TED

(Laughter) Finally, we have contextual communication.

(Laughter) But, actually, it's suddenly come to me after years working in the business, that what we create in advertising, which is intangible value -- you might call it perceived value, you might call it badge value, subjective value, intangible value of some kind -- gets rather a bad rap.

What on earth is wrong with placebos?

We invented the whole lot of them.

There was a young intern at Ogilvy Canada called Hunter Somerville, who was working in improv in Toronto, and got a part-time job in advertising, and was given the job of advertising Shreddies.

There is a basic view that real value involves making things, involves labor.

It patently veers toward propaganda.

(Laughter) But, actually, it's suddenly come to me after years working in the business, that what we create in advertising, which is intangible value -- you might call it perceived value, you might call it badge value, subjective value, intangible value of some kind -- gets rather a bad rap.

Here is my naive advertising man's suggestion.

What's fascinating about these signs is they cost about 10 percent of the running cost of a conventional speed camera, but they prevent twice as many accidents.

(Laughter) (Applause) Now, you'll still have about three billion pounds left in change, and people will ask for the trains to be slowed down.

And it was replaced with replica jewelry made of cast iron.

Because actually, never mind the actual intrinsic value of having gold jewelry.

(Laughter) But, actually, it's suddenly come to me after years working in the business, that what we create in advertising, which is intangible value -- you might call it perceived value, you might call it badge value, subjective value, intangible value of some kind -- gets rather a bad rap.

What's also interesting, if you look at products that have a high component of what you might call messaging value, a high component of intangible value, versus their intrinsic value: They are often quite egalitarian.

Very clever Buenos Aires street vendors decided to practice price discrimination to the detriment of any passing gringo tourists.

It actually works by giving you the impression that you've had a very good education, which gives you an insane sense of unwarranted self-confidence, which then makes you very, very successful in later life.

So, the bizarre thing, which is baffling to conventional, classically trained economists, is that a weird little smiley face has a better effect on changing your behavior than the threat of a £60 fine and three penalty points.

(Laughter) (Applause) (Laughter) If you think it's funny, bear in mind there is an organization called the American Institute of Wine Economics, which actually does extensive research into perception of things, and discovers that except for among perhaps five or ten percent of the most knowledgeable people, there is no correlation between quality and enjoyment in wine, except when you tell the people how expensive it is, in which case they tend to enjoy the more expensive stuff more.

(Laughter) But, actually, it's suddenly come to me after years working in the business, that what we create in advertising, which is intangible value -- you might call it perceived value, you might call it badge value, subjective value, intangible value of some kind -- gets rather a bad rap.

This actually had symbolic value, badge value.

(Laughter) But, actually, there is a thing, just as there are Veblen goods, where the value of the good depends on it being expensive and rare -- there are opposite kind of things where actually the value in them depends on them being ubiquitous, classless and minimalistic.

There is your environmental problem solved, by the way, guys: All convicted child molesters have to drive a Porsche Cayenne.

This is mobile food.

Very clever Buenos Aires street vendors decided to practice price discrimination to the detriment of any passing gringo tourists.

However, what we do have now is a much more variegated media ecosystem in which to kind of create this kind of value, and it's much fairer.

(Laughter) So, actually, he tried making it compulsory.

Woman #2: I'm a little bit confused.

Another fantastic case of creating intangible value to replace actual or material value, which remember, is what, after all, the environmental movement needs to be about: This again is from Prussia, from, I think, about 1812, 1813.

And this shows that engineers, medical people, scientific people, have an obsession with solving the problems of reality, when actually most problems, once you reach a basic level of wealth in society, most problems are actually problems of perception.

And this shows that engineers, medical people, scientific people, have an obsession with solving the problems of reality, when actually most problems, once you reach a basic level of wealth in society, most problems are actually problems of perception.

And I actually went to the Marginal Revolution blog by Tyler Cowen.

Tiny little behavioral economics detail: in Italy, penalty points go backwards.

Adam Smith talks about 18th century America, where the prohibition against visible displays of wealth was so great, it was almost a block in the economy in New England, because even wealthy farmers could find nothing to spend their money on without incurring the displeasure of their neighbors.

