233. Wait…There’s a System 3? featuring Leigh Caldwell

Welcome to episode 233 of the Brainy Business Understanding the Psychology of why People Buy. In today's episode, I'm excited to introduce you to Lee Caldwell. Ready? Let's get started. You are listening to the Brainy Business Podcast where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now, here's your host, Melina Palmer. Hello. Hello everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. In today's conversation, I'm joined by Lee Caldwell, the founding partner of Irrational Agency. He's a behavioral economist and pricing expert with more than 10 years of experience in applying behavioral science commercially. He's the creator of the System 3 methodology, which we are going to be talking about a lot on today's episode, as well as being the author of the Psychology of Price and a free frequent speaker at academic and industry conferences. That's actually how Lee and I met in person while we were both speaking at IEX Europe and Amsterdam this past summer. We'd been connected on LinkedIn and Twitter prior to that and it was so great to chat in person a bit and then follow up after with a virtual coffee, which of course led to this episode. My conversations with Lee have really gotten me thinking about what I believe, what I'm familiar with, what I've built my career on, what we all have, and what it might mean to open up and consider how things might not be exactly as they seem. So what I encourage you to do as you listen to today's episode, especially if you've been familiar with behavioral economics and behavioral science for a long time, is to be open to this idea, be open to something that goes against what you believe to be true and wonder what might that look like. I think if you allow it to be, this is one of those ideas and episodes that will really stick with you for a long time. And I love that. Now, before we jump into the interview, I want to be sure you know there are links to related past episodes, books and articles, as well as ways to connect with Lee and much more, all waiting for you in the show. Notes for the episode, which you can find within the app you're listening to and@the brainybusiness.com 233. Now let's jump right in. Lee Caldwell, welcome to the Brainy Business Podcast.

Hi Melina, great to great to see you here.

Absolutely. I'm so excited to have you and we I know I will have at the point of recording the intro, everyone will have just heard a little bit about how we met in person in Amsterdam recently. It was great to chat with you there for iiex Europe. Then, you know, we had some conversations following and it definitely made sense to bring you on the show. But if you can share a little bit about your background and who you are for everyone who doesn't yet know you, that's always a great place to start.

Sure, yeah. So I suppose I describe myself as a mathematician above anything else. And I think the reason I got into the world of behavioral science and cognitive science and psychology was that I had made the mistake of trying to apply my mathematical, quantitative, logical mode of reasoning to the world of business. So I Left University in 1994 when the dot com boom was just about starting. And I thought, right, this is going to be what I do. I'm going to start a web company. I'm going to make a billion dollars. So I started my company and then I went out there trying to sell and trying to market my business and trying to get people to buy my products. And it wasn't working quite as I thought. It wasn't all about the best features, the best price, all the logical reasons that people should buy.

So.

I had got lucky in my timing in that there was such a demand for those services at that time that I was able to make a living and make a certain amount of success anyway. But I always had in the back of my head, you know what? There's something here that I'm not getting. There's something going on about how people are buying from me. But also I looked around me, how people were buying in the world more generally, that clearly is not logical, it's not rational, an aspect of psychology at work that I need to understand. And so there came a time in the evolution of that business when I thought, right now it's time for me to go out and find out. And so I started to try and work a little bit on it independently. I developed some ideas using some of the software that I had built to model information flows around an organization and how information goes in and out of different people's roles and different people's minds, and went along to. He presented at a workshop in Tilburg in the Netherlands, back to the Dutch theme. And somebody said to me, oh, have you heard of behavioral economics? Which I have not. This was 2006, so just kind of before any of the popular books had come out about it. But he said, you know, it sounds very much like what you're trying to do here. Is what that discipline is about. So I looked up and lo and behold, yes, it was. It was that. You know, that was a whole discipline of people studying how people make decisions, how they buy things, how they spend money, how they perceive the world, and especially how it doesn't conform to all of those logical, rational expectations. So I taught myself about that. There wasn't really a course to go on, so I went along to a lot of the academic conferences to. There was a weekly seminar at UCL in London that I would go to and just kind of like threw myself in to the world of judgment and decision making and academic psychology and kind of learned it from there. That was how I got started in the field. And then I kind of thought. So there was. There was two directions that I went in from there. One was pricing, because I felt like there's this gap in the market of helping businesses understand how to set their prices. And I know this is something that you do as well nowadays. It was something I'd always struggled with in my own business. What is the way to set a price? We know about things like anchoring, about the Goldilocks effect, but what's the way to really apply that? So I first learned the literature around that. I started to provide pricing strategy consulting to companies in London and eventually wrote a book about that called the Psychology of Price. And the other direction I went though, which was it was harder to find the business application, but was actually fundamentally more interesting, was to try and help economics to make the same shift that psychology had made back in the 60s from behavioral psychology to cognitive psychology. So from understanding external behavior to figuring out what's going on inside people's heads to try and make economics undergo that same transition from behavioral economics to cognitive economics. So then I started to think, right, how can I build models of what's going on inside people's heads? I think, you know, we all know that we have these rich interior lives, but what's not as obvious is that actually those interior lives are of equal value or as great economic value to us as the material things that we buy outside. So the. Yes, you may like your car and the material benefits it provides to driving to work and getting you around, but also the experience you have in the car, or the stories you tell yourself about the car and what it means and what. And how you think people perceive you in that car, all of which are happening inside your brain, these are just as much part of what you're buying as the physical machinery of it. And so that world of what's Going on inside the head. And what is it, you know, what's our imagination made of? That is what really fascinated me. And so that is kind of where I subsequently developed my work.

