Perspective is everything
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0:01 - 0:02What you have here
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0:02 - 0:04is an electronic cigarette.
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0:04 - 0:08It's something that's, since it was invented a year or two ago,
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0:08 - 0:11has given me untold happiness.
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0:11 - 0:12(Laughter)
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0:12 - 0:14A little bit of it, I think, is the nicotine,
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0:14 - 0:16but there's something much bigger than that.
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0:16 - 0:20Which is ever since, in the U.K., they banned smoking in public places,
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0:20 - 0:26I've never enjoyed a drinks party ever again.
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0:26 - 0:27(Laughter)
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0:27 - 0:30And the reason, I only worked out just the other day,
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0:30 - 0:32which is when you go to a drinks party
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0:32 - 0:33and you stand up and you hold a glass of red wine
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0:33 - 0:35and you talk endlessly to people,
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0:35 - 0:38you don't actually want to spend all the time talking.
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0:38 - 0:39It's really, really tiring.
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0:39 - 0:42Sometimes you just want to stand there silently, alone with your thoughts.
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0:42 - 0:48sometimes you just want to stand in the corner and stare out of the window.
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0:48 - 0:51Now the problem is, when you can't smoke,
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0:51 - 0:55if you stand and stare out the window on your own,
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0:55 - 0:58you're an antisocial, friendless idiot.
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0:58 - 0:59(Laughter)
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0:59 - 1:04If you stand and stare out of the window on your own with a cigarette,
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1:04 - 1:06you're a fucking philosopher.
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1:06 - 1:08(Laughter)
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1:08 - 1:13(Applause)
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1:13 - 1:18So the power of reframing things
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1:18 - 1:22cannot be overstated.
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1:22 - 1:24What we have is exactly the same thing, the same activity,
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1:24 - 1:27but one of them makes you feel great
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1:27 - 1:30and the other one, with just a small change of posture,
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1:30 - 1:32makes you feel terrible.
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1:32 - 1:35And I think one of the problems with classical economics
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1:35 - 1:38is it's absolutely preoccupied with reality.
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1:38 - 1:43And reality isn't a particularly good guide to human happiness.
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1:43 - 1:45Why, for example,
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1:45 - 1:48are pensioners much happier
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1:48 - 1:49than the young unemployed?
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1:49 - 1:53Both of them, after all, are in exactly the same stage of life.
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1:53 - 1:57You both have too much time on your hands and not much money.
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1:57 - 2:00But pensioners are reportedly very, very happy,
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2:00 - 2:04whereas the unemployed are extraordinarily unhappy and depressed.
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2:04 - 2:08The reason, I think, is that pensioners believe they've chosen to be pensioners,
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2:08 - 2:10whereas the young unemployed
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2:10 - 2:12feel it's been thrust upon them.
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2:12 - 2:16In England the upper-middle-classes have actually solved this problem perfectly,
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2:16 - 2:20because they've rebranded unemployment.
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2:20 - 2:22If you're an upper-middle-class English person,
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2:22 - 2:25you call unemployment "a year off."
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2:25 - 2:27(Laughter)
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2:27 - 2:30And that's because having a son who's unemployed in Manchester
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2:30 - 2:32is really quite embarrassing,
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2:32 - 2:35but having a son who's unemployed in Thailand
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2:35 - 2:38is really viewed as quite an accomplishment.
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2:38 - 2:40(Laughter)
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2:40 - 2:42But actually the power to rebrand things,
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2:42 - 2:46to understand that actually our experiences, costs, things
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2:46 - 2:50don't actually much depend on what they really are,
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2:50 - 2:52but on how we view them,
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2:52 - 2:55I genuinely think can't be overstated.
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2:55 - 2:56There's an experiment I think Daniel Pink refers to
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2:56 - 2:59where you put two dogs in a box
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2:59 - 3:03and the box has an electric floor.
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3:03 - 3:09Every now and then an electric shock is applied to the floor,
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3:09 - 3:10which pains the dogs.
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3:10 - 3:16The only difference is one of the dogs has a small button in its half of the box.
