads of occasions where people wore Google glass and started filming parties or whatever, and just generally pissed everything off.

But this point that actually, okay. This is the, this is the ultimate empirical historical proof point. Okay. The assumption which pervades economics  and which pervades business is that  people already know what they want in advance.  Okay. And in economics, that's we have a utility function. We know how much utility we'll gain for every penny we spend.

We completely trust the person who's selling us the product. This is just a matter of calculation. No social skills are required in the performance of this economic action. Okay.  It's just a utility function.  The truth of the matter is nothing works like that, that actually people may have desires, but they also have fears and uncertainties and they're hardwired evolutionarily to minimize uncertainty, minimize variance.

And if you want the real proof that marketing matters, okay, let's take the best idea that anybody's ever had, which is probably, we can all debate, some people might say Jesus or Mohammed, and I'll be honest, You know, I'll listen to that, but possibly the best idea anybody's ever had is actually the smallpox vaccination idea from Edward Jenner. 

Now, I always assume naively that he came up with this idea and everybody said, whoop dee doo, my children no longer have to die horribly, I'm no longer at risk of serious disfigurement or death and all it requires is a fairly simple, you know, procedure.  And everybody said, hey, hey, Jenna, here's like a knighthood and a peerage and a stack of money and we're off to the races. 

Jenna basically had to spend his whole life fighting against vested interests. The people who made money out of variolation were seeking to discredit the idea. Ridicule the church who believed that it was ungodly because it was unbiblical and Mixing cow material with your, the human body seemed completely wrong.

So there were anti vaxxers back in the 18th century. Gilray does a cartoon ridiculing vaccination by showing people turning into cows after they've been vaccinated. Okay, right.  And I think probably there was a breakthrough moment.  There was a breakthrough moment, probably, which was influencer marketing.

Of the time, which was getting the king to vaccinate his own children,  which was possibly a bit of a marketing breakthrough where people infer, okay, it's good enough for him. It's good enough for me.  You know, you would have used  Taylor Swift  today. Okay,  but it's fascinating this idea that there's this calculus and that people go, Oh, that's a better version of this.

So I'll go and get that. Look at it with electric cars. Look at it with solar panels. Power. You can look at it with all kinds of behaviors, which come up against these extraordinary forms of friction.  And quite often, the most important and most difficult problem is to actually unlock the psychological lock, not the technological lock. 

But I think it's just a really important point that you can have the best idea that anybody's ever had, and you still have to sell it. That's, that's my point. 

Yeah,  yeah, absolutely. And Roy, I mean, what you've been talking about makes me think yeah. About something that I want to ask you because I think you're going to have an interesting take on the psychology of it, but so it's all around the psychology of purchasing, right?

And, and you're driving on the right sort of notification USBC device idea made me think about this category. By the way, the reason I'm giving that away is I seriously, 

I can't be bothered to do it, but I seriously hope that someone does make the 

idea. And there's a whole category of uh,  Preventative products, um, that I think there's a really interesting psychology behind where  people somehow devalue future risks that they think they're smart enough to avoid.

You could kind of put it like that. So before someone's actually driven on the wrong side of the road and had a crash or almost had a crash, people think, Oh no, God, that would never be me. I don't need that product. And it's antivirus software, scan prevention software. In this case.  Fortunately, I think in this case, 

people, that wouldn't be a problem because people who are doing it for the first time are also disproportionately frightened.

I mean, a lot of Americans don't rent a car in the UK because they're absolutely in conniptions about the idea of driving on the land. It's actually not that difficult. As I said, the one thing you've got to do is make sure you start off on the right side of the road. The two occasions where you go wrong and when you start off in the morning, when you start off on a drive through.

First thing, and also occasionally there's like a petrol station at a roundabout and you get completely muddled. Anyway, you'd be muddled if you're in the UK and you're muddling contributes to you making the  bad mistake.  

Yeah, but in these cases, that's one example. But take, take the example of antivirus.

How do you make these preventative products psychologically appealing to consumers or potential consumers? 