Yeah, well, we're absolutely getting into a lot of that imagination stuff here soon, which I'm sure the audience is very excited about. I want to just touch a little bit. You mentioned your book the Psychology of Price. As you said, I talk about pricing psychology on the show a lot, but would love if you can give a little breakdown of your approach to that, knowing the book came out a bit ago, so potentially you have some updates to it now. But, you know, with your approach with Psychology of Price, what does that look like?

I mean, I think the dilemma with pricing is actually that encapsulates the dilemma with the whole of behavioral science, which is some of it can be modeled, some of it is an approach. And that's kind of the what as economists, you know, we like the elegance of having a model and an approach, but some of it is just. Well, there's actually a whole bunch of things you just got to try. And so my way to approach a pricing challenge is first, understand the value that you're providing as perceived by the customer. So whoever's buying your product, what is it that they think they're getting from you? They're probably solving a particular problem. They probably are comparing you with certain other things that, you know, they've pigeonholed you into a certain category, and there are benefits or features that they believe they're getting from you. And so start by trying to understand all that. Make a model of what they believe they are buying from you and what does it do for them? And then start looking, well, what are the alternative routes that they could follow to solve those same problems, and how much would they expect to pay for those routes? So they will have some kind of anchor in their head about how much is it worth to me to solve this problem. And that's really. That should be your starting point for a price pricing question. And it may well be that that's very different to what it costs you to provide the service there or provide the product. Often people fall into this trap of, how much does my product or service cost? Let's put a 20% markup on, and that's the price. Well, no, you should start from how much the customer would pay to solve that problem. And occasionally that will be less than your cost, in which case you should switch into a different business. But more often, it's more. More often they will pay a lot more than it costs you to provide. And so that's one of the big places that your profit margin comes from, is understanding the subjective value that your customers place on your product. So having got that as your starting point, then you get into the kind of panoply of techniques and this is where you have this sometimes unsatisfying approach of like the bag of biases, of, let's try a bit of this, let's try a bit of that. So let's see, anchoring works, let's see if the Goldilocks effect works in placing your product in the middle of two other options. Let's see if hyperbolic discounting works and being able to defer payment. And each of those, you probably need to do a bit of experimentation to see which of those techniques can help you to capture more of the value that's available. But ultimately that all comes from seeing what's it worth to the customer to solve this problem. And how can I capture as much as possible of that value? What are the techniques I can use to get my fair share of the value for the problem that I'm solving? One of the things that I think people often miss is the fact that that value is very different for different customers. So you'll probably have in most markets at least three segments. So, you know, a base segment who are, they still want the problem solved, but they don't have or aren't as willing to pay as much. There's a mainstream market and then there's a kind of business class market. So just as with your airplane tickets, there are people who are willing to pay different levels. And it's really critical that you find a way to pitch your product at all of those levels so that you can capture the market for you, capture the revenue at all three levels. And the psychology of, for example, making your basic product unattractive to the people who have enough money to buy the premium product. That's the kind of subtlety that actually where there's a lot of money to be unlocked and you need to make it unattractive to them without making it unattractive to the part of the market who it's actually aimed at. And those. There's lots of subtlety there, but it's actually that's where some of the interesting mileage is, right.