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3:16 - 3:19And when it nuzzles the button, the electric shock stops.
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3:19 - 3:23The other dog doesn't have the button.
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3:23 - 3:27It's exposed to exactly the same level of pain as the dog in the first box,
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3:27 - 3:29but it has no control over the circumstances.
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3:29 - 3:34Generally the first dog can be relatively content.
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3:34 - 3:38The second dog lapses into complete depression.
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3:38 - 3:43The circumstances in our lives may actually matter less to our happiness.
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3:43 - 3:48than the sense of control we feel over our lives.
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3:48 - 3:49It's an interesting question.
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3:49 - 3:53We ask the question -- the whole debate in the Western world
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3:53 - 3:55is about the level of taxation.
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3:55 - 3:58But I think there's another debate to be asked,
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3:58 - 4:00which is the level of control we have over our tax money.
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4:00 - 4:04That what costs us 10 pounds in one context can be a curse.
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4:04 - 4:10What costs us 10 pounds in a different context we may actually welcome.
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4:10 - 4:14And pay 20,000 pounds in tax toward health
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4:14 - 4:18and you're merely filling a mug.
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4:18 - 4:21Pay 20,000 pounds to endow a hospital ward
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4:21 - 4:24and you're called a philanthropist.
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4:24 - 4:28I'm probably in the wrong country to talk about willingness to pay tax.
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4:28 - 4:30(Laughter)
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4:30 - 4:34So I'll give you one in return. How you frame things really matters.
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4:34 - 4:36Do you call it the bailout of Greece
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4:36 - 4:40or the bailout of a load of stupid banks which lent to Greece?
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4:40 - 4:44Because they are actually the same thing.
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4:44 - 4:45What you call them actually affects
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4:45 - 4:49how you react to them, viscerally and morally.
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4:49 - 4:52I think psychological value is great to be absolutely honest.
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4:52 - 4:56One of my great friends, a professor called Nick Chater,
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4:56 - 4:58who's the Professor of Decision Sciences in London,
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4:58 - 5:01believes that we should spend far less time
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5:01 - 5:03looking into humanity's hidden depths
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5:03 - 5:06and spend much more time exploring the hidden shallows.
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5:06 - 5:08I think that's true actually.
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5:08 - 5:10I think impressions have an insane effect
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5:10 - 5:12on what we think and what we do.
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5:12 - 5:16But what we don't have is a really good model of human psychology.
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5:16 - 5:17At least pre-[unclear] perhaps,
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5:17 - 5:21we didn't have a really good model of human psychology
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5:21 - 5:27to put alongside models of engineering, of neoclassical economics.
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5:27 - 5:30So people who believed in psychological solutions didn't have a model.
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5:30 - 5:33We didn't have a framework.
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5:33 - 5:35This is what Warren Buffett's business partner Charlie Munger calls
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5:35 - 5:37"A latticework on which to hang your ideas."
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5:37 - 5:43Engineers, economists, classical economists
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5:43 - 5:44all had a very, very robust existing latticework
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5:44 - 5:47on which practically every idea could be hung.
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5:47 - 5:51We merely have a collection of random individual insights
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5:51 - 5:54without an overall model.
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5:54 - 5:56And what that means is that in looking at solutions,
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5:56 - 6:00we've probably given too much priority
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6:00 - 6:04to what I call technical engineering solutions, Newtonian solutions,
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6:04 - 6:07and not nearly enough to the psychological ones.
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6:07 - 6:08You know my example of the Eurostar.
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6:08 - 6:11Six million pounds spent to reduce the journey time
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6:11 - 6:15between Paris and London by about 40 minutes.
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6:15 - 6:19For 0.01 percent of this money you could put WiFi on the trains,
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6:19 - 6:22which wouldn't have reduced the duration of the journey,
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6:22 - 6:26but would have improved its enjoyment and its usefullness far more.
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6:26 - 6:29For maybe 10 percent of the money,
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6:29 - 6:31you could have paid all of the world's top male and female supermodels
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6:31 - 6:36to walk up and down the train handing out free Chateau Petrus to all the passengers.
