The Maddest Men of All: A New Freakonomics Radio Podcast

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Rory Sutherland presenting "Praxeology: Lessons from a Lost Science" (Photo: Betsy Weber)

Ogilvy & Mather’s Rory Sutherland, an enthusiast of behavioral economics. (Photo: Betsy Weber)

Our previous Freakonomics Radio episode, “Hacking the World Bank,” discussed how Jim Yong Kim, president of the World Bank, is using the insights of behavioral economics to fight poverty. Kim acknowledged that non-profits like the World Bank are playing catch-up:

KIM: If you were to go to Ogilvy or any of the big public-relations companies and give them this [new World Bank report on behavioralism], I think they would laugh at us in the sense that they would have been utilizing these insights very aggressively for a very long time.

This week — voila! — we have a story about how Ogilvy (& Mather), the global marketing and advertising giant, is indeed pushing the limits on how behavioral insights can be applied in the real world. The episode is called “The Maddest Men of All.” (You can subscribe to the podcast at iTunes or elsewhere, get the RSS feed, or listen via the media player above. You can also read the transcript, which includes credits for the music you’ll hear in the episode.)

The star of the show is Rory Sutherland, the voluble and iconoclastic vice chairman of Ogilvy & Mather in the U.K. (If you’ve never read David Ogilvy’s Confessions of an Advertising Man, do yourself a favor and do so immediately.) I met him last year in London and was nearly overwhelmed by his passion and knowledge of behavioral economics. (For further proof of both, see his Spectator columns or his oral history). When I learned that Sutherland had founded an O&M offshoot called #ogilvychange, which brings the latest behavioral research to mainstream firms (American Express and Nestle, e.g.) as well as non-profits (the European Parliament and Public Health England), I thought he’d be a great podcast subject. I can happily say that my guess was right — and I hope you’ll agree.

In the episode, you’ll hear Sutherland expand on what behavioral economics gets right that classical economics doesn’t; you’ll hear “choice architects” from #ogilvychange teach the employees at a call center to use behavioral tricks to talk newspaper subscribers out of canceling their subscriptions; and you’ll hear how advertisers use behavioral insights like loss aversion and social norming for good and, occasionally, evil:

SUTHERLAND: Let’s take an example where you go to an airline website and it … quotes you a price for your seat to Sacramento, whatever it may be, and it says only four seats left at that price. Now, that works on me. I’ve spent eight years studying this stuff, I know it’s an attempt to exploit my scarcity bias, but it still makes me click. That’s just the way I’m wired. Now implicit in that line is that subsequent seats will be more expensive. But actually the person in their weasel wording hasn’t exactly made that promise, have they? They’ve merely said at this price. At this price is not quite clear. It could be that the subsequent four seats are being sold actually at a lower price.

Along the way, we peel off for a fascinating conversation with Michael Housman, chief analytics officer for Cornerstone OnDemand, which builds software to help employers find the right employees and then track their performance. This is part of the burgeoning field of “workforce science.” Housman tells us what he has learned about employee honesty (and how it correlates with performance), whether salary is as strong an incentive as we think (spoiler alert: probably not), whether the computer browser you use says something about your competence (yep), and how much it matters whether your boss is wonderful or terrible (a lot!).

Housman acknowledges that employers have to decide just how much data to gather on employees, and that it’s unwise to cross the “creepy” line:

HOUSMAN: As an economist and someone who loves data, I want to get every piece of data that I can on everyone to figure out what it is that truly keeps people on the job creates a good employee. Unfortunately, there are things that legally we’re not allowed to touch and then there are also things that we have decided as an organization we shouldn’t touch. The obvious legal ones are race, sex, age, those are off limits and I completely understand why. But beyond that we’ve decided to take a somewhat conservative approach in what we’re going to use. And so we’re not scouring your Facebook profile. We’re not looking at your Twitter feed.

Having learned a few things from Housman and Sutherland, let me leave you with the following message:

I wouldn’t want you to miss out on this or any future Freakonomics Radio episodes. Many people like you subscribe to this podcast — at iTunes or elsewhere. We are so confident that you’ll like it that we’re willing to give it away for free. Happy listening.


John

Minute mark 12:33, how do you pronounce codify? I've always said it as /kä-de-fī and this is the first I've heard it said like "code"

http://i.word.com/idictionary/codify

...Love the show though!

Dale Eltoft

Sadly the revelation of this psychological manipulation is not news nor surprising. What depresses me is that it is pervading more and more of our interaction making it less possible to have straight forward communication. Consider what has happened to political discourse. It is no longer possible for us to know what a politician believes because ... (well you know). These tactics are like war escalation. Once in place they can never be backed off. So consumers will have to develop counter measures. Consider the popup ad. For the most part web surfers are now blind to them so they have become more intrusive by blocking the view until explicitly skipped.

Now when I want to cancel something and they start to give me this run around I just lie and say I'm leaving the country.

Dana

Very interesting episode. Appreciated the 'other side' view - give us more of this!!