Well, and definitely making it so that somebody helping people to self identify and choose the right path for them. There's so much value and that's, you know, I talk to people all the time about. People will say, well, I can Only sell. People only want to buy. When they talk to me, they have to get on the phone because a video is not going to do it. A website page isn't going to do it. You say, but there's a thing that you are saying potentially every, you know, you hear them say they have a concern about something that helps you to identify. Oh, they need to hear this to then move on. And it's, it's deep in your brain somewhere. You might not consciously realize that this is triggering this, which is very much getting into what we're going to be talking about here soon. But if you sit and think about it for a minute, if we stop and say, well, what happens? What do I usually say? How can that be translated into the language that gets written or is in a video or something else to make it so people can determine. And like you said, yes, unlocking all, all three of those paths of customers and those segments is very important. And in some way, some cases you may say, this area is not for me. You know, I'm not in the small dollar ones. There's nothing for this segment that I want to be focusing my time on because it's not going to be worth it in the model that I have. I accept that and I'm going to move forward. And then you can put all your eggs in the right baskets. Right. So knowing who you're talking to for what, what you want them to do, what they're trying to solve, how much they would pay to solve the problem, and then knowing, like you said too, I think just to build on the different aspects when people think about buying stuff is also one reason I have found that people have a really hard time with. Pricing is not your ideal client or customer. Right. And so how much you would pay for the thing is not how much the person who needs your services would pay.

Yeah. You know, you know how easy it is to do whatever you do, because you do every day. It is easy for you. You, therefore you, you undervalue it. But the, the client does not think of it in that same, in that same way.

Absolutely. That's. You were saying about having a background in math, which my husband's is, is a similar human calculator sort of person, perhaps.

Right.

And we were talking about business strategy stuff and consulting things and saying like, you don't. And like he'll say to me, like, you don't understand, like the thing that comes to you so easily for marketing of stuff, where it's like, oh, it takes 15 minutes to do this thing. I Can do this in my head very quickly on marketing. For me, Molina is something that other people is very, very. Not even like it would take a very long time. It's just not achievable. They will. They can't do that themselves. And that's how that is. Right. And same on the math thing where I'm saying him like the stuff that you just. Ta da. That your brain just does those calculations. I will never be able to do that. I'm a person that will pull out my phone to do the calculator on the simplest of calculations to double check myself. Because. Because while I am conceptually good at math, that spur of the moment mental calculation. No, that's not a thing that my brain does naturally.

Yeah, yeah. I think one of the things that attracted me to economics was the idea of being able to use maths to model human behavior. And the unsatisfying thing about it is that economics traditionally models such a narrow range of behavior. But I really love the idea that we can expand the mathematical side of economics to encompass how people really think and what they really do. And there's a debate within the behavioral science world about how possible that is. And sometimes when I'm feeling mischievous, if I go to a talk by Thaler or Ariely or somebody, I'll sometimes try and ask this in the Q and A. And I got a very firm answer from register Thaler saying there will never be like a theory of everything. There will never be a replacement kind of economic general equilibrium theory that encompasses behavioral economics because it just is all anomalies. It's all about exceptions and things that don't work and things that don't fit into the model. And obviously who am I to gainsay Richard Thaler? But my view is, well, if we look at it from a different angle, instead of trying to say, start from the classical economic model and make the fixes, let's start from something deeper. Let's start from a cognitive science model and see how do people perceive concepts in their mind? How do they process information? How do they understand the world and build a mental model of the causality in the world, for instance, Start from there and work upwards into behavior and the outward manifestations. And maybe then we will be able to come up with something that does have that mathematical elegance but can still accurately explain far more of the phenomena that we see in real behavior which just don't fit those traditional models.

Yeah. So we are talking in August. The episode's not going to be. It's scheduled to come out in November. But as we are talking is where my episode with Michael Hallsworth on do nudges work? The other sort of debate that's really, I don't know that I want to say raging, but that is happening right now, right? A conversation that's going on and like I said, it just came out, so I don't expect that you would have heard it. You potentially read his article though, in Behavioral Scientist where he is talking about his view on this do nudges work? Debate and saying that's the wrong question. And really I love how he was talking about a new version and being able to look at the complexities and saying, you know, when you're looking at this linear model and say yes, A can create B, but like what about C, D, E, F, G, like all these things around that are happening. There's when you're using a linear path to predict something that is anything but, you're going to end up in a difficult spot. And so being able to identify in these complex systems and be able to classify behavioral science in that way is kind of where he's seeing as this next frontier for behavioral science. It sounds like you are in a similar vein. Is that accurate? Ish.

