Book Summary Alchemy: The Surprising Power of Ideas That Don’t Make Sense

I recently listened to the audiobook of:

Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland

I love it. The book seems to do a great job at providing the EQ (emotional) side of things compared to the IQ often talked about in most of the books I read on Entrepreneurship or behaviour change.

I highly recommend the book for anyone who’s making something. Pretty much all of the Lenny’s Podcast listeners or anyone in Marketing, product, etc..

He takes the behavioural psychology insights of the past few decades and shows how applying them to the real world can have tangible results.

As I’ve read Dan Ariely’s Predictably Irrational, Thinking Fast and Slow by Daniel Kahneman and just about everything by Dr Robert Sapolsky, I was familiar with the base psychology, but he’s got a great, no-nonsense approach to actually using these and other such ideas instead of trying to model people as an economic rationalist which almost no one actually is.

His points about variability and how people waiting for something like a train are going to be far more appreciative of knowing when the train will arrive than having it arrive a few minutes earlier resonated with me. Especially having travelled the world a few years ago and seeing all the different takes on public transport. The not anxiety of knowing when something will arrive is usually more of a pain. Unless you are actually in need of medical attention and getting to a hospital ASAP.

His main argument is that unconventional, often counterintuitive solutions can be incredibly effective in solving problems and influencing behavior.

Some videos and then the summary of the book:

Book Summary From Claude

The main premise of the book is that logical, rational thinking has limits, and sometimes irrational or counterintuitive approaches can be more effective in business, marketing, and problem-solving. Sutherland argues that human behavior often defies conventional economic logic, and understanding psychological factors is crucial.

Key concepts include:

1. Psycho-logic vs. Logic: Often, what seems irrational can work better than purely logical solutions.
2. Perception matters: How people perceive things can be more important than objective reality.
3. Signaling: Actions or features that seem wasteful can serve important signaling functions.
4. Satisficing: People often seek “good enough” solutions rather than optimal ones.
5. Context and framing: How choices are presented greatly influences decisions.
6. Unconscious motivations: People often don’t understand or can’t articulate their true motivations.
7. Alchemy in practice: Small, counterintuitive changes can sometimes have outsized effects.

Sutherland provides numerous examples from advertising, business, and everyday life to illustrate these concepts. The book encourages readers to question assumptions, consider psychological factors, and be open to unconventional solutions.

Psycho-logic vs. Logic

Psycho-logic vs. Logic is a core idea in Sutherland’s book. He argues that while conventional logic is useful in many situations, especially in fields like engineering or mathematics, it often falls short when dealing with human behavior and decision-making.

Key aspects of this concept:

1. Psycho-logic considers how humans actually think and behave, rather than how they “should” behave according to economic theory or pure logic.
2. Solutions based on psycho-logic may seem irrational but can be more effective because they align with human psychology.
3. Conventional logic often ignores context, emotions, and unconscious factors that influence human decisions.

Examples from the book:

1. Red Bull: From a logical standpoint, Red Bull shouldn’t succeed. It’s expensive, comes in a small can, and many people say it tastes bad. Yet it’s hugely successful because its marketing taps into psychological factors like exclusivity and energy.
2. Uber’s map: Showing users a map of nearby cars doesn’t make the wait shorter, but it makes waiting feel less frustrating. This psycho-logical solution is as valuable as having more cars.
3. Doormen: Logically, an automatic door is more efficient than a doorman. But a doorman serves multiple psychological functions – security, status signaling, assistance – that an automatic door can’t replicate.
4. Advertising: Logically, ads should just convey information. But effective ads often use emotional appeals, storytelling, or seemingly irrelevant elements that resonate psychologically.
5. The “£300 million button”: An e-commerce site increased sales dramatically by changing a button from “Register” to “Continue” and adding a line of reassuring text. This small change addressed customers’ psychological barriers.
6. Sainsbury’s potato peeler: When a customer complained about a peeler, the logical response would be to improve the product. Instead, they renamed it a “carrot peeler,” solving the problem without changing the product.

Sutherland argues that by understanding and applying psycho-logic, businesses and policymakers can find more effective solutions to problems and create more value, often at lower cost than conventional approaches. The key is to consider how humans actually behave and make decisions, rather than how a purely rational actor would behave.

Perception matters: How people perceive things can be more important than objective reality

The idea that “Perception matters: How people perceive things can be more important than objective reality” is a crucial concept in Sutherland’s book. He argues that in many situations, especially those involving human behavior and decision-making, subjective perception can have a greater impact than objective facts.

