Nudge Theory | Rory Sutherland

This episode was first published in May 2021.

Nudge Theory burst onto the scene in 2008 when Cass Sunstein and Richard Thaler published their book “Nudge: Improving Decisions About Health, Wealth, and Happiness.” The simplest models of economics take preferences as given, but nudge ideas suggest we can be moved, steered, and in some cases manipulated. 

Nudge has influenced politicians around the World. There are “Nudge Units” in government in the UK, US, Germany, Japan, and even Canada. The World Bank, United Nations, and European Commission have “Nudge” teams.

Guest Rory Sutherland, Vice chairman Ogilvy UK

Website 

To book Rory for your event email

Canadian Nudge Team = BeSci Team 

UK Nudge Team = Behavioural Insights Team 

Australian Nudge Team = Behavioural Economics Team of Australia 

American Nudge Team = Social and Behavioural Sciences Team 

Stories and Strategies is the Official Podcast Sponsor of IABC World Conference in Toronto June 14-16, 2026

Click here to check it out https://wc.iabc.com 

Transcript

SPEAKER_02 0:06

My local grocery store or supermarket is the perfect example of nudge theory in action. When I first go inside, the fresh fruit and the bakery are right at the entrance. Now this is typical globally for good reason. The smell of the baked goods, the brightly colored fruits, and the easy-going music on the speakers are all attempts to make me relax. When I'm relaxed, I'm hungrier. And when I'm hungrier. The milk is usually on the opposite side of the store from the bread. So if you've come to just get milk and bread, there are a lot of choices to pass up between the two.

SPEAKER_00 0:51

Hi, how are you? I think we're gonna try uh two of the bacon cheddar potatoes and two of the herb and garlic potatoes.

SPEAKER_02 1:02

Every aisle and shelf offers interventions that involve altering small-scale physical and social environments or microenvironments. The spin doctors use the term choice architecture.

SPEAKER_01 1:26

So if I come on Fridays, the fronds are half off.

SPEAKER_02 1:40

Big companies like Coke and Pepsi pay extra to reserve shelves at high level. High level is eye level. If you have a favorite grocery store, you get to the point where you know where everything is, and then suddenly, one day, they change all the displays, but in a really weird way. And you don't know where things are anymore. Well they do that on purpose, not to make things easier, but to make things more discs orienting. Suddenly you need to pay more attention, so you get distracted by more items. So today, on stories and strategies, some of these nudges are manipulated.

SPEAKER_03 2:20

Hey, how are you, Debbie? How are you?

SPEAKER_00 2:34

Yeah, okay.

SPEAKER_03 2:36

Yeah.

SPEAKER_02 2:44

We look at nudge theory, brilliant behavioral economics, or is it getting too pushy? My name is Doug Downs. From Brian Adams' Brand New Day, written by Adams and Jim Valance on the Polydor label. My guest today is Rory Sutherland. Hi, Rory. Hello there. Hi, and you're joining us today from Kent, uh, just southeast of the big city of London, right?

SPEAKER_05 3:34

That's it. Yep. Been there more or less for the last year. I've been into London, I think, three times since February 2020. Yeah. Uh, when previously that was something like four times a week or five times a week.

SPEAKER_02 3:49

You know, I think if New York is the city that never sleeps, London is the city that just never stops. It seems to go on and on forever geographically. So it's it's nice to see there's some separation somewhere.

SPEAKER_05 4:00

Yeah, I think it's one of those interesting places where you'll see much more uh property shift if we move to a kind of two days a week uh flexible working model.

SPEAKER_02 4:10

You're right. This whole COVID thing is is nudging us, shall I say? Rory, I'll say it. You're one of the most creative thinkers in marketing and communications. You're, of course, Ogilvie's vice chairman. And and I read once uh that you suggested to Microsoft they they make it possible for people to share office documents on the internet. And the idea was scoffed at. So even the best lose it nudge theory sometimes.

SPEAKER_05 4:35

Yeah, in fairness, I had a very strange advantage there because although at university I was a classicist, my brother was at the same university and was a kind of astrophysicist and mathematician. And so classicists didn't really get any mainframe uh computer time back in 1988 or 87. Uh, but I could blag my brother's login. And I was an early and enthusiastic user of the internet back in the late 80s, uh, where more or less it consisted of email and things called news groups, which you probably remember as well, do you? So you had alt.rec.pets.cats, which would be the place where cat lovers who are then online would share their obsessions. And there was a famous internet event that happened, I think, in the late 80s, when alt.pets.reck.cats was invaded by the members of alt.reck.humor.tasteless. And so a lot of people who are um the pets enthusiast group, of course, consisted um, you know, what the internet would later become. Lots and lots of cat pictures and lovely stories about how nice Tibbles was. And one day it got invaded by purveyors of sick humour who just set out to upset the cat lovers. And it was it long before you had, say, you know, the whole GameStop uh thing, or many of these other online orchestrated campaigns, that was one of the earliest ones.

