SPENCER: Seth, welcome.

SETH: Thank you for having me. It's good to talk to you, doctor.

SPENCER: You've published more than 20 books. I was counting them, and I lost count at 20. What made you decide to write a book about strategy?

SETH: I have to tell you, I think your counting skills are probably better than you're giving yourself credit for. But I wrote a book about strategy because people don't know what strategy is. Most books that say they're about strategy are about something else, like tactics, and they're often for MBAs or generals. I think we have enough leverage and enough freedom in this moment that finding a strategy is important because it doesn't matter how fast you're going, if you're going in the wrong direction.

SPENCER: So what's the difference between tactics and strategy?

SETH: Tactics are all the steps you take to support your strategy. Your strategy is a philosophy of becoming. It is how you dance with the future. It is how you make decisions. It is the arc of the work you're doing, and it dances with the systems around you and other elements that might be invisible. Once you articulate your strategy, plenty of people can help you with your tactics. But if you don't have a strategy, tactics are just a form of copying your competition.

SPENCER: What's an example of a strategy you've used in your own life?

SETH: Anytime we're in a situation where there are limited resources and there are options and outcomes, we're going to use a strategy. And if it's an intuitive strategy — an unstated strategy — it's probably not going to be as resilient or effective as if we can say it out loud. To give you an example, let's say you're 17 years old and you want to get into a college. You need a strategy to do that because the supply and demand numbers are all out of whack, and that strategy can involve an analysis of what's a useful way to spend a quarter of a million dollars. That strategy can involve making thoughtful decisions about the where and the how. But then once you decide where you want to go, it requires empathy because the admissions officer isn't the president or the owner of the college. They're just doing their job, and they're going to admit the people that are easiest to admit. So you'll need a strategy to navigate your way through that. Like most teenagers, I was not particularly sophisticated about talking about what I wanted and how I was going to get it, but what I've tried to do since then is be able to think out loud about where I'm trying to go. So after business school, my strategy was to get a job with the fastest growing company I could find. The reason is, in a fast-growing company, you are more likely to have varied experiences and have the wind at your back as it grows. It didn't matter to me whether that company made ice cream — which is one place I applied — or made computer software. What mattered to me is: would I be surrounded by smart people and growth? It's amazing how rare that sort of analysis is.

SPENCER: I've heard a VC give similar advice when people say, "What should I do in the startup world?" It's basically, "Join a company that's a rocket ship," and there are going to be all kinds of opportunities happening. There are going to be all kinds of ways you can make an impact because so many things are needed at any given moment. I think that's a really cool life strategy. There's this wonderful quote from Max Roser: "The world is much better than it was. The world is still awful in many ways, and yet there's still much more improvement that we can have." How does this relate to strategy?

SETH: Every person listening to this is wealthier and better off than the last king of France was. We have riches beyond measure, and we are squandering them. We are squandering them by feeling like we're trapped. We are squandering them by doing trivial things instead of important things. And mostly we're squandering them by being in a bad mood. You need a certain kind of confidence and enthusiasm to seek out a strategy because you need to believe that you can contribute to making things better. It is easy to let ourselves off the hook by saying, "Things are so bad, I give up," but that's a self-fulfilling prophecy. Confronting any problem, I'd rather have an optimist on my side than a pessimist because an optimist is way more likely to bring initiative to the table to make things better. What Max is saying — and the site he built is such a useful tool; I'm really grateful to him — is seeing the world accurately and understanding the systems that are in it is a critical first step in making it better.

SPENCER: You're talking about our world and data, right?

SETH: This is correct.

SPENCER: Because it seems to me that, if you're trying to do important things, part of it is looking at the world and seeing what's wrong, and part of it is seeing how the world could be, the differences between what could be there in the future and what you're seeing today. Is that what you're getting at?

SETH: We need to see systems, and it's easy to see the symptoms of systems, but the systems themselves are resilient. They like sticking around. I love the expression that a chicken is just an egg's way of making another egg. What the systems are doing is quietly — and sometimes invisibly — enforcing their own gravity, and we take it for granted that it can't be changed. We already talked about the educational industrial complex. That's a system baked deep into our world. The food system in the United States, the healthcare system. But there are also tiny systems, like the math department at Columbia University, at some level, is a system. It's easy to decry some of the side effects of systems. For example, climate change is a side effect of the system that took oil out of the ground and turned it into wealth. The social injustice and caste that so many people have to wrestle with is a system that reinforces the status of some while taking it away from others. But if we can name it, see it, and understand it, it's a lot like the Fibonacci sequence. When we're looking at the Fibonacci sequence, it's not an accident that the next number is what the next number is. It's predictable because it's a sequence. So what is the sequence of the system we are part of? Can we use it to cause it to change?