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6:36 - 6:39You'd still have five billion pounds in change,
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6:39 - 6:42and people would ask for the trains to be slowed down.
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6:42 - 6:43(Laughter)
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6:43 - 6:49Why were we not given the chance
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6:49 - 6:51to solve that problem psychologically?
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6:51 - 6:54I think It's because there's an imbalance, an asymmetry,
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6:54 - 6:59in the way we treat creative, emotionally-driven psychological ideas
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6:59 - 7:03versus the way we treat rational numerical spreadsheet-driven ideas.
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7:03 - 7:06If you're a crazy person, I think quite rightly,
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7:06 - 7:08you have to share all your ideas for approval
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7:08 - 7:11with people much more rational than you.
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7:11 - 7:13You have to go in and you have to have a cost-benefit analysis,
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7:13 - 7:17a feasibility study, an ROI study and so forth.
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7:17 - 7:18And I think that's probably right.
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7:18 - 7:20But this does not apply the other way around.
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7:20 - 7:24People who have an existing framework,
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7:24 - 7:26an economic framework, an engineering framework,
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7:26 - 7:30feel that actually logic is its own answer.
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7:30 - 7:34What they don't say is "Well the numbers all seem to add up,
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7:34 - 7:36but before I present this idea, I'll go and show it to some really crazy people
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7:36 - 7:40to see if they can come up with something better."
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7:40 - 7:41And so we, artificially I think, prioritize
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7:41 - 7:46what I'd call mechanistic ideas over psychological ideas.
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7:46 - 7:48An example of a great psychological idea:
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7:48 - 7:54The single best improvement on customer satisfaction on the London Underground per pounds spent
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7:54 - 7:59came when they did add any extra trains or change the frequency of the trains,
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7:59 - 8:02they put dot matrix display board on the platforms.
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8:02 - 8:05Because the nature of the wait
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8:05 - 8:07is not just dependent on its numerical quality, its duration,
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8:07 - 8:10but on the level of uncertainty you experience during that wait.
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8:10 - 8:13Waiting seven minutes for a train with a countdown clock
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8:13 - 8:17is less frustrating and irritating
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8:17 - 8:18than waiting four minutes, knuckle-biting
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8:18 - 8:22going, "When's this train going to damn well arrive?"
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8:22 - 8:25Here's a beautiful example of a psychological solution deployed in Korea.
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8:25 - 8:28Red traffic lights have a countdown delay.
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8:28 - 8:31It's proven to reduce the accident rate in experiments.
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8:31 - 8:35Why? Because road rage, impatience and general irritation
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8:35 - 8:37are massively reduced when you can actually see the time you have to wait.
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8:37 - 8:42In China, not really understanding the principle behind this,
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8:42 - 8:44they applied the principle to green traffic lights.
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8:44 - 8:47(Laughter)
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8:47 - 8:51Which isn't a great idea.
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8:51 - 8:53You're 200 yards away, you realize you've got five seconds to go, you floor it.
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8:53 - 8:57(Laughter)
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8:57 - 9:01The Koreans, very assiduously, did test both.
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9:01 - 9:02The accident rate goes down when you apply this to red traffic lights;
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9:02 - 9:06it goes up when you apply it to green traffic lights.
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9:06 - 9:09This is all I'm asking for really in human decision making,
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9:09 - 9:12is the consideration of these three things.
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9:12 - 9:14I'm not asking for the complete primacy of one over the other.
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9:14 - 9:16I'm merely saying that when you solve problems,
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9:16 - 9:19you should look at all three of these equally
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9:19 - 9:22and you should seek as far as possible
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9:22 - 9:25to find solutions which sit in the sweet spot in the middle.
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9:25 - 9:27If you actually look at a great business,
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9:27 - 9:29you'll nearly always see all of these three things coming into play.
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9:29 - 9:32Really, really successful businesses --
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9:32 - 9:35Google is great, great technological success,
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9:35 - 9:37but it's also based on a very good psychological insight:
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9:37 - 9:42People believe something that only does one thing
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9:42 - 9:46is better at that thing than something that does that thing and something else.
