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Annotated captions of Rory Sutherland: Life lessons of an ad man in English

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tedtalks 00:00
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This is my first time at TED. Normally, as an advertising man,

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

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that pays all the bills.

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It's held every two years in Burma.

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And I particularly remember a really good speech

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

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(Laughter)

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But, actually, it's suddenly come to me after years working in the business,

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that what we create in advertising,

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which is intangible value -- you might call it perceived value,

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you might call it badge value, subjective value,

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intangible value of some kind --

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gets rather a bad rap.

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If you think about it, if you want to live in a world in the future

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where there are fewer material goods, you basically have two choices.

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You can either live in a world which is poorer,

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which people in general don't like.

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Or you can live in a world where actually intangible value

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constitutes a greater part of overall value,

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that actually intangible value, in many ways

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is a very, very fine substitute

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for using up labor or limited resources

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in the creation of things.

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

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The question was given to a bunch of engineers,

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

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And they came up with a very good engineering solution,

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which was to spend six billion pounds

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building completely new tracks

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from London to the coast,

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and knocking about 40 minutes off a three-and-half-hour journey time.

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

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

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merely to make it shorter.

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Now what is the hedonic opportunity cost

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on spending six billion pounds on those railway tracks?

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Here is my naive advertising man's suggestion.

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What you should in fact do is employ all of the world's top male

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and female supermodels,

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pay them to walk the length of the train, handing out free Chateau Petrus

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for the entire duration of the journey.

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(Laughter)

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(Applause)

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

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

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(Laughter)

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

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And this shows that engineers,

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medical people, scientific people,

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have an obsession with solving the problems of reality,

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when actually most problems, once you reach a basic level of wealth

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in society, most problems are actually problems of perception.

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So I'll ask you another question.

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What on earth is wrong with placebos?

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

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They work extraordinarily well.

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They have no side effects,

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

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(Laughter)

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

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

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

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and actually produce placebo education.

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

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It actually works by giving you the impression

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that you've had a very good education, which gives you an insane sense

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of unwarranted self-confidence,

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which then makes you very, very successful in later life.

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So, welcome to Oxford, ladies and gentlemen.

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(Laughter)

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(Applause)

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

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How many problems of life can be solved

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actually by tinkering with perception,

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rather than that tedious, hardworking and messy business

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of actually trying to change reality?

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

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but doing a bit of historical research,

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it seems to be Fredrick the Great.

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Fredrick the Great of Prussia was very, very keen

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for the Germans to adopt the potato and to eat it,

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because he realized that if you had two sources of carbohydrate,

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wheat and potatoes, you get less price volatility in bread.

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And you get a far lower risk of famine,

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

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

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

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rather like contemporary Scottish people.

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(Laughter)

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So, actually, he tried making it compulsory.

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The Prussian peasantry said,

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

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

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There are even records of people being executed

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for refusing to grow potatoes.

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So he tried plan B.

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He tried the marketing solution, which is he declared the potato

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as a royal vegetable, and none but the royal family could consume it.

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And he planted it in a royal potato patch,

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with guards who had instructions

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to guard over it, night and day,

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but with secret instructions not to guard it very well.

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(Laughter)

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Now, 18th century peasants know that there is one

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pretty safe rule in life, which is if something is worth guarding,

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it's worth stealing.

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Before long, there was a massive underground

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potato-growing operation in Germany.

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

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It was an absolute masterpiece.

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

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

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Ataturk, rather like Nicolas Sarkozy,

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was very keen to discourage the wearing of a veil,

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in Turkey, to modernize it.

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

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

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and a hell of a lot of resistance.

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Ataturk was a lateral thinker.

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He made it compulsory for prostitutes to wear the veil.

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(Laughter)

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(Applause)

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

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

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All convicted child molesters

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have to drive a Porsche Cayenne.

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(Laughter)

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What Ataturk realized actually is two very fundamental things.

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Which is that, actually, first one,

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all value is actually relative.

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All value is perceived value.

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

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

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in Buenos Aires. Very clever Buenos Aires street vendors

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decided to practice price discrimination

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to the detriment of any passing gringo tourists.

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As an advertising man, I have to admire that.

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But the first thing is that all value is subjective.

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Second point is that persuasion is often better than compulsion.

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These funny signs that flash your speed at you,

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some of the new ones, on the bottom right,

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now actually show a smiley face or a frowny face,

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to act as an emotional trigger.

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What's fascinating about these signs is they cost about 10 percent

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of the running cost of a conventional speed camera,

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but they prevent twice as many accidents.

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So, the bizarre thing, which is baffling

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to conventional, classically trained economists,

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is that a weird little smiley face

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has a better effect on changing your behavior

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than the threat of a £60 fine and three penalty points.

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Tiny little behavioral economics detail:

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in Italy, penalty points go backwards.

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You start with 12 and they take them away.

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Because they found that loss aversion

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is a more powerful influence on people's behavior.

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

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Not so in Italy.