SPENCER: If you take a really big societal problem like homelessness, you see so many people that are good-intentioned that are trying to solve it, and yet it feels like we're making so little progress. In big cities like New York and San Francisco, we see chronic homelessness around us all the time, and we know that lots of money and lots of effort is going into that. People debate why that is, but it's clear that these are very wicked problems where the structures are self-perpetuating. Whatever those structures are, they're highly self-perpetuating. What kind of advice would you have for someone who's working on a really wicked problem like that?

SETH: Big problems demand small solutions because big problems took a while to get here. Big problems got layered bit by bit by bit, and we can't get rid of all the sediment all at once. When you want to change something in a system, that's a big problem. If you build small components that get better over time, the system will begin to shift. There's nobody in the system of housing and government and health care that wants there to be homeless people. That is not the purpose of the system. It is a side effect of a system. If we can help the system get what it does want, and have the side effect of it be that homelessness is decreased, then homelessness will decrease because the system will do whatever it can to get what it wants.

SPENCER: Does that suggest that people often are fighting against the grain of the system, rather than saying, "Okay, this is the system. This is what the system perpetuates. Let's find a way to make the good that we want to make in the world while still working within the perpetuating system itself"?

SETH: If we talk about the healthcare system, the healthcare system in the United States makes treatments; it doesn't make health. And once you hear that sentence, a whole bunch of things make sense. There are plenty of people inside the system who are rewarded for making treatments, and there aren't that many people in the system who are rewarded for making health. It's tempting to make an announcement one day that we're going to change the whole system. That's probably not going to work, because the system ended up being the way it is because of the incentives that each one of the nodes in the system engages with. The alternative is to use the desire of nurses and doctors and others, including insurance companies, to get the thing they say they want, to cause them to gradually shift their behavior so that the output of the system becomes health instead of treatment.

SPENCER: I think of a similar idea with regard to capitalism, that capitalism is this incredibly powerful force. But if you think about what it's really doing, it's lots and lots of people trying to make money. And so what that suggests is, if there are ways to make money hurting people, then the system will tend to do that. And if there are ways to make money helping people, the system will do that as well. And so if you're trying to say, how do we get the most out of capitalism, we need to make sure to see capitalism in such a way that you can't make money hurting people, but you can make money helping people. Is that connected?

SETH: It's very connected. The elegant way to think about this is that market economies are extremely, extremely effective at filling market needs. What they're terrible at is dealing with externalities and uncosted side effects. And so if someone can make money dumping effluent and waste in the river because it's legal, they probably will, because in a competitive environment, they're saying, "If I don't, somebody else will." And as a result, they are taking one of their costs and dumping it onto the people downstream. So when we accurately show and expense the costs, when we make the externalities internal, the market gets smart. It incorporates the real cost of things and changes. It changes extraordinarily quickly. And so our work is not to say, "Don't make less money." Our work is to say, "If you can make money while owning the cost of all of your externalities, go for it." And so there are defects in the market that community action can fix by causing the creators of externalities to have to pay for them.

SPENCER: The way you describe strategy sounds a bit like vision to me. How is strategy different from a vision?

SETH: Well, it might be similar, but my understanding of the word 'vision' is a lot softer and much less open to conversation. You can be a statesman, a hero in culture, because you have a vision; you have a dream. But when we talk about a strategy, what I want to understand is, what system are you engaging with? Which individuals in the system will voluntarily cheer you on? What's in it for them to do this? What is the role of time and games as you approach this? Now, all of a sudden it becomes a strategy. Garry Kasparov may have a vision that he's going to be the world chess champion, but I want to know his strategy for winning this game.

SPENCER: You also say that a strategy isn't a map; it's a compass. So how does that relate?

SETH: If I'm going to drive from here to Columbus Circle, and all I have is a map from 1884, it's going to take me a very long time to get to you because the roads have changed. But if I have a compass, I'll get there. Maps tend to be a little bit more brittle, and when the world shifts, we're not sure what to do; whereas, a compass keeps us on track to understand that the world is going to change, but we have a goal.

SPENCER: Does that suggest that a good strategy provides heuristics or rules of thumb for how to make decisions? It hasn't pre-made all the decisions, right? You haven't decided exactly what turns you're going to take yet, but you have decided your general approach to getting to the endpoint?

SETH: Can we talk about decisions? Because Annie Duke and I both love to talk about decisions.

SPENCER: Yeah, and she was a past podcast guest.

SETH: You've heard her talk about the best decision you made in the last six months?

SPENCER: I don't know that she talked about that. Tell me about that.

SETH: So, Spencer, you don't have to say it out loud. What's the best decision you made in the last six months? Can you think of what it might be?

SPENCER: Yeah, I have an idea.

SETH: Did it turn out okay?

SPENCER: It has so far.