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9:46 - 9:50It's an innate thing called goal dilution.
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9:50 - 9:51Ayelet Fishbach has written a paper about this.
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9:51 - 9:52Everybody else at the time of Google, more or less,
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9:52 - 9:55was trying to be a portal.
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9:55 - 9:56Yes, there's a search function,
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9:56 - 10:00but you also have weather, sports scores, bits of news.
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10:00 - 10:03Google understood that if you're just a search engine,
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10:03 - 10:06people assume you're a very, very good search engine.
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10:06 - 10:07All of you know this actually
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10:07 - 10:08from when you go in to buy a television.
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10:08 - 10:13And in the shabbier end of the row of flatscreen TV's
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10:13 - 10:17you can see are these rather despised things combined TV and DVD players.
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10:17 - 10:21And we have know knowledge whatsoever of the quality of those things,
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10:21 - 10:26but we look at a combined TV and DVD player and we go "Uck.
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10:26 - 10:29It's probably a bit of a crap telly and a bit rubbish as a DVD player."
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10:29 - 10:32So we walk out of the shops with one of each.
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10:32 - 10:38Google is as much a psychological success as it is a technological one.
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10:38 - 10:41I propose that we can use psychology to solve problems
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10:41 - 10:42that we didn't even realize were problems at all.
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10:42 - 10:45This is my suggestion for getting people to finish their course of antibiotics.
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10:45 - 10:48Don't give them 24 white pills.
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10:48 - 10:51Give them 18 white pills and six blue ones
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10:51 - 10:54and tell them to take the white pills first and then take the blue ones.
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10:54 - 10:58It's called chunking.
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10:58 - 11:00The likelihood that people will get to the end is much greater
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11:00 - 11:03when there is a milestone somewhere in the middle.
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11:03 - 11:06One of the great mistakes, I think, of economics
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11:06 - 11:08is it fails to understand that what something is,
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11:08 - 11:10whether it's retirement, unemployment, cost,
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11:10 - 11:16is a function, not only of its amount, but also its meaning.
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11:16 - 11:20This is a toll crossing in Britain.
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11:20 - 11:23Quite often queues happen at the tolls.
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11:23 - 11:25Sometimes you get very, very severe queues.
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11:25 - 11:28You could apply the same principle actually, if you like,
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11:28 - 11:30to the security lanes in airports.
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11:30 - 11:32What would happen if you could actually pay twice as much money to cross the bridge,
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11:32 - 11:36but go through a lane that's an express lane.
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11:36 - 11:38It's not an unreasonable thing to do. It's an economically efficient thing to do.
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11:38 - 11:41Time means more to some people than others.
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11:41 - 11:44If you're waiting trying to get to a job interview,
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11:44 - 11:45you'd pay a couple of pounds more to go through the fast lane.
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11:45 - 11:50If you're on the way to visit your mother in-law,
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11:50 - 11:54you'd probably prefer to stay on the left.
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11:54 - 11:58The only problem is if you introduce this economically efficient solution,
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11:58 - 12:00people hate it.
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12:00 - 12:04Because they think you're deliberately creating delays at the bridge
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12:04 - 12:05in order to maximize your revenue,
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12:05 - 12:08and "Why on earth should I pay to subsidize your imcompetence?"
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12:08 - 12:11On the other hand, change the frame slightly
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12:11 - 12:14and create charitable yield management,
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12:14 - 12:17so the extra money give goes not to the bridge company, it goes to charity,
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12:17 - 12:22and the mental willingness to pay completely changes.
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12:22 - 12:26You have a relatively economically efficient solution,
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12:26 - 12:28but one that actually meets with public approval
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12:28 - 12:31and even a small degree of affection,
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12:31 - 12:32rather than being seen as bastardy.
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12:32 - 12:36So where economists make the fundamental mistake
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12:36 - 12:39is they think that money is money.
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12:39 - 12:43Actually my pain experienced in paying five pounds
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12:43 - 12:45is not just proportionate to the amount,
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12:45 - 12:47but where I think that money is going.