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Another fantastic case of creating intangible value

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to replace actual or material value, which remember, is what,

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after all, the environmental movement needs to be about:

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This again is from Prussia, from, I think, about 1812, 1813.

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

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were encouraged to give in all their jewelry.

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And it was replaced with replica jewelry

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made of cast iron.

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

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The interesting thing is that for 50 years hence,

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the highest status jewelry you could wear in Prussia

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wasn't made of gold or diamonds.

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It was made of cast iron.

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Because actually, never mind the actual intrinsic value

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of having gold jewelry. This actually

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had symbolic value, badge value.

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

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So, the modern equivalent would of course be this.

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(Laughter)

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But, actually, there is a thing, just as there are Veblen goods,

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where the value of the good depends on it being expensive and rare --

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there are opposite kind of things

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where actually the value in them depends on them being

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ubiquitous, classless and minimalistic.

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If you think about it, Shakerism was a proto-environmental movement.

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Adam Smith talks about 18th century America,

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where the prohibition against visible displays of wealth was so great,

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it was almost a block in the economy in New England,

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because even wealthy farmers could find nothing to spend their money on

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without incurring the displeasure of their neighbors.

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It's perfectly possible to create these social pressures

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which lead to more egalitarian societies.

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What's also interesting, if you look at products

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that have a high component

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of what you might call messaging value,

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a high component of intangible value, versus their intrinsic value:

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They are often quite egalitarian.

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

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which replaces material value with symbolic value.

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

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and you may not like the Coca-Cola company,

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

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What Warhol said about Coke is, he said,

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"What I really like about Coca-Cola is the president of the United States

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can't get a better Coke than the bum on the corner of the street."

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Now, that is, actually, when you think about it -- we take it for granted --

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it's actually a remarkable achievement,

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to produce something that's that democratic.

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Now, we basically have to change our views slightly.

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

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involves labor. It involves engineering.

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It involves limited raw materials.

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

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

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It patently veers toward propaganda.

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However, what we do have now

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is a much more variegated media ecosystem

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in which to kind of create this kind of value, and it's much fairer.

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

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as translated into food.

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You had a monopoly supplier. On the left,

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you have Rupert Murdoch, or the BBC.

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(Laughter)

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And on your right you have a dependent public

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which is pathetically grateful for anything you give it.

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(Laughter)

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Nowadays, the user is actually involved.

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

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

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(Laughter)

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This is actually called a mash-up,

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where you take content that someone else has produced

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and you do something new with it.

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In the world of food we call it cooking.

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This is food 2.0,

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

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

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Fish and chips in newspaper, the Cornish Pasty,

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the pie, the sandwich.

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We invented the whole lot of them.

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

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but it's not very portable, generally.

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(Laughter)

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

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

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(Laughter)

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Finally, we have contextual communication.

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

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

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It tastes great within the borders of that country,

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but absolute shite if you take it anywhere else.

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(Laughter)

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Unicum in Hungary, for example.

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The Greeks have actually managed to produce something called Retsina,

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which even tastes shite when you're in Greece.

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(Laughter)

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But so much communication now is contextual

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that the capacity for actually nudging people,

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for giving them better information -- B.J. Fogg,

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at the University of Stanford, makes the point

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that actually the mobile phone is --

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He's invented the phrase, "persuasive technologies."

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He believes the mobile phone, by being location-specific,

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contextual, timely and immediate,

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is simply the greatest persuasive technology device ever invented.

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Now, if we have all these tools at our disposal,

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we simply have to ask the question,

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and Thaler and Sunstein have, of how we can use these more intelligently.

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I'll give you one example.

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If you had a large red button of this kind, on the wall of your home,

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and every time you pressed it, it saved 50 dollars for you,

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put 50 dollars into your pension,

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you would save a lot more.

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The reason is that the interface fundamentally determines

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the behavior. Okay?

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Now, marketing has done a very, very good job of creating

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opportunities for impulse buying.

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Yet we've never created the opportunity for impulse saving.

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If you did this, more people would save more.

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It's simply a question of changing the interface

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by which people make decisions,

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and the very nature of the decisions changes.

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Obviously, I don't want people to do this,

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because as an advertising man I tend to regard saving as just

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consumerism needlessly postponed.

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(Laughter)

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But if anybody did want to do that,

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that's the kind of thing we need to be thinking about, actually:

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fundamental opportunities to change human behavior.

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Now, I've got an example here from Canada.

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There was a young intern at Ogilvy Canada

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called Hunter Somerville,

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who was working in improv in Toronto,

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and got a part-time job in advertising,

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and was given the job of advertising Shreddies.

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Now this is the most perfect case of creating

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intangible, added value,

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without changing the product in the slightest.

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Shreddies is a strange, square, whole-grain cereal,

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only available in New Zealand, Canada and Britain.

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It's Kraft's peculiar way of rewarding loyalty to the crown.

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(Laughter)

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In working out how you could re-launch Shreddies,

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he came up with this.

