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