 Funnily enough, there's a famous example you can find on YouTube of Muhammad Ali happily being vaccinated on TV.  That was the kind of equivalent of, you know, sort of influencer marketing or social.  I'm very interested in influencer marketing because I think we don't just care that things are recommended.

We care who recommends them.  And, you know, one of the ideas of economics was that once you had kind of rating systems, then brand advertising or brand reputation didn't matter because people would simply look at ratings. Now, those ratings, as anybody who's used TripAdvisor knows, are actually hugely unreliable because people are very, very different.

 And, you know, quite a lot of negative ratings, you read them and you think this person's just bad. Fucking nuts. I mean, the fact that this insane person dislikes this hotel is actually to me a recommendation. You know, you get people kind of west of the Mississippi who check into a hotel which is a converted 13th century Italian convent and they go, the rooms are quite small.

And you kind of go, yeah, they weren't really thinking of you in the 13th century. And you know, I'm, I'm always interested actually. I've always wanted to do a guide to hotels that really polarize people. Because I often think they're the most interesting hotels, you know, hotels that are really Marmite,  you know It's either a five star review or a one star review and you know, there, you know, there's a, there's a hotel in East Germany, which was formerly a police station in East Germany, and you basically sleep above your shower on a kind of platform.

There's one black and white TV in the room, which only has one channel, which shows the big Lebowski on continuous loop. I'm not making this up. I promise. Okay. Now the hotel also has in the middle of the hotel, you know, the best coffee shop you've ever been to. Okay.  And basically that's a hotel where you either get it or you go, this is brilliant.

It's mad, but it's fantastic. But if you turned up at that hotel expecting the Marriott, okay,  you'd go practically insane. It all depends on how you frame things, your state of mind, your expectations, your personality, and so on.  So, you know, recommendations from people like us. Yeah, of course. 

Rory, I've just got a quick question about that because, You mentioned the marriott there and you've also I think you've got a famous um, Sort of keynote about how mcdonald's is not shit.

Anyway, you guys always you never get food poisoning from mcdonald's basically So these like mature brands almost they become like a consistency that everyone relies upon But presume do they is there like a brand?  Where you have to be a bit more at the beginning to stand out from the crowd and eventually you become the standard.

And I think you've got another one about mature cheddar with rind and without rind. Yes. Um, you know, is there, is there a sort of an arc that they need to go on and for founders listening, how do they think about where their early stage company is on that arc and how they, Over time can become the standard, but at the beginning they need to do something to really stand out that might be a bit irrational.

Psychologically, there's an interesting thing which is jobs to be done and it all depends on what you're trying to do, okay? So McDonald's isn't a great place to take someone on a date because it doesn't have much singling value because it's a universally available, affordable, democratic place.  Okay.  there's a whole sort of business theory around this thing of what's called jobs to be done, which is what is the person trying to do that your particular brand helps them achieve. 

And depending on a whole variety of factors, that will be quite different. Now, I think there are really interesting hacks that. Some disproportionately successful brands. I might include five guys or the Moxie Hotel chain have kind of stumbled on. Okay which work very, very well. I mean, the Moxie Hotel chain is interesting because it's a less extreme version of that Berlin hotel in that the rooms are basically utilitarian.

They're perfectly good. Okay, the TV is pretty modern. The Wi Fi works, but the rooms are fundamentally utilitarian. There's no room service. There's no laundry service. You wouldn't wanna stay in one for a week,  but if you've got a two night stay in Manchester, go to democracy. It's fine because they've got a grand floor, which is like a kind of cool wheel work.

We work with a 24 hour barista and a bar, and it's all pretty cool. And even after you've checked outta the hotel, you can hang out there and do your emails for four hours without feeling unwelcome, and it's just a vibe. They do one thing remarkably well.   Then there are interesting brand hacks, which I remark on, which are low cost airlines, which is there is a very strong human  heuristic in buying things, which is kind of you get what you pay for,  and it manifests itself in something I call the too good to be true heuristic. 