SPEAKER_02 5:59

Yeah, well now we have protocols where we can say pause off to people on those.

SPEAKER_05 6:03

Lovely. And it was it was interesting because uh it struck me as fairly evident that this was an important technology even then. And so when the web finally came along in 94, which also my brother told me about very early, um, he was then living in Berkeley, and his his flatmate in Berkeley had previously been Tim Berners-Lee's flatmate in CERN, and so word of the web reached the Sutherland family disproportionately early. So I had this um uh this kind of very early epiphany, I think.

SPEAKER_02 6:34

Let's talk about nudge theory. Um, people may or may not be familiar with it, but regardless, everyone listening right now has already been nudged several times today.

SPEAKER_05 6:47

Oh, I mean, if you include habit and you include social copying and so forth, um, you know, you could argue that the greater part of our behavior is not really consciously mediated. And the other important insight of nudge, which I see as at its best, and there's a there's a dark side to it as well, which I'll talk about later happily, but at its best, it's a problem-solving uh tool. And it simply comes from the fact that people's actions are strongly affected where the action of atoms and physical objects differ from the behavior of humans, is that we perceive the world contextually, and therefore it's possible to change behavior without necessarily changing the objective reality very much at all, but merely by changing the context. And I think when you change the context of something, you change the meaning. When you change the meaning, you change the emotional response, and when you change the emotional response, you change the behavior. So, I mean, you know, and one of the reasons I'm fascinated by video conferencing is that it took a large imposed simultaneous imposition of behavior on people to discover what the upside was. I'm not denying, by the way, there's a downside. And the benefits and the disadvantages are very, very unequally spread. So it's probably worth remembering that as a middle-aged bloke who's slightly sick of commuting and who has children who are 19, who don't need to be homeschooled, and who lives in a reasonably large house surrounded by garden, um, the upsides to not having to go into the office outweigh the downsides. If I had a nightmare flatmate, two young children, was having to homeschool the children, the equation is very, very different. But I mean, it's always worth understanding that how people behave uh is heavily affected by context and presentation and phraseology, everything else. And economics is to some extent an attempt to obtain a kind of spurious certainty by pretending that these forces don't exist.

SPEAKER_02 9:01

Hey, it's Doug. If you're anywhere within driving distance of Toronto, you have zero excuses to miss IEBC World Conference 2026. It's June 14th to the 16th. No flights, no check bags. You live right in the area, just get in the car and go. It's built for communicators and PR pros at every level. And you don't need to be an IEBC member to register either. This is the kind of professional development that actually moves the needle. Real sessions, real connections, real takeaways. Stories and Strategies is the official podcast sponsor, and I'm going to be walking the floor and recording some episodes. So come say hi. I would love to meet you. Seriously. Details are in the show notes that are on your screen right now. Just click that link, and I hope to see you there. The context. You have a couple of examples of how subtle nudge theory can be.

SPEAKER_05 9:59

Well, I mean, a classic example is that we always favor, I think, rational explanations for things over emotional or psychological uh explanations. And concomitant with that is we always favor rational solutions to problems over problems that involve psychology. And I'm not suggesting, by the way, both kinds of problem solving aren't important. I'm simply suggesting we've got the balance slightly wrong. Um and um, you know, I was giving a talk to the finance department of Ogilvy only this morning, and I jokingly said, Look, uh, you people all have this rational idea that you're, you know, that paying people means making them rich, and you make them rich by paying them more money. I said, It's worth bearing in mind that there's an inexpensive alternative to that, which is if you can make people feel rich, okay, you've achieved the same thing with less money. And I'm always interested in this, by the way, because I think it's an interesting philosophical question, which is what do people need in order to feel wealthy? Which is a much more interesting and much more creative question than how do we do more with more? Which seems to be the question that economics mostly asks, you know. And most assumptions about progress are assuming more-ness in some way.

SPEAKER_02 11:13

You have a couple of examples of how subtle nudge theory can be. For example, fish stores located near the seaside tend to do better business, and coffee shops who leave their patio chairs out, even when it's raining, tend to have more sales. Tell me about those two bits of phenomenon.

