Video summary
Rory Sutherland begins by contrasting top-down theoretical approaches with bottom-up observation, arguing that applying standard market rules to complex systems like property or dating is fundamentally flawed. He illustrates this distinction using the efficient market hypothesis and his experiences in advertising versus economics. To highlight how markets function differently depending on their nature, he uses a personal anecdote about driving an American car in Austin, Texas, noting the differences between US and UK licensing and humorously speculating that residents might place fake speed limit signs to trick autonomous electric vehicles into slowing down. He connects this unpredictability to his prediction five years ago regarding hackers immobilizing self-driving taxis with cones or weighted balloons on roads, emphasizing how real-world systems often defy rigid theoretical models. The core of Sutherland's argument focuses on the structural similarities between three specific markets: graduate recruitment, property sales, and online dating. In all these arenas, participants face a significant information asymmetry where they must rely on poor proxies to make initial decisions because they lack sufficient data about potential partners or employees. For job seekers, this proxy is often university ranking (such as Russell Group status), while in the dating world, it reduces individuals to static photographs and brief text descriptions. Sutherland argues that these filters act like a "peacock's tail," signaling commitment rather than actual ability or human capital, effectively discarding talented individuals who may not fit the initial criteria but possess valuable traits like humor, wit, or deportment that cannot be captured in an image or resume. Sutherland critiques the efficiency of this uniform filtering process by comparing it to a more chaotic pre-internet era where "noise" in the system allowed for diverse and effective matching mechanisms. In traditional British dating, people might meet through social circles like rugby clubs, while house hunting often involved stumbling upon properties unexpectedly rather than starting with a rigid budget constraint. He suggests that if every HR director or estate agent applied identical prejudices—such as only hiring Oxbridge graduates or buying homes in specific price brackets—the market would suffer from a ludicrous undersupply of suitable candidates and assets. Conversely, he proposes that multiple differing biases across the industry could create greater diversity of opportunity than current equality-based sorting methods, allowing for more efficient market clearing where individuals find partners who are disproportionately attractive to them rather than universally appealing models or properties. To resolve these inefficiencies without compromising fairness in a regulated environment like recruitment, Sutherland suggests looking at property listings as an example of how choice architecture could be improved by forcing agencies to list downsides alongside upsides. He advocates for a strategic approach where buyers seek out what others hate but do not mind themselves, rather than searching for a "perfect" house or partner that appeals to everyone. This game-theoretic perspective acknowledges that while men might appear shallow in their initial filters, personality features are crucial long-term factors often missed by static images. Ultimately, the speaker concludes that rigid consistency in selection criteria across an entire industry leads to waste and inefficiency, whereas a messier system with varied starting points allows for better outcomes where people find partners who truly suit them despite not meeting standardized metrics.
Read the full video transcript
what have you learned about the choice
architecture of online dating sites and
how it relates to property websites well
this is this is kind of interesting
because one of the reasons one of the
reasons I like working in advertising
and marketing is I think the correct way
to solve problems and to understand
what's going on is really bottom up not
top down by which I mean
um actually open-minded inquiry and
observ ation of all kinds of things okay
tends then over time patterns start to
emerge and I think the better way what
we try and do in politics in particular
is we start with a theory we then impose
the theory on reality we trumpet the
areas or the scale at which that theory
succeeds and we sweep under the carpet
those areas where the theory basically
fails okay so if you take something like
okay uh if you take something like the
efficient market hypothesis it probably
has an application in a few fields and
those are well celebrated and measured
by economists it's a complete nonsense
to apply um the same rules of a market
to say the property Market or the dating
markets as you do to the market for a
commodity like iron or or something of
that kind okay they're fundamentally
different in particular if you look at
the property Market there's a problem
because when people go and buy most
things you know uh if you went out to
buy a car I've got to ask about your car
I'm a big Macky Enthusiast have you gone
electric or in Texas does that get you
vilified it will it would get me killed
not in Austin though uh yeah Austin suff
Austin okay it's sufficiently
Progressive I think I'll get Camaro a
Camaro for my first car in America uh
FYI there's no license equivalency
between the US and the UK which means
that I need to retake my theory test 18
years after I took it in American which
is weirdly difficult it's going to be
it's all the road signs are different
what does this particular thing mean all
of my knowledge about roundabouts is
totally [ __ ] useless obviously my car
which is obviously American has an