Most of the reasons why low cost airlines are actually cheaper are things like pilot pensions, faster turnaround times, they sweat their assets more, by which I mean they fly much later in the evening, you know, quite often the last easy jet flight back from wherever is at like 11 o'clock at night, whereas the last BA flight's like at 7, okay? 

There are a whole load of reasons why they're cheaper.  But I always noticed the fact that the low cost airlines kind of had these visual economies, highly salient economies, like you didn't get it in Southwestern, you didn't get a pre allocated seat, you didn't get a meal, you didn't get anything for free, you didn't get a lounge, you didn't get checked in luggage for free, okay?

And those things were kind of there symbolically to overcome, I think, to overcome the too good to be true heuristic, which is if you just said, we're as good as British Airways, but we're half the price. Everyone would have gone, I don't believe you. You know, there's something wrong here, you're hiding something, you know, you don't service the engines properly, the planes are all 30 years old, and you have flight crew on day release from prison or something, right, okay, okay, right, and so by actually being very visible about this is where the economy is made, IKEA, you might argue, does the same thing. 

Okay, don't don't expect anyone to assemble this for you or to or indeed to help you carry it around the store. And by the way, we're going to make you walk all the way around the bloody store, but that makes you feel that the goods are actually cheaper because you've put some effort into their acquisition, not because they're less valuable to begin with.

Pick your own strawberries is a totally different message to cheap strawberries,  okay?  And so I think there are often things where now in economics are too good to be true heuristic shouldn't exist It shouldn't be a problem if you produce something that's better than someone else's and it's also cheaper Everybody goes whoop dee doop higher utility lower cost.

I'm off to the races. Nothing to see here. No brainer Okay. In reality, most humans have a kind of, other than economists, have a kind of social intelligence, which goes, that's weird, because if that were actually, if that clock radio  better than the other clock radio, and it's got more features, and it's a bit bigger, and it's more powerful, you know, the speakers are more powerful.

But I'd expect. If I made that clock radio, I'd expect to charge more for it than the other one,  and it's cheaper, so I now feel uncomfortable because there's something here that doesn't make sense.  Do you see what I mean? That, that actually, what, what to an economist is the easiest decision in the world, to a real world consumer is quite a difficult decision. 

I think AI 

can replace human intuition on these, on these kind of decisions, these counterintuitive um, business decisions. This question is interesting. Can it have enough 

context? Yeah. I mean, it can certainly, I mean, AI as an aid and prompt to better human decision making strikes me as having, you know, as kind of,  Wizard guide  strikes me as something quite interesting.

One of the things I want to query about it, however,  is that it may have a misunderstanding and the tech world may have a misunderstanding of how people really make decisions, which is they decide what they want and they set out to get it.  And so the idea that AI gives you an instantaneous response rather than entering into an iterative dialogue may be wrong.

Let me give an example of this. Okay. In a state agency. If you talk to any estate agent, everybody who's house hunting comes to them with a list of criteria. A good estate agent knows not to confine the houses you show those people to homes that meet those criterias, partly because they want to sell something, but what they find through experience is people end up buying a house, maybe an horseman den, okay, which meets none of their pre stated criteria, or very few of them, probably true in dating as well, okay.

If, you know, it would be absolutely fatal if you said, you know, I want my wife to be blonde, take a very shallow example, and the algorithm only showed you blonde people, because in reality, the right redhead or whatever,  okay, might absolutely tip. So we actually use search to refine our preferences. In the housing market and then the dating market,  you know, we actually use search to actually help us decide what we want.

So an AI that goes, this is the best holiday for you to stay in Greece is not giving you the best holiday to stay in Greece. What you want is an AI that goes, yeah, okay, over the next few months, I'll show you interesting Greek holidays. It's going to be like an AI estate agent. Okay, I'm going to show you interesting Greek holidays and interesting Greek locations, which you can go to. 

