Author/Founder Richard Shotton

Auren Hoffman (00:00.526) Hello fellow data nerds my guest today is Richard Schotton. Richard is the founder of Astroten and author of two bestselling books, The Choice Factory and The Illusion of Choice. And he has a new book coming out now called hacking the human mind. Richard, welcome to world of DaaS.

Richard (00:17.822) Well, thank you for having me. Glad to be here.

Auren Hoffman (00:19.47) Very excited. Now, a lot of companies like run AB tests constantly, but you, kind of argue that testing, many tests are just like the wrong things entirely. Like where's the blind spots as companies approach these type of experimentation.

Richard (00:34.994) Yeah. So the first thing I should probably say is, AB testing is a huge improvement on directly questioning customers. I think that's the first thing. It's certainly a big improvement. If there's a theme of behavioral science, which is my forte, it's that what people say influences them and what actually influences them are very different things. So there's an amazing psychologist at University of Virginia called Timothy Wilson. And he has this lovely phrase. He says, we are strangers to ourselves.

Auren Hoffman (00:44.791) Okay.

Richard (01:05.354) And what it means by that is people don't really know why they do the things they do. So if you're like most businesses and you question people, send them a survey, put them in a focus group, they'll give you long, logical, sensible reason about why they buy your products. But most of the time, those reasons are very misleading. We don't have introspective insight. So what we say is often a really misleading guide to what we actually do.

Auren Hoffman (01:34.978) And some things are like testable, but some things are like hard to test. if you're like, if you're building a product and it takes two years to build this thing, it's a little bit hard to A-B test that thing. If it's a button on a website and it's red or blue, that's a little bit easier.

Richard (01:44.828) Yes, and-

Richard (01:49.098) Absolutely, but I would argue when people are thinking about tests, especially in the world of apps and digital, many of those companies, as you say, have this culture of A-B testing. But what they tend to do is test the final thing, like, should we change the color of the text or the size of the button or the shape of the button? Now that's incrementally beneficial.

But what I would say is you should take that same A-B testing mentality and do it much earlier in the process. So what you really want to do is take a behavioral science principle, let's say social proof, the idea that we are deeply influenced by what others do. You want to find out whether this idea that has been proven in lots of different categories and markets and places, you want to find out if it works for your particular challenge. And that's where you should use A-B testing.

And then once you know this broad insight is powerful, then you can start iterating on how best to use it. So I think yes, AB testing, but bring it earlier in the process.

Auren Hoffman (02:57.996) Are there particular types of things like social proof that companies don't think of enough? Like in some ways, like every time I go into a company, almost always they have like a deficit of social proof. Like that seems like an easy one for a lot of companies to fix, but are there other kind of like ones where they just don't do enough?

Richard (03:16.584) Yes, there's some biases like social proof that I think are partially applied but not enough. Of all the experiments that behavioural scientists have looked into, probably the one with the most robust data is social proof. So it's this argument that if you make a course of behaviour look like it's popular, you'll make that course of behaviour more appealing and more people are likely to do it. Now many

listeners might be rolling their eyes and thinking, well, we see this all the time. You you go to a website and it says 5,000 customer reviews or 1 million happy customers. And that's true. Those are examples of social proof, but they're pretty basic. If people are applying that basic level, you can always push it further. So for example, people like Robert Cialdini at Arizona State University have shown that we're not equally influenced by other people. So we are most influenced by people like ourselves.

I'm a Londoner living in Britain. I'm going to be more influenced by knowing what other Londoners do than what other Brits do. So rather than saying you have a million customers, what you should be doing is identifying facts about the audience, know, where they live, type of business they own, and then tailoring the message of popularity accordingly. So social proof is one of those experiments where

It's applied in a basic degree, but there's so much more opportunity. You very rarely see that level of tailoring. And then the other one with social proof. yeah.

Auren Hoffman (04:48.334) I saw like a bunch of things to get people to vote and there were a bunch of things like, you know, 60 % of people vote that helps people. But if it was like both your neighbors voted already, then it's like really you're going to vote. Yeah.

Richard (05:01.738) Yeah, and it's fascinating some of the original studies into tailoring this social proof message. It is really trivial linkages with the audience. So knowing your neighbours are most people on your street are voting, that would be absolutely super powerful. But the other thing is, you could apply these principles.

quite subtly. there's a lovely study by Peterson at the University of Texas, gets a giant sample, I think it's over a thousand people, and he randomizes them into two kind of e-commerce journeys. So some people are shopping and they see that an item they want to buy isn't there. And then after they've done their e-commerce journey, they're questioned by Peterson and he finds out how irritated they are.

Now, sometimes those people see the product that isn't there labeled as unavailable or out of stock. Other times they see it labeled as sold out. When it comes to irritation scores, people are much, more irritated if it's labeled out of stock or unavailable than sold out. Now, according to Peterson, this is about social proof. If you say something's unavailable or out of stock, what you're drawing attention to as a product is that you've been inept.

You haven't managed your supply chain. You've had logistical problems. If you say it's sold out, completely different set of associations. You're emphasizing loads of people wanted this product and you were overwhelmed by demand. So yes, people apply social proof in this basic way, but there's far more sophisticated ways you can apply it.

Auren Hoffman (06:18.252) Yeah. Yeah.

Auren Hoffman (06:36.002) Yeah. I often when I'm searching on internet, I'll see something like only two more available at this price. And I'm like, I gotta, I gotta buy this now before it goes away. Yeah.

Richard (06:45.418) Yeah, yeah. So that kind of is very closely related to social proof. But psychologists would say it's scarcity. So if you emphasize there isn't much left, exactly the same product will become more appealing. Now, that is a real powerful bias. When psychologists try and rank the relative impact commercially of some of these experiments, scarcity along with social proof, they always come out.

Auren Hoffman (06:52.718) Scarcity, yep.

