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1-Page Summary of Alchemy
Overview
Most of our world is run by logic. We use data to make decisions and rely on spreadsheets in businesses. While this makes us feel like we’re in control, it also limits us from thinking outside the box.
It’s especially true for economists, policymakers and business owners. They tend to rely on logic too much when trying to solve human problems. As a result, they often assume that people are rational creatures driven by universal aims and motivations. The reality is, we’re not always rational creatures driven by universal aims and motivations.
Governments and CEOs don’t understand how people really behave. Instead, they use theories about how they think people behave to make decisions. This is a mistake because the theories are often wrong and lead to ineffective decision-making strategies. The author calls these faulty assumptions “alchemy.” Successful decision-making requires abandoning reason in favor of irrational possibilities. The key points in this article teach you how thinking irrationally can help with problem solving; ways of understanding human behavior; and ways to reach outside logic for creative ideas.
Big Idea #1: Human behavior can’t always be explained by logic.
Logic is important in many aspects of life, but it doesn’t always work when trying to understand human behavior. For example, scientists have made revolutionary discoveries using logic and reasoning, while infrastructure has been built based on that same logic. However, there are instances where logic fails to apply to human behavior; for instance, scientific research into the way people behave can be flawed if they don’t consider how emotions factor into their decisions.
People are complex and irrational; they make peculiar decisions. We should look at our attitudes toward brands, as we value some more than others even though their quality is the same. Toothpaste is a good example of this phenomenon. Even though there’s no advantage to using stripy toothpaste over non-stripy toothpaste, consumers prefer to use it anyway because of clever design.
Stripe toothpaste has different colors, signaling to us that it does multiple things. We see the different colored stripes and think that stripe toothpaste is more effective than regular toothpaste because we’re getting three benefits in one tube of paste. Our preference for stripe toothpaste is irrational; this shows how hard it is to predict human behavior.
That’s why the assumptions made by businesses about people, which are based on logic, often fail.
For example, many businesses think that productivity is related to the number of hours employees work. As the author explains, this means that if an employee has more vacation time, they must be less effective because like machines, people can get rusty when left idle for too long.
However, there’s a counterargument to that. If workers are happier and more rested, they’ll presumably want to work later in life. Also, look at businesses in Europe; Germany has six weeks of paid leave per year and the economy is thriving; France gives its employees generous vacation time and their productivity remains high.
Businesses are always looking for ways to increase profits. One way is to ask employees to work longer hours, but that might not be the best approach. If businesses were to think outside of their assumptions and look at this from a different perspective, they could make room for some startling insights.
Big Idea #2: Businesses should sweat the small stuff.
Businesses are focused on being the best in their respective fields. They want to be seen as a popular choice for consumers, so they often try to come up with big solutions to big problems.
