The Limits of Logic
Rory Sutherland challenges our obsession with reductionist thinking—the belief that because logic works in the physical sciences, it must work everywhere. The problem is that most human behavior isn’t logical; it’s psychological. We have two reasons for our actions: the ostensible logical reason and the real reason hidden beneath the surface.
The danger lies in our need to appear scientific. This prevents us from considering “magical solutions” that are cheap, fast-acting, and effective. Companies can’t request budgets for such solutions because business cases must look logical on paper. Yet reality demands that we recognize: not everything that makes sense works, and not everything that works makes sense.
Sutherland argues that we’ve become so enamored with logical models that we’ve created a dangerous blind spot. The most vivid example: a businessman warned voters that leaving the EU would cause “rising labour costs”—not realizing voters would interpret this as a “pay rise.” Pure logic disconnected from human psychology becomes counterproductive.
The Power of Psychological Irrational Actors
An unexpected insight: irrational people are more powerful than rational people because their threats are more convincing. A rational leader suggests changing course to avoid a storm; an irrational one can change the weather. This reveals a fundamental truth about decision-making—context determines outcomes far more than logical analysis.
The consequences are profound. Organizations reach a point where narrow, conventional logic becomes the natural thinking mode for risk-averse executives. Why? Because you can never be fired for being logical. But this creates a fatal problem: logic always gets you to exactly where your competitors are. The most valuable brands—Apple, Disney—make magic. They don’t optimize to sameness; they create alchemy.
Why We Think and Act Irrationally
Humans have evolved to behave in seemingly illogical ways for five main reasons (conveniently starting with S): Signalling, Subconscious hacking, Satisficing, and Psychophysics. These aren’t failures of reasoning—they’re evolutionary adaptations.
One brilliant example: when chased, a hare zigzags randomly to escape. This works better when genuinely random and unconscious. If the hare knew where it would jump next, its posture would reveal cues to its pursuer. Evolution favors self-deception because we’re better at deceiving others when we don’t fully understand our own motivations.
Restaurants illustrate this perfectly. They’re not primarily about food—their real value lies in social connection and status. Food delivery pills failed because futurists forgot that eating is enjoyable and socially necessary. The world isn’t broken; our expectations are.
Context Over Universal Solutions
What matters most is context. There are two equally valid but contradictory ways to sell the same product: “Not many people own one (so it must be good)” and “Lots of people already own one (so it must be good).” The winning approach depends entirely on context.
This reality dooms many universal models from the start. Sophisticated strategies fail when they ignore the evolved human brain. Good design works with psychological constraints, not against them. A change in perspective is worth eighty IQ points—the best defense of creativity in ten words.
The Art of Affordance and Clarity
When Sony removed the recording function from Walkmans, it created a product with less functionality but greater power to change behavior. This concept—called “affordance”—deserves wider recognition. By clarifying what a device is for, Sony made it more pleasurable to use and easier to justify buying.
The jack-of-all-trades heuristic explains why we prefer single-purpose items. A Swiss Army knife claims to do many things, making it harder to buy. The British Museum’s classical portico needs no signage—its design tells you exactly where the door is. Clarity of purpose, not versatility, drives adoption.
Meaning Through Costly Signalling
We attach meaning and significance to things in direct proportion to the expense with which they’re communicated. Bits deliver information, but costliness carries meaning. We don’t invite people to weddings via email. A wedding invitation, formal and expensive, signals importance. This “costly signalling theory” explains why people will pay $20 for “Chilean sea bass” but not “Patagonian toothfish”—the same fish, different names, entirely different price points.
Geographic and descriptive labels work magic. Call something “Cornish sardines” and customers will pay more and buy more. Add a photograph to a menu, however, and pricing power collapses. Perception and presentation matter enormously—sometimes more than the product itself.
The Placebo Economy
Placebos work even when people know they’re placebos. This seems absurd until you understand the mechanism: placebos work by assuring our subconscious that treatment will weaken infection without overburdening body resources. Military paraphernalia—flags, drums, uniforms, regalia—may function as “bravery placebos,” environmental cues fostering courage and solidarity.
Self-grooming, religious practices like saying grace before meals, and even the “close door” button on elevators that’s connected to nothing—these are confidence placebos addressing our deep psychological need for control and certainty. Branding functions similarly. A Red Bull vodka makes people feel drunker and act more confidently than the same drink labeled differently. Meaning shapes experience.
Decisions in Uncertain Worlds
The human brain has been calibrated by evolution not to pursue economic optimization but to avoid systemic disaster. This explains why we prefer diverse providers over quad-play bundling. We intuitively understand that someone with a reputable brand has more to lose from selling bad products.
When making decisions, we minimize variance—the difference between best and worst outcomes—as much as we chase optimal averages. In choosing spouses, avoiding the worst matters more than maximizing the best. This “defensive decision-making” isn’t irrational; it’s perfectly rational for an uncertain world where reputation and trust grow at the speed of a coconut tree and fall at the speed of a coconut.
The Alchemy Advantage
Sutherland’s core assertion: we should not recoil from testing alchemical solutions simply because they don’t fit reductionist models. The smallest change in context or meaning can have immense effects on behavior. A name creates a norm. Clarity of purpose drives adoption. Perception shapes reality.
The most successful companies understand this. They test counterintuitive things because no one else does. They recognize that efficiency, logic, and meaning form an impossible trinity—pick any two. Companies that died usually failed not because their ideas were illogical, but because they contained no alchemy. Those that thrive make magic.
What cognitive psychologists discovered and formalized, advertising executives and used-car salesmen knew instinctively all along: human decision-making is far more magical than rational. Alchemy isn’t the opposite of science—it’s the science of human psychology, perception, and behavior applied creatively to solve real problems in the real world.