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Video: (Buzzer)

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Man: Shreddies is supposed to be square.

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(Laughter)

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Woman: Have any of these diamond shapes gone out?

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(Laughter)

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Voiceover: New Diamond Shreddies cereal.

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Same 100 percent whole-grain wheat in a delicious diamond shape.

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(Applause)

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Rory Sutherland: I'm not sure this isn't the most perfect example

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of intangible value creation. All it requires is

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photons, neurons, and a great idea to create this thing.

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I would say it's a work of genius.

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But, naturally, you can't do this kind of thing without a little bit of market research.

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Man: So, Shreddies is actually producing a new product,

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which is something very exciting for them.

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So they are introducing new Diamond Shreddies.

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(Laughter)

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So I just want to get your first impressions when you see that,

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when you see the Diamond Shreddies box there.

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(Laughter)

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13:25

Woman: Weren't they square?

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13:27

Woman #2: I'm a little bit confused. Woman #3: They look like the squares to me.

tedtalks 13:27
13:29

Man: They -- Yeah, it's all in the appearance.

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13:33

But it's kind of like flipping a six or a nine. Like a six,

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13:35

if you flip it over it looks like a nine.

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13:37

But a six is very different from a nine.

tedtalks 13:37
13:39

Woman # 3: Or an "M" and a "W". Man: An "M" and a "W", exactly.

tedtalks 13:39
13:41

Man #2: [unclear]

tedtalks 13:41
13:44

You just looked like you turned it on its end. But when you see it like that

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13:46

it's more interesting looking.

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13:48

Man: Just try both of them.

tedtalks 13:48
13:51

Take a square one there, first.

tedtalks 13:51
14:03

(Laughter)

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14:05

Man: Which one did you prefer? Man #2: The first one.

tedtalks 14:05
14:07

Man: The first one?

tedtalks 14:07
14:09

(Laughter)

tedtalks 14:09
14:13

Rory Sutherland: Now, naturally, a debate raged.

tedtalks 14:13
14:16

There were conservative elements in Canada, unsurprisingly,

tedtalks 14:16
14:18

who actually resented this intrusion.

tedtalks 14:18
14:20

So, eventually, the manufacturers actually

tedtalks 14:20
14:23

arrived at a compromise, which was the combo pack.

tedtalks 14:23
14:25

(Laughter)

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14:34

(Applause)

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14:39

(Laughter)

tedtalks 14:39
14:42

If you think it's funny, bear in mind there is an organization called

tedtalks 14:42
14:45

the American Institute of Wine Economics,

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14:47

which actually does extensive research into perception of things,

tedtalks 14:47
14:49

and discovers that except for among

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14:52

perhaps five or ten percent of the most knowledgeable people,

tedtalks 14:52
14:54

there is no correlation between quality and enjoyment

tedtalks 14:54
14:56

in wine,

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14:58

except when you tell the people how expensive it is,

tedtalks 14:58
15:01

in which case they tend to enjoy the more expensive stuff more.

tedtalks 15:01
15:04

So drink your wine blind in the future.

tedtalks 15:04
15:06

But this is both hysterically funny --

tedtalks 15:06
15:08

but I think an important philosophical point,

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15:11

which is, going forward, we need more of this kind of value.

tedtalks 15:11
15:14

We need to spend more time appreciating what already exists,

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15:16

and less time agonizing over what else we can do.

tedtalks 15:16
15:18

Two quotations to more or less end with.

tedtalks 15:18
15:20

One of them is, "Poetry is when you make new things

tedtalks 15:20
15:22

familiar and familiar things new."

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15:25

Which isn't a bad definition of what our job is,

tedtalks 15:25
15:27

to help people appreciate what is unfamiliar, but also

tedtalks 15:27
15:31

to gain a greater appreciation, and place a far higher value on

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15:33

those things which are already existing.

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15:36

There is some evidence, by the way, that things like social networking help do that.

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15:38

Because they help people share news.

tedtalks 15:38
15:42

They give badge value to everyday little trivial activities.

tedtalks 15:42
15:45

So they actually reduce the need for actually spending great money on display,

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15:47

and increase the kind of third-party

tedtalks 15:47
15:51

enjoyment you can get from the smallest, simplest things in life. Which is magic.

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15:54

The second one is the second G.K. Chesterton quote of this session,

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15:57

which is, "We are perishing for want of wonder, not for want of wonders,"

tedtalks 15:57
16:00

which I think for anybody involved in technology, is perfectly true.

tedtalks 16:00
16:02

And a final thing: When you place a value on things like health,

tedtalks 16:02
16:04

love, sex and other things,

tedtalks 16:04
16:06

and learn to place a material value

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16:08

on what you've previously discounted

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16:11

for being merely intangible, a thing not seen,

tedtalks 16:11
16:14

you realize you're much, much wealthier than you ever imagined.

tedtalks 16:14
16:16

Thank you very much indeed.

tedtalks 16:16
16:17

(Applause)