And.  Let me know. Let me know what you think. And I'll use your response to what I show, you know, maybe to just, you know, get to understand you a bit better and eventually will happen on something that's much better than you would have arrived at. If you demanded an instantaneous answer based on pre existing criteria. 

And so most of the time as human beings were actually it's what an algorithm design is called. The explore exploits trade off. We're not actually seeking.  Economists think that all, all basic human desire is already pre existing in the brain and it's only a matter of satisfying, satisfying it at the lowest cost possible.

Meet what the customer wants, give it to them, don't ask any further questions and then just give it to them at the lowest cost possible and everybody's happy.  And I think that causes a massive misdirection in um, business effort.  I mean,  let's say you're Deliveroo, okay, well there are going to be occasions where you think, I don't know, I, I suggested this to Deliveroo actually.

Okay. There are occasions where you definitely want a Deliveroo, right, your home and you've been working from home all day, your fridge is empty, it's Friday, you've just been paid, etc.  But there are also occasions where you could actually prompt it in the right way. You could go, I wasn't thinking of having a Deliveroo, but now you mention it.

Let's say you said, your next door neighbor is having a Deliveroo at eight o'clock this evening. You know, you can have free delivery if you add some things onto the bike.  You go, Oh, okay. Given that those are the, given those, that context and those circumstances, my preferences have changed completely.

Okay. So you literally have this discipline economics.  Because we'd all do that. A  cardo has a beautiful thing called the green van. You may know that. Okay? And it just nudges you. There's no financial incentive to choose a green van because there's already a delivery happening nearby to you, or the driver is passing by your door.

So there's a lower co carbon cost to actually choosing that delivery. Now, it doesn't work on everybody. Doesn't work on everybody all the time because some people need it before 10 o'clock because they're leaving the house But on people who are otherwise indifferent they go Well given that that one's a bit easier for a car to deliver and probably helps the planet i'll go with the green van  I asked them actually how well does it work?

I said, could you give me some data? They said no, it's secret and I said well go on give me a clue and they said put it this way You wouldn't believe how effective it is. Okay.  And so there's a story  and Kevin Dutton, who wrote the book, the psychopath test tells this story. It's about Winston Churchill at a Commonwealth dinner sometime in the 1950s, when he's prime minister again,  and one of the Commonwealth heads of government, we don't know who it is, but it was someone female, which probably narrows it down a bit in the 1950s.

I think  is seen stealing one of the salt shakers. From the table at the Buckingham Palace dinner. Now, you're thinking no big deal, but I think they date back to George III and they're solid gold. Right, okay. So they're significantly valuable things, you don't want to break up the collection. So someone goes, look, we've seen this person nick a bloody salt shaker.

what the hell do we do? Because we don't want to create a diplomatic incident. We don't want to accuse them of stealing. The same time, you know, we can't invoice them and you know, they're going to be massively keen on denying it because it's so embarrassing. And Churchill supposedly said, look, leave this to me. 

And he waits for the person to be sort of standing alone or not, not in any company,  pops the matching pepper shaker in his top pocket  and walks over.  Walks over to the lady and says, pulls out the pepper shaker and says, I think we've both been spotted. We better put these back.  Okay. I don't think she really believed that Churchill had nicked the actual pepper shaker.

Maybe she wanted to believe it. Maybe it gave her just, you know, and now he was not an accuser. He was a co conspirator. Okay. It was a complete reframing of the conversation.  Now, Kevin 

Dutton, I think it's such a, I think it's such an interesting point, wider point around finding mutual ground, mutual ground, you know, have disagreement.

Yeah. 

So the interesting question Kevin Dutton asked, which I think is a huge question. OK, is are there actually none of us, I think, would have thought of that. OK, I mean, you know, maybe if you give me a year, I might have thought of it. Thinking about on the spot suggests this is a rare. You know, a rare persuasive genius at work here.

I always thought he was the greatest lost copywriter. Uh, You know, he would, if he'd been an advertising copywriter, he would have been astonishing.  The question Kevin Dutton asked, which is a great question is, do we think there's actually an ingenious psychological solution out there that would actually solve a hell of a lot of problems if we just spent the time looking for it?