Richard (07:14.538) towards the top. So one of my favorite applications, and I think retailers in America are much better at doing this than in Britain. We don't really do it much in Britain. But let's say you go in either to a digital site, could be a supermarket, and a product is discounted. What you should do to apply scarcity is say to people, maximum number of products you can buy is two per transaction. They hardly ever do that.

Auren Hoffman (07:39.264) Yeah, yeah, I always see that. I see that all the time. Yeah, you're not allowed to buy more than four. And I'm like, I wasn't even thinking about one, but now I'll buy four. Yeah.

Richard (07:44.668) Yeah, exactly, exactly, because you kind of think to yourself, and people are making these snap decisions, they're inferring things from the body language of the promotion. So what they think.

Auren Hoffman (07:55.566) I better get this soup, canned soup now. You never know when I might need canned soup.

Richard (08:00.202) Yeah, and interesting you say can't Yeah, yeah, yeah, yeah, yeah, yeah. Who knows if they'll keep on making tomato soup. Yeah, it kind of suggests that people, that the retailer either thinks this thing's going to sell out at such a low price. That implies social proof, or it implies that the retailer's losing money at such a good discount. These are the explanations in people's minds about why.

Auren Hoffman (08:06.615) Right.

Auren Hoffman (08:23.5) Yeah. Cause back in the day, like when you had a super hot item, like the beanie babies in the nineties, like you could only buy one. You could go in the store and wait in line and you could only buy one or like, well, you know, when if you're buying Taylor Swift tickets, you can maybe only buy two of them or something. Right. So there are these things that are for real scarce. And then, so then it's easy to kind of fool us when there's things that are kind of pseudo scarce.

Richard (08:46.568) Yeah, I think that's a really nice way of putting it that there are all these biases, there's an element of truth to them, but sometimes they become so wedded on our mind that the consumer over applies them. So yeah, often a very valuable item will be scarce, but we become we use this rule of thumb that scarcity was high value, even in situations where it's it's not applicable.

Auren Hoffman (09:11.328) What are some other behavioral biases that kind of influence our purchasing decisions?

Richard (09:17.062) One of them I thought might be interesting to your listeners is one called the illusion of effort. So the original study was run in America, Andrea Morales at the University of Southern California back in 2005. And she recruits a group of people who are in the market for an apartment, they're trying to buy a house. And she shows them 10 apartments that meet their requirements. Now, everyone in the study gets exactly the same list of houses.

And then they are asked to rate the caliber, the quality of the real estate agent. Now the twist in the experiment, and there's always a twist in these experiments, is that sometimes people are told the real estate agent took one hour to generate the list and they used a computer. That's the low effort condition. Other people are told the real estate agent took nine hours and they generate this list manually.

Auren Hoffman (09:57.123) Yes.

Richard (10:15.338) Now, when people rate this, the real estate agent, you see a very clear difference. Scores are all out of 100. Low effort group, they rate the service provider at 50 out of 100. High effort group rate the service provider at 68 out of 100. So even though people are getting exactly the same products, there is this 36 % variance in rate levels.

Auren Hoffman (10:36.566) Interesting. would have like in my business, in the tech business, I think it would be the opposite. So I think if we saw someone who's like who spent like nine hours and you got like some random list, you're like, what the heck? Why even one hour to get me a list of Ted Diggs? It's like that seems like a lot of time. I'd be like, this person's a complete dunce. Like, I don't want to work with somebody like that. It took nine hours to get me like 10 items here. Like they're clearly inept and clearly stupid.

Richard (10:42.621) Wow.

Auren Hoffman (11:06.527) I want to work with a person who takes like, nine seconds to get rid of.

Richard (11:09.906) Now, if you ask people, any customer, if you ask them directly, they're never going to say, I wish my estate agent took a little bit longer to produce this stuff. But this is when claim data becomes a little bit problematic because when you run these test and control experiments, you see this happening again and again. And I think it's this rule of thumb that generally in life, the more effort someone puts into something, the longer they take, the higher quality it is.

There's this argument from Daniel Kahneman, won the Nobel Prize back in 2002. says, look, when people face complex questions, what they tend to do, they don't even realize it, but what they tend to do is replace the complex question with a simpler one that gives them an almost as good answer. And when you are judging the quality of a real estate agent, that is a complex question. So people think to themselves, well, can't deal with that. A really simple thing is how much effort did they take? So we use effort as a proxy for

quality.

Auren Hoffman (12:10.574) I still think in our industry, it's the opposite where they'll high, if there's a high effort that, that means lower quality, uh, in our industry, but I could be wrong. So, uh, I, I may be falling for it the other way. Yeah. When I see an engineer and they're like, this took me like 32 hours to build this thing. And then I see another engineer took me like, this took me one minute. I clearly think the one minute engineer is way better than the 32 hour one.

Richard (12:20.891) Well, there's a couple of ways you could think about this. So it might be...

Richard (12:34.13) Yeah. So, so what you could make that same argument, an estate agent, if I thought an estate agent could do this same product in one hour, nine hour, but I think the customer's looking at a slightly different way. They're thinking, you know, what's likely to have the better quality, the thing that people put effort into or the thing that they didn't. Now, the reason I think, I think this might occur in your industry, you know,

Auren Hoffman (12:39.245) Yeah.

Frank, maybe you just did dough. Yeah, okay.

Auren Hoffman (12:53.154) Yep. Well, that's true. Okay.

Richard (13:01.61) There's always a gap between an experiment and a different situation. But with AI, I think you're starting to see something quite interesting. So the number of experiments on AI from behavioral scientists are a bit smaller because it's a more recent invention. But there are some. There's a great academic at a VR university in Amsterdam called Kobi Millet. And in 2023, he does a lovely simple test, shows people a poster.

And he changes the labeling. So sometimes this poster of a skull is referred to as being created by an AI robot. Other times it's referred to as being hand drawn. So everyone sees the same poster, the labeling changes. Now, when Millet asks people about the artistic merit, the creativity, their purchase intent, you see this wild swing.