So, the bizarre thing, which is baffling to conventional, classically trained economists, is that a weird little smiley face has a better effect on changing your behavior than the threat of a £60 fine and three penalty points.

Ataturk, rather like Nicolas Sarkozy, was very keen to discourage the wearing of a veil, in Turkey, to modernize it.

The wealthy Prussians, to help in the war against the French, were encouraged to give in all their jewelry.

Ataturk was a lateral thinker.

This is actually what's called, in the digital world, "user-generated content."

And he planted it in a royal potato patch, with guards who had instructions to guard over it, night and day, but with secret instructions not to guard it very well.

And a final thing: When you place a value on things like health, love, sex and other things, and learn to place a material value on what you've previously discounted for being merely intangible, a thing not seen, you realize you're much, much wealthier than you ever imagined.

They seem fantastic to me.

So he tried plan B. He tried the marketing solution, which is he declared the potato as a royal vegetable, and none but the royal family could consume it.

When I grew up, this was basically the media environment of my childhood as translated into food.

Fredrick the Great of Prussia was very, very keen for the Germans to adopt the potato and to eat it, because he realized that if you had two sources of carbohydrate, wheat and potatoes, you get less price volatility in bread.

Or you can live in a world where actually intangible value constitutes a greater part of overall value, that actually intangible value, in many ways is a very, very fine substitute for using up labor or limited resources in the creation of things.

Two quotations to more or less end with.

Now, marketing has done a very, very good job of creating opportunities for impulse buying.

We need to spend more time appreciating what already exists, and less time agonizing over what else we can do.

Fogg, at the University of Stanford, makes the point that actually the mobile phone is -- He's invented the phrase, "persuasive technologies."

(Laughter) What Ataturk realized actually is two very fundamental things.

Because they found that loss aversion is a more powerful influence on people's behavior.

These funny signs that flash your speed at you, some of the new ones, on the bottom right, now actually show a smiley face or a frowny face, to act as an emotional trigger.

What's fascinating about these signs is they cost about 10 percent of the running cost of a conventional speed camera, but they prevent twice as many accidents.

Very clever Buenos Aires street vendors decided to practice price discrimination to the detriment of any passing gringo tourists.

Someone was actually suggesting that you can take this concept further, and actually produce placebo education.

Adam Smith talks about 18th century America, where the prohibition against visible displays of wealth was so great, it was almost a block in the economy in New England, because even wealthy farmers could find nothing to spend their money on without incurring the displeasure of their neighbors.

This is a train which goes from London to Paris.

However, what we do have now is a much more variegated media ecosystem in which to kind of create this kind of value, and it's much fairer.

They have no side effects, or if they do, they're imaginary, so you can safely ignore them.

Or you can live in a world where actually intangible value constitutes a greater part of overall value, that actually intangible value, in many ways is a very, very fine substitute for using up labor or limited resources in the creation of things.

I've heard this attributed to several other kings, but doing a bit of historical research, it seems to be Fredrick the Great.

And he planted it in a royal potato patch, with guards who had instructions to guard over it, night and day, but with secret instructions not to guard it very well.

(Laughter) But, actually, it's suddenly come to me after years working in the business, that what we create in advertising, which is intangible value -- you might call it perceived value, you might call it badge value, subjective value, intangible value of some kind -- gets rather a bad rap.

I've heard this attributed to several other kings, but doing a bit of historical research, it seems to be Fredrick the Great.

Or you can live in a world where actually intangible value constitutes a greater part of overall value, that actually intangible value, in many ways is a very, very fine substitute for using up labor or limited resources in the creation of things.

How many problems of life can be solved actually by tinkering with perception, rather than that tedious, hardworking and messy business of actually trying to change reality?

So, the bizarre thing, which is baffling to conventional, classically trained economists, is that a weird little smiley face has a better effect on changing your behavior than the threat of a £60 fine and three penalty points.

Shreddies is a strange, square, whole-grain cereal, only available in New Zealand, Canada and Britain.

