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Alchemy book summary

Alchemy book cover

Psycho-Logic

  • Companies tend to make decisions assuming that humans behave rationally and logically. We don't.
  • It doesn’t pay to be logical if everyone else is being logical. In real life, most things aren’t logical — they are psycho-logical.
  • The smallest things can have significant impacts. The way to find these things out is by experimenting and asking the dumb, basic questions.
  • Test counterintuitive things only because no one else will.
  • It is easier to get fired for being illogical than for being unimaginative.
  • Irrational people are much more powerful than rational people, because their threats are so much more convincing. Being rational means you are predictable, and being predictable makes you weak.
  • For a business to be truly customer-focused, it needs to ignore what people say. Instead it needs to concentrate on what people feel.
  • You can trick ten people once, but it’s much harder to trick one person ten times.
  • Don't design for average. In some cases, "average" doesn't even equate to a real person. Focus on outliers instead. Metrics, and especially averages, encourage you to focus on the middle of a market, but innovation happens at the extremes.
  • Weird consumers drive more innovation than normal ones.
  • The attractiveness of what we choose is affected by comparisons with what we reject.
  • We constantly rewrite the past to form a narrative which cuts out the non-critical points, and which replaces luck and random experimentation with conscious intent.
  • Reason arose in the human brain not to inform our actions and beliefs, but to explain and defend them to others. It’s an adaptation necessitated by our being a highly social species. Reason is the brain’s legal and PR department.

Signaling

  • Reciprocation, reputation and pre-commitment signaling are the three big mechanisms that underpin trust.
  • All powerful messages must contain an element of absurdity, illogicality, costliness, disproportion, inefficiency, scarcity, difficulty or extravagance — because rational behaviour and talk convey no meaning.
  • The potency and meaningfulness of communication is in direct proportion to the costliness of its creation.
  • Feelings can be inherited, whereas reasons have to be taught, which means that evolution can select for emotions much more reliably than for reasons.

Satisficing

  • Our brain has evolved not so much to find a right answer as to avoid a disastrously wrong one.
  • It’s better to find satisfactory solutions for a realistic world, than perfect solutions for an unrealistic one.
  • Just because it’s irrational, it doesn’t mean it isn’t right.
  • We will pay a disproportionately high premium for the elimination of a small degree of uncertainty.
  • While a brand name is rarely a reliable guarantee that a product is the best you can buy, it is generally a reliable indicator that the product is not terrible.

Psychophysics

  • Give people a reason and they may not supply the behaviour. Give people a behaviour and they’ll have no problem supplying the reasons themselves. (It's easy to fool ourselves with the stories we come up with.)

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