Happy Sunday, friends.
Everyone has a contrarian view - mine is that markets are terribly inefficient and that consumers behave very differently from the basic assumptions most economists make.
I’d been struggling to find a good non-fiction book until I stumbled upon Alchemy by Rory Sutherland, which explores this exact thesis in brilliant ways.
I’m going to switch things up a bit in today’s newsletter and share a string of thoughts about the book and other related stuff about what it means to be human. Let me know what you think!
I hope you stick around, we’ll be back to regular programming next week.
Stay human 🙏🏼
🎩 Alchemy: The Surprising Power of Ideas That Don’t Make Sense
Alchemy was written by Rory Sutherland, who is the Vice Chairman of Ogilvy and Mather, and the speaker behind my all-time favorite Ted Talk. I discovered his Ted Talk in college and it is still a mind-blowing presentation, so you might want to get into the mood for this great book by watching it.
Some of my favorite thoughts from the book:
As much as we like to think we’re rational creatures, the bottom line is, we’re not. We don’t make logical decisions based on evidence. Most decision making is driven by emotion.
There are 11 rules of alchemy in the book. One of them is that the opposite of a good idea can be another good idea. For example, there are two great ways of welcoming people to a hotel: one of them is highly automated and impersonal, the other is highly elaborate and involves large degrees of obsequiousness.
Most invention and discovery comes when we realize that the dominant assumption in one market or category is actually wrong. Or, if not wrong, then not exclusively true. E.g. Coke tastes really good and Red Bull tastes kind of disgusting. Both are successful.
Logic requires that people find universal laws, but outside of scientific fields and once human psychology has a role to play, it is perfectly possible for behavior to become contradictory. A tax rise can cause you to work less because the returns of your labor are lower, or work harder to maintain your present level of disposable wealth. There are two ways to sell 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”. It always depends.
Advertising adds value to a product by changing our perception of it. An example I love that is not mentioned in the book: for years, few people bought “death insurance.” Then some genius changed the name to life insurance and grew the industry by many billions of dollars. After all, life insurance sounds so much better than death insurance.
Marketing changes how we are perceived by others when we use a product. “If you stand and stare out of the window on your own, you're an antisocial, friendless idiot. If you stand and stare out of the window on your own with a cigarette, you're a fucking philosopher.”
Some people believe driverless cars will not work unless they learn to be irrational — if such cars stop reliably whenever a pedestrian appears in front of them, pedestrian crossings will be unnecessary and and jaywalkers will be able to march into the road, forcing the driverless car to stop suddenly, at great discomfort to its occupants. To prevent this, driverless cars may have to learn to be angry and occasionally maliciously fail to stop in time and strike the pedestrian on the shins.
Making a train journey 20% faster might cost hundreds of millions, but making it 20% more enjoyable may cost almost nothing. It seems likely that the biggest progress in the next 50 years may come not from improvements in technology but in psychology and design thinking.
💸 You’re only Human: an economist explains how it hurts your portfolio
This is a fantastic interview of Richard Thaler who is considered to be the father of behavioral economics.
His observations about how people behave in the real world are a welcome change from the basic assumptions of most economists. Thaler breaks down the world into two sorts of people: Econs, the artificial constructs of how people are supposed to behave. They are perfectly rational, have great self-control, calculate like machines and know exactly what is best for themselves.
Then there are Humans, who do all of the things that traditional economic theory suggests they should not. They react emotionally, lack patience, fail to consider consequences and seem to be flummoxed by mathematics. They are filled with all manner of biases and judgment errors. This interview is a laundry list of all our worst cognitive biases as investors
💎 Everything is Bullshit
Priceonomics released their first book, an investigation into our society’s most hallowed traditions and business practices, many of which are based on historical accident, the profit motives of a few companies, or the agenda of someone who died long ago. Basically, a lot of what we believe and do is bullshit, yet we walk around thinking our way of doing things is inherently correct.
Why do we exchange diamond engagement rings? Why is wine so expensive? How does art become “art”? Why does college cost so much? Why do so many pets die in animal shelters?
The Chilean sea bass is a pure marketing invention — prior to 1977, scientists knew the fish by the name of Patagonian or Antarctic toothfish. Far from unique, the story of the Chilean sea bass represents something of a formula in today’s climate of overfishing: choose a previously ignored fish, give it a more appealing name, and market it. The result: a fish once tossed back as bycatch will become part of trendy $50 dinners.
We exchange diamond rings as part of the engagement process because the diamond company De Beers decided in 1938 that it would like us to. It circulated marketing materials suggesting that a man should spend one month’s salary on a diamond ring. It worked so well that De Beers arbitrarily decided to increase the suggestion to two months’ salary.
Data has shown that being Asian instead of white is the equivalent of a 140 point score penalty on your SAT when applying to top private universities. The data compiled shows that while the number of college aged Asians has increased dramatically, Asians’ presence at top schools has shrunk or remained flat. By contrast, CalTech, which has a strictly race-neutral admissions policy, has kept pace with the growth in the Asian population.
According to nutritional guidelines published by the USDA and the Harvard School of Public Health, fruits and vegetables should make up about 50% of a healthy diet. But the financial value of the fruit and vegetable market is nowhere near 50% of the food industry. In 2012, the USDA calculated that American farms earned $47 billion in revenue from fruits, vegetables, and nuts. In contrast, just three American processed food manufacturers had (global) revenues of $116.2 billion in 2013. So whenever a federal agency or Congress makes a push to support healthy foods, it essentially picks a fight with a collection of the world’s largest companies.
