The Power of Reframing Things


Rory Sutherland Persuasion
A small change of posture can make a big difference. The circumstances of our lives may matter less than how we see them, says adman Rory Sutherland. There is also a cultural dimension to how we feel about our circumstances. Says Sutherland:

Why, for example, are pensioners much happier than the young unemployed? Both of them, after all, are in exactly the same stage of life. You both have too much time on your hands and not much money. But pensioners are reportedly very, very happy, whereas the unemployed are extraordinarily unhappy and depressed.

The reason, I think, is that the pensioners believe they've chosen to be pensioners, whereas the young unemployed feel it's been thrust upon them.

The idea of agency, that we drive our own experience, helps us see circumstances in a different light. Literally, when we change the way we look at things, the things we look at change:

the power to re-brand things — to understand that actually our experiences, costs, things don't actually much depend on what they really are, but on how we view them — I genuinely think can't be overstated.

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The circumstances of our lives may actually matter less to our happiness than the sense of control we feel over our lives.

Sutherland is an outspoken proponent of putting the learnings of behavioral economics to good ends. “Much of our decision-making is heuristic and instinctive,” he says, “made by parts of the brain inaccessible to introspection.”

I think psychological value is great to be absolutely honest.

One of my great friends, a professor called Nick Chater, who's the Professor of Decision Sciences in London, believes that we should spend far less time looking into humanity's hidden depths and spend much more time exploring the hidden shallows. I think that's true actually. I think impressions have an insane effect on what we think and what we do.

But what we don't have is a really good model of human psychology. At least pre-Kahneman perhaps, we didn't have a really good model of human psychology to put alongside models of engineering, of neoclassical economics.

This is why he says the next big thing is not a technology at all.

Before Kahneman there was no model, no framework for people who believed in psychological solutions. “This is what Warren Buffett's business partner Charlie Munger calls a latticework on which to hang your ideas,” a process of understanding these ideas in a such a way that you can see how they relate and interact, each being a critical piece that fits into a sort of cross-discipline foundation of understanding. 

When we review how we go evaluating ideas to solve problems today, we notice:

there's an imbalance, an asymmetry, in the way we treat creative, emotionally-driven psychological ideas versus the way we treat rational, numerical, spreadsheet-driven ideas.

If you're a creative person, I think quite rightly, you have to share all your ideas for approval with people much more rational than you. You have to go in and you have to have a cost-benefit analysis, a feasibility study, an ROI study and so forth. And I think that's probably right.

But this does not apply the other way around. People who have an existing framework, an economic framework, an engineering framework, feel that actually logic is its own answer. What they don't say is, “Well the numbers all seem to add up, but before I present this idea, I'll go and show it to some really crazy people to see if they can come up with something better.”

And so we, artificially I think, prioritize what I'd call mechanistic ideas over psychological ideas. 

Rory Sutherland says when we're solving problems, we should seek to take into consideration technology, psychology, and economics, all three:

If you actually look at a great business, you'll nearly always see all of these three things coming into play. Really, really successful businesses — Google is great, great technological success, but it's also based on a very good psychological insight: People believe something that only does one thing is better at that thing than something that does that thing and something else. It's an innate thing called goal dilution. Ayelet Fishbach has written a paper about this.

Everybody else at the time of Google, more or less, was trying to be a portal. Yes, there's a search function, but you also have weather, sports scores, bits of news. Google understood that if you're just a search engine, people assume you're a very, very good search engine.

As another example, if you are an agency, you are a single-source model, or a service integrator. Full service dilutes what the sweet spot is and makes any one service or all of them easily replaceable.

When we focus only on money, we miss everything else — all kinds of value, and creative solutions, go out the window. For example, paying more for express lanes in toll roads:

where economists make the fundamental mistake is they think that money is money.

Actually my pain experienced in paying five pounds is not just proportionate to the amount, but where I think that money is going. And I think understanding that could revolutionize tax policy. It could revolutionize the public services. It could really change things quite significantly.

How we think about what we're paying for, what the funds help support, makes a difference in our decision-making. Austrian economist Ludwig Von Mises was active in Vienna in the first part of the 20th Century.

What was interesting about the Austrian school is they actually grew up alongside Freud. And so they're predominantly interested in psychology.

They believed that there was a discipline called praxeology, which is a prior discipline to the study of economics. Praxeology is the study of human choice, action and decision making.

I think they're right. I think the danger we have in today's world is we have the study of economics considers itself to be a prior discipline to the study of human psychology. But as Charlie Munger says, “If economics isn't behavioral, I don't know what the hell is.”

Von Mises, interestingly, believes economics is just a subset of psychology. I think he just refers to economics as the study of human praxeology under conditions of scarcity.

Von Mises says we should treat the value of perceived value as equivalent to any other kind of value. 

We tend to, all of us — even those of us who work in marketing — to think of value in two ways. There's the real value, which is when you make something in a factory and provide a service, and then there's a kind of dubious value, which you create by changing the way people look at things.

Von Mises completely rejected this distinction. And he used this following analogy.

He referred actually to strange economists called the French Physiocrats, who believed that the only true value was what you extracted from the land. So if you're a shepherd or a quarryman or a farmer, you created true value. If however, you bought some wool from the shepherd and charged a premium for converting it into a hat, you weren't actually creating value, you were exploiting the shepherd.

Von Mises said that modern economists make exactly the same mistake with regard to advertising and marketing.

He says, if you run a restaurant, there is no healthy distinction to be made between the value you create by cooking the food and the value you create by sweeping the floor. One of them creates, perhaps, the primary product — the thing we think we're paying for — the other one creates a context within which we can enjoy and appreciate that product. And the idea that one of them should actually have priority over the other is fundamentally wrong.

Hence, when we choose our frame of reference, the perceived value and therefore the actual value is completely transformed. Perception is also leaky, says Sutherland. When perception is much worse of reality, the first thing we need to do is change perception, bring it up to par with what actually happens.

Watch the video of the talk below.

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