Key aspects of this concept:

1. People make decisions based on how they perceive a situation, not necessarily on the objective reality.
2. Changing perceptions can often be easier and more effective than changing reality.
3. Marketing and branding often work by influencing perceptions rather than changing product attributes.

Examples from the book:

1. The Uber Map: As mentioned earlier, showing users a map of nearby cars doesn’t objectively change the wait time, but it changes the perception of waiting, making it feel less frustrating.
2. Placebo Effect: Sutherland discusses how expensive placebos are often more effective than cheap ones, even though they’re objectively the same. The perception of value influences the effectiveness.
3. Wine Tasting: Sutherland mentions studies where people’s perception and enjoyment of wine is significantly influenced by its perceived price, even when it’s the same wine.
4. Reframing Train Journeys: Instead of making trains faster (changing reality), Sutherland suggests changing the perception of the journey by making it more enjoyable or productive.
5. The “Fly in the Urinal”: Amsterdam’s Schiphol Airport reduced spillage around urinals by 80% simply by etching the image of a fly in the urinals. Men instinctively aimed at the fly, improving accuracy without changing the urinals themselves.
6. Changing Product Names: Sutherland gives examples of how changing a product’s name can change its perception. For instance, the Patagonian Toothfish became much more popular when it was renamed “Chilean Sea Bass”.
7. The Noise of Vacuum Cleaners: Dyson found that people perceived their vacuums as more powerful when they were louder, even though objectively, a quieter machine could be just as effective.
8. Hotel Bathroom Floors: Expensive marble floors in hotel bathrooms are often dangerously slippery, but guests perceive them as luxurious. Sutherland argues that using a high-end non-slip material would be objectively better but might not be perceived as positively.
9. The Pepsi Paradox: In blind taste tests, people often prefer Pepsi, but when brands are visible, Coca-Cola usually wins. This demonstrates how brand perception can override taste perception.

Sutherland’s point is that by understanding and influencing perceptions, businesses and policymakers can often achieve their goals more effectively and efficiently than by trying to change objective reality. This approach opens up new possibilities for problem-solving and value creation that might be overlooked by purely logical thinking.

Signaling: Actions or features that seem wasteful can serve important signaling functions

The concept of “Signaling: Actions or features that seem wasteful can serve important signaling functions” is a key idea in Sutherland’s book. He draws on evolutionary biology and behavioral economics to explain how seemingly irrational or wasteful behaviors can actually serve important purposes in communication and decision-making.

Key aspects of this concept:

1. Signals are actions or features that convey information about quality, commitment, or status.
2. Effective signals are often costly or difficult to fake, which makes them reliable.
3. What seems wasteful from a purely logical perspective can be valuable for its signaling function.

Examples from the book:

1. Peacock’s Tail: Sutherland uses this classic example from evolutionary biology. The peacock’s tail seems wasteful and impractical, but it signals genetic fitness to potential mates.
2. Expensive Advertising: Large advertising budgets might seem wasteful, but they signal a company’s confidence in its product and its commitment to staying in business long-term.
3. Luxury Goods: Expensive watches or cars that don’t perform objectively better than cheaper alternatives serve as signals of wealth and status.
4. College Degrees: The specific knowledge gained in college may not always be directly applicable to jobs, but the degree signals persistence, intelligence, and conformity to social norms.
5. Corporate Headquarters: Impressive office buildings might seem like a waste of money, but they signal stability and success to clients and investors.
6. The Knowledge (London Taxi Drivers): The extensive knowledge required of London taxi drivers might seem inefficient in the age of GPS, but it signals commitment and reliability to customers.
7. Elaborate Packaging: Fancy packaging for products might seem wasteful, but it can signal quality and care to consumers.
8. Long Job Interviews: Extensive interview processes might seem inefficient, but they signal the importance of the position and the company’s thoroughness.
9. Dress Codes: Formal business attire might seem unnecessary, but it signals professionalism and respect for clients or colleagues.
10. Handwritten Notes: In a digital age, handwritten thank-you notes might seem old-fashioned, but they signal personal attention and effort.
11. Product Warranties: Offering long warranties might seem risky for a company, but it signals confidence in product quality.
12. Unpaid Internships: These might seem exploitative, but they can signal a person’s commitment to a career path.

Sutherland argues that understanding signaling can help businesses and individuals make better decisions about where to invest time and resources. Sometimes, what appears to be waste is actually a valuable investment in communication. By recognizing the signaling value of certain actions or features, organizations can create more effective strategies and potentially find ways to signal important qualities more efficiently.