And   I think my answer to the question is probably not every single problem. I'm not suggesting, you know, there's some. Slogan that will solve the war in the Middle East. Okay, and I'm not that naive.  However, It's probably common enough that there's a psychological hack solution Which is miraculously cheap and effective that at the very least we should spend more time looking for them   And, you know, one of the things is that if you look at the R and D process for developing solar panels, that you accept a very large rate of failure, you accept the fact that some of these panels are massively difficult to manufacture, if you look at the difficulties of making the cyber truck, okay, they accept this huge amount of trial and error and failure and etc. 

And then it comes to marketing, which is every bit, I would argue.  As investigative and experimental process  and they want you to get it right first time  so they go, you know, we've spent ages with material scientists and, you know, various people trying to make the cyber truck work and making sure the windows don't break when you shoot at them and God knows what else.

Okay. Oh, and marketing guys. Can you go and sell it now?  And it strikes me that they're both, you know, in mirror image, they're both equally complicated processes, which require a high degree of what you might call iterative experimentation, and also speculation and creativity. Okay,  but the R& D and technical development thing is given a huge amount of leeway and permission to fail, and the marketers are expected to come up with a, with a uniform kind of deterministic, Plan  straight off the bat,  and I think it's deeply unfair, actually. 

I've got some questions that I'd quite like either one word or one word with a one sentence Why okay, so tech brands that you think are getting their positioning really right at the moment. There is a parallel world,  

okay,  where  Octopus Energy had been launched as green tech dot com  and hadn't had a cuddly pink octopus  Okay, as its mascot and in that parallel universe, it would have 15, 000 customers and would have gone bust. 

Now,  I absolutely venerate Greg, okay, the founder of Octopus,  but one of the things I will say, and I think it's an engineering bit piece of engineering genius, and also it's a very psychologically driven company because it understands that actually part of the solution to the climate crisis is to actually change behavior, okay, and not just through the pricing mechanism, they've just launched the most loyalty program where you get bonus points for using electricity at times when it's green owned in, you know, there's less competing demand. 

I also think there's a parallel universe in which Steve Jobs, everything else was the same in this universe, but Steve Jobs was 30 percent less charismatic, and in that world we'd still be using phones with keyboards. Which are objectively better, by the way,  right? The BlackBerry rim were right. Okay, I'll be absolutely honest with that.

Okay  Steve Jobs was also driven by the way by rabid Campunophobia, which is he was frightened of button.  If you look at his clothing, there are never exposed button  on any of his You know, his jeans always have a belt in front of them He's always wearing some sort of buttonless shirt, and I think that informed his horror of moving parts  but, but, okay.

Tech, tech brands, one thing I would like one Whoa, whoa, whoa. Ocado. I went, went on a tour of Ricardo's customer fulfillment center as they call them, CFC, um, and that, that we're annoying as Brits because we do have our own real successes. Okay. But whereas the Americans absolutely idolize their entrepreneurial.

successes. We have them in Britain.  Uh, You know, large, you know, large parts of living in Britain are highly innovative  and there are companies exactly, I'm talking about two large ones  that are actually really, really good, but we don't big them up to the extent that we should when they succeed.

Well, it's part of why we do this podcast is to try and do a little bit of that. Um, So those, those are two large examples 

of companies which are significantly innovative.  Deliveroo would be another one.  Okay. And they solve real, they solve very real human problems, by the way, all three of those things. 

Yeah. And then tech brands that you think are maybe, well, had it bang on at one point, but maybe losing their way or you're less impressed by currently. I think in 

shitification  combined with the departure of a founder particularly if the chief financial officer takes over from the founder,  has caused Google.

I was having a conversation with some people who run a search engine called Kagi.  K A G I. It's Japanese for key.  And the model is that you pay for your search engine, it's not advertising funded.  And the quality of the experience Uh, using kagi. com is emphatically worth paying for. It's magical. It's like using search uh, you know, eight years ago before it became utterly dominated by in other words, a lot of businesses start off focused on the consumer interest.

