Almost ten years ago these two – Levitt the iconoclastic economist and Dubner the journalist – published Freakonomics, in which they confronted received wisdom and political correctness. Levitt’s approach is about finding true cause and effect by daring to ask different questions and using data without prejudice.  In a way it’s the precursor of behavioural economics, nudge theory and all that, because it reveals how frequently outcomes are shaped by unseen forces, rather than being conscious choices. It’s still worth reading. Superfreakonomics followed with more examples and stories. Think Like A Freak recaps on those principles neatly, without really taking us anywhere new. It’s a quick, easy and fun read though, with a few good stories – why Van Halen demanded bowls of M&Ms with the brown ones removed, and why Nigerian fraud scammers don’t make their scam letters more convincing.

Incentives loom large in these books. Of course Levitt believes people respond to incentives, but there his conventional economist wisdom ends, as he shows how incentives don’t always achieve what was intended, and in some cases do quite the opposite. TLAF contains his simple set of rules to design the right incentive scheme. These should be read by every marketer – because they also apply to marketing more widely. His first rule is, “Figure out what people really care about, not what they say they care about.” Good advice for all of us. The second is, “Incentivise them on the dimensions that are valuable to them but cheap for you to provide.” Again good advice, and a strong rationale for building attractive brands that people find emotionally rewarding, which usually reduces your reliance on price.

I have one major disagreement with these two. They say, “To the average company, a customer is a human wallet from which the company attempts to extract as much money as possible. Everyone understands this but no one wants it to be so explicit. That’s why companies use super-friendly logos, slogans, mascots and endorsers.”  Harsh words indeed. There are businesses like that, but I believe good businesses create value by seeking to satisfy both sides in every transaction, and that long term profitability is their reward. So here’s our challenge. Can we use their own principles to prove them wrong?

Books | August 2014