SETH: Yeah, that's what everyone says. [Spencer laughs] The fact that it turned out okay has nothing to do with whether it's a good decision or not. If you buy a lottery ticket and you win, it was still a bad decision. Buying a lottery ticket is stupid, and the fact that you won is a weird, random event, not proof that you made a good decision. So what we want to do is establish a platform for us to make good decisions. Good decisions simply are: based on what you know at the time, and what you are seeking at the time, is this probabilistically and statistically the best path? If it is, and it doesn't turn out, you still made a good decision. That is part and parcel of what we're trying to do with a strategy, which is, we're here to make a change happen. We're here to get the world to be different. And we need to make decisions all the time to do that. But we can't do that if we don't understand the world as it is and have assertions about how the world might become.

SPENCER: Besides confusing tactics and strategy, what are some common errors you see people make when they're developing a strategy?

SETH: Oh, the biggest one by far is not talking about it. And that's why I wrote a book, so that you can hand it to somebody and have a conversation. An intuitive strategy feels authentic and safe, but it's neither. An intuitive strategy is just some hunches multiplied. A strategy that is stated out loud can be improved, and the people around you can engage with it. In the book, I talk about... Actually, in the seminar I run, Microsoft strategy was written down, and it's super simple. From the day they began, it's, "We're going to be the IBM of software." Because IBM, their strategy was, no one's ever going to get fired for buying IBM. Microsoft said, "We're not always going to be the first people with software. We're not always going to have the best software. But we're going to create the conditions so that big companies and people who want to act like big companies will always trust that we're going to make something just better-enough than average that you'll use it." Repeating that strategy over and over again and letting teams of people come up with tactics for it helped them immensely. Steve Ballmer forgot the whole thing, and that's why he's one of the worst performing CEOs of all time. But Satya Nadella, coming back to the fore, repeats it. It's very clear what their strategy is, and the world can change; they will make new decisions, but the strategy remains.

SPENCER: It's interesting how simple a strategy that is. You might think that a giant company like that might need a really complex strategy. Is that typical, that a strategy would be something you could just write in a couple sentences?

SETH: I think the best strategies are not made by a committee; they tend to be made by a person. And they're almost always quite straightforward. They're always quite direct because you're not embarrassed; you don't have to add a lot of generalized, cushy words. You're saying, "This is what I do, and this is why it's going to be resilient over time. These are the seeds I am planting, and over time, it will grow."

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SPENCER: So what are the benefits of being able to state it out loud? Is it because it helps you get feedback? It helps you reflect on it,?

SETH: Yeah, because if you are averse to being a hypocrite, saying it out loud, first you have to hear it, and then second, it's a math proof. There has to be a QED. You're not allowed to insert and then a miracle happens. I'm going to do this and do this and do this, and then I'm going to be cast in a major motion picture and win an Academy Award. Yet you skipped 42 steps. And people don't want to hear that you skipped 42 steps, but if you say it out loud, you'll make different decisions.

SPENCER: It's funny, that reminds me, I once met with this young guy, and he wanted career advice. He told me he had this big plan for his life, and I asked him about it, and step four in the plan was to make a groundbreaking film, but not because he wanted to make a groundbreaking film, but because he wanted to use it to promote something else he was doing. I was like, "Hold on a second. I think there's a problem with your strategy." [laughs]

SETH: Exactly.

SPENCER: So how do you know when to drop a strategy?

SETH: Okay, so systems persist. The bookselling system, 400 years untouched, and then change agents show up. A change agent is something that buffets the system. It might be an individual, but it's unlikely. It's more likely to be a technological or communications change, something that the system can't fight back against. It tries, but it can't. When a change agent arrives, new opportunities show up, but the people who are clinging to the old model have a challenge. I was at Yahoo in 1999. I wasn't invited to this particular meeting, I'm glad to say. But in 1999, Yahoo had the chance to buy Google for ten million dollars, and they didn't do it. The reason they didn't is they spent the ten million dollars building out Yahoo Kids instead. So what was Yahoo's strategy from 1994 to 1999? It was: "The web is interesting and nascent. People are interested in it. We will build a site where people come and they don't leave. One click turns to ten clicks turns to 100 clicks. Yahoo Weather, Yahoo Finance, Yahoo this, Yahoo that, and we're gonna sell ads on every page. So we're doing best when we get people to stay." And Google shows up and their strategy is, "A change agent has occurred. The Open Web has gotten way cooler, smarter, better. So we're going to build a site where people come and then they leave. We're going to measure how long people stay on our site, and we're going to try to make the number as low as possible. And by the way, when people leave, we'll make a lot of money from the ads they click on when they're leaving." Those are two totally different strategies, and the change agent of the open mature web took Yahoo amazingly by surprise, and they didn't want to change their strategy, even though they should have seen it.

