Rory Sutherland

There is an experiment in behavioural economics which involves showing people some item — a mug or suchlike — and asking them what they might be prepared to pay for it. Some time later, you contrive to give them an identical mug for free. You then ask how much they want to hand their mug back. The figure they cite is significantly higher than before. This discrepancy, which defies conventional economic models, is known as the ‘endowment effect’. An extreme example of this was demonstrated by Dan Ariely, who found that students who had been unsuccessful in the ticket lottery for a major Duke University basketball match were on average prepared to pay only $170 for a ticket.

It isn’t every day you hear the suggestion that British imperialism has ‘done more to alleviate poverty than all the world’s aid programmes in the last century’, and to hear such praise from the lips of an American is rarer still. All the more so when the American in question is an eminent economist called Paul Romer and is speaking at the TED Global event in Oxford (see www.TED.com), where earlier in the week Gordon Brown had received a standing ovation.

Exhibit A in Rod Liddle’s case against Twitter two weeks ago was a painful (but hardly representative) post by Stephen Fry. Exhibit A in Rod Liddle’s case against Twitter two weeks ago was a painful (but hardly representative) post by Stephen Fry. Exhibit B was a quotation from a sceptical ‘youth’ report written by a teenage intern at Morgan Stanley, who suggested that because he and his school-age contemporaries didn’t use Twitter, it was doomed. Hmmm. This report did make me wonder how many people would want to befriend anyone whose idea of fun at age 15 is to work in a bank. But, even if his inference was wrong, his facts are largely right. Most people his age don’t need Twitter. For one thing, they don’t have many friends.

Henry Ford supposedly said, ‘If I had asked people what they wanted, they would have said a faster horse.’ This quotation is often used as an argument against relying on market research in the pursuit of innovation. Bill Gates voiced a similar thought to Ford’s when he suggested that ‘people don’t know how to want the things we can offer them’. A glance at human behaviour makes it hard to argue against this approach. After all, most technology is what economists call an ‘experience good’ — something whose value only becomes apparent once people have tried it for themselves, like mobile telephony, Sky+ or, come to think of it, heroin.

I was all set to write a scathing piece about Lord Carter’s newly published Digital Britain report (http://tinyurl.com/ksp9t7) when, in a break with journalistic practice, I decided to read it first. In fact many of its proposals make sense. For instance I now accept the case for the controversial 50p-a-month tax on phone lines in order to subsidise broadband provision in remote parts of the country. I also like the report’s plans for expanding 3G coverage, and the idea of handing over FM frequencies to new, ultra-local radio stations.

Whenever you make an optimistic prediction, you risk being wrong twice. First there is the risk that the prediction itself is wrong: 1,000 Concordes by 1973; flying cars; food in pill form. More often, though, it isn’t the prediction that’s wrong but the optimism that accompanies it. The commonest failing of techno- optimists is to be right about future technologies but naively idealistic about the lasting enjoyment they will bring. In reality, yesterday’s novelty soon becomes today’s annoyance (email, for instance), while many innovations fall victim to habit, snobbery or prejudice.

It’s called Spotify. I don’t know why. And I have no idea how it can make money for the people who have invested in it. But this is the internet we are talking about, where all of us can enjoy good things for years while it falls to other people to work out how to make money from them. So, if you live in Britain (or Sweden, Norway, Finland, France or Spain), don’t waste any time reading the rest of this article — go along to www.spotify.com and download the free version now. Those who first want to know what it does may want to sit down now, since you’re in for a surprise. What the Spotify software allows you to do, and quite legally, is to use your PC to listen to almost any music you like — on demand, instantly and free.

When I was a child, almost everyone I knew had a single telephone kept in a draughty hallway. Why the hallway I don’t know. Perhaps the bell was better heard from there or else they were copying the location from posher homes where once a butler would have answered it. Until recently, there was also a single place — a study or spare room — where people went to use a computer. Today laptops outsell desktops and wireless internet access means you can use them in every room. This seemingly small detail will have far-reaching effects. For instance, have you ever wondered where people find time for the many hours they now spend on the net? Accepted wisdom long held we were watching less television.

