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  • This is my first time at TED. Normally, as an advertising man,

  • I actually speak at TED Evil, which is TED's secret sister

  • that pays all the bills.

  • It's held every two years in Burma.

  • And I particularly remember a really good speech

  • by Kim Jong Il on how to get teens smoking again.

  • (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.

  • 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.

  • You can either live in a world which is poorer,

  • which people in general don't like.

  • 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.

  • Here is one example. This is a train which goes from London to Paris.

  • The question was given to a bunch of engineers,

  • about 15 years ago, "How do we make the journey to Paris better?"

  • 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, call me Mister Picky. I'm just an ad man ...

  • ... but it strikes me as a slightly unimaginative way of improving a train journey

  • merely to make it shorter.

  • Now what is the hedonic opportunity cost

  • on spending six billion pounds on those railway tracks?

  • Here is my naive advertising man's suggestion.

  • 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)

  • (Applause)

  • Now, you'll still have about three billion pounds left in change,

  • and people will ask for the trains to be slowed down.

  • (Laughter)

  • Now, here is another naive advertising man's question again.

  • 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 I'll ask you another question.

  • What on earth is wrong with placebos?

  • They seem fantastic to me. They cost very little to develop.

  • They work extraordinarily well.

  • They have no side effects,

  • or if they do, they're imaginary, so you can safely ignore them.

  • (Laughter)

  • So I was discussing this. And I actually went to the Marginal Revolution blog

  • by Tyler Cowen. I don't know if anybody knows it.

  • Someone was actually suggesting that you can take this concept further,

  • and actually produce placebo education.

  • The point is that education doesn't actually work by teaching you things.

  • 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, welcome to Oxford, ladies and gentlemen.

  • (Laughter)

  • (Applause)

  • But, actually, the point of placebo education is interesting.

  • 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?

  • Here's a great example from history. I've heard this attributed to several other kings,

  • but doing a bit of historical research,

  • it seems to be Fredrick the Great.

  • 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.

  • And you get a far lower risk of famine,

  • because you actually had two crops to fall back on, not one.

  • The only problem is: potatoes, if you think about it, look pretty disgusting.

  • And also, 18th century Prussians ate very, very few vegetables --

  • rather like contemporary Scottish people.

  • (Laughter)

  • So, actually, he tried making it compulsory.

  • The Prussian peasantry said,

  • "We can't even get the dogs to eat these damn things.

  • They are absolutely disgusting and they're good for nothing."

  • There are even records of people being executed

  • for refusing to grow potatoes.

  • 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.

  • 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)

  • 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.

  • Before long, there was a massive underground

  • potato-growing operation in Germany.

  • What he'd effectively done is he'd re-branded the potato.

  • It was an absolute masterpiece.

  • I told this story and a gentleman from Turkey came up to me and said,

  • "Very, very good marketer, Fredrick the Great. But not a patch on Ataturk."

  • Ataturk, rather like Nicolas Sarkozy,

  • was very keen to discourage the wearing of a veil,

  • in Turkey, to modernize it.

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

  • But that would have ended up with a lot of awful kickback

  • and a hell of a lot of resistance.

  • Ataturk was a lateral thinker.

  • He made it compulsory for prostitutes to wear the veil.

  • (Laughter)

  • (Applause)

  • I can't verify that fully, but it does not matter.

  • There is your environmental problem solved, by the way, guys:

  • All convicted child molesters

  • have to drive a Porsche Cayenne.

  • (Laughter)

  • What Ataturk realized actually is two very fundamental things.

  • Which is that, actually, first one,

  • all value is actually relative.

  • All value is perceived value.

  • For those of you who don't speak Spanish, jugo de naranja -- it's actually the Spanish for "orange juice."

  • Because actually it's not the dollar. It's actually the peso

  • in Buenos Aires. Very clever Buenos Aires street vendors

  • decided to practice price discrimination

  • to the detriment of any passing gringo tourists.

  • As an advertising man, I have to admire that.

  • But the first thing is that all value is subjective.

  • Second point is that persuasion is often better than compulsion.

  • 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.

  • 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.

  • Tiny little behavioral economics detail:

  • in Italy, penalty points go backwards.

  • You start with 12 and they take them away.

  • Because they found that loss aversion

  • is a more powerful influence on people's behavior.

  • In Britain we tend to feel, "Whoa! Got another three!"

  • Not so in Italy.

  • 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.

  • The wealthy Prussians, to help in the war against the French,

  • were encouraged to give in all their jewelry.

  • And it was replaced with replica jewelry

  • made of cast iron.

  • Here's one: "Gold gab ich für Eisen, 1813."

  • 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.

  • It was made of cast iron.

  • Because actually, never mind the actual intrinsic value

  • of having gold jewelry. This actually

  • had symbolic value, badge value.

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

  • So, the modern equivalent would of course be this.

  • (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, Shakerism was a proto-environmental movement.

  • 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.

  • It's perfectly possible to create these social pressures

  • which lead to more egalitarian societies.

  • 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.

  • In terms of dress, denim is perhaps the perfect example of something

  • which replaces material value with symbolic value.

  • Coca-Cola. A bunch of you may be a load of pinkos,

  • and you may not like the Coca-Cola company,

  • but it's worth remembering Andy Warhol's point about Coke.

  • 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."

  • 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.

  • Now, we basically have to change our views slightly.

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

  • involves labor. It involves engineering.

  • It involves limited raw materials.

  • And that what we add on top is kind of false. It's a fake version.

  • And there is a reason for some suspicion and uncertainly about it.

  • It patently veers toward propaganda.

  • 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.

  • When I grew up, this was basically the media environment of my childhood

  • as translated into food.

  • You had a monopoly supplier. On the left,

  • you have Rupert Murdoch, or the BBC.

  • (Laughter)

  • And on your right you have a dependent public

  • which is pathetically grateful for anything you give it.

  • (Laughter)

  • Nowadays, the user is actually involved.

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

  • Although it's called agriculture in the world of food.

  • (Laughter)

  • This is actually called a mash-up,

  • where you take content that someone else has produced

  • and you do something new with it.

  • In the world of food we call it cooking.

  • This is food 2.0,

  • which is food you produce for the purpose of sharing it with other people.

  • This is mobile food. British are very good at that.

  • Fish and chips in newspaper, the Cornish Pasty,

  • the pie, the sandwich.

  • We invented the whole lot of them.

  • We're not very good at food in general. Italians do great food,

  • but it's not very portable, generally.

  • (Laughter)

  • I only learned this the other day. The Earl of Sandwich didn't invent the sandwich.

  • He actually invented the toasty. But then, the Earl of Toasty would be a ridiculous name.

  • (Laughter)

  • Finally, we have contextual communication.

  • Now, the reason I show you Pernod -- it's only one example.

  • Every country has a contextual alcoholic drink. In France it's Pernod.

  • It tastes great within the borders of that country,

  • but absolute shite if you take it anywhere else.

  • (Laughter)

  • Unicum in Hungary, for example.