Jen C

Brilliant episode, I can really identify on the finding regarding pay and bosses on employee retention rate! Thanks for such a great episode!

michelle

I worked in a psychology lab focusing on consumer psychology in undergrad, then went to work in advertising agencies as a strategist/account planner. Despite knowing theory on how to hijack the cognitive processes, I found advertisers are much more interested in the art. I've found that many creative types find basic psychological research too contrived and don't believe it will work "in the real world" outside of a lab and questionnaire. Instead, they go with their "gut check" and "experience with people." It's easy to find instances when advertisers actually do use some of these concepts, but they didn't get there by consulting behavioral psych. Mr. Sutherland's applications aren't necessarily the creative masterpieces that win Cannes, but they work. (PS, this is why I like the Effies)

Susan

I always enjoy your podcasts including this one but it is in spite of the background music which has become very intrusive and almost drowns out the content.

Susan Boyles

I just listened to the "Maddest Man" episode of the podcast. I am a teacher in an elementary school, and I was struck by how many of the strategies that the call-center used that I also use with my students. I would be very interested in learning what other strategies behavioral economists might suggest for use in the classroom.

Thanks for another great episode!

j.s.

I guess you're right that academics are late to this game... If you're only talking about behavioral economists. But just about every idea you cover here was known to social psychologists like Robert Cialdini decades ago. He literally wrote the book on these techniques and, among many other accomplishments, advised Obama about how to use them to get reelected.

David Haile

The foundation of this episode is how to tell lies to get what you want. In most cases, we catch on to the fact that we are being manipulated and trust goes out the window. Imagine an airline website showing a 9am flight from Atlanta to Dallas on March 1st, the type of plane making the flight, with prices hovering over each available seat. Change the date to March 2nd and of course we expect the prices may change. The prices for seats near the front of the plane or with more legroom are higher than those near the back of the plane. The airline wouldn't "reserve" more expensive seats just in case the economy class fills up and they need to sell the expensive ones at a cheaper rate. Instead, the airline would dynamically change the prices as the economy section started to fill up. We'd have all the information we need to decide whether to book now or if it is OK to wait a couple of days before the prices go up. I suggest to the airlines that an obvious and honest website would result in trust and goodwill from the customers. We'd give them the benefit of doubt in a stressful situation instead of assuming we're being screwed.

The telemarketing industry is based on manipulation which correlates to Zero Trust when someone calls to sell insurance or a timeshare or kitchen knives. Most of us have learned to hang up immediately. It is a shame that an airline would stoop to such depths.

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Sinpiovertwo

Great podcast. I' really curious about how behavioral economics could help my Middle School students get their homework done!

Stu Holden

great podcast, please do more like this.

Sofie

Very interesting podcast! There's a concept called Rational Irrationality http://en.wikipedia.org/wiki/Rational_irrationality might explain some of the behavioral psychology and would be interesting to cover!

Beth

I work with at-risk teenagers. How can Nudge Theory be used to help them be successful in school? My students tend to identify with "outsiders", so I think the fear of missing out and social cohesion actually act to keep them out of class. I would love to see the "Mad Men" address this issue!

Tom Friesen

Just finished listening to your recent podcast where the advertising guy reckoned that good public policy should be implemented using behavioural analysis etc.
The issue is not whether or not he is right, but who gets to decide what is "worthy" of being pushed forward in this manner.
With regard to trains, yes, it may be better to provide super quality free wifi at a fraction of the cost of a slightly faster train. Here in Victoria, Australia, our billion dollar investment in very fast trains made them slower, as shown by the time table... go figure. But who gets to decide which projects are dodgey and which ones are actually good for the state and what criteria do they use....?
I'd vote for you guys if you went into politics here... but if you were in politics, you'd probably ignore all reasonable methods for determining good public policy. Why is that?
Lastly, for some reason, Ive noticed that I have a BS detector for some of these "Behavioural Economics" tools (I wont say all). I wonder how we can develop these BS detector skills as a society to aid better decision making when objectiveness is required? yet exploit them when required to improve society? We need these traits but they also cause us grief.

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A.J.

From the putting WiFi on trains example. I wish more care were taken by engineers to realize that experience is about place and not getting there. It's funny how the proverb of "Happiness is a journey, not a destination" is forgotten when we're too concerned with speed and efficiency. People will still complain even as speed and efficiency of transportation increase, and they'll still be complaining because speed and efficiency don't make them personally better off.

Which reductio ad absurdum makes us all the fat hover car people in Wall-E.

Curtis Densmore

I found the tactics used by the call center disgusting. It should be illegal. If they are allowed to attempt to persuade you to stay after you explicitly tell them to cancel, couldn't they ask you unlimited questions, effectively filibustering your cancellation? Capitalism should be founded on mutually voluntary transactions. As far as advertising in general goes, it's amazing how many companies make their living collecting data on people just to make advertising more efficient, but I can't remember the last time I clicked on an ad. Most advertising has a negative impact on my opinion of the company (I'm looking at you, Geico and every car dealership). Imagine how much free stuff we wouldn't have (Google, Pandora, broadcast radio) if companies realized how useless advertising is.