SPEAKER_05 11:35

So, you know, the economic explanation of a store having a sale is you reduce prices because of the price-demand curve, demand goes up because prices down. Actually, a lot of the side, a lot of the potency of a retail sale is actually created by scarcity and social proof. In other words, you create a massive short-term event around this. You go to a shop, lots of people are bargain hunting furiously, you tend to join in, and you're also conscious of the fact that goods on sale tend to be on short supply, whereas goods at full price aren't. So what's going on in a sale is a complex mixture of economics and psychology, but the economic explanation tends to be given um higher uh consideration over the psychological one. And so I was talking to some people at London Business School, and I said, I've got a lovely exam question for you, which is to ask why are there more fish restaurants by the sea? And it's the perfect question to ask to MBAs, because what MBAs will go on is they'll burble on about supply chains, distribution, low distribution costs, access to produce, blah, blah, blah, blah, blah. And I said, the interesting thing is all those answers are plausible, but uh either completely untrue or at least very far from being the full story. And the way I explain this is as follows. Okay, first of all, if you want access to high-quality fish at low prices, the place you go is Billingsgate Market in London. Uh, it's not the seaside, okay, because that's the central distribution hub for most of the UK's high-quality fish. And I said the more likely explanation, to be honest, is that fish taste better by the sea. Now, if you think about it, proof points. One, there aren't a lot of fish restaurants around Billingsgate Market. There are some meaty restaurants around the meat market, but by and large, not what you'd expect if distribution and supply were really the issue. But the second thing is you don't get lots of fish restaurants three miles in land. Where you get fish restaurants is slap bang on the coast, on the beach. You know, I've got a little flat down by the Kent coast in Deal, and eating, put it this way, eating fish and chips on a beach is fundamentally more enjoyable than eating fish and chips in a park. Okay, now it's possible this is an evolved instinct. It wouldn't be ridiculous, would it, that humans would feel more confident eating seafood close to a large body of water than they did in land. Okay, that would hardly be ridiculous, okay? Because it's not a bad measure of freshness. But there's this is not, by the way, uncommon. Rose wine tastes better by the sea, fascinatingly. Um uh interestingly, um, you know, wine tastes better if you pour it from a heavier bottle, wine tastes better if you tell people it's expensive, uh, wine can taste better if you tell people a load of bullshit stories about the terroir and the extraordinary Frenchman who produces it, and you know, what is cats called. Okay. You can change the taste and experience of things by adding ancillary information or context. Um, painkillers are more effective if they're read, I think that's true. Um painkillers are more effective if they're branded, painkillers are more effective if you tell people they cost a lot of money. And so quite a lot of these things are emotions, are not merely a reaction to the objective sensation of the thing itself, but also to the context in which the thing is being consumed. Okay. So I always think that's an interesting case. Now, the other interesting cases are things which we things which are advertisements which we never think of as advertisements. So you mentioned the coffee shop, and I said, I've got a coffee shop about a quarter of a mile away here, and it's on a busy road. And one of the things I noticed, and I actually told them this, is look, um, your predecessors, okay, um, had sort of heavy benches outside, which were outside all the time. And strangely enough, they kind of went bust. You've now invested in a load of chairs and tables which fold, okay, and a kind of windbreaky thing that goes around the front of the coffee shop. Now, two things are important about that, which is one, if you see a um a shop with chairs and tables outside from 300 yards away from a fast-moving car, your brain instinctively knows two things. There's a coffee shop there and it's open. And the reason you know it's open, which you don't know if you've got wooden benches, okay, is because if it were closed, they would have put the chairs away. Now, the interesting thing about that is I said, very simple bit of advice. Even if it's pissing with rain, leave your chairs outside. Because from 400 yards away, it tells people that a coffee shop exists at that location and it's open for business. Therefore, if you feel like decelerating now and trying to park, you can confidently expect the supply of coffee in this place.

SPEAKER_02 16:27

Let's take it from marketing to governments. Governments love nudge theory. There's the famous nudge unit in the UK, uh, but other countries, Germany, Japan, Australia, the United States under President Obama. Although I had a look at their website, it looks like they might have shut their nudge team down. I'm not sure. And and even Canada has a nudge team. I don't think any of us actually knew.