I. Yeah, I mean, I. Complex systems is a very interesting challenge to any idea of modeling because the fundamental insight of complex systems are that no predictive model can work because there are too many factors that can essentially throw off, can create these butterfly effects. And so while I certainly accept that as a statistical fact, I do think that there are still models that we can build that will have predictive power even if there are, let's say, noise effects around the edges. But I think what I understand of Michael's view on this is that there's heterogeneity, so there are different approaches that work and others that don't. There are nudges that have, I think, undoubtedly been successful. And you know, we know the strength of things like the default effect. And although there's, you know, there are, let's say, organization of secondary debates about the policy effectiveness of changing the default, but we know that the change, changing the default definitely works. And then there are other nudges like let's say priming, which are more debated. And I think where the field has correctly started to go is beyond just lumping all of these together into, as this meta analysis has done, kind of grouped together all sorts of behavioral interventions in one lump and said, well, do they all work or do they all not work? And Michael is right to point out that, well, if you separate those and say, let's look at classes of nudge, then you get a very different answer. And you will find strong effects in certain areas. That, frankly, is just a part of the maturing of the field. You know, there are things that 10, 15 years ago, we all thought were reliable, robust effects that we now have seen the evidence that they're not. And that's okay. It does not mean that the whole field has gone wrong. It simply means that the science has moved on as it should.

Right. Yeah. We have to be building, growing, changing. That's in that episode I was talking about. You know, it's hard to hear any sort of negative, any criticism, any questioning that comes toward us or something we've devoted our careers and lives to. Right. So someone saying, you know, nudges aren't real or whatever, you go, yes, they are, you're wrong. Right. And you want to just, like, dig in on it, you know, confirmation bias and things in there. But we really do need to look at that as an opportunity to say, how might we grow and change? And what's the. What's the next step here? So, as Michael said there, as you're saying here, it's nudges do work. It's. But then the next step is, you know, where can we say this is most likely to work in this case? And if we modify it for this group, it's better over here. You know, things like that. How can we advance what we've learned?

There is so much debate and critique within the discipline that you only need to look at the comments on journal articles and the debates people have at conferences to know that there's huge disagreement and there are a wide variety of views. But as you say, when someone from outside the team, so to speak, who feels like we're all being attacked at the same time, then suddenly we all band together and say, no, no, this is what we were saying all along. You're misrepr. Representing us. I have to admit. I don't. I can't remember or I didn't look up who wrote this meta analysis. So maybe they are within the field. I'm not sure. But there are. There are plenty of people from outside who do lob the old. The old grenade at us.

Sure. Yes, for sure. So, well, moving on from that, like you said, not necessarily wanting to argue with or contest against Thaler, but building on that, not going after. Going after, quote, unquote, obviously very kindly, another Nobel laureate and their work of saying it's System One and System Two and that's it there are the two systems of the brain, the end. You say no, I say, I see.

I do say no, I will if we have time. We come back to system one and two in the dual process debate. And you know, that's, that's already hotly contested anyway. But I think that if we take the. The types of thinking that are characterized typically by system 1 and system 2. System 1 is fast, automatic unconscious things that are really like a gut reaction. The classic one is you touch a hot stove and you jump back without thinking or, you know, you. The brake lights go on in the car in front and you hit the brake because that's. Your mind has been programmed to make a very direct connection between A, the brake lights go on and B, my foot goes down and there is no intervention in between, really. System two, of course, the deliberative mind is meant to be logical and calculating. We follow algorithms, we work out rules, and we get to slowly and with occasional mistakes, but largely we get to the right optimal answer. And I think those do characterize two kinds of thinking. But I think there's another kind of thinking that is not captured by either one. And that's the thinking that we typically do when we're daydreaming or indeed dreaming. When we're telling a story, when we're watching a movie is the activity of the imagination and it's the activity of narrative. That kind of thinking, I would argue, could potentially be called System 3, could be a third type of thinking. So the reason it doesn't fit into necessarily one or two is it's much more conscious and slow typically than system one. So it's not always. There's an automatic aspect to it, but it can take place over a long period. If you're watching a movie, you're immersed in this imaginary world for hours. And it's definitely not fast in the sense of thinking fast and slow, but equally, it's not logical. It's not. There's no rules, there's no algorithms, there's not a right answer. You're not trying to calculate anything. Instead, you're letting your mind explore, kind of roam around this landscape of your mental model of the world, or indeed a world that's been given to you in the case of a fictional experience. And so you're kind of, you're letting the mind go where it. Where it will and follow kind of emotional cues, follow the causal relationships that it has learned, and in doing so, it generates emotional response. And so when you are watching a movie or reading a book, you're feeling genuine emotions, you really are truly happy or sad. In the same way as if you think about the future or you think about, say, other people in other parts of the world, maybe you are experiencing vicariously something of what they're experiencing. There's no logic to that. There's no real utilitarian reason why you should feel what they're feeling. But you do. And I argue that this is distinct enough from the other two classes of thought to be given its own title. And I would call that System three.