Auren Hoffman (13:42.232) Yep. Yeah, yeah.

Auren Hoffman (13:49.059) Yeah.

Auren Hoffman (13:52.366) Well, that makes sense. Yeah. And you always like, you want the hand crafted, you know, leather bound thing rather than the machine made, even in the machine made bone might be like, where are your quality? You just presume the handcrafted one is better.

Richard (14:07.154) Yeah, and he attributes this back to the illusion of effort. We think AI equals low effort. Our experience of chat GPT as consumers is you put in a prompt and 10 seconds later it spat out a blog post. So the point here, I think that may be relevant to your argument, is I would say it would be ridiculous of me to say, don't use AI because people don't want things speeded up. Of course you can't do that.

Auren Hoffman (14:11.245) Yeah.

Auren Hoffman (14:15.052) Yeah, which is true. Yeah. Yeah.

Richard (14:34.506) But what you've got to be aware of is if your product is being fired out more and more quickly, there is a danger the same product is rated as low quality. So what you need to do is shift people's focus from the speed of delivery to how long it may be took to set up the protocols and processes. So even though I can generate these answers that you're talking about really, really quickly, it's because I've got 15 years of experience or 25 years of experience or we've invested a million pounds.

Auren Hoffman (15:00.76) Yeah, yeah.

Richard (15:02.984) And I think it's that subtle shift that all of us could use.

Auren Hoffman (15:08.814) Yeah, there are these like, there's these, you know, there are all these anecdotes of people, like a lawyer or something like that, billing somebody a million dollars for like an hour of work. And they're like, that just took you an hour. It's like, no, actually that took me 30 years to get you this $1 million thing.

Richard (15:20.094) Yeah. Yeah.

Richard (15:28.874) Exactly. And it's interesting, it comes up in all sorts of different categories. So I've heard it attributed to Picasso, think Whistler, there's a Paula Sher one who was a graphic designer. So always the same kind of thing. Yes, it took me 30 seconds to deliver, but it took me 34 years to learn how to do it in 30 seconds. Yeah, it's exactly that principle.

Auren Hoffman (15:47.725) Yes.

Now there's, how do you think like B2B marketing feels different from consumer marketing?

Richard (15:56.136) Yeah, absolutely one of the big challenges I always face is people say, okay, yeah, this stuff might work when it's cans of Coke and bags of crisps, but it's not going to work when it's really big decisions, either massive consumer decisions like buying a car or big professional decisions. And interestingly, when behavioral economics, which I would say is a subset of behavioral science, when that first came to the four 70s, 80s, there was an English economist called Ken Binmore.

who was very dismissive. said, all these biases, they're not going to affect really important purchases. You know, if you're buying a million pound product or you're buying a car, you've got a vested interest to think things through very clearly. And Richard Thaler, he went on to win the Nobel Prize in 2017. He responded and said, look, Ken, you've got this completely the long way around. When people are buying very small purchases, they do it so regularly, they know their preferences. When you buy very expensive,

Auren Hoffman (16:53.923) Yeah.

Richard (16:56.234) products, like a car or a house or an engagement ring or many business purchases, you do it so infrequently that you know that you don't know. And it's in these situations of uncertainty where we rely more and more on biases. the theoretical argument from failure is business to business will be even more affected by these biases. Now, all very well and good that he makes that theoretical argument.

Auren Hoffman (17:11.779) interesting.

Richard (17:24.34) but the experimental evidence backs him up. So we talked about social proof, lots of evidence that works on consumers, but it works on professionals as well. There's a 2018 study from the Australian government. So they had a very serious challenge. Australian doctors were overprescribing antibiotics. So they send out 6,600 letters trying to persuade doctors to give out fewer antibiotics.

And sometimes they just try and educate the doctor. Here are all the reasons why over prescription is so bad. And it makes barely any difference on prescription rates. They go down by 3.2%. Other doctors though, they get that same educational letter, but they also have a social proof line at the top. So the exact message.

Auren Hoffman (18:12.27) Yeah. You are, you're, you're, you're, know, you prescribe more than the 90 % of doctors or something like that or whatever. Yeah.

Richard (18:18.474) Exactly, and then they tailored it to the city. yeah, nights and other doctors in Sydney to, you yeah, that reduced prescription rates by 9.3%. So far more effective. But you would think many people would argue, well, know, doctors, are logical, rational decision makers. These are life and death decisions. Surely they will just weigh up the facts. But even this group, know, even this group who define themselves in that logical manner, even they are deeply influenced by social.

Auren Hoffman (18:23.534) Okay, yep.

Auren Hoffman (18:28.174) Okay, that makes sense, yeah.

Richard (18:49.103) And that's pretty common.

Auren Hoffman (18:49.588) What about where there's like a double decision being made? So let's say you're a CFO, you're rarely looking to go to a new company, and then you're a company, you're rarely hiring a CFO, and there's a double decision that needs to be made. Like, how do all these biases affect when there's like two, like, it's not just me wanting to buy a product and the product trying to sell to me, they'll sell to anybody. It's more like a dual kind of rare decision being made.

Richard (19:16.554) I mean, I guess both parties can harness these biases. So, you know, there'll almost be, I suppose, a, you know, a war of who does it best. So if you're one of 10 candidates being interviewed for a very rare position, your way of making yourself appealing is to use these biases more effectively, more creatively and more laterally than your opponent in this situation.

Auren Hoffman (19:22.776) Yep.

Auren Hoffman (19:44.3) Yep. Yep. What about, what about in the dating market? Again, that's like a double decision being made, right? For marriage or something like that. Like, and, you know, marriages tend to work out pretty well, right? In general, like, what, like, how is that kind of, do those decisions get made?

Richard (19:53.865) Yeah.

Richard (20:01.384) Yeah, well, mean, dating is a fascinating one. And if people have got a deep interest in that, I would strongly recommend a book. And often the books have different names in England and America. So in England, it's called Dataclism and it's by Dataclism. But the thing that will be consistent across markets is it's by Christian Rudder, who was the founder and chief technology officer at OkCupid. And he started by writing this blog. And I think the subtitle was

Auren Hoffman (20:14.392) Dataclism. Okay.