The book reminded me of the famous quote by Steve Jobs:
“When you grow up you tend to get told that the world is the way it is and your life is just to live your life inside the world. Try not to bash into the walls too much. Try to have a nice family life, have fun, save a little money. That's a very limited life. Life can be much broader once you discover one simple fact: Everything around you that you call life was made up by people that were no smarter than you. And you can change it, you can influence it… Once you learn that, you'll never be the same again.”
🌈 An ode to humanity
This is a wonderful speech delivered at the Secular Solstice, a beautiful reminder that despite our flaws, we (humans) have always found a way to thrive:
“You’re only human.”
That’s what someone says when they want you to set your sights a little lower, to make your goals a little less lofty. “Only human”. It’s supposed to be a reminder that, when you get down to it, we are basically chimps who traded a little less hair for a little more brain. “Only human” means: you’re limited. You’re fragile. You are flawed. And all that is true – but that doesn’t preclude greatness.
You, and I, are human.
When evolution created us as weird chimps to hunt and gather on the African Savannah, we said “how about we thrive on every corner of every continent instead?” And when evolution looked at us skeptically and said “um…even the really cold parts? Like, there’s this whole Scandinavian region you are really not cut out for” we said “ESPECIALLY the really cold parts, and when we get there we’re going to invent IKEA because frankly these rocks are uncomfortable”, at which point evolution presumably threw up its hands and left the weird insane chimps to it.
We are the humans! We are the ones who write, who speak, who invent! We are the strange chimps who always found a way to thrive, on every corner of this ridiculous planet, no matter what it threw at us!
We are the humans! We are the ones who saw a poisonous tree, thought “that looks delicious”, turned it into almonds, and now we pour it in our coffee for breakfast! We are the humans, and we have it in ourselves to care, and love, and protect all of our people! We are perhaps uniquely endowed with the ability to go beyond what drives evolution instilled in us, to love and care and protect for its own sake.
We are the humans! We figured out what the stars are made of! We’ve peered into distant galaxies! We’ve mapped the echoes of the very beginning of the universe! We figured out what EVERYTHING is made out of, and now we take the fundamental building blocks of everything and SPLIT THEM APART to make energy. Like that! (said as a light turns on) We are the humans, and after spreading to every corner of this planet, we looked up and said “yeah, that looks good.” We are the humans, and if you want to do a full headcount you’re going to need to go into orbit. We are the humans, built to run on the Savannah, but now you can find our footprints on the moon.
We are the humans. We’re the reason you don’t see Smallpox around anymore. It got a bad case of us. Oh, and by the way, we’re not done. You know polio? It killed or paralyzed five hundred thousand of us in 1950. But humans noticed, and humans said “FUCK NO”, and inch by inch we’ve fought back, from half a million each year to just THIRTY-FOUR cases of polio in the wild in 2016. This year? Only SIXTEEN. Polio is at the gates of oblivion, and we have a message: Give smallpox our regards.
Next time someone says that you’re only human, forget the “only”! You are one of THE humans! The truth-seekers, the peacemakers, the atom-splitters, the moon-walkers, the artists, the dreamers, the lovers and protectors – The rebels who defy the world they were made for, who never stop dreaming and working for a better tomorrow.
We are not done. We countless problems left to solve,many of them self-made. But we are the humans, and we don’t give up, and we have come this far, and as long as even one of us is still breathing, we fight – because we are ONLY HUMAN.
We’re only human. “Only human” means: you’re limited. You’re fragile. You are flawed. And all that is true – but that doesn’t preclude greatness.
We are the humans! We are the ones who write, who speak, who invent! We are the strange chimps who always found a way to thrive, on every corner of this ridiculous planet, no matter what it threw at us! We are the humans! We are the ones who saw a poisonous tree, thought “that looks delicious”, turned it into almonds, and now we pour it in our coffee for breakfast! We are the humans, and we have it in ourselves to care, and love, and protect all of our people! We are perhaps uniquely endowed with the ability to go beyond what drives evolution instilled in us, to love and care and protect for its own sake.
We are not done. We countless problems left to solve, many of them self-made. But we are the humans, and we don’t give up, and we have come this far, and as long as even one of us is still breathing, we fight – because we are ONLY HUMAN.
Have you heard of?
You'll either love this company or you'll hate it, but one thing is true: this would fly in the face of economists. Liquid Death is a company that sells water with a punk edge and a tagline murder your thirst. The branding makes it look indistinguishable from a normal can of craft beer, making it easier for recovering alcoholics or the sober curious wishing to socialize without being pressured to drink. I screenshotted one of their Instagram ads below - certainly not for everyone.
From the founder: [I was] just thinking through exciting ways to rebrand water as a substance that was totally opposite of the current yoga accessory stigma, while also having a truthful insight that isn’t complete bullshit. And since we are competing with the most explosive rebellious brands on the market, our healthy water brand had to be even more punk and fuck-you than energy drinks.
If you’re wondering who’s behind this newsletter:
My name is Sari Azout. I am a design-thinker, storyteller, and early stage startup investor at Level Ventures. My mission is to bring more humanity and creativity to technology and business.
Know a founder i should meet?
Drop me a note at email@example.com
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