Right. Which we, I think all agree like. Like System one and System two are bad names. Sorry to Kahneman. Like they are not great. I'm not a fan of them. And so it wouldn't be three in that it comes after. It's more in the middle. But, you know, we're stuck in the system that we have of naming.

Yeah. A lot of the drill process lecture will Talk about type 1 and type 2 processes in order to avoid the implication that there are distinct, for example, distinct brain regions that are responsible for System one or sort of Type one thinking. Because we do know that although there are the frontal lobes, prefrontal cortex is a little more associated with type 2 thoughts. Some of the amygdala, some of the deeper brain components are more associated with type 1. And the striatum and other parts of the cortex may be associated a bit more with type 3. If we look at how the default mode network works in the parts of the brain that are activated in replay and in daydreaming, which are called the dmn, there are correlations with parts of the brain, but definitely these are not independent systems that somehow have been plugged together. But they are characteristic types of thinking that are used to solve different types of problems.

Right. Yeah. You shared with me a really great paper that you wrote, I think about three years ago that's talking about System three and this power of consumer imagination. And in it you have, I think, just this really great story that kicks things off to help get us into the mode of that imagination. Is it something that you have talked about enough that you know how you would kind of reshape that story for those who are listening to kind of set the stage, so to speak. Or is it something that I can like pull up and, and read some of what it says there, what's ideal there?

Why don't you go ahead and, and read some of that and then I'll, I'll comment then on, on whether things have moved on.

Okay, so it says an 11 year old girl walks in thin sandals across pebbles baked hot by the afternoon sun. Shade is scarce here, but she can just make out a tree ahead where the road turns past the edge of a hill. And breakfast was six hours ago. And her hunger competes her attention with a sandpaper dry throat. Staring ahead toward the tree, she stumbles, her toe kicking the sharp edge of a stone. A bird above calls out, not even mocking her, but barely aware she exists. She doesn't even know if she's lost. She approaches the tree. Finally she recognizes this is the place her mother keeps a table selling water, food and mobile phone cards. She starts to run.

So I hope that you and the listeners will have been able to project yourself into that place. I tried hard to use language that was evocative and imagery that would bring to mind those feelings and the emotions that you might imagine if you were in that situation yourself. And again, I hope that illustrates the fact that what we're experiencing doesn't have the logic or the calculation of system two. It's not for anything. It doesn't have a purpose in that sense of a problem we're trying to solve. But equally, it's not a learned reaction in system one because we're not responding to any stimulus. Everything, all of the stimulus there is generated inside your head. And I think this has a lot in common with the way that brands try to interact with us. This is perhaps where it comes onto the business side. And that paper that you mentioned was presented at the Market Research Conference smr, where I was talking to market researchers about how they can understand what's going on inside their customers heads and understand where their products or where their brands play a role in the stories that customers are telling themselves. And those stories may not always be as evocative as that one that you just read out, but they all kind of come from that same place of the fact that we as humans, we can generate imaginary emotions and imaginary sensory feelings. And you can really bring to mind what it does feel like to be hungry, even if you're not hungry right now. And that's where. That's where a lot of our mental activity goes on and where if we can tap into that with the right kind of stories, then we can play a part in that rich interior life of the people around us.

Right. And as you're saying in the paper and a little bit here, you know, market research has sort of conditioned and trained a field against bringing in that imagination space, especially in the quantitative side where you're trying to kind of get rid of all of that to. To eliminate the bias. Right. So talk a little bit about why that is missing the point on theme. Right?