Satisficing: People often seek ‘good enough’ solutions rather than optimal ones

“Satisficing: People often seek ‘good enough’ solutions rather than optimal ones” is an important idea in Sutherland’s book, borrowed from behavioral economics and decision theory. It challenges the assumption that people always make fully rational, optimizing decisions.

Key aspects of this concept:

1. Satisficing is a combination of “satisfy” and “suffice” – finding a solution that is good enough rather than the best possible option.
2. People often use mental shortcuts (heuristics) to make decisions, rather than thoroughly analyzing all options.
3. Satisficing can be more efficient and sometimes more effective than trying to optimize, especially in complex or uncertain situations.

Examples from the book:

1. Brand Loyalty: People often stick with familiar brands rather than constantly searching for the absolute best product. This satisfices by reducing decision-making effort and risk.
2. Restaurant Choices: When traveling, people might choose a familiar chain restaurant over exploring unknown local options, satisficing for reliability over potential optimization.
3. Job Searches: Job seekers often accept a “good enough” position rather than continuing to search for the perfect job indefinitely.
4. Dating and Marriage: People generally don’t exhaustively compare all potential partners before committing, but rather choose someone who meets their key criteria.
5. Supermarket Shopping: Consumers often buy the first acceptable product they see rather than comparing every option in a category.
6. Technology Adoption: Many people use default settings on devices or software rather than optimizing every possible option.
7. Investment Decisions: Instead of trying to maximize returns, many investors satisfice by choosing “safe” options that meet their basic needs.
8. House Hunting: Home buyers often settle for a house that meets their main criteria rather than exhaustively searching for the perfect home.
9. Menu Choices: Diners frequently choose the first appealing item they see on a menu rather than reading through all options.
10. Travel Booking: People might book the first acceptable flight or hotel rather than spending hours comparing every possible option.
11. Insurance Purchases: Consumers often choose insurance plans that seem “good enough” rather than meticulously comparing all available policies.
12. Social Media Use: Users tend to satisfice by engaging with content that appears in their feed rather than optimizing their experience by thoroughly curating their connections and sources.

Sutherland argues that understanding satisficing is crucial for businesses and policymakers. It explains why people don’t always choose what might objectively be the “best” option, and why they sometimes stick with suboptimal choices. This insight can inform product design, marketing strategies, and policy interventions.

For example, a company might focus on making their product the easiest to find or the most familiar, rather than objectively “the best.” Or a policy might be designed to nudge people towards a good-enough healthy choice rather than trying to enforce an optimal but unrealistic behavior change.

Recognizing satisficing behavior can lead to more effective and realistic approaches to influencing decisions and behaviors, often by simplifying choices or making “good enough” options more accessible or appealing.

Context and framing: How choices are presented greatly influences decisions

“Context and framing: How choices are presented greatly influences decisions” is a central theme in Sutherland’s book. It draws on insights from behavioral economics and cognitive psychology to show how the way information is presented can dramatically affect decision-making, often in ways that defy conventional economic logic.

Key aspects of this concept:

1. The same information presented in different ways can lead to very different decisions.
2. People’s preferences are often not fixed but are influenced by how choices are framed.
3. Small changes in wording, order, or context can have significant impacts on behavior.

Examples from the book:

1. Organ Donation: Sutherland discusses how countries with opt-out systems for organ donation have much higher participation rates than those with opt-in systems, even though the choice is essentially the same.
2. Price Framing: A product priced at “$100 off” often seems more attractive than the same product at “10% off”, even if the final price is identical.
3. Menu Design: Restaurants can influence ordering by how they arrange and describe menu items. For example, placing an expensive item at the top of the menu can make other items seem more reasonably priced.
4. Subscription Services: Framing a subscription as “$10 per month” versus “$120 per year” can affect sign-up rates, even though they represent the same total cost.
5. Travel Options: Presenting a flight+hotel package can make the total price seem more attractive than if the components were priced separately.
6. Health Messaging: Framing a medical treatment in terms of survival rates versus mortality rates can significantly influence patients’ decisions, even though the information is statistically equivalent.
7. Decoy Effect: Adding a third, less attractive option can make one of the original options seem more appealing. Sutherland gives the example of The Economist’s subscription options.
8. Social Norms: Framing a behavior as common or socially approved can increase its adoption. For example, telling hotel guests that most people reuse their towels increases towel reuse rates.
9. Default Options: Making an option the default choice (like automatic enrollment in pension plans) can dramatically increase uptake.
10. Anchoring: Presenting a high-priced option first can make subsequent options seem more reasonable, even if they’re still expensive.
11. Loss Aversion: Framing a choice in terms of avoiding a loss rather than achieving a gain can be more motivating. For example, “Don’t miss out on this opportunity” versus “Take advantage of this opportunity.”
12. Temporal Framing: Describing something as “per day” rather than “per year” can change perception. For example, “50 cents a day” sounds more affordable than “$180 a year.”