Auren Hoffman (20:25.089) Okay.

Richard (20:30.174) how people behave when they think no one's watching. And he analyzes all sorts of interesting quirks of behavior. And the main thing he shows is that what people say is a very, very bad guide to what they actually think. On the dating sites, there's an awful lot of lying. So what he shows, for example, is you can look at American Heights for men.

it's essentially a bell curve and I can't remember this five years game but let's yeah okay let's say five eight five nine's the way it should be what he shows is on okay cupid the heights of American males mirrors the bell curve almost perfectly but it shifted two inches so every you know the average height is now five eleven what's yeah well that's the

Auren Hoffman (21:01.624) Yep. Five eight, five nine, it's probably, yeah, yeah, yeah.

Auren Hoffman (21:15.758) It's shifted to it. Yeah. Okay. Yeah. Yeah. But it's a slight lie. It's a slight lie. Like it says, say you're five, 10, you're five, five, eight, or five, 10 or so. Like that's, okay. And then everyone just counts that. Like everyone kind of knows, okay, well, if this guy says he's five, 10, he's probably five, nine or five, eight. Yeah. Yeah. He's probably, if he says he's five, 10, he's probably not five, three, right?

Richard (21:25.372) Yeah, so what people are doing is they're lying!

Richard (21:33.224) Yeah, yeah, yeah, exactly. So you've got this thing of...

Richard (21:38.858) Exactly, Exactly, No, no, no, no, no, no, no. Yeah. So yeah, I think you're actually right. There's people are lying, but kind of only enough so they've got plausible deniability. And then you get this paradox of if you actually tell the truth, you aren't properly communicating your height. Because if you're five at nine and you say you're five at nine, people will think you're five at seven. So truth becomes a kind of misleading answer.

Auren Hoffman (21:39.754) And he's probably definitely he's definitely not taller than 510. Right. So you know that I usually don't say the other way.

Auren Hoffman (22:06.584) Well, you know, also it kind of depends what you're optimizing for. You're optimizing for the first date or the second date, right? Cause you're optimized for the first date. Yeah. You might want to lie, but if you're optimizing for the second date, then if they're going to be, they're going to be pleasantly surprised when they see you, they'll be like, great. He's even better looking than I thought. Okay, great. I, this is a fantastic, you know, kind of thing.

Richard (22:11.332) that's interesting. Yes.

Richard (22:26.28) Well, I really like your angle because one of my favorite experiments is one that I think could be applied more by marketers, which is my field, but definitely more by data. So there's an idea called the Pratt fall effect. And it's this idea Pratt fall. So we don't use this term in UK, but I think in the 1960s in America, it meant a small blunder. So what happens in the original study?

Auren Hoffman (22:41.58) Would you go pratful?

Auren Hoffman (22:52.888) Okay.

Richard (22:55.562) There's a guy called Elliot Aronson who's at Harvard. He gets his colleague to take part in a quiz. He then gives his colleague all the answers to the quiz questions. So the guy, know, absolute steamroller is the opposition, looks like a genius, wins this quiz by miles, gets 92 % of the questions right. But then as the quiz is finishing, he makes this pratfall, he makes a small blunder and he spills a cup of coffee down himself. Now, Aronson records this.

and he plays an audio version of this clip to listeners but sometimes the listeners hear the entire incident, great performance and mistake, other times they just hear the great performance so the mistake is airbrushed out, edited out and what he finds is that people are significantly more, we're talking 45-55 % more likely to find the contestant appealing if they hear the mistake and the great performance.

So he calls this the Pratt Fall effect.

Auren Hoffman (23:54.414) okay. Cause like they want to shine a little bit of a lantern on your problem or something like that.

Richard (24:00.986) Yeah, so the argument I think would be, know, if you're thinking of using this commercially, most advertisers brag. So if you admit, and actually most people on dating sites brag. So if you admit like any type of flaw, you will stand out and being distinctive is exactly that. It's the Guinness Good Things Come To Those Who Wait. Yeah, yeah, really slow.

Auren Hoffman (24:06.05) Mm-hmm.

Auren Hoffman (24:11.852) Yeah.

Auren Hoffman (24:16.706) This is the Avis word number two type of thing.

Auren Hoffman (24:24.354) Yeah, Heinz ketchup thing, yeah.

Richard (24:29.534) The other thing it does is I think makes you feel a little bit more human. It makes your other claims more believable because admitting a flaw has tangibly proved, to be

Auren Hoffman (24:39.714) Well, we know, we know everyone and every product has flaws. So if you don't know what those flaws are, you're always like, something, but if, they, if they shine a lantern on their flaw, then it's like, great. Okay. I know I can live with that. like he's a smoker. Okay. I can live with the fact that he's a smoker because he's got all these other great things about him or something.

Richard (24:53.17) Yes.

Richard (25:00.348) I think you're absolutely right. We all know every product person has a flaw. And if we're uncertain about where it lies, we might assume that it's a really important thing. If you can admit something in a, I mean, it can't be a humble brag. It's got to be meaningful enough, but not too important. And then the really clever bit is if you admit the right flaw, you can emphasize a mirror strength. So if you're a product and you say,

we're really expensive. What people assume is well if it's really expensive they're probably going to be high quality. So often humans think that weaknesses and strengths are two sides of the same coin. So if you pick the right floor to admit you can then emphasize a core strength and that's what Avis did in your example. know they admit that they're unpopular.

Auren Hoffman (25:40.737) Yep.

Auren Hoffman (25:44.61) Mm-hmm.

Right. Yeah. I work too much, which might mean I'm rich. Yeah. Yeah.