Yeah. Yeah. Well, the, as you say, researchers love the idea of objectivity. And the, the idea, especially quant researchers, qual researchers do, are often a bit more sympathetic to the idea of the subjective and understanding how everybody is different. But quant researchers, they're trying to eliminate sources of noise because the more noise you can eliminate, then the smaller sample size you need to survey to get the same statistically significant results. And for all the bad press that P values have had in the academic literature market, researchers still are fully bought into the 95% mantra. So by trying to take away the risk that one respondent will interpret your question differently to a second respondent, researchers have fallen over themselves to create these elongated questions that ask things like thinking about the last time you brushed your teeth and putting aside any events that happen outside of your normal toothbrushing hours. Please rate on a scale of 1 to 10, your agreement with the following statements. And then they'll go into statements like, I agree that my provider of toothpaste is doing good things for the world and whatever other nonsense it might be, asking questions in a way that's completely unnatural to any human being. And the unnaturalness is kind of the point. They're trying to say. If I ask this question in, in an intuitive way, then people could go anywhere with it. Their minds might go wandering into their natural lives and they might think, oh, you know what? My gum was bleeding when I brushed my teeth this morning, so therefore I'm going to give it 3 out of 10 instead of 9 out of 10. But that wasn't the toothpaste fault. So it really, we're going to try and strip that out of the experience. But in reality, it was part of the experience. And if you want to understand people's real experiences, you have to allow them to bring in all of those influences that, those accidental influences that occur in real life and the different places that their minds could wander to. So I like to ask questions that are deliberately open. They're a little bit ambiguous because you get richer and better and more meaningful answers as a result. And it does mean that it's harder to just tell the client, well, your toothpaste scored 7 out of 10 and your competitor scored 6.3. So well done. You've got the best toothpaste. But I can give them some much more useful insights instead about how people tell stories about their, the toothpaste or what their memories are about it or the hopes and emotions that is fulfilling for them when they brush their teeth. And that opens up a whole range of, of new ways to use that insight.

Right? And I think it was so, so in the paper, you know, so we have the original, the initial story which I read just a few moments ago. And we can see how this is this imaginative process. Like you're saying, I feel what the girl is feeling. I remember having had that myself. I'm thinking about what this might mean to me. And then, you know, you, you, you talk a little bit about the problem kind of in market research and insights where we're trying to eliminate this, but then you show this real value point of how this can be used for brands. So in this case, you know, it's saying, you know, we need to understand consumers imagination. The girl's last few steps exhaust the energy that remains in her. But she reaches the shade of the tree. She recovers her breath as she slows to stand in front of the table. Imagine now that you are her, what would you reach for first? A bottle of water, a pastry, an orange, a bandage for your toe or your mother's arms. And then you think at first when it said the bottle of water, you say, oh yeah, I would have wanted the water. And then you say a pastry. And maybe, I don't know, the toe, like, oh yeah, my toe is bleeding. Oh, but my mom, like I, I was so scared. Do I want that comfort? Right? We can feel that moment. And then you sit and think, okay, if it were me and I was actually a small child stumbling across here, would I want the hug first? And then mom's gonna give me the water. You know, what, what do I feel like I need in that moment? And I don't know what that tells us about individuals where we say certain types of people are like, who's going for mom first? Who's going for the bandage? Who's going for the water? And then what does that tell us? Or is it it? Where does our brand come up in the mix of things? It's such an a, so much more interesting of a, of a conversation and so much closer to getting to that mindset. I find it to be fascinating. So please, now you talk.