SPEAKER_05 16:49

You you you say you say even you're being very unfair, even Canada. I consider Canada one of the most advanced countries in the world in this. Well, the Rottman School, for example, does exceptional work. Yep, you've got Dinebsoman, who's one of the one of my total gurus. So, no, no. I I actually think that oddly, although it originated in the US, it's taken off in Australia, Canada, India, uh it arises huge interest, Southeast Asia. It's actually been a you know, a bit like you know, it's a bit like the British invasion in POP, that something that originated fundamentally in the US seems weirdly to get more successfully adopted for a time. I don't think this will be permanent, but but as of now, actually, the you know, what you might call Commonwealth countries um have actually shown rather more of an appetite. South Africa likewise.

SPEAKER_02 17:38

Okay, but why do governments love nudge? And and let me ask point blank, have they been successful at all in solving issues like obesity, uh vaccination acceptance, other things that need good nudges?

SPEAKER_05 17:51

Well, the first thing is within the realm of experimentation, you can't be hostile to nudge. One, because it is at least persuasion rather than um uh compulsion. Okay. So it does give people the freedom not to do the thing you're nudging them to do, should they conceive of a good reason not to do it. Now, one of the weird things about government, I think, is that government, and this is Richard Thaler speaking, the co-author of the book Nudge with Cass Sunstein. Okay. He wrote it, I think, in the New York Times that Washington is dominated by lawyers who occasionally take advice from economists. No one else interested in helping out the lawyers need apply. And as a result of this very unequal distribution of talents in government, it tends to adopt a legislation first, incentive second, persuasion third, approach to problem solving. Okay. Now, what now, don't get me wrong, there are problems which can only be solved by collective compulsion, or there are problems which need economic incentives as part of the solution. It's it's both and not either or. But even if you're not a nutter libertarian, right, I think any reasonable person should argue that you should attempt persuasion first, incentives second, and compulsion third. Now, a huge amount actually of the COVID behaviour, a lot of it was driven by fear, let's be candid, okay? Um, but an awful lot of our the pro-social behavior through the COVID crisis was driven by essentially voluntary collective action. Okay, we simply don't have the police force to police this should we have a large number of people disobeying the instructions, you know. Um and uh it seems to be a really important lever that government can pull. I mean, another lever government can pull, by the way, is just asking people really nicely. And so defaulting to this um legalistic solution is really a silly way to go about it, but it's a product of the fact that to a man with a hammer everything looks like a nail, and to a man with a law degree, everything looks like a legal problem. And my my simple argument in the defense of nudge theory is if nothing else, okay, it expands the possible solution space. If you're willing to consider voluntary behavioral change or persuasion or nudging as one contributory thing as part of the solution, then your solution space is going to be much bigger, and your space for meaningful experimentation, which is how we should proceed more and more, I think, is with randomized control trials. Um, you know, if you add that option into the mix, then your potential for finding interesting solutions is going to be bigger. Because if you're confined to law and economics, okay, those things don't really offer you much room for creative interventions.

SPEAKER_02 20:52

You make a wonderful argument in support of the positives of nudge theory. Can I be a bugger for a second? Yeah, yeah, go, go, no, there are negative. All right. So I'm gonna play an example for you of how nudge theory can actually be from the dark side. It's a clip from the BBC series Yes, Prime Minister. In this scene, Sir Humphrey Appleby, played by Nigel Hawthorne, of course, explains when it comes to survey questions, it's all in the sequencing of how you ask the questions.

SPEAKER_06 21:25

Well, the party who had an opinion poll done, it seems all the voters are in favour of bringing back national service. We'll have another opinion poll done showing the voters are against bringing back national service. We can't be for it, Bill Corsair Camberna. Have you ever been surveyed? Yes. Well, not me, actually, my house. Oh, I see what you're doing. Do you know what happens? Nice young lady comes up to you. Obviously, you want to create a good impression. You don't want to look a fool, do you? So she stands asking you some questions. Mr. Woolley, are you worried about the number of young people with that job? Yes, are you worried about the Rise in crime among teenagers. Yes. Do you think there's a lack of discipline in our comprehensive schools? Yes. Do you think young people welcome some authority and leadership in their lives? Yes. Do you think they respond to a challenge? Yes. Would you be in favour of reintroducing national service? Yes. Oh, well, I suppose I might. Yes or no? Yes. Of course you would, Bernard, after all you've told you, you can't say no to that. So, they don't mention the first five questions and they publish the last one. Is that really what they do? Well, not the reputable ones, no, but there aren't many of those. Alternatively, the young lady can get the opposite result. Huh? Mr. Woolley, are you worried about the danger of war? Yes. Are you worried about the growth of alms? Yes. Do you think there's a danger in giving young people guns and teaching them how to kill? Yes. Do you think it's wrong to force people to take up arms against their will? Yes. Would you oppose the reintroduction of national service?

