Sutherland Defines Economics

"Economics is the study of human motivation but with all the interesting variables set to zero, other than greed or prudence. Everything else is set to zero."

- Rory Sutherland, vice chairman, Ogilvy & Mather Group

The Sutherland Heuristic

Speaking of government nudging, Ogilvy Vice Chairman Rory Sutherland says:

"Essentially, you should try persuasion first, bribery second, and legislation third. 

"What tends to happen in government, because it's their natural mode of approach, is they tend to use legislation first before they've even tried persuasion. The point is that legislation is a blunter instrument than persuasion. 

"One of the beautiful attributes of persuasion is people can always give a good reason and choose not to be persuaded. No reputational or other costs are incurred so long as your reason for opting out is generally acceptable."

Source: "Things to Hang on Your Mental Mug Tree," Edge.org

Exploit Explained: Least Reinforcing Syndrome

{This post is part of the Archive of Human Exploits}

When someone does something that angers or upsets you, doesn't getting it off your chest feel great? Bad news: That can actually work against the goal of getting that person not to do it again.

It turns out one of the best ways to train humans to stop bad behaviors is to employ a trick used to train dolphins. It's called “Least Reinforcing Syndrome” or LRS. In a (now famous) article for The New York Times titled, “What Shamu Taught Me About a Happy Marriage,” Amy Sutherland explains:

When a dolphin does something wrong, the trainer doesn't respond in any way. He stands still for a few beats, careful not to look at the dolphin, and then returns to work. The idea is that any response, positive or negative, fuels a behavior. If a behavior provokes no response, it typically dies away.

This is counter-intuitive at first, but then it make sense. Like animals, we are hard-wired to create associations between a stimulus and a response — even if it’s an unconscious one. Thus, even a negative reaction can have the perverse effect of reinforcing a behavior. A reaction, any reaction, becomes a reward. But no reaction? That isn’t satisfying in any way, so the perverse motivation to repeat the behavior is removed.

I haven't found the need to use this in my marriage, but it works wonders with my four-year-old. Her tantrums are epic and neither threats nor appeasement do anything but fuel her fire. The only thing that works is LRS. It's amazing to watch how effective it is.

Want to learn more? Check out the NYT article.

Enough To Do Anything, Not Enough to Do Nothing

[Warren] Buffett does not believe that it is wise to bequeath great wealth and plans to give most of his money to his charitable foundation. Having put his two sons and a daughter through college, the Omaha investor contents himself with giving them several thousand dollars each at Christmas... 

Buffett is not cutting his children out of his fortune because they are wastrels or wantons or refuse to go into the family business -- the traditional reasons rich parents withhold money. Says he: "My kids are going to carve out their own place in this world, and they know I'm for them whatever they want to do.'' But he believes that setting up his heirs with ''a lifetime supply of food stamps just because they came out of the right womb'' can be ''harmful'' for them and is ''an antisocial act.'' 

To him the perfect amount to leave children is ''enough money so that they would feel they could do anything, but not so much that they could do nothing.'' For a college graduate, Buffett reckons ''a few hundred thousand dollars'' sounds about right.

- "Should You Leave It All to the Children?," Fortune Magazine, 1986

As usual, the 'Sage of Omaha' nails it. As someone who has acquired more wealth than my family had growing up, I have thought a lot about this question. Now, thanks to Rory Sutherland quoting the Buffett line above, I have a great aphorism to help me decide how much money I should give to my children... 

Enough to do anything, but not enough to do nothing.

Brilliant!

Media Bias by Quantity of Coverage

"My friend, the psychologist Robert Cialdini, explained how this works: media mostly creates bias not through quality of argument but by quantity of coverage, highlighting some events and burying others."

- Rory Sutherland, vice chairman, Ogilvy & Mather Group

On Booking Travel

"People have different heuristics, in behavioural economics language. Some people will want to get there as fast as possible, some people will want it as comfortable as possible. Because people have these different heuristics, I always think allowing someone else to book your travel is a terrible mistake because they may have totally different heuristics to you."

 - Rory Sutherland, vice chairman, Ogilvy & Mather Group