Now, boring people would have just simply banned the veil.

What you should in fact do is employ all of the world's top male and female supermodels, pay them to walk the length of the train, handing out free Chateau Petrus for the entire duration of the journey.

There are even records of people being executed for refusing to grow potatoes.

Adam Smith talks about 18th century America, where the prohibition against visible displays of wealth was so great, it was almost a block in the economy in New England, because even wealthy farmers could find nothing to spend their money on without incurring the displeasure of their neighbors.

(Laughter) But, actually, there is a thing, just as there are Veblen goods, where the value of the good depends on it being expensive and rare -- there are opposite kind of things where actually the value in them depends on them being ubiquitous, classless and minimalistic.

And you get a far lower risk of famine, because you actually had two crops to fall back on, not one.

And he planted it in a royal potato patch, with guards who had instructions to guard over it, night and day, but with secret instructions not to guard it very well.

(Laughter) Finally, we have contextual communication.

The question was given to a bunch of engineers, about 15 years ago, "How do we make the journey to Paris better?"

If you had a large red button of this kind, on the wall of your home, and every time you pressed it, it saved 50 dollars for you, put 50 dollars into your pension, you would save a lot more.

And they came up with a very good engineering solution, which was to spend six billion pounds building completely new tracks from London to the coast, and knocking about 40 minutes off a three-and-half-hour journey time.

Now what is the hedonic opportunity cost on spending six billion pounds on those railway tracks?

Now, that is, actually, when you think about it -- we take it for granted -- it's actually a remarkable achievement, to produce something that's that democratic.

Or you can live in a world where actually intangible value constitutes a greater part of overall value, that actually intangible value, in many ways is a very, very fine substitute for using up labor or limited resources in the creation of things.

(Laughter) But, actually, it's suddenly come to me after years working in the business, that what we create in advertising, which is intangible value -- you might call it perceived value, you might call it badge value, subjective value, intangible value of some kind -- gets rather a bad rap.

Now, if we have all these tools at our disposal, we simply have to ask the question, and Thaler and Sunstein have, of how we can use these more intelligently.

Fredrick the Great of Prussia was very, very keen for the Germans to adopt the potato and to eat it, because he realized that if you had two sources of carbohydrate, wheat and potatoes, you get less price volatility in bread.

But this is both hysterically funny -- but I think an important philosophical point, which is, going forward, we need more of this kind of value.

There is your environmental problem solved, by the way, guys: All convicted child molesters have to drive a Porsche Cayenne.

Or you can live in a world where actually intangible value constitutes a greater part of overall value, that actually intangible value, in many ways is a very, very fine substitute for using up labor or limited resources in the creation of things.

We need to spend more time appreciating what already exists, and less time agonizing over what else we can do.

(Laughter) Woman: Have any of these diamond shapes gone out?

Or you can live in a world where actually intangible value constitutes a greater part of overall value, that actually intangible value, in many ways is a very, very fine substitute for using up labor or limited resources in the creation of things.

It was an absolute masterpiece.

Which isn't a bad definition of what our job is, to help people appreciate what is unfamiliar, but also to gain a greater appreciation, and place a far higher value on those things which are already existing.

Which isn't a bad definition of what our job is, to help people appreciate what is unfamiliar, but also to gain a greater appreciation, and place a far higher value on those things which are already existing.

Chesterton quote of this session, which is, "We are perishing for want of wonder, not for want of wonders," which I think for anybody involved in technology, is perfectly true.

(Laughter) In working out how you could re-launch Shreddies, he came up with this.

Or you can live in a world where actually intangible value constitutes a greater part of overall value, that actually intangible value, in many ways is a very, very fine substitute for using up labor or limited resources in the creation of things.

He believes the mobile phone, by being location-specific, contextual, timely and immediate, is simply the greatest persuasive technology device ever invented.

(Laughter) Nowadays, the user is actually involved.

And they came up with a very good engineering solution, which was to spend six billion pounds building completely new tracks from London to the coast, and knocking about 40 minutes off a three-and-half-hour journey time.