interesting American feature which is
you can set the cruise control to
effectively go at the speed limit plus
or minus X miles an hour so it's using
this satnav us a mixture I think of
satnav and actually Optical Character
reading the road which does raise the
question that people in residential
areas are going to put up fake 7 m hour
signs along their streets so that
electric cars all automatically slow to
a crawl how hilarious but um so I
imagine you know you noticed that
wonderful thing where people as I
predicted were hacking autonomous taxis
in San Francisco put con you put a cone
on the on the hood as they'd call it and
the thing was basically immobilized in a
state of complete confusion and I
predicted that I'm proud to say five
years ago I said people will hack
self-driving cars and they'll discover
that all you got to do is put a pattern
of weighted balloons on the road and the
things will go absolutely Del and sure
enough someone discovered that okay
dating sites so dating sites okay so
let's look at something here which is so
to go back to my original point the
market for property is highly
problematic because what most people do
when they buy uh they look for property
to buy is they work out how much Deposit
they have they then work out how much
they can borrow they add those two
together and they start looking for
houses around that price okay so the
basic heuristic question they're asking
is how much can I afford and then they
start
looking now if you notice we don't buy
anything else like that we don't buy
cars that way okay if you went and said
okay how much money can I raise as a
deposit how much can I borrow people be
driving around in Bugattis and you know
Bugatti Veyrons and Bentleys all over
the place we don't do that with cars we
kind of take a balance on how much
property how much car do I actually need
how much do I care about cars Etc but
because we have this urtic that
effectively property is the only taxfree
big bet you can make in your life okay
with huge tax advantages in terms of the
capital gains everybody maxes out now
unsurprisingly people who sell property
have noticed this fact and consequently
property prices go up and up and up
because everybody's effectively so as
interest rates go down it doesn't make
anybody richer it just means that they
set their Target price for the property
they're prepared to buy even higher than
before sellers of aren't complete idiots
so they basically put their price up to
get whatever they can get and so
consequently you end up with an absurd
spiral okay so the property Market is
fundamentally unlike say the market for
as I said whether it's iron ore or
indeed whether it's you know a high
quality energy drink yeah is doing some
implausible product placement it is now
it struck me also that there's a
fundamental problem in three things
which actually is the same in all three
cases and it's the market for graduate
recruits the market for first in other
words employees for first
jobs the market for property and the
market for dating okay which is that two
problems when you recruit someone
straight out of University or you
recruit anybody for a job in which they
have no experience at all okay you don't
know anything about them realistically
but you need a proxy
so the proxy seems to have become you
know Russell group University 21 or
above and everybody uses that as the
first stage filter for their search and
everything that doesn't meet those
criteria or everybody who doesn't meet
that those criteria effectively
disappears out of the marketplace
despite the fact that they may be
possessed of unbelievable talents they
just either had a good time at
University or a part of that very large
part of the population who are very very
clever but don't feel motivated doing
academic hypothetical things okay you
know if you think about it I know people
people who are good at chess are
probably quite bright in some respect
but you can't say someone who's bad at
chess is thick right you know my
brother's an astrophysicist he's [ __ ] at
chess right okay um uh you know I mean
they they do actually record games that
sort of Einstein and Oppenheimer played
in The Manhattan Project and they're
kind of okay chess players but they're
nothing amazing
so you know there are quite a lot of
things that are oneway proxy necessary
but not sufficient in other words
exactly necessary but not or sufficient
you know but but actually not necessary
so actually you know now what's happened
here as a consequence is that we're
automatically just discarding now let's
take dating as a parallel there what's
your first filter okay the HR person's
first filter is two one and above you
know and then they interview them but
but the first filter is that two one and
above they've got to have a degree in
fact increasingly I noticed my
daughter's generation are doing master's
degrees because even if you got a first
class degree from a Russell un russle
group University it's that positional
good thing where you create hyper
competition and it's really a kind of
peacock's taale signaling effect okay so
what you're really proving is not
ability or human capital it's just
commitment to the area in which you're
invested okay now in dating sites it
strikes me that what you have I I got
married long before they were on
websites and as a contemporary of mine
said who also got married before there
was online dating he said I feel like I
caught the last helicopter out of Saigon
you know genuinely I wouldn't know where
to get started in online dating but
what's the first Criterion you use
accept or reject now I'm assuming here
you're a guy I don't quite know it works
slightly differently I think for women
because obviously the demand is
completely asymmetric okay but it's a
still picture of them and some words of