Then they focus on the customer interest, which is advertisers, and eventually they end up focused on themselves to the detriment of both the consumer and the customer because they're well embedded enough by network effects. They don't have to care about those people anymore.  It's what I would say is in a lot of digital businesses, it's a 10 year road from property developer to slum landlord. 

That's what the process of inshittification, as named by Cory Doctorow, is really about. And they just become exploitative. Is that also  

Is, is that also a natural cycle of you've got the same  sort of property and you've got to squeeze more out of it for the next quarter's results? 

Yeah, I mean it's, the finance people are obsessed with the short term costs as opposed to long-term value creation.

It's always much easier to quantify a cost than it is to quantify an opportunity cost. And my question is, what's the opposite of your procurement department? Okay. The procurement department are wandering around every day, getting bonused by asking the question, what's overpriced. There's nobody who's getting bonused for saying what's undervalued.

 What are we undervaluing here? What is it the consumers really care about, which we don't really understand, or we don't invest  in. Okay. And I think you need, you know, And so when the finance person takes over from the CEO, the CEO takes over from the founder, fundamentally a kind of short term, you know, shareholder obsession then takes over.

I mean, you people in private equity can fuck the dog pretty rapidly too. I mean, one thing you might do, for example, is over expansion. You force the brand to, let's  have a little debate about this. Okay. How many, how many five guys should there be? Now, if you're trying to basically build it up and sell it on, you're going to open five guys all over the shop.

I would argue there possibly should be a five guys in Tunbridge Wells, but there shouldn't be one in Sevenoaks. It's a horseman den. No. Okay. Right.  The reason I say that is that if it loses to some extent, some of its scarcity. Okay. it's no longer the brand it was. It has to be a special occasion brand to some extent.

Ooh, look, there's a Five Guys, rather than, oh, there's another Five Guys. I'm not sure it works if you make it too ubiquitous.  So they're like, you know, I mean, it's very difficult to tell people that, yeah, you've got a great brand, but only up to a certain size.  That, them's the rules, you know. Um,

Okay, and then a quick comment on the 

VC facts.

If, if, no, no, but if you look at the companies that have survived the longest in the FTSE or the Fortune 500, they're consumer goods companies.  And why do they survive the longest in those indices? It's because they're customer focused and they're forced to remain both resilient and inventive by their marketing focus on their customers. 

Okay. Once you get a business, which basically it says what we actually provide is a given.  Okay. And our job is to simply cut costs so we can provide it at an ever lower cost or a greater scale. Okay. In the short term, you've got to fill up in your profits. In the long term, you've basically got extinction or irrelevance. 

 Consumer focus keeps you resilient. It provides two things, actually. It keeps you relevant and it keeps you resilient.

 Okay. And then a quick comment on the VC worlds are, you know, our job is to basically try and find potentially outlier high returning companies, take big risks in the hope of big returns. Well, what does the, the creative outside world kind of view of that? 

One thing is that it is massively fed by fashion.

one of the things that worries me about VC money is that if it is driven by this kind of competitive urge and it basically floods certain categories with money at the expense of others, okay? And it's also quite ideological because it's very driven by the idea of automation basically destroying jobs, okay?

Okay. One thing that interests me is, from an economic standpoint, I think that Zoom and videoconferencing is a very, very important technology.  Now I thought, four years after lockdown ended, we'd have a big camera on top of my telly. Why can't I video? I can actually. There was a device called the Facebook Meta Portal,  but they cancelled it.

It was a brilliant product. If you can go and buy one second hand, go and buy the Facebook. It's called the Meta Portal TV. It plugs into your TV with a HDMI cable, and it's, it does live face tracking. It's like a 500 device that they were selling for 150 pounds. It's, it's a sensationally good product.

Okay, but they cancelled it because they decided the metaverse was more fashionable. It didn't align with their strategic body. But  there should be far more hardware and software products that are enhancing video calling and remote work than there are. Okay, but we have this kind of the slight tendency of the of the world of tech is to kind of You know, like a dog barking at every passing car, you know, it gets obsessed and fixated on something.