I have just passed a pub in Gosport. ‘Beer garden with free gas barbecue’, reads a notice outside. ‘Bring your own food.’ Perhaps the landlord has just been reading an advance copy of Chris Anderson’s upcoming book Free, subtitled Why $0.00 is the future of business. This book (an expanded version of a Wired article at http://tinyurl.com/2okqbk) suggests a new business model has arisen where companies, rock bands and publishers give things away at no charge in order to make money somewhere else. In truth there is nothing new about this — since Hogarth’s time pubs have experimented with cross-subsidies, offering free straw or, latterly, peanuts to attract customers or make them thirsty.

Nobody fully realised the achievement of Sir Joseph Bazalgette until 70 years after his death. The size of the pipes he specified for London’s sewers was determined by calculating what diameter would handle the average daily flow and then doubling it to allow for natural fluctuation. Having arrived at the optimum diameter this way, Bazalgette arbitrarily redoubled the resulting figure, explaining ‘We’re only going to do this once and there’s always the unforeseen.’ The unforeseen turned out to be high-rise buildings. Without his decision, London’s sewage system would have failed 40 years ago.* Something of the same foresight seems to have passed down to his descendant Peter Bazalgette. Writing in Prospect magazine last year (http://tinyurl.

I had been expecting it for weeks: the announcement of the first Google Street View divorce. A lawyer speaking anonymously to the Sun now claims to have been briefed to start proceedings after his client was browsing the Google site and spotted her husband’s car parked outside another woman’s house. Although the Street View software automatically blurs car number-plates (as well as most human faces), the lawyer believes the photograph offers sufficient proof of identity since the man had customised his Range Rover with distinctive wheel trim (grounds enough in itself, you’d think). If you have never used Google Street View, you can take a look at the Spectator’s front door here — http://snipr.

The strangest thing happened to me the other day. I went into a branch of PC World and found nothing to buy. I have left PC World empty-handed before, but only through an act of will. Occasionally I would steel myself not to buy anything before I went in, treating the trip as a test of my resolve, rather as Gandhi shared his bed with young women to test his self-control. This time it was different. I simply could not see anything left to want. Usually, we technophiles are obsessed with what’s coming next. Faster, smaller, lighter, thinner.

When Professor Susan Greenfield warned last month of the damaging effects of new technologies on childhood, my first instinct was to dismiss it as another hand-wringing exercise. On one point, though, where she complains of the dangers of instant gratification, she might be right. I’m not even sure the problem is confined to children. One trait I notice in myself as a result of using computers is a growing impatience with the real world. The millions of us who spend hours each day working or playing with technology have become dangerously at home in an environment where everything happens at a pace we choose.

David Young’s Spectator article ‘Health’n’safety everywhere, except in banking’ (14 February) was inspired. He might have added that bankers are occasionally made to pay for their excesses. Unlike regulators. For years the Food Standards Agency warned we should eat no more than three eggs a week. It now emerges that this figure had no evidential basis at all: there is no reason a normal person should not eat two eggs every day. I think we should sue. After all, for 50 million Britons to forgo 11 eggs every week seems a heavy loss of net human happiness. A gain in weight, too, since recent trials in Baton Rouge suggest women who eat two eggs for breakfast consume many fewer calories in the course of each day than those who start with bagels.

Two years ago my father decided to try selling books on the internet. Since he had spent much of my childhood expatiating his theory that computers involved more work than they saved, this was something of a U-turn. But he quickly opened a seller’s account on Amazon where he listed for sale the 1,500 of his books he was least likely to miss before sitting back and waiting for the orders to come in. Rather to the surprise of his sceptical sons, orders did come in — and have kept on coming. Two years on, along with a few neighbours who are eBay sellers, he has turned the village post office into a hub for global commerce, parcels being sent out every week to almost anywhere.