SPENCER: So was that an example where they were just stuck in one strategy because they had been doing it? How would they have known, "Okay, the world is going to change"? Because it's easy looking back to say, "Yeah, that was so dumb of them."

SETH: Oh, they did know. You can look up the peanut butter memo, which is still easy to find on the internet, in which one of their VPs who came after me wrote a detailed memo about how they were losing their way. The CEO they hired, Terry Semel, came from Hollywood, and he said, "I got unlimited money. I'm gonna go build myself a studio." So they started building content creation in Los Angeles because he had a vision for the life he wanted to live. He did not have a strategy that had empathy at its core. He said, "Maybe I could build a great studio and I'd be in charge." So that's what he did.

SPENCER: That's a really interesting example of a strategy that worked for a long time, and then the world changed and they didn't update it. What about for someone who's building a new strategy? Let's say they have a startup or a nonprofit or project. How can they tell if they've done a good job with their strategy?

SETH: First, I'm going to insert a segue where a company did change their strategy. The change agent that showed up shortly after that was streaming, and Netflix had had a really tough fight, and they beat Blockbuster. Netflix, with those red envelopes with the DVDs in them, had won, and they were making 100% of their profit from renting DVDs by mail. They saw streaming coming, and Reed and Ted — the two people who engineered the shift — realized that someone was going to use streaming to put Netflix out of business, so they started a division to do streaming. To do that, they had a series of meetings about how they were going to do it, and at all of the meetings, no one in the DVD division was invited. They weren't allowed to come. The reason is, if they had been there, they would have had a loud voice, and compromises would have been made to protect the DVD business. They knew that they had enough runway and money to build a second strategy, but they also knew they couldn't do both with the same people at the same time. I love that story. That story came in just as I was finishing the book, and I was like, "Wow, that's a great story." Okay, so you wanted to know, how does a smaller company know that they're onto something, right?

SPENCER: Yeah. How do they know whether they're onto something or that they need to shift strategies?

SETH: If you're a gardener, what you want to make sure of is that some of the seedlings you're planting sprout. If you're building a campfire, you want to make sure that you're not trying to light any logs on fire that are bigger than the kindling you have available. But if you can light those logs and those seedlings are starting to grow, it's quite likely you will have enough momentum to get to the next step and then the next step and then the next step. What we're looking for is traction, customer traction. Do you have ten people who would miss you if you were gone? These ten people, are they telling their friends? Because if we look at the big flameouts of venture capital-backed companies, they tend to fail because they were hiding the fact that they could buy a customer, and then the customer would leave, and they would just buy another customer. That's not how it works. Facebook, for all its problems, began on one college campus and then spread to two, and then five, and then ten, and each step was organic, where people couldn't stop telling their friends.

SPENCER: Do you think it's a mistake to try to focus on getting too many customers at once, rather than (say) find your first ten customers, make sure they love it. Then find the next 20 and make sure they love it.

SETH: If you can get ten million customers, I'm very happy for you. I just don't think you can.

SPENCER: Just because in the real world, you have to iterate based on those first customers to make a product that the next group likes and so on? Or why?

SETH: Well, there are two problems. The first problem is that everything in our world that's worth anything evolved; nothing started perfect. Number two is that all customers are not the same. Some people want to watch reruns of "The Tonight Show." Some people want to watch a live video that's way out on the fringe that no one's ever seen before. We have different preferences about new ideas. And so if you try to make something for the mass market, advertise it on the Super Bowl, say this is for everyone, you will almost certainly fail.

SPENCER: It does seem intuitively appealing to many people to say, "Why not try to make something that everyone's going to like? Isn't that going to maximize my TAM — total addressable market — and I can have all this trillion-dollar market and so on?" What's the fundamental flaw in that reasoning?

SETH: It's very tempting. In 1983, I'm at my first job, Spinnaker software, Cambridge, Mass. This guy somehow gets a meeting with me, and he comes in to show me this electronic device. He's raised $200,000 to promote it. And he says, "Here's what I'm going to do. I'm going to buy a 30-second ad on 'The Cosby Show,'" which is the number one show in America. "And it's going to be" — and I still remember the exact words — "like a thresher through a wheat field, like a hot knife through butter. Everyone's going to buy this thing." And I said, "How many customers do you have now?" And he said, "None." And I said, "That's very tempting, isn't it?" That has never once happened in the history of the world, and we want it to happen because we're sort of lazy and we're sort of afraid. The idea that you're going to get picked by a game show host and you're going to win the big prize, that you're going to win the lottery, that you're going to find this magical thing and go from zero to 60 in a heartbeat is so tempting and amplified by our culture. But low-hanging fruit isn't; the low-hanging fruit's already been picked. What we seek to do is live and dance with time because time is available to us, just like everybody else — one day per person per day — and if we use it, we gain traction. I'm from Buffalo, New York, and what you learn about driving in snow is that traction is everything. You don't speed up too fast, you don't slow down too fast, and you'll be fine.