Well, so I can't tell you which of the options I would choose. I think probably my, probably the mother's arms. I'm actually going to see my mum in about 20 minutes after we speak, so I'll tell her all about this. But I think as well as what the choice reveals, the next stage in asking this question is, well, tell me why. Tell me what was going on in your mind. And this is where we go far beyond just an option. And this is where quantitative research, again, has the reputation of trying to strip away and boil down everything to a set of choices. Choices are important, but narratives are just as important. So we always ask, once we've had people make that choice, we ask them to then tell us more. Tell us what's going on in your head. Tell us why you chose X and not Y. Tell us what does this remind you of? Has this happened to you? Or has something like this happened to you? And then that, albeit very useful, is a lot of open text data. So we might have 2,000 responses, and we might have asked five questions like this. So we've got 10,000 verbatims to interpret. Now you can do that. And there are different ways of analyzing that text. But what we do next is we take people down a path of giving us their associations. So we will show a grid of maybe 25 words. We'll say, which of these words comes to mind when you think about the choice you just made? And they might pick three or four words. We'll then say, and now what do those words mean to you? And again, we'll show a grid and we'll ask them to say, so they may have have chosen the words thirst. They may have chosen the words safety or comfort or happiness. And then we'll say, what does happiness mean to you? And they'll choose another set of words. So by doing this, we build a map of all of the mental associations that people make when they are immersed in this story. And those mental associations represent the causal model or the mental map that people have of the world around them and the world they live in. And by understanding that map, that landscape, and summarizing it and kind of integrating it to all of the. All of the 2,000 people that we've asked and finding the common trends and finding the pathways, we develop an understanding of what we call the common narratives that essentially reflect how people see this product category or this type of situation. And those narratives are extremely valuable to the people who are selling in that category, because it will tell me, for example, that people who want, well, to take a recent example, healthy snacks, there are certain things that they are looking for. Yes, they want health, but they also want quality and naturalness, and they want something that tastes good. And when you can take someone on a story that starts with taste, goes to natural, organic ingredients, and then ultimately goes to health, then it's much more plausible and people buy into that story much more so than if you just say this stack is really healthy because that kind of doesn't have the credibility. So by uncovering the existing connections in people's heads, we can show brands how to tap into those stories and how they can play their own part in that customer's narrative.

Absolutely. And so with that, you know, taking that just to this next step as we kind of wrap up here, what can that do for brands? I know you have clients that you've been working on this with for years now and you have some pretty tangible and to use our descriptive language, we'll say tantalizing results as, as this is working out. So what's that, what's that been able to achieve and why is it different?

Sure. Well, one of the, the recent examples where that we're very happy with and we're presenting with this client at the Market Research Society's Behavioral Science Summit next month is a TV channel and they are a channel called Alibi, which is a crime drama channel in the uk. And for them we were able to help them uncover the narrative that people are really looking for from when they watch those kind of shows, which is about intrigue and thrill and the twists. So they had, there are lots of other things that are going on in crime drama. There's, you know, there's a certain amount of violence, there's a certain amount of, in certain genres. You've got this cozy idea of Miss Marple or Poirot and there's obviously the idea of solving a mystery in the puzzle. But of all those different areas, it turns out the ones that were most motivating were the idea of intrigue, thrill and twist. So we were able to help them design a marketing campaign that kind of had this teaser approach where there was, there was the intrigue of asking a question, was the thrill was represented through the graphics and the way that what they showed, the imagery they showed from the TV shows and the twist was then the reveal after the teaser campaign that showed that actually things weren't quite how you first saw them. And the results were they've had an increase in audience share of 14%. They had two new program launches that had record breaking levels of something like four times the typical first night viewership. And, and this was something that when you, with hindsight it could sound kind of obvious, but there were a lot of different ways that those campaigns could have gone and that creative approach could have taken. And by uncovering how people really perceived the crime genre and what they were looking for. We were able to help them essentially tell the right story in their marketing that was consistent with the story that people already had and wanted. And I think there's a lot. We hear a lot about storytelling in marketing these days. And the one thing I would say is really missing from that is how do we know what stories to tell? How do we know what stories are going to resonate and what stories people want from their marketing? Well, the only way we can find that out is by going out and gathering the stories that people share with us. And that's really the point of this, is to. To get the thousands or millions of stories that are out there that real people are telling, listen to those stories, and then distill them into a story where they play their part and the brand plays its part. And by doing that, you can create a better, stronger relationship between brand and customer.

Oh, yeah, absolutely. And this, your episode is coming out right, kind of, I think, sandwiched between the two authors of branding. That means business. So Matt Johnson, who also wrote Blindsight, he's got his interview and then Tessa's got hers coming, and I think hers is going to come out right after this. And so very much tied in with what you're talking about there, for sure. And really fantastic book, which is already going to be out at the time that this episode comes out, too. So. Yeah, thank you so much. And I think also that really brings it full circle to what we were talking about at the beginning, that you have to understand who you're talking to and what it is that you want them to do and your audience and how that's different for the Alibi audience. They want that intrigue and that twist. That's what you expect from drama like that. Right. Whereas if it's a, you know, romantic comedy channel or the Hallmark channel or kids stuff or whatever, it would be potentially a different like that. That model wouldn't necessarily work for Disney, right?

