Subtitles section Play video Print subtitles 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.