text all
right now how could just as two one or
above is not actually a brilliant proxy
for how valuable an employee this person
will be it's all you've got okay I don't
think a still photograph and a few words
of text uh in any way a proxy for who
you might Forge a long-term relationship
with okay because what you're doing is
you're making a series of decisions
you're going you're working your way
down the decision tree to use the
language of choice architecture and
because every decision you make you're
happy with you think therefore that a
series of seemingly rational decisions
will reach an optimal
outcome but actually I me for example
there are people who are extremely
attractive actresses who wouldn't make
it as a model because their
attractiveness is to do with motion
humor wit pres you know all those things
which matter more in a relationship than
how you look in a static photograph you
know I'm showing my age here but Cameron
Diaz probably wouldn't have made it as a
Vogue model okay but know Jennifer
Aniston I don't know okay but what I
mean what I'm saying is what makes them
attractive is a whole mix of things like
humor deportment movement you know
subtle things which cannot be captured
at all in that initial filtration phase
same goes for employment what makes a
good employee cannot really be very well
captured by that initial filtration
phase same goes with property okay which
is what do people do when they look for
property they go okay uh first of all
how much can I afford and they start
looking at that point point then they
ask the second question which is where
is it and how many
bedrooms now all I'm saying okay is that
it seems rational while we're going
through that process it seems perfectly
sensible because each stage we're
filtering what we don't see the dog that
doesn't bark in the night is what we're
rejecting that might be great okay now
here's where the problem really gets
acute okay everybody's going through
this decision tree starting at the same
place and working through in the same
order that's what online Choice
architecture does now if you look at how
people chose houses or for that matter
girlfriends or boyfriends back in the
pre- internet age there was a lot of
noise in the system you know I mean the
conventional British way and the you
know the New York way is you go out with
people and first of all find out how
much they earn as far as I can see okay
I mean dating in New York always strikes
me as like a weird Jane Austin kind of
transactional field okay but in Britain
basically you went to a rugby club and
got pissed with your friend's sister
okay and then you discovered you really
liked each other now that's messy I'm
not suggesting it's optimal there's a
lot of choice you're missing out but
everybody effectively found a house
found a partner in a different way the
choice architecture was different the
starting point was different the initial
filter in many cases people found a
house because they walked past an estate
agent window they drove down a lane and
saw a for sale side mhm and in many
cases they didn't start searching with
800,000 and down right and it was messy
so people had houses had lots of
opportunities to appeal to people and
partners had lots of different strengths
which they could deploy depending on the
circumstances in which the meeting took
place because I mean guys aren't that
shallow men are a bit shallow but there
are hell of a lot of Personality
features okay now if everybody chooses
according to the same criteria it's a
much less efficient market clearing
mechanism than if everybody's a bit
messy so let's assume that you had you
know I I mentioned this earlier because
I was talking to a kind of recruitment
firm I said let's imagine where you had
a world where weirdly everybody's HR uh
director was like oddly prejudiced okay
but they're all prejudiced in completely
different ways you know one person was
obsessed with hiring Oxbridge graduates
another person was obsessed with hiring
Jamaicans uh a third person was obsessed
with hiring scousers okay over time
multiple differing prejudices or what
you might call diversity of opportunity
rather than equality of opportunity
would provide a more efficient market
for talent than the one we have now
which is regimented and identical and it
seems to me there's a conflict here
which is in recruitment the needs to
look fair means you have to apply the
same criteria to everybody which means
as that kind of consistency of selection
spreads out across the whole of Industry
okay it actually means that there's a
ludicrous undersupply of certain people
who meet those initial criteria while
the 50% 80% of people who don't meet
those initial sortation criteria
effectively go to waste yeah it's like
there must hell girls who are single
because they just don't look that great
in the Still's photo right now there's a
further thing which is now i' got to be
really careful because my wife's going
to watch this okay but actually you
don't want a wife or a house
which appeals to everybody right if you
you know if you marry a supermodel right
basically they're going to run off with
your tennis coach and take your house
right what what you want is someone
who's disproportionately attractive to
you yeah all right that's the sort of
game theoretic approach of house hunting
so my my approach to house hunting I'll
stay out of dating because my wife might
be watching this okay it's to some
extent a form of and I've often said
that estate agencies would be a lot
better if they actually were forced to
list the downsides of a property as well
as the upsides because the shrewd way to
choose a house is not to say what's my
perfect house it's to say what do other
people hate that I don't mind in other
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