SPENCER: I see these two different models for how things grow. One is the exponential growth of a startup, the hockey stick curve. When you hear about companies that succeeded in a really big way, it often seems to be the case that this is what happened. Their product absolutely exploded. Every year they were doubling or even more their size. You take Rent the Runway as an interesting example where they offer rental high-end dresses. My understanding is there was so much demand right away that their website crashed; they couldn't even handle it all. So that's one growth model. Another growth model is the linear kind of grinding growth model where, day after day, you're just grinding away and making it a bit better and a bit better and a bit better. Eventually, you get to great success after a very long time. I hear a lot about the exponential growth model, but I don't hear people talk about the linear growth model that much. I'm curious, which of them do you think is a better model to think about in your own life?

SETH: Well, I think I want to challenge some of the precepts here. If we have a pond with virulent growth of algae, it's a fun math problem to say how many days of doubling will it take to fill the pond? It's not very many, but it's worth noting the pond does not fill on the first day or the second day or the third day. It looks from the outside, when we're not paying attention, like exponential growth that happened overnight, but it never does. A simple example of how things evolve: I'm sure it's been a long time since you put your hands on an Apple Newton. The Apple Newton came out long before the iPad or the iPhone, and it's widely derided as one of the biggest tech failures of all time, made fun of in the Doonesbury comic. The Apple Newton actually sold 100,000 units in its first month at $700 each, back when $700 was a lot of money. That is almost exactly the same number of units that the iPhone sold in its first month, give or take. So what's going on here? Why is it that the iPhone is the single most successful consumer product in the history of the world, and no one has an Apple Newton? What was the difference? The difference is that the iPhone quickly — but not right away — had an App Store, and the App Store started to evolve, and different apps showed up that Steve didn't like, that people didn't predict, and each app brought new people along with it. It wasn't for months or years before the iPhone was everywhere. The difference was the Newton, they didn't stick with it. They didn't let it evolve. They didn't have any traction. And so it's gone. If you look at when Rent the Runway was founded and when Rent the Runway hit its stride, it wasn't a week. It was a lot more than a week.

SPENCER: It seems like pings only become visible when they break out and you suddenly become aware of it, and you think, "Oh, wow, that just was a breakout success," and you don't see all the undercurrents that might have been brewing for many years.

SETH: Yes, exactly right. That's the thing with the pond and the algae, where a disease that suddenly comes out of nowhere, and then everyone has it. Ebola didn't go from one patient to threatening an entire continent in a week. It sits around for a while, and then it hits a patient zero, and then it starts to spread, and everything else. Leaving horrible diseases out of the discussion, what I'm getting at here is this: the very fact that we're having this conversation about the fundamental precepts of strategy and the fact that this conversation is rare is precisely why we need to talk about it, because this should be the first primary thing we understand before we expend any effort at all. But people don't really understand it.

SPENCER: One thing we haven't talked about is where good strategy comes from. You can take an example like Microsoft strategy, which seems to have worked brilliantly for them, but someone had to think of that. Are some people just creative and able to create great strategies? Or is there some approach to coming up with your strategy?

SETH: I would say almost all great strategies are stolen. Just like there's no first rock and roll song, there's no first piece of furniture, you rhyme with what came before. And before there was Microsoft, there was IBM, and before there was IBM, there was Sperry Rand. And before there was Sperry Rand, there was the Western Union Corporation. There's been a long history of making something that big companies are comfortable with. Human beings don't want that many different things, and there aren't that many different structures for how to build a resilient, regenerative system on top of other systems. The hard work is deciding to make it your life's work or your decade's work. There's a magical book called "The Wizard and the Prophet," and it's about two scientists who lived at about the same time, who had fundamentally opposite strategies about climate. Norman Borlaug, who won the Nobel Prize, may have saved the lives of more people than any human who has ever lived. His strategy was very simple. He would hybridize and develop grains that could grow with fertilizer in places where they traditionally hadn't grown. The end. All of a sudden, there's wheat all over Mexico. All of a sudden, there's rice that's able to feed more people. But it wasn't all of a sudden; it took decades. At the same time that he was doing that, which of course ended up denuding the topsoil of the world and putting an enormous amount of carbon in the air because of fertilizer, a different pioneer had a strategy. He said the carrying capacity of the Earth is lower than we think, and if we don't scale back, cut back, and wake up to the environmental issues around us, we're all going to die. Both of them had very interesting strategies, and neither of their strategies was original to them. They just saw that — no pun intended — they could plant seeds and they would grow. They could find traction that would permit them to keep going on the path.

