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.