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12:47 - 12:51And I think understanding that could revolutionize tax policy.
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12:51 - 12:53It could revolutionize the public services.
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12:53 - 12:55It could really change things quite significantly.
-
12:55 - 12:58Here's a guy you all need to study.
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12:58 - 13:00He's an Austrian school economist
-
13:00 - 13:05who was first active in the first half of the 20th century in Vienna.
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13:05 - 13:07What was interesting about the Austrian school
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13:07 - 13:10is they actually grew up alongside Freud.
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13:10 - 13:12And so they're predominantly interested in psychology.
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13:12 - 13:19They believed that there was a discipline called praxeology,
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13:19 - 13:21which is a prior discipline to the study of economics.
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13:21 - 13:25Praxeology is the study of human choice, action and decision making.
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13:25 - 13:27I think they're right.
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13:27 - 13:27I think the danger we have in today's world
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13:27 - 13:28is we have the study of economics
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13:28 - 13:34considers itself to be a prior discipline to the study of human psychology.
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13:34 - 13:38But as Charlie Munger says, "If economics isn't behavioral,
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13:38 - 13:41I don't know what the hell is."
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13:41 - 13:46Von Mises interestingly believes economics is just a subset of psychology.
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13:46 - 13:47I think he just refers to economics as
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13:47 - 13:49"The study of human praxeology under conditions of scarcity."
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13:49 - 13:54But von Mises, among many other things,
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13:54 - 14:00I think uses an analogy which is probably the best justification and explanation
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14:00 - 14:04for the value of marketing, the value of perceived value
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14:04 - 14:08and the fact that we should treat it as being absolutely equivalent
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14:08 - 14:10to any other kind of value.
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14:10 - 14:12We tend to, all of us -- even those of us who work in marketing --
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14:12 - 14:13to think of value in two ways.
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14:13 - 14:16There's the real value,
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14:16 - 14:17which is when you make something in a factory and provide a service,
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14:17 - 14:20and then there's a kind of dubious value,
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14:20 - 14:21which you create by changing the way people look at things.
-
14:21 - 14:22Von Mises completely rejected this distinction.
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14:22 - 14:26And he used this following analogy.
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14:26 - 14:30He referred actually to strange economists called the French Physiocrats
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14:30 - 14:35who believed that the only true value was what you extracted from the land.
-
14:35 - 14:38So if you're a shepherd or a quarryman or a farmer,
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14:38 - 14:40you created true value.
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14:40 - 14:43If however, you bought some wool from the shepherd
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14:43 - 14:46and charged a premium for converting it into a hat,
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14:46 - 14:49you weren't actually creating value,
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14:49 - 14:50you were exploiting the shepherd.
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14:50 - 14:55Now von Mises's said that modern economists make exactly the same mistake
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14:55 - 14:56with regard to advertising and marketing.
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14:56 - 14:58He says, "If you run a restaurant,
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14:58 - 15:01there is no healthy distinction to be made
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15:01 - 15:04between the value you create by cooking the food
-
15:04 - 15:06and the value you create by sweeping the floor."
-
15:06 - 15:08One of them creates, perhaps, the primary product --
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15:08 - 15:09the thing we think we're paying for --
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15:09 - 15:10the other one creates a context
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15:10 - 15:14within which we can enjoy and appreciate that product.
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15:14 - 15:19And the idea that one of them should actually have priority over the other
-
15:19 - 15:21is fundamentally wrong.
-
15:21 - 15:22Try this quick thought experiment.
-
15:22 - 15:23Imagine a restaurant that serves Michelin-starred food,
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15:23 - 15:27but actually where the restaurant smells of sewage
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15:27 - 15:30and there's human feces on the floor.
-
15:30 - 15:30The best thing you can do there to create value
-
15:30 - 15:35is not actually to improve the food still further,
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15:35 - 15:40it's to get rid of the smell and clean up the floor.
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15:40 - 15:43And it's vital we understand this.
-
15:43 - 15:46If that seems like some strange, abstruse thing,
-
15:46 - 15:50in the U.K., the post office had a 98 percent success rate
-
15:50 - 15:53at delivering first-class mail the next day.