Richard (25:52.586) Well, yeah, yeah, yeah. Yeah. And so I think what you've got to do is think what is the genuine thing I want to land and then is there a flaw that I can admit that might emphasize that. But my favorite example, are you familiar with Buckleys? So it's a cough syrup in Canada back in 1990, tiny little brand, 13th or so in the market. No one was really buying it. They then changed their creative direction and the new line they have is it tastes awful.

Auren Hoffman (26:10.136) Okay.

Richard (26:22.73) And it works. And the ads are very comic and for 35 years they have run that line. They emphasize how foul this thing tastes because they know people will assume if it's that bad tasting, it's going to be really potent. They shot to number one in market share, even though, yeah.

Auren Hoffman (26:23.755) Yeah, yeah, yeah.

Auren Hoffman (26:34.112) Yeah, yeah, yeah. Wow, that makes sense. Yeah, I would think something that tastes awful would be better for me. Right.

Richard (26:43.624) Yeah, exactly. mean, there's no, you know, them bringing attention to that doesn't, same liquid as it was six months ago, but drawing attention to it. Yeah. Emphasize that potency.

Auren Hoffman (26:49.069) Yeah.

Auren Hoffman (26:55.116) Yeah, it's very important. think politicians do that too sometimes where they'll kind of like shine a lantern on their problem. And then that kind of helps the other stuff or humanizes them in some sort of way as well.

Richard (27:07.21) Yeah, that's a really interesting one about politicians. I mean, I wonder in, you know, maybe Britain, I think they're probably both saying Britain, America, Britain, we've had a stagnant economy for, you know, barely grown since the financial crash, what's that, 17 years. So people are increasingly angry with mainstream politicians. So one of the most successful tactics, Boris Johnson did it and became Conservative leader and then Prime Minister. Nigel Farage is doing it currently.

topping the polls for his reform party. What they do is they make themselves that they are very, very different from other politicians. They know that people will say, I'm angry with cookie cutter standard politicians. This person because they drink loads or they make jokes or a bit scruffy. They've defined themselves as being not politicians and therefore their popularity shoots up for a while. I think you're right. It does work in politics.

Auren Hoffman (27:50.136) Yep.

Auren Hoffman (28:03.53) How does like you mentioned like price is kind of an interesting issue. There's a price quality thing or like how does one think about price when they're trying to sell their product?

Richard (28:14.056) So there's a hell of a lot of research on price. You mentioned price quality. Absolutely true. There's a Stanford psychologist called Babashev, does a lovely study, serves people five different bottles of wine. And each bottle has a prominent price label, but there are only four different liquids in the wine. So one of the wines is repeated. Now people begin this.

study and they have a little sip of the first wine, a Merlot which they think is coming from a five dollar bottle and they say it tastes awful. A couple of wines down the line they are getting another bottle of Merlot which has a prominent 45 dollar price label, same liquid. Exactly, you can see where this is going and when they rate it not only do they describe it with far more positive adjectives, the quantitative score is 70, 70, 70 percent higher.

Auren Hoffman (28:56.022) Yeah, same, same, same line. Yeah.

Auren Hoffman (29:11.107) Yeah.

Richard (29:11.334) according to Shiv, not completely, but partly what we experience is what we expect to experience. And one of the things that sets up our expectation is price, because people have a rule of thumb in their head that you get what you pay for. And the interesting thing is that becomes self-fulfilling. So exactly the same liquid is rated wildly differently, dependent on the cost. So if someone isn't buying your products,

Economists would say, you you need to reduce it because you haven't got enough value and you're not providing enough utility in their mind. But before you do that, you still might need to, but before you do that, why don't you test the far more profitable idea of maybe I'm charging too little? know, because...

Auren Hoffman (29:50.284) Yeah.

Auren Hoffman (29:57.582) I saw a study where it's somewhat of like a placebo effect where it was, you know, there was an Advil and then people rated how much Advil worked. And then it was the same exact bottle of Advil, nothing different, except on the Advil, they wrote 30 % off and that one actually worked less. It was just like less effective for some reason, because it just, you know, people's heads and these things are really like messing with people.

Richard (30:28.337) I think that's a Dan Ariely study. He didn't do it on his own, but I think it's Dan Ariely and a couple of others. Exactly. Even the world of pain killing. know, are the exactly the same pharmacological pill will have a different impact whether we think it's expensive or whether we think it's cheap. So you've got to be very careful about radical discounts on your products, reducing price, promotions that are too strong.

Because you're not only training people to think your product's poor quality, the actual experience of the product will be worse. That's, think, the interesting behavioral science part. It's the actual experience deteriorates as well.

Auren Hoffman (31:09.42) Now, this is a data podcast and a lot of cognitive biases kind of affect the way like we executives interpret our own company's data. Like what are the dangerous ones that we should be aware of as leaders?

Richard (31:17.961) Yeah.

Richard (31:24.37) I would say one of the big ones is overconfidence. This is an area that's been studied hugely. So whether it's looks, humour, intelligence, people, you know, it's not 50 % of the population think they're above average, it's more like 70 or 80%. You know, again and again, in all sorts of different categories, people are overconfident. Two of my favourite studies in this area, there's one by, I think it's Ola Svensson, Swedish psychologist back in the 80s.

He was interested in driving. It won't shock anyone that most people think they're a better driver than average. But what Svensson thought, sorry, what Svensson did, he went to hospitals where people are laid up, they're injured, they're in bed, they've been in car accidents. Even that group, they think they're better than drivers than average. Well, there's another one in Britain by Constantine Sedikides, the University of Southampton. He goes to prisons.

These are young people's prisons. And even the prisoners, most of think they are more moral than average. So this is a consistent finding that affects all walks of life. Now, I think if people recognize that and they recognize it affects them as well, they could save themselves an awful lot of problems. In my world of marketing, yeah.

Auren Hoffman (32:45.422) How does it like, like, I mean, in some of the things they're like, they're quite hard to measure. like, it's quite hard to know. Like, I mean, I may have a sense of like, first of I don't, I don't even know how moral I am. And then, and then I don't necessarily know how moral the average person is. So these things are a lot harder to do, but there are other things where I think it is a little bit easier to have a sense. Like I think probably most people have a, probably a pretty good sense where they fall in the IQ zone or something.