Yeah. You would find a different story. Absolutely. So for this, this broadcaster has several different TV channels, and we worked with two of their other channels, one of which is in more in the comedy space, one of which is kind of factual, like reality programs. And we found. Yes, absolutely. Very different narratives the people were looking for in those different genres. And so you absolutely need to cue people with the right scenarios, the right prompts that bring to mind the specific. The life and they're leading and the point of life they're at when they're watching that channel or when they're eating those snacks or when they're drinking that beer or when they're taking that airplane flight because the narratives going on in our heads will be very different at every point.

Yeah, absolutely. Well, thank you so much for coming on the show and talking about. Oh my gosh, we covered so much. We've talked about imagination and System three and the do nudges work debate and we talked about pricing strategy and just thriller television channels and, and all the things that market research and quantitative analysis. Lots of great stuff for everyone who is now super excited to go learn more from you and see their brands can get, you know, 14% lift by evoking and using this sort of methodology. What's the best path for them to get in touch with you, to learn more and to get in contact?

Thank you. Well, the my company is called Irrational Agency. So if you go to irrationalagency.com, you'll find plenty of information there. You can find me on Twitter as Lee Bloon, or Lee is spelled L E I G H L E I G H. And then the color blue. And on LinkedIn you'll find me as Lee Caldwell. Again, Lee is L E I G H C A L D W E L L. So yeah, please, please look for me there. What I think we're really interested now where I think where I hope that we can make a difference is we're entering a challenging period and I'm sure in November it will still be very active. But right now inflation is, is soaring in a way that most of us haven't seen in our whole careers. There may be a recession coming and both people need to find ways to get through this time. They need to find the right stories that will help them through this challenging period. But brands also need to be able to find how they can play a part in customer stories even in these challenging times, how they can make sure that they are the need to have and not so something that could easily be dropped when budgets are under pressure. So that's the kind of work that I'm really interested in doing right now and I'd love to hear from anyone who'd like to work with me on that.

Fantastic. Well, of course we'll have links to all of that in the show notes to make it easy for everyone. And thank you so much again for coming on the show. It was a delight to chat with you.

Thank you so much. It was really great to talk properly and I'm sure we'll see each other at another conference probably in Amsterdam again in or maybe somewhere else in this, in this lovely world.

Yeah, sounds like a plan. Thank you again to Lee Caldwell for joining me on the show today. What got your brain buzzing in today's conversation? For me, as I mentioned at the top of the episode, this conversation and the others I've had with Lee really stuck with me. They made me think about my own initial reaction to something I hold so dear, being questioned or modified. Sure, I wanted to say no way. But then when you can let go a little, open the door, or peek behind that curtain and wonder a bit, there are some really interesting possibilities. That's why Tuesday's refreshed episode this week was on Pre Factual Thinking. It was an opportunity to open up your mind and really think about what could be, to understand how imagination and visioning into the future can change your outlook and actions and how that's different from strictly logical system 2 or automatic system 1 processing. I of course don't know if there's a system 3 for sure and what the field might adapt into in the coming years, but it's so cool to realize that we're on the forefront of something. Amazing that this is something that could be the next phase in a field. It's so, so cool. Where are the opportunities in your business or industry that are just beyond your familiarity, bias and love of the status quo if you were to open up your mind and be willing to wonder what could be possible? As always, share it with me on social media. You'll find me as the brainy biz pretty much everywhere, including Twitter and Lee is Lee Blue L E I G H B L U E. Those handles as well as other ways to connect with with Lee and get his book and check out other related articles and episodes like those on status quo, bias, familiarity, bias and prefactual thinking are all waiting for you in those show notes for the episode which are within the app you're listening to and@the brainybusiness.com 233 and thank you again to Lee Caldwell for joining me on the show today. It was a delight to chat with and learn from you. You join me Tuesday to learn all about value, what it really is and how it differs from cost and price and why that all matters for a business. It's going to be a lot of fun. You won't want to miss it. Until then, thanks again for listening and learning with me and remember to be thoughtful. Thank you for listening to the Brainy Business Podcast. Molina offers virtual strategy sessions, workshops and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness Com.