SPENCER: Shifting topics a little bit, I've heard you say that there are three big principles in marketing. There's affiliation, status, and freedom from fear that marketing operates on. Could you explain? What are those three factors?

SETH: I would say humanity operates on those three factors. I think once you have a roof over your head and enough to eat, those are the only three factors that motivate most people most of the time. Freedom from fear means that we're afraid of fear; we would rather do something that doesn't expose us to the tension that we feel about things that might not work or insufficiency or inconvenience. Affiliation is who's to the left, who's to the right? Who am I in sync with? Am I popular? It's high school all over again. Status is who eats lunch first? Who's up and who's down? Who is seen as having influence and power? When we offer people one or more of those things, they are likely to be interested in them, and everything else is just a story that helps us get those things.

SPENCER: Maybe you could give an example of great marketing that uses one or more of those factors.

SETH: Okay, well, if we think about status, it's not just who has the nicest car in the Hamptons. It's not just that you have a Birkin bag and I don't because I can't afford to get off the waiting list. It's something like, "I have a reputation in this town as being the best doctor," or it's "My kid is going to this college. Look at the sticker on my car. I must be a better parent than you." Or it's, "Who is sitting closest to the bandstand at the festival or the picnic because they got here early?" These are all status roles. These are all things that indicate to other people that they have something we might want. Affiliation is, "I went to a wedding and everybody was wearing a tuxedo, but no one had told me that tuxedos were required. So I felt stupid because I did not fit in. I wasn't naked, but I didn't fit in the way I was hoping to." And freedom from fear is, "Hey, there are only 20 Taylor Swift tickets left, and the box office opens at 8 a.m. How early should we wake up to get there? Because I don't want to feel bad that I missed it. I'm afraid we're going to be left out."

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SPENCER: Sometimes people see marketing as unethical. A book on marketing you wrote, you even had this kind of cute "Marketing is lying" that was crossed out, and then you talked about stories instead. What do you think the distinction is between ethical marketing and where it crosses a line and becomes unethical?

SETH: I am really worried about manipulation. Manipulation is when we use the tools of storytelling and marketing and pressure to get someone to do something that they regret later. Great marketing doesn't do that. Great marketing helps people decide to do something that they don't regret later. I worked on the marketing of toilets in parts of Kenya, and there was an enormous amount of resistance in certain neighborhoods to paying money to have access to a clean facility. But the people who tried it kept coming back because the self-esteem and good health that came with it was worth it. When you raise money for a charity, you are asking people to give you money in exchange for a story. But if your story is false and people end up feeling ripped off because you pressured them, you manipulated them, that's not okay. On the other hand, if you talk to a philanthropist who has had life-changing satisfaction from engaging with a nonprofit, your marketing was a gift. It wasn't taking; you were giving. The simple test is, are you willing to tell your mom exactly what you're doing and why? If the answer is, "Yeah, but I'm going to tell her that I'm just taking advantage because, if I don't, someone else will," I think that's unethical.

SPENCER: That's a nice test. Do you think that a lot of marketing done today is unethical, or do you think that mostly marketing is above-board?

SETH: Well, I don't know what units are in the set we need to count to get to the word 'mostly.' I can tell you that, by volume, a lot of email and social media marketing is obviously unethical. Some fake doctor selling you some fake patent medicine that's going to pretend to help you lose weight while putting you in debt to sell you these expensive pills, that's clearly unethical. Yet that might be all you see all day because something's tracking you across the internet. Do I think the world has been relentlessly getting better my whole life, with a few exceptions? Yeah, and that's partly because ethical marketing pays for itself, so you get to do it more. It's the shortcut hustle, hype, and spam — I don't want to call that marketing because I don't think it is marketing; we have words for that, words like rip-off and selfishness — that's not marketing; that's something else.

SPENCER: One area where I see this come up a lot is products where you can't really evaluate how good they are. Let's say you take a supplement. The supplement claims to increase your longevity. How on earth do you know whether that supplement is helping you? They can claim all kinds of things about the supplement, but you can't really evaluate it, and so you're just buying the story and hoping for the best.

SETH: Okay, so now you're talking about placebos a little bit. I love placebos. I'm a fan of placebos. There's a group called the Journal of Wine Economists, and they're a serious group, and they've done a bunch of studies. One of the studies they did among sommeliers and really sophisticated wine drinkers is they had them taste $100 bottles of wine and $10 bottles of wine, and almost unanimously, they preferred $100 wine. Then they switched the fluid in the bottles and had them taste it again. Almost unanimously, they preferred $10 wine in the $100 bottle. In a blind taste test, people actually prefer the taste of $10 wine to $100 wine. So is the story that you get when you buy a $100 bottle of wine making the wine taste better? Obviously, yes. Is it worth it? Could be. If we look at the data from Harvard on the efficacy of placebos, on average, it's 33%, meaning that believing you're taking something that is going to make you better has a spectacular impact on whether or not you're going to get better. In fact, if a doctor hands you two pills and she says to you, "This is a placebo, it will make you feel better," it will, because the brain has a lot to do with us enjoying wine more or getting better or living longer. Generally, a placebo is a bargain. Where I have problems is when people sell a placebo that doesn't actually activate anything in our brain to make us feel better or even makes us sick. That's selfish. That's manipulation.