And it does worry me that the way in which money is apportioned and gains are apportioned is more to do with a Keynesian beauty contest of what do I think everybody else is going to find attractive rather than the question of what's important.

 Interesting. Yeah. I think that's a Completely fair observation. So Rory, we're, we're almost there on time. By the way, by the way, no one, no one has 

improved, no one has improved email significantly, okay? It occupies two and a half hours, three hours of every fucking day for me, okay? And all these bloody clever Stanford graduates out there, no one has actually sought to actually improve it. 

Okay, or to make it less of a time vampire in 20 fucking years,  right?  I mean, genuine Paul Graham has said this actually, Paul Graham has made the point. Actually, your email and your calendar should be the same thing. Okay, the email when it comes in should actually, if it's really urgent, should go to the top of your calendar.

And if it's less urgent, should go to a space in your calendar, which is set aside for reading email. Okay, the prioritization falls on the recipient. It's a monumental waste of time. Okay, it never happened with ordinary letters because you looked at the letter you go. It's handwritten. It's got a stamp or it's sent by FedEx I better look at this first.

Okay  The fact that this appalling situation has been allowed to arise and yet nobody's actually sought to solve that problem strikes me as basically, it's a kind of, it should be a source of shame for the tech industry. 

Yeah, so it's just our final question, Rory, to wrap up. If you could have dinner with any three people, who would it be?

Oh, I thought about this, and everybody says like Gandhi and Churchill and things like that. And then I thought, well, those people are, you know, actually really valuable, so I don't want them wasting time having dinner with me. So the best people to invite to dinner would be people who would be doing far more harm if they were elsewhere.

So it's Hitler Mao and Stalin,  because they're more than, you know, they're less damaging if they're, if they're busy having dinner than they are, if they're out, out there, you know, left to their own devices. 

Do you think you could persuade them to  refrain from some of their 

bad behavior? Actually, that's a perfectly fair question, which is if you've got them early enough in life, that would be, that's the biggest opportunity cost.

It's not making Gandhi better or Churchill more persuasive.  It's making these people marginally less arseholy. Yeah, yeah, yeah. Definitely.

It will be a pretty interesting dinner by the way.  

Yeah. Yeah, absolutely. Awesome. Well, Rory, look, it's been really fascinating. I think there's so much in there of the way you talk about irrational, you know, decision making and ideas and positioning and everything. But also there's so much just around that founders can tap into around how they think of their own business and the way they should approach things.

And we completely agree. That products and technology is only one lock on the door. Sales and marketing is the other. We often try and summarize it as product and distribution in venture. And if you haven't got distribution, you haven't really got a product because no one's going to use it. And so.

We try and come up with clever go to markets and distributions and things like that, but I think that's why your car accessory is so clever. 

 The London Overground always existed. Most of the tracks were there for a hundred years, but until they added it to the tube map, no one could make sense of it in their life.

Okay, that's the greatest best marketing case study.

 Yeah. Um, You've got so many of them. It's incredible. Um, There was the other one that you talked about with, I think on another podcast, he talks about Uber and then solving the problem of not actually, you know, if you ask the customer, they just say, I hate waiting for taxis. And he said, well, actually, if you give them a little Blinking dot on their phone that says it's going to be three minutes away.

They realize they don't they don't hate Waiting for taxes. They hate the uncertainty of when it's going to get there  

Or not believing that it's been sent in the first place.  

Oh, yeah. Yeah. Yeah  This this has been really fantastic. I think you have to go. I do. I just want to say a massive massive. Thank you And yeah, it's always so interesting to get a slightly different perspective.

We obviously interview a lot of investors and founders, but I think this episode will give those people lots to think about in their, in their working life. And um, yeah, just thank you so much again. Good to meet someone else from the Kent massive too. Fantastic.  

Fantastic. Bye bye. Bye bye.   

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