Fredrick the Great of Prussia was very, very keen for the Germans to adopt the potato and to eat it, because he realized that if you had two sources of carbohydrate, wheat and potatoes, you get less price volatility in bread.

So, eventually, the manufacturers actually arrived at a compromise, which was the combo pack.

So, the modern equivalent would of course be this.

As an advertising man, I have to admire that.

So they are introducing new Diamond Shreddies.

He believes the mobile phone, by being location-specific, contextual, timely and immediate, is simply the greatest persuasive technology device ever invented.

And also, 18th century Prussians ate very, very few vegetables -- rather like contemporary Scottish people.

The interesting thing is that for 50 years hence, the highest status jewelry you could wear in Prussia wasn't made of gold or diamonds.

(Laughter) Now, 18th century peasants know that there is one pretty safe rule in life, which is if something is worth guarding, it's worth stealing.

What you should in fact do is employ all of the world's top male and female supermodels, pay them to walk the length of the train, handing out free Chateau Petrus for the entire duration of the journey.

This is food 2.0, which is food you produce for the purpose of sharing it with other people.

Before long, there was a massive underground potato-growing operation in Germany.

What's fascinating about these signs is they cost about 10 percent of the running cost of a conventional speed camera, but they prevent twice as many accidents.

He believes the mobile phone, by being location-specific, contextual, timely and immediate, is simply the greatest persuasive technology device ever invented.

So they actually reduce the need for actually spending great money on display, and increase the kind of third-party enjoyment you can get from the smallest, simplest things in life.

And also, 18th century Prussians ate very, very few vegetables -- rather like contemporary Scottish people.

(Laughter) (Applause) (Laughter) If you think it's funny, bear in mind there is an organization called the American Institute of Wine Economics, which actually does extensive research into perception of things, and discovers that except for among perhaps five or ten percent of the most knowledgeable people, there is no correlation between quality and enjoyment in wine, except when you tell the people how expensive it is, in which case they tend to enjoy the more expensive stuff more.

They cost very little to develop.

So, the bizarre thing, which is baffling to conventional, classically trained economists, is that a weird little smiley face has a better effect on changing your behavior than the threat of a £60 fine and three penalty points.

One of them is, "Poetry is when you make new things familiar and familiar things new."

There is some evidence, by the way, that things like social networking help do that.

(Laughter) (Applause) (Laughter) If you think it's funny, bear in mind there is an organization called the American Institute of Wine Economics, which actually does extensive research into perception of things, and discovers that except for among perhaps five or ten percent of the most knowledgeable people, there is no correlation between quality and enjoyment in wine, except when you tell the people how expensive it is, in which case they tend to enjoy the more expensive stuff more.

Now, that is, actually, when you think about it -- we take it for granted -- it's actually a remarkable achievement, to produce something that's that democratic.

So, eventually, the manufacturers actually arrived at a compromise, which was the combo pack.

When I grew up, this was basically the media environment of my childhood as translated into food.

(Laughter) Man: Which one did you prefer?

These funny signs that flash your speed at you, some of the new ones, on the bottom right, now actually show a smiley face or a frowny face, to act as an emotional trigger.

So he tried plan B. He tried the marketing solution, which is he declared the potato as a royal vegetable, and none but the royal family could consume it.

(Laughter) And on your right you have a dependent public which is pathetically grateful for anything you give it.

This is actually what's called, in the digital world, "user-generated content."

So, eventually, the manufacturers actually arrived at a compromise, which was the combo pack.

(Laughter) Rory Sutherland: Now, naturally, a debate raged.

Someone was actually suggesting that you can take this concept further, and actually produce placebo education.

There were conservative elements in Canada, unsurprisingly, who actually resented this intrusion.

Very clever Buenos Aires street vendors decided to practice price discrimination to the detriment of any passing gringo tourists.

It tastes great within the borders of that country, but absolute shite if you take it anywhere else.

(Laughter) But so much communication now is contextual that the capacity for actually nudging people, for giving them better information -- B.J.

It's a fake version.