Sutherland argues that understanding framing and context is crucial for effective communication, marketing, and policy-making. By carefully considering how choices and information are presented, organizations can significantly influence behavior without changing the fundamental options available.

He also suggests that being aware of framing effects can help individuals make better decisions by considering how the presentation of information might be influencing their choices. This awareness can lead to more thoughtful decision-making and potentially better outcomes.

Overall, Sutherland’s point is that objective information alone doesn’t determine decisions – the way that information is framed and the context in which it’s presented play a crucial role in shaping behavior and choices.

Unconscious motivations: People often don’t understand or can’t articulate their true motivations

“Unconscious motivations: People often don’t understand or can’t articulate their true motivations” is a key insight in Sutherland’s book. It challenges the assumption that people always know and can accurately report why they make certain decisions or behave in certain ways.

Key aspects of this concept:

1. Many of our decisions are driven by unconscious processes that we’re not fully aware of.
2. The reasons people give for their actions may be post-hoc rationalizations rather than true motivations.
3. Understanding these hidden motivations can lead to more effective marketing, product design, and policy-making.

Examples from the book:

1. Toothpaste: Sutherland argues that while people claim they brush their teeth for health reasons, the real motivation is often social (fresh breath, white teeth for appearance). This explains why most toothpaste is mint-flavored rather than unflavored.
2. Car Purchases: People might say they buy a luxury car for quality or performance, but the true motivation might be status signaling.
3. Gym Memberships: The stated reason might be “to get fit,” but an unconscious motivation could be the desire to see oneself as a health-conscious person.
4. Social Media Use: Users might claim it’s for staying connected, but unconscious motivations could include fear of missing out or desire for validation.
5. Expensive Wine: People may say they buy it for taste, but the true motivation might be to signal sophistication or wealth.
6. Brand Loyalty: Consumers often can’t articulate why they prefer one brand over another, suggesting unconscious factors at play.
7. Charitable Donations: While people might claim purely altruistic motives, unconscious motivations could include enhancing self-image or social status.
8. Food Choices: People might say they choose certain foods for taste or health, but unconscious factors like childhood associations or cultural norms often play a big role.
9. Fashion Choices: The stated reason might be comfort or practicality, but unconscious motivations often relate to group belonging or self-expression.
10. Travel Destinations: People might say they choose based on attractions or climate, but unconscious motivations could include status or escapism.
11. Career Choices: While people often cite passion or aptitude, unconscious motivations like parental approval or societal expectations can be significant factors.
12. Voting Behavior: Voters might claim to decide based on policies, but unconscious factors like a candidate’s appearance or their own group identity often play a big role.

Sutherland argues that recognizing these unconscious motivations is crucial for several reasons:

1. Market Research: Traditional surveys might not capture true motivations, leading to misguided strategies.
2. Product Design: Understanding unconscious desires can lead to more appealing products.
3. Advertising: Effective campaigns often tap into unconscious motivations rather than just stating product benefits.
4. Policy-Making: Policies that align with people’s unconscious motivations are more likely to be effective than those that rely on conscious, rational decision-making.
5. Personal Decision-Making: Being aware of our own unconscious motivations can lead to more informed choices.

Sutherland suggests that to uncover these hidden motivations, we need to look at what people actually do rather than what they say, and to consider the evolutionary and psychological factors that might be influencing behavior. He advocates for more indirect and observational research methods, as well as for being open to counterintuitive explanations for human behavior.

By acknowledging and working with these unconscious motivations, Sutherland argues that we can create more effective solutions in business, marketing, and public policy.

Alchemy in practice: Small, counterintuitive changes can sometimes have outsized effects

“Alchemy in practice: Small, counterintuitive changes can sometimes have outsized effects” is a central theme in Sutherland’s book. It encapsulates his main argument that unconventional, often counterintuitive solutions can be incredibly effective in solving problems and influencing behavior.

Key aspects of this concept:

1. Small changes in approach can lead to disproportionately large effects.
2. Solutions that seem illogical or contrary to conventional wisdom can be highly effective.
3. Creativity and lateral thinking can often solve problems more efficiently than direct, logical approaches.