SPENCER: It's really interesting to me, because suppose someone sells a placebo, but they claim it's not a placebo, yet it does actually give people the placebo benefits. Do you view that as unethical, because they're misleading people about the nature of the benefits?

SETH: You know, this is interesting. So which is faster, my electric Rivian pickup truck or a Corvette? A Corvette looks way faster. So there's a placebo when you drive a Corvette, which is you feel like you are driving a sports car. My pickup truck is actually faster than your Corvette. I think there's a lot of gray area here. I do believe, as a matter of public policy, we have benefited from double-blind studies. We have benefited from knowing that if it's an FDA-approved prescription, it has been through a lot of rigorous testing, and it performs better than a placebo. I don't think we should allow selfish marketers to chip away at that.

SPENCER: It's interesting because we can get benefits from placebos, but simultaneously, we at times have to be very careful to distinguish an effect from a placebo effect so we can continue making scientific progress. If all medicine was placebos, that would be clearly inferior. I've done this sort of fortunate, sort of unfortunate, thing to myself where I think the placebo effect doesn't really work on me anymore. I test things on myself all the time. I'm always running one to two self-experiments, and 80 to 90% of the time, I conclude the thing doesn't work. I think I've somehow psyched myself out of the placebo effect.

SETH: I would bet that you maybe have chipped away a little bit, but I don't think you can talk yourself completely out of the placebo effect, particularly when it extends far beyond pain relief for headache. There's a placebo effect, for example, if you are traveling somewhere and your flight is delayed; the half hour you are sitting there feels worse than the half hour before that, even though the only thing that changed was the story in your head.

SPENCER: Yeah, there's a great story — I've not verified whether this is true — that at airports, if they get you to your baggage check too quickly, people are actually less happy, even if the total amount of time is the same, because basically, you'd rather be walking to the baggage claim than sitting there waiting for your bags. [laughs] And I think this is where placebo starts to blend into general psychological phenomena like framing or just the way you're perceiving something. If I drink my morning tea and I pay really close attention to it and think about the farmer that had to produce it and how it came thousands of miles, I'm going to have a completely different experience than if I'm just like, "Oh, this cheap tea," whatever. Is that a placebo, or is that just the fact that what we're responding to when we do anything is not just the thing in front of us, but the story we're telling ourselves about the thing?

SETH: Yeah, another example from my friend Dan Ariely. They did a study with these toys that are like Legos, and they paid a bunch of graduate students 20 bucks an hour to put together a bunch of these toys. At the end of an hour, they said, would you like to do another hour? Here's another 20 bucks. They measured how many would do that. Then they did the experiment again, but this time, as the people were putting it together, the experimenter right in front of them was taking it apart and putting it back in the box. The number of people who stayed for the second hour dropped dramatically because we want to tell ourselves a story of utility and meaning and worth, and to have our work destroyed, even if the work was nothing but putting together some toys, it hurt too much, and people couldn't bear it.

SPENCER: Presumably, people know that eventually it's going to be taken apart anyway, but seeing it ruined the illusion, right?

SETH: Yeah, you can see what your rating is on Upwork as an employer, and I had a perfect rating on Upwork. I'm very proud of that until recently. Because it was an important project, I hired two different people to work on it, and the first person finished. So I went to the second person and I said, "Thanks. No need to finish this up. I'm paying you. Here's a tip, but we already have it done," and they were offended at that and gave me three stars instead of five.

SPENCER: I totally can relate to this. I hate backtracking. If I took the wrong direction and I have to go back exactly the same path, it feels better psychologically to just go a different route, not the same way I walked. [laughs] I've heard it said that, at a very fundamental core level, humans are story-processing machines. That is the language with which we do things. Do you agree with that?

SETH: Oh, there's no question about it. I think that... And you're the expert on this. I believe first we know that LLMs and AI don't actually think and know things; they're just doing a math thing. But we in our brain invent a story that takes the intentional stance, imagining that Claude or whatever has a voice in its head the way we have a voice in our head. My theory lately is that's how our brains work, too, that when I think about speaking, I almost never know the end of a sentence before I start the sentence, that we are picking the word and then the next word and then the next word, the same way that it may be that an LLM does that thing.