There were conservative elements in Canada, unsurprisingly, who actually resented this intrusion.

Tiny little behavioral economics detail: in Italy, penalty points go backwards.

Shreddies is a strange, square, whole-grain cereal, only available in New Zealand, Canada and Britain.

What's fascinating about these signs is they cost about 10 percent of the running cost of a conventional speed camera, but they prevent twice as many accidents.

Adam Smith talks about 18th century America, where the prohibition against visible displays of wealth was so great, it was almost a block in the economy in New England, because even wealthy farmers could find nothing to spend their money on without incurring the displeasure of their neighbors.

All it requires is photons, neurons, and a great idea to create this thing.

It said that your family had made a great sacrifice in the past.

And I actually went to the Marginal Revolution blog by Tyler Cowen.

And this shows that engineers, medical people, scientific people, have an obsession with solving the problems of reality, when actually most problems, once you reach a basic level of wealth in society, most problems are actually problems of perception.

(Laughter) But, actually, there is a thing, just as there are Veblen goods, where the value of the good depends on it being expensive and rare -- there are opposite kind of things where actually the value in them depends on them being ubiquitous, classless and minimalistic.

If you think about it, if you want to live in a world in the future where there are fewer material goods, you basically have two choices.

Fredrick the Great of Prussia was very, very keen for the Germans to adopt the potato and to eat it, because he realized that if you had two sources of carbohydrate, wheat and potatoes, you get less price volatility in bread.

Now, boring people would have just simply banned the veil.

They have no side effects, or if they do, they're imaginary, so you can safely ignore them.

Now this is the most perfect case of creating intangible, added value, without changing the product in the slightest.

The interesting thing is that for 50 years hence, the highest status jewelry you could wear in Prussia wasn't made of gold or diamonds.

And you get a far lower risk of famine, because you actually had two crops to fall back on, not one.

It's Kraft's peculiar way of rewarding loyalty to the crown.

What's also interesting, if you look at products that have a high component of what you might call messaging value, a high component of intangible value, versus their intrinsic value: They are often quite egalitarian.

Adam Smith talks about 18th century America, where the prohibition against visible displays of wealth was so great, it was almost a block in the economy in New England, because even wealthy farmers could find nothing to spend their money on without incurring the displeasure of their neighbors.

And this shows that engineers, medical people, scientific people, have an obsession with solving the problems of reality, when actually most problems, once you reach a basic level of wealth in society, most problems are actually problems of perception.

So they actually reduce the need for actually spending great money on display, and increase the kind of third-party enjoyment you can get from the smallest, simplest things in life.

What you should in fact do is employ all of the world's top male and female supermodels, pay them to walk the length of the train, handing out free Chateau Petrus for the entire duration of the journey.

(Laughter) But, actually, there is a thing, just as there are Veblen goods, where the value of the good depends on it being expensive and rare -- there are opposite kind of things where actually the value in them depends on them being ubiquitous, classless and minimalistic.

Very clever Buenos Aires street vendors decided to practice price discrimination to the detriment of any passing gringo tourists.

There are even records of people being executed for refusing to grow potatoes.

And a final thing: When you place a value on things like health, love, sex and other things, and learn to place a material value on what you've previously discounted for being merely intangible, a thing not seen, you realize you're much, much wealthier than you ever imagined.

And they came up with a very good engineering solution, which was to spend six billion pounds building completely new tracks from London to the coast, and knocking about 40 minutes off a three-and-half-hour journey time.

So, the modern equivalent would of course be this.

What Warhol said about Coke is, he said, "What I really like about Coca-Cola is the president of the United States can't get a better Coke than the bum on the corner of the street."

There is some evidence, by the way, that things like social networking help do that.

And they came up with a very good engineering solution, which was to spend six billion pounds building completely new tracks from London to the coast, and knocking about 40 minutes off a three-and-half-hour journey time.

What on earth is wrong with placebos?

So they actually reduce the need for actually spending great money on display, and increase the kind of third-party enjoyment you can get from the smallest, simplest things in life.

Because they found that loss aversion is a more powerful influence on people's behavior.