Examples from the book:

1. The “$300 Million Button”: An e-commerce site increased annual revenue by $300 million simply by removing the requirement for users to register before making a purchase.
2. Red Bull: Despite being expensive, coming in a small can, and having a taste many people initially dislike, Red Bull became hugely successful through clever marketing and positioning.
3. Behavioral Interventions in Tax Collection: Adding a single line to tax collection letters stating that most people in the recipient’s area had already paid their taxes significantly increased compliance rates.
4. Reducing Urinal Spillage: Amsterdam’s Schiphol Airport reduced spillage around urinals by 80% by etching the image of a fly in the urinals, giving men a target to aim at.
5. Solving Train Overcrowding: Instead of expensive infrastructure changes, Sutherland suggests reframing the problem by making standing more attractive or comfortable.
6. Reducing Elevator Wait Times: Installing mirrors next to elevators reduced complaints about wait times without actually making the elevators faster.
7. Encouraging Pension Savings: Rather than trying to convince people to save more now, the “Save More Tomorrow” program asked people to commit to saving more from future pay raises, dramatically increasing savings rates.
8. Reducing Shoplifting: Some stores found that greeting customers at the door was more effective at reducing theft than sophisticated security systems.
9. Improving Customer Service Calls: A software company significantly improved customer satisfaction by adding four words to their call center script: “I’m going to solve this for you.”
10. Encouraging Recycling: Instead of complex educational campaigns, simply providing an extra bin for recyclables in kitchens dramatically increased recycling rates.
11. Reducing Speeding: Painting lines on roads that get progressively closer together creates an illusion of acceleration, causing drivers to slow down.
12. Improving Medication Adherence: Making pill bottles that glow when it’s time to take medication proved more effective than complex reminder systems.

Sutherland argues that these alchemical solutions work because they tap into human psychology in ways that purely logical approaches often miss. They often work by:

1. Changing perceptions rather than reality
2. Exploiting cognitive biases
3. Leveraging social proof or norms
4. Reframing problems or choices
5. Reducing friction in desired behaviors
6. Adding friction to undesired behaviors

He suggests that to find these alchemical solutions, we need to:

1. Question assumptions and conventional wisdom
2. Look for indirect approaches to problems
3. Consider psychological factors, not just logical ones
4. Be willing to test counterintuitive ideas
5. Pay attention to small details that might have big impacts

Sutherland’s overall point is that by being open to these unconventional, alchemical approaches, we can often find more effective, efficient, and creative solutions to a wide range of problems in business, policy-making, and everyday life.

What’s different about this book?

“Alchemy” by Rory Sutherland is quite distinctive compared to many other books on entrepreneurship and marketing. Here’s how it compares:

1. Focus on Psychology: Unlike many marketing books that focus on tactics or strategies, “Alchemy” emphasizes the psychological underpinnings of human behavior and decision-making. It draws heavily from behavioral economics and cognitive psychology.
2. Counterintuitive Approach: While many business books advocate for data-driven, logical approaches, Sutherland argues for embracing seemingly irrational or illogical solutions. This sets it apart from more conventional marketing wisdom.
3. Breadth of Examples: “Alchemy” draws examples from a wide range of fields beyond just business, including public policy, technology, and everyday life. This gives it a broader perspective than many marketing-specific books.
4. Emphasis on Perception: Many marketing books focus on changing product attributes or messaging. Sutherland emphasizes changing perceptions, often without changing the underlying product or service.
5. Creativity Over Data: While not dismissing data, Sutherland places a higher premium on creative thinking and intuition than many contemporary marketing books that emphasize data-driven decision making.
6. Challenging Assumptions: “Alchemy” actively encourages readers to question fundamental assumptions about human behavior and market dynamics, which is less common in more prescriptive business books.
7. Humor and Storytelling: Sutherland’s writing style is more anecdotal and humorous than many business books, making complex ideas more accessible and entertaining.
8. Cross-Disciplinary Approach: The book draws insights from fields like evolutionary psychology and behavioral economics more heavily than typical marketing literature.
9. Focus on ‘Why’ Not Just ‘How’: Many marketing books focus on how to execute strategies, while “Alchemy” delves deeper into why certain approaches work psychologically.
10. Emphasis on Small Changes: Unlike books that advocate for major overhauls or disruptions, “Alchemy” often focuses on how small, clever changes can have outsized impacts.

While “Alchemy” touches on entrepreneurship, it’s not a typical guide to starting or running a business. It’s more about cultivating a mindset that values creative, psychologically-informed problem-solving in business and beyond. This makes it quite different from step-by-step entrepreneurship guides or marketing textbooks, but potentially very valuable for entrepreneurs and marketers looking to think differently about their challenges.