Richard (32:58.066) Yeah.

Richard (33:12.99) So I think intelligence people tend to overestimate because a lot of people won't have done tests or I bet if they do a test they think, I was hungover that day. They'll come up with some explanation. I wonder if you said something like height though, people might be better.

Auren Hoffman (33:20.674) Yeah.

But I would say it would be pretty rare to like someone who's like in the bottom 25 % out of intelligence to think they're in the top 25 % out of intelligence.

Richard (33:32.234) Oh, now I don't know this one off the top of my head because there's not such a commercial application, but there is this idea called the Dunning-Kruger effect, which is essentially the more stupid that you are, the more likely you are to exaggerate your intelligence. And I think some of it is, you know, if you don't know anything about a topic, you don't know how much you're missing out on.

Now, this dangerous thing is as you get better at a topic, it's like an island that the sea's receding. You kind of realize how much else there is to know. You're kind of coastline of ignorance grows. You're more aware of that. So I think actually the more stupid people are, there is this bigger gap.

Auren Hoffman (34:20.044) where people think they're worse than average.

Richard (34:23.614) Ooh, very good question. So I've only seen studies like intelligence, humour, looks where people are overconfident. And remember, we're talking on average, you know, there will be some people who are kind of overly underconfident. I've heard people make an argument that there's a gender variation. When I've asked marketers, how good at their job are they versus their peers?

Auren Hoffman (34:29.73) Yeah.

Auren Hoffman (34:33.88) Yeah, on average.

Richard (34:53.342) Both men and women are overconfident. You get, I think it's 90 % of men. I'm exaggerating the numbers, I'm making them up, exactly. 90 % of men thought they were better than their peers at their job. It's more like 80 % for women. So both genders were overconfident, but women less so than men. I haven't seen something recently where there's a repeated finding of people being underconfident.

Auren Hoffman (35:16.686) often to ask people like what percentile they're in in for given traits. And, and I find that for many traits, people are quite accurate. They're like roughly good. It'd be my assessment of them. or, know, other types of things, people are quite good. But I the trait where people are the worst at assessing is EQ.

Richard (35:37.008) so I think something interesting there though, Oran, how are you asking these people? Because when, if you ask people on an anonymous server and stress that it's anonymous, you get, and I was going to stick this over confidence question, let's say 85 % on average people say they are better than their colleagues at their job. I've done that study where I've stood up in a conference hall and asked people who's better at their job. And of a hundred people, you get three sticking their hand up.

Auren Hoffman (36:06.094) Ah, I got it, because they don't want to stick out. They don't want to stick out. Yeah, yeah, yeah, yeah.

Richard (36:06.238) because there is a very different thing about telling everyone. I believe that I'm better in a kind of confessional, anonymous situation, but I can't put my hand up and let other people know that I think I'm better. So I often think answers will depend on how you do it.

Auren Hoffman (36:20.586) Yeah. So it's a good point. When I ask people like, are you really good at this? Yeah. Cause there was the humble kind of thing. So people will often only admit to things that they are really good at where I, where I found that where people just have no idea how good they are is, EQ. Like people will be like, I'm very high in EQ and you're like, or, or someone will say they're very low in EQ. I don't even know if it's, it's, it has any relationship to the truth.

Richard (36:28.734) Yes.

Richard (36:35.636) Yeah, okay.

Richard (36:45.714) Yeah, yeah, I think that would probably be one of the areas where I would be happy admitting that I'm probably below average on, mainly because my wife keeps on telling me. Yeah, Yes, yeah. On this question of the difference between what people say in public forums and private ones, I don't know if you've seen there's an amazing book by Seth Stevens, Seth Stevens Davidovitz called Everybody Lies.

Auren Hoffman (36:53.034) Yeah, I'm definitely below average in EQ, but then, who knows? Maybe some people are so bad at it. It's very hard to...

Richard (37:15.944) And one of my favorite examples is he compares Facebook data with search data. So he looks at what queries are people putting into Google, and then he compares it on a similar topic to what people are posting about on Facebook. So he looks at something like, my boyfriend is, and the most likely words to come up on Facebook after that phrase are things like, generous, wonderful, loving.

On Google, it's things like, know, cheating, an idiot, selfish. You know, it's a really powerful demonstration of what people say when they know others will see it is about a airbrushed, manufactured version of themselves. And to me, as a marketer, what it means is people who do social media listening should never take those statements.

as verbatim truth. are the image people want to project themselves in no way an accurate insight into what people actually think and do.

Auren Hoffman (38:24.728) You know, how, does AI, cause AI is going to get better and better at personalization. Hopefully. I mean, it's still terrible. Like I still get terrible recommendations on Spotify and Netflix and stuff like that, but hopefully it'll get better and better and better at personalization. does that make the traditional behavioral insights more important long-term or less important long-term?

Richard (38:45.354) I'm a skeptic about psychology and behavioral science going out of fashion. there's a legendary creative director from the 1960s called Bill Birnbach. And he said, you know, it's taken millions of years for human nature to evolve. It'll take millions for it to vary. It may be fashionable to talk about the changing man. But what we as communicators should be concerned with is the unchanging man.

And yes, technology changes, yes, of culture changes, but these drivers of what people want, they are remarkably consistent. You you can go.

Auren Hoffman (39:25.71) Do you think it will be, do you think like, cause you could, I can make an argument that behavioral science types of things will become more important in the AI world. I can make an argument, it will become less important. Surely they'll still be important, but on the relative importance, do you think it changes or do you think it's roughly the same?