SPENCER: It's really interesting that you say that, because some people want to just point at LLMs and be like, "Look, it's just a bunch of numerical operations. It's a bunch of linear algebra. That's not really thinking." And you're like, "Yeah, but what do our brains do? We don't know. Maybe our brains are doing a bunch of linear algebra." [laughs] But, yeah, we tell some nice stories about what our brains output after the fact. And it is really fascinating how we don't have direct access to everything going on in our minds. There is a bunch of stuff that happens where the best we can do is look at it after the fact and try to guess why we did it. It's like, if you've ever done something really dumb, like you go to put a glass down and, instead, you drop it right on the floor and it explodes. And you're like, "Why did I do that? I don't actually know." I can try to reason about it.

SETH: Right, and there is no me; there's just all these processes of which only a few of them have a narrative. And the thing about the narrative — and this is getting back to the book and the idea of talking about it — is the narrative happens after our brain does the work, not before. So the way I think about this is, imagine you're watching a sporting event where there's play-by-play. What happens on television is the game gets played and then the announcer, a few seconds after, is telling you what is happening. So this is very easy to visualize. Bob passes the puck to Jane. Jane shoots; she scores. All of this was said after the thing just occurred. What would happen if we recorded the show and just split the audio and video tracks and moved the audio up so now the announcer said things and then the people on the ice did them. That would be weird. But we like to think that's what our brain is doing. Our brain tells us to do something, and then we decide and go do it. But in actual fact, when we test it, it's the other way around. We make a decision, we start feeling hungry, and then our brain says, "Hmm, I'm feeling hungry," not the other way around.

SPENCER: It reminds me of the way people talk about the stock market. If you read the news, you'll constantly hear things like, "Oh, and the Chinese stock market fell today due to fears about a crackdown on the economy." You're like, "How on earth do you know that? That's just a story you're telling. We know it went down 2%; we don't know why." So, yeah, it just seems ubiquitous. But do you think that good decision-making involves getting more interplay between the part of you that's making the decision and the part of you that's telling the story?

SETH: Exactly. This is exactly it. So the wedding industrial complex, what's the right amount of money to spend on a wedding? The answer is, "Exactly what your best friend spent, plus more," and once you realize that that is the story you are telling yourself, you will make a better decision about your wedding.

SPENCER: Right, so in that example, if you're just trying to prove to yourself or prove to other people that you're good enough — that you're having a fancy enough wedding, or that you're of a certain social class or whatever — then if you realize that, you can at least reflect on, "Well, is that actually my value?" without just doing it, without recognizing...

SETH: Or just spend the money on things that your guests will notice have status, and don't spend the money on the other parts that are expensive but invisible.

SPENCER: Just go right for the pure status thing, like just set fire to a bunch of money in the middle of the dance floor.

SETH: Exactly, because they'll tell that story for years. Or acknowledge that you're not going to win that game and don't play it and play a different game instead.

SPENCER: With things like this where people obviously actually value status — people want to have higher status — but there's also a discomfort with having a desire to want higher status, that doesn't feel good. It's easy to suppress the fact that you have that desire and maybe act on it subconsciously because maybe it's actually uncomfortable to be too aware of it.

SETH: That's right, because too much status hurts you on affiliation. Affiliation is a counterbalance to status. And when it gets out of control in an Ayn Randian Silicon Valley world where all people are racing for is status, things fall apart. On the other hand, in communities where everyone only cares about affiliation and isn't willing to lean into status, progress often falls apart. So the two of them are in tension.

SPENCER: Seth, before we wrap up, final question for you: when people are making their strategy, what's the single most important thing that they should be thinking about?

SETH: The two questions are, who's it for and what's it for? Who are you seeking to change and what is the change you seek to make? You cannot change everyone, so be specific. Put yourself on the hook. Specifically who are you seeking to change, and specifically what change would make this worth it? If you're not trying to make a change, don't bother me. Don't bother anybody, because we're doing fine. If you are trying to make a change, make a change you're proud of and be very clear about where you need to plant the seeds and what it's going to take for them to grow.

SPENCER: Seth, thanks so much for coming on.

SETH: Thanks for having me. Keep making this ruckus, sir.

[outro]

JOSH: A listener asks: "If you think of yourself at age 70 or 80, do you imagine you'll still be striving for improvement?"

SPENCER: I certainly hope so! I think you could you can still benefit from improvement throughout your entire lifetime. Obviously, the younger you are, if you can both make an improvement and maintain that improvement, you'll get the benefits from that improvement for longer; it will hopefully propagate forward for the rest of your life. So that's great. So maybe in that sense there's a somewhat less incentive when you're older. But I still think when you're older, there's still a lot of benefits to improving yourself, living more the way that you would want yourself to live, living more by your own values, and being able to accomplish your goals better, whatever those are.