-
15:53 - 15:54They decided this wasn't good enough
-
15:54 - 15:55and they wanted to get it up to 99.
-
15:55 - 16:02The effort to do that almost broke the organization.
-
16:02 - 16:05If at the same time you'd gone at asked people,
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16:05 - 16:08"What percentage of first-class arrives the next day?"
-
16:08 - 16:09the average answer, or the modal answer would have been 50 to 60 percent.
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16:09 - 16:15Now if your perception is much worse than your reality,
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16:15 - 16:15what on earth are you doing trying to change the reality.
-
16:15 - 16:21That's like trying to improve the food in a restaurant that stinks.
-
16:21 - 16:25What you need to do
-
16:25 - 16:26is first of all tell people
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16:26 - 16:29that 98 percent of mail gets there the next day, first-class mail.
-
16:29 - 16:33That's pretty good.
-
16:33 - 16:35I would argue, in Britain there's a much better frame of reference,
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16:35 - 16:36which is to tell people
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16:36 - 16:38that more first-class mail arrives the next day
-
16:38 - 16:40in the U.K. than in Germany.
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16:40 - 16:43Because generally in Britain if you want to make us happy about something,
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16:43 - 16:45just tell us we do it better than the Germans.
-
16:45 - 16:48(Laughter)
-
16:48 - 16:48(Applause)
-
16:48 - 16:52Choose your frame of reference and the perceived value
-
16:52 - 16:57and therefore the actual value is completely tranformed.
-
16:57 - 16:58It has to be said of the Germans
-
16:58 - 17:01that the Germans and the French are doing a pretty good job
-
17:01 - 17:02of creating a united Europe.
-
17:02 - 17:02The only thing they don't expect is their uniting Europe
-
17:02 - 17:07through a shared mild hatred of the French and Germans.
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17:07 - 17:11But I'm British, that's the way we like it.
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17:11 - 17:17What you also notice is in any case our perception is leaking.
-
17:17 - 17:19We can't tell the difference between the quality of the food
-
17:19 - 17:22and the environment in which we consume it.
-
17:22 - 17:23All of you will have seen this phenomenon
-
17:23 - 17:25if you have your car washed or valeted.
-
17:25 - 17:28When you drive away, your car feels as if it drives better.
-
17:28 - 17:33And the reason for this is,
-
17:33 - 17:34unless my car valet mysteriously is changing the oil
-
17:34 - 17:38and performing work which I'm not paying him for and I'm unaware of,
-
17:38 - 17:40is because perception is in any case leaking.
-
17:40 - 17:44Analgesics that are branded are more effective at reducing pain
-
17:44 - 17:45than analgesics that are not branded.
-
17:45 - 17:48I don't just mean through reported pain reduction,
-
17:48 - 17:49actual measured pain reduction.
-
17:49 - 17:54And so perception actually is leaky in any case.
-
17:54 - 17:58So if you do something that's perceptually bad in one respect,
-
17:58 - 17:59you can damage the other.
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17:59 - 18:00Thank you very much.
-
18:00 - 18:02(Applause)
- Title:
- Perspective is everything
- Speaker:
- Rory Sutherland
- Description:
-
The circumstances of our lives may matter less than how we see them, says Rory Sutherland. At TEDxAthens, he makes a compelling case for how reframing is the key to happiness.
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 18:24
Krystian Aparta commented on English subtitles for Perspective is everything | ||
Krystian Aparta edited English subtitles for Perspective is everything | ||
Krystian Aparta edited English subtitles for Perspective is everything | ||
Camille Martínez commented on English subtitles for Perspective is everything | ||
Jenny Zurawell edited English subtitles for Perspective is everything | ||
Jenny Zurawell commented on English subtitles for Perspective is everything | ||
Jenny Zurawell edited English subtitles for Perspective is everything | ||
Jenny Zurawell edited English subtitles for Perspective is everything |
Krystian Aparta
The English transcript was updated on 4/20/2017. On-screen text ("[Ludwig Von Mises is my hero.]") was added at 12:56.