SPEAKER_05 22:58

Yes. That's that just to be clear. That is both a very strong defense of nudge theory, in the sense that how you present a question to a person will majorly affect their emotional response. It works. Yes. Okay. So it works. Undoubtedly, you can use that for ill. I I'm also reminded of something in the West Wing where they say they're discussing the legalization of cannabis, and one person says it's electoral suicide, and another person says, well, if you just look at the under 30 demographic, you'll find a small majority in favor. To which someone replies, he says, Yes, but if you restrict the survey sample to the members of Bob Marley and the whalers, you'll find an even larger majority in favor. Okay. And so undoubtedly you can play fast and loose with statistics, by the way, and you can play fast and loose, which is one reason why, you know, this idea that we should somehow adopt perfectly scientific government is a bit of a non-starter. And by the way, you know, this applies to economics as well. Whether something is cheap or expensive, whether something is valuable or not valued, depends on how we frame it. And so an example I'll give of um nudge theory, which worked for reasons people didn't fully understand. We used to have a thing in the UK called an ICER, and you were allowed to put £3,000 a year into your ISA. And that then went into a savings typically invested in the stock market, from which you were absolved from capital gains.

SPEAKER_02 24:31

Sure. We have a tax-free savings account saving similar, similar system.

SPEAKER_05 24:36

Good idea, by the way. By the way, because it encourages people to save it. For sure. What the economists did is they said we'd like to encourage this even more. So they put the limit up from £3,000 a year to £20,000 a year. Now let's be quite clear about this, right? First of all, there's an ethical question of if you can save £20, or in the case of a married couple, £40,000 a year after out of out after tax income, you probably don't need a tax break from the government. Okay? I think we can say that. But the second problem was that when you kicked it from £3,000 to £20,000, the scarcity value of it disappeared. So really rich people punted in £20,000 because they thought, well, hey, I've got a huge tax break here. This is an alternative for my pension. Previously, people who could save £2,000 a year, which is a kind of normal middle class savings rate, okay, would go, well, I better put something in because if I don't put £2,000 in this year, I'll miss out. Once you took the limit up to £20,000, the sense of urgency had been completely destroyed. It was like having a it was like Harrods holding a sale which said all year sale, right? No one's gonna rush along to that because they go, well, I'm gonna go any old time, right? Now this created an impetus to people, which is I don't want to throw away my £3,000 concession here, so I'm gonna make some use of it. Put it up to £20,000, which an economist thought was a rational thing to do. And normal people who could only save two or three thousand pounds a year thought, well, there's no particular hurry this year. Tell you what, I'll have a holiday instead, and I can always put in six thousand pounds next year, something which they never did, because that's how we are as human beings. And so that was a classic case of someone understanding the incentive through a purely economic lens and failing to understand that part of what made it work was actually a psychological factor.

SPEAKER_02 26:23

Rory Rory, there's more for us to talk about on Nudge Theory. Can I nudge you to join me for episode two in a couple of weeks? Sound okay? Absolutely delighted. I'd be as happy as anything. Awesome. If you'd like to send a message to my guest for part one of Nudge Theory, Rory Sutherland, the best way to do that is uh a direct message through Twitter, if you can. Uh, make sure you have the right Rory Sutherland. There's the rugby player in England, there's the professional cyclist. Scotland. Is it the Scotland?

SPEAKER_05 26:50

Thank you for being called he's actually a Scottish rugby player. The name is Scottish originally, yeah. I should have said UK, then I have it covered, right?

SPEAKER_02 26:57

That's yeah, yeah.

SPEAKER_00 26:58

Uh there's also a professional cyclist in Australia.

SPEAKER_02 27:01

Yeah. And I think you have more followers than both. No, occasionally, occasionally I get mistweeted. A short note if you're a regular listener of this podcast, we've been publishing weekly since May 2010. We're now shifting to bi weekly. Um, no shortage of episode ideas, great guests um, or shortage of interest. Uh, this just gives me more space to work with my clients on their comms strategies and podcasts. Um, if you liked what you heard today, we're hoping to nudge you to follow stories and strategies, receive updated episodes automatically, which is another form of nudge. Uh, we'd love it if you followed us on Twitter. It's at comms underscore podcast. And also hoping you choose to follow and rate this podcast on any directory you're listening on. And do us a favor recommend this podcast to one friend. That's another nudge. If you have an idea for an episode, you just want to tell us something, send us a note at info at JGR Communications dot com. Thanks for listening.