Richard (39:42.794) I think there's two ways you can look at this. Firstly, the more choice people have, the more powerful these biases are because, you know, take a supermarket example, if you were standing in front of the shampoo aisle, if you try to logically work out which shampoo would maximize your utility per dollar spent, you would be choosing for an hour, maybe two hours. So people don't...

do that, they just pick the one that's the mid-price one or the most expensive one, the one they've seen on TV. They have a quick rule of thumb that they use to make a fast decision. Now, one thing that is happening in society is we've got more and more information at our fingertips. Now, as that just goes on and on, I say it makes these biases more powerful. So I think I would put my chips in that that camp.

Auren Hoffman (40:34.35) Interesting. You, I've been, it's one of the things like the, I, I often just like choose based on the, packaging, like what looks cool. Um, and so it kind of like judging the book by its cover. Uh, and I have actually found that that's been a great rule of thumb. Like just, just read whatever has the best, coolest cover is actually quite good. Uh, like are there, are there like weird sayings like that, that you think are just like wrong? Like, you know, people always say, don't judge by your book by its cover, but maybe we should judge the book by its cover.

Richard (40:43.326) Yeah.

Richard (41:04.232) Well, I mean, if we extend that argument beyond books to products, the serving vessel affects, you know, the aesthetics of those elements affects.

Auren Hoffman (41:14.958) Oh yeah, of course, yeah, yeah. Yeah, that beautiful bottle of vodka, yeah. Even though it's the same vodka, yeah.

Richard (41:20.81) Yeah, exactly. And it goes, I think, further than people expect. yeah, a lot of people who listening might think, okay, I kind of believe that a beautifully designed bottle will have that effect. But you could go to Cutterick. There's a wonderful psychologist called Charles Spence. I think he's the most interesting person when it comes to the psychology of taste and food. He did a study in Edinburgh where they served dinner at this conference.

and people are randomized into different tables. And some people get this very fancy heavy cuttlery. Other people get cheap, light cuttlery. And I think it's 11%, maybe 12 % variance in terms of the ratings of exactly the same food. People have this kind of assumption that heavy equals quality, and it becomes a self-fulfilling prophecy.

Auren Hoffman (42:07.662) yeah, of course. Yeah. If I got heavy color, I definitely feel like it would taste better. I think it would cause it's just like, yeah. And then it's like, delicious. Yeah. Yeah.

Richard (42:18.844) Yeah. And all sorts of brands apply this. So yes, in the food world where they'll, know, expensive bottles of wine will be a bit heavier, but even you go through to fancy speakers, sound systems, Bang & Olufsen, know, their remote control could be super light, but they artificially put weight in it because they know this heft gives it a sense of quality. So I'm really...

Auren Hoffman (42:40.275) Richard (42:46.73) ethically resistant to your argument on books, but I think you're probably right, but certainly judging products by their aesthetic attributes, touch, sounds, weight, I think you're absolutely right.

Auren Hoffman (43:00.086) In the last 25 years, there's been just so many books and so many people have been talking about these cognitive biases. And I would have thought that because so many people were talking about it, it would mean they would be less effective or less involved. But it doesn't seem that's the case. It seems like we're still just as susceptible to all these things as we were before we learned about them. Why is that happening? Where am I right?

Richard (43:22.634) No, no, they still affect us. There are some experiments where, know, on charity donations where you say things like, how much do want to donate? That's the control condition. Then they use a principle like anchoring for another group of people which say, most people give, or lots of people give £50, how much do want to give? And what happens is people end up giving more money. So let's say they give £20 in the first group, £30 in the second group. The principle of anchoring is you throw out this high number,

people take it as a starting place, they adjust, but not enough. ends up affecting their end behavior. Third group of people go to the donation page and it says, you know, many people give 50 pounds. Please be aware that being told this figure can inflate people's donation levels. Now, and I'm making exact numbers up. I don't know this study brilliantly, but they'll end up giving, let's say 28 pounds. It does drop a little bit, but it's still much more.

than in the control condition. So even being told about the biases doesn't negate them completely. Now, my... Yeah, it was a trivial lessening, though. That's the only thing to say. So, yes, it does lessen it, but it's trivial. I would argue one of the reasons they don't disappear with knowledge is they're useful. It's the danger of people referring to them as irrationalities. Because if we go back to our shampoo example, who's being irrational? Me who...

Auren Hoffman (44:23.063) Interesting.

Auren Hoffman (44:27.596) Okay, but it does lessen it, potentially.

Richard (44:51.198) you maybe cares about my hair a lot. That's obviously not true. But if I cared about my hair a lot, just picking very quickly the most expensive one or you who is a econ and trying to, I'm not saying you actually are, I don't want to offend you, but you go and weigh up all the pros and cons and you spend two hours there. You know, which of us is being irrational? The biases and these shortcuts and these rules of thumb are quite good ways of making very fast decisions. And I think

Auren Hoffman (45:06.67) Right. Right.

Richard (45:20.208) most consumers, most people would prefer speed over accuracy in most situations.

Auren Hoffman (45:23.532) Yes. Yeah. Yep. That makes sense. what is the next frontier of behavioral science that maybe, maybe is coming.

Richard (45:33.638) I think one of the really interesting areas here is understanding far more about how different demographics or personality types are affected by biases, because most studies at the moment are just, on average, this principle works well or it doesn't work well. What's getting interesting is people are starting to test the relative impact on different groups. So on something like social proof, you this idea that we're influenced by other people.

If something looks popular, it becomes more popular still. That's been around so long that that kind of work has already been done. So for example, young people tend to be more affected by social proof than older people. There are some studies that show the super wealthy aren't as affected by social proof. So there's a study by the British Tax Office, HMRC, that showed if you say to people,

nine out of ten people pay their tax on time in people increased the likelihood of paying on time. But if people were in the top 1 % of debtors, actually was the top 1 or 5%, you these are people who owe like 50 or $75,000, $100,000, that group actually became less likely to pay their tax on time.

Auren Hoffman (46:54.222) Right. Because you're like, oh, 10%. Oh, great. I should be in the top 1 % of all time wasters. Yeah. Yeah. Yeah. Yeah. Yeah. Or that's great. 10 % is I didn't realize it was as high as 10 % that is doing that. So I don't feel as bad anymore.

Richard (46:58.322) Well, yeah, yeah, yeah, they think, well, like, everyone says.

Yeah, I think the argument from behavioural scientists was everyone thinks they're not influenced by the average, but this group genuinely thought they were different. So being told what the common man was doing actually made them less likely to do it.

Auren Hoffman (47:24.738) Yeah, that makes sense. question about your Twitter handle or your X handle. So, cause I would have thought your X handle would be bad. Cause it's, it's very hard to understand. It's like R S H O T the letter, then the number two, then T O N right. You could have just been, you don't, okay.

Richard (47:39.85) No, no, no, no, that's not mine. don't know who that is. Mine's at our shot and yeah.

Auren Hoffman (47:45.267) okay. So we got that wrong. I'm sorry. Okay.

Richard (47:48.085) no worries. There's someone. Maybe that's their surname. Yeah.

Auren Hoffman (47:50.99) Oh, you're right. Okay. I'm sorry. I had that wrong in my thing. Okay. Okay. There we go. Okay. All right. Well that's just, that's just my fault. Okay. Okay. So you are our shot. Okay. I thought you were like, we're trying to play a trick on me here. And, uh, and I was like, Oh, maybe he's like adding all these behavioral biases. Okay. You're just our shot on, uh, on X. Okay. Okay. Well that's good. Okay. Well that makes much more sense. Okay. Uh, two personal questions. We ask all of our guests, what is the conspiracy theory that you believe?

Richard (47:54.57) Yeah. I think... No, no, I think... Yeah, yeah. No, no, no, no, no, that wouldn't have been a good trick. Yeah.

Richard (48:09.514) Yeah.

Richard (48:18.332) Well, I think the problem with that is question is, if you believe it, you define it as the truth, not a conspiracy theory. the... Yeah. okay, okay. I mean, it was certainly seen as a conspiracy theory when it first came out. And I'm not saying I was wholeheartedly certain, but I remember when there was COVID coming out and there was the lab leak hypothesis, and that was branded as a conspiracy theory. I always thought it sounded plausible. I'm not going to...

Auren Hoffman (48:24.862) You might have some sort of sense that other people think it's a conspiracy. Yeah, yeah

Richard (48:46.954) bet any money on it. I don't know whether there's other plausible explanations out there probably are. So I always found that one was too quickly labeled a conspiracy theory. And I think generally probably left leaning liberal.

Auren Hoffman (48:59.842) Well, sometimes when things are labeled quickly a conspiracy theory, there's a conspiracy to label them a conspiracy, right? Right. So sometimes there is a conspiracy there.

Richard (49:04.946) Yeah, yeah. I think some of it was the us versus them political attitude, because someone on the conservative side, Donald Trump espouse that view. Therefore, everyone on the liberal side didn't think about whether it was true or not. They just thought, well, I disagree with this man. So therefore, it must be untrue. And I felt a bit of that went on with that particular. Yeah, yeah.

Auren Hoffman (49:21.791) Yeah. Yep.

Yeah, that happens quite a bit. Our last question, we ask all of our guests, what conventional wisdom or advice do you think is generally bad advice?

Richard (49:34.836) Well, we've covered what I was going to say, was, yeah, this asking your customers what they think about. That's, I think that's awful advice. Tests look, prioritize what they do, prioritize, observe data over claim data. What we haven't talked about is I think there's a myth about the decline of trust in businesses. Now, everyone's always talking about certainly marketing like a crisis in trust.

Auren Hoffman (49:36.46) We covered some of them, yeah.

Auren Hoffman (49:41.73) Okay, asking your customer, shit. Yeah. That's a terrible advice. Yeah. Yeah.

Richard (50:04.518) Actually though, if you take something like the Adelman tracking, they're probably the ones that we do this for longest. If you actually go back and look how much people trusted businesses 15, 20 years ago, it was really low, just like it is now. People have never trusted businesses because, let's say you were in a Greek market 2000 years ago and I came up to you and said, my olive oil is the best in the world. What you're going to think is not, wow, this is a miracle that I've discovered the one man selling the best. You're going to think this man's...

Auren Hoffman (50:24.471) Right.

Auren Hoffman (50:31.713) Right, right, right.

Richard (50:34.058) trying to pull the wool over his eyes. He just wants to make a quick denarii or whatever, a drachma or whatever they used to buy. And I think that's a really dangerous myth because if you think you're in a unique historical moment, you don't learn from the past. If you recognize the challenge is the same as it was 20, 30 years ago, well, you can learn from how the best people tackled it 20, 30 years ago. You can apply things like the Prattful effect. You can apply

Auren Hoffman (50:35.214) Of course, yeah.

Richard (51:01.34) ideas like speaking very precisely and specifically, there's studies that show that's more trusted. Now, if I say I'm 92.3 % certain, it's more believable than if I just say I'm quite certain. It might not actually change the validity of my idea, but precision is taken as a shortcut by people for accuracy and trustworthiness. So yeah, I think this idea about businesses being hit by a trust crisis, I think it's a really bogus idea.

Auren Hoffman (51:27.746) This is great. Thank you, Richard Schotten for joining us on World of DaaS. I follow you as I mentioned at Rschotten on X, which I got correct now. I definitely encourage our listeners to engage you there and buy your new book as well. This has been a ton of fun.

Richard (51:29.769) fantastic!

Richard (51:36.617) Yeah

Richard (51:42.538) Yeah. Oh, thank you. Yeah. Thank you very much. And I actually post more on LinkedIn now than I do on Twitter, so people are on there. Yeah. Oh, no, no, R-shot on still is good. Yeah. Cool. Thank you very much. Thanks a lot. Cheers,

Auren Hoffman (51:47.566) Okay, sorry. Okay. So also let's follow you on LinkedIn too. Perfect. All right. Great to chat with you.