Alchemy
Click here to buy the book.🚀 The Book in 3 Sentences
Drawing on thirty years of work in the world’s biggest laboratory for human behavior, Alchemy unpacks how people really think and act.
Alchemy is a tour through the strange, often irrational world of decision-making, with surprising takeaways for both life and business.
Through real-world examples with major brands and influencers, Sutherland shows how our obsession with logic often gets in the way of solving problems—and how creative, unexpected thinking can lead to better solutions.
🧠 Key Takeaways
Instead of optimizing for what makes sense, we should be optimizing for human behavior, which often doesn’t.
If you want to really understand human behavior, you can’t just take people’s self-declared reasoning at face value. You have to look beneath the surface and ask what their hidden purpose might be.
Our unconscious operating system is far more powerful (and far more common) than we usually realize. We tend to notice logic because it’s the part we can explain. But “psycho-logic” has been pulling the strings in the background all along, shaping our behavior without us even realizing it.
When your sense of self is based on your intelligence, being wrong feels like more than just making a mistake—it feels like a threat to your entire identity. That makes it much harder for people to admit when they’re wrong, which ironically makes solving difficult problems even more difficult.
People are never perfect, precise, or predictable. We’re messy, chaotic, and often contradictory, which makes it impossible to come up with universal laws of human behavior.
It’s easier for smaller businesses to make unconventional decisions because they involve fewer people and don’t have to answer to anyone. But as a company grows larger—especially if it becomes publicly traded—it gets boxed into only making decisions that seem to make logical economic sense.
The best indicator of how people truly feel isn’t what they tell you—it’s what they do. And the clearest signal of all is how they choose to spend their money.
An object’s value comes more from how people feel about it than from its actual, physical worth.
Trust—more than anything else—is what turns first-time customers into loyal customers.
People don’t remember logic. They remember how something made them feel. And the emotion your message evokes becomes the emotion they associate with your brand.
If a product is good, an identifiable brand allows it to be recognized and rewarded. If it’s bad, the brand takes the hit. That differentiation is what creates the incentive to get better.
Just because something doesn’t have a scientific explanation doesn’t mean it’s not effective.
The way each of us perceives the world shapes how we act within it. And since everyone’s perception is slightly different, so is everyone’s version of reality.
Information is important, but too much of it can cause you to overthink what you’re looking at. And when that happens, it’s easy to start misinterpreting the data or reading too much into things that seem important when they really aren’t — which can ultimately sway your decisions.
✍️ Memorable Quotes
“If we allow the world to be run by logical people, we will only discover logical things. But in real life, most things aren’t logical—they are psycho-logical.”
This is the central theme of the book.
It would be nice if the world worked in a neat and orderly way without any hiccups or surprises. In that kind of world, we could apply logic to everything, and logical people could solve all of the world’s problems.
But because the world is filled with human beings—who are not perfectly logical—the world will never be perfectly predictable.
That’s why we need to change our frame of reference when it comes to problem-solving. Instead of optimizing for what makes sense, we should be optimizing for human behavior, which often doesn’t.
“There is an ostensible, rational, self-declared reason why we do things, and there is also a cryptic or hidden purpose. Learning how to disentangle the literal from the lateral meaning is essential to solving cryptic crosswords, and it is also essential to understanding human behavior.”
There are always reasons behind the things we do. But the reasons we say aren’t always the real reasons.
On the surface, we have our conscious reasoning—the logical explanations we tell ourselves and others. But beneath that, we also have our subconscious reasoning—the instinctual, human impulses that actually drive the behavior.
As an example, ask a Starbucks customer why they spend $3.50 (or probably more) on a coffee they could make at home for less than a dollar, and they might say something like, “I like the taste” or “It’s convenient on my way to work.”
Those answers are probably true, but they don’t give you the full story. The hidden purpose might actually be what the cup represents.
Walking into work with the little green emblem in your hand signals something about you. That subtle status signal might be the real driver, even if the person doesn’t consciously realize it.
In a nutshell, if you want to really understand human behavior, you can’t just take people’s self-declared reasoning at face value. You have to look beneath the surface and ask what their hidden purpose might be.
“Logic is what makes a successful engineer or mathematician, but psycho-logic is what has made us a successful breed of monkey that has survived and flourished over time. This alternative logic emerges from a parallel operating system within the human mind, which often operates unconsciously, and is far more powerful and pervasive than you realize. Rather like gravity, it is a force that nobody noticed until somebody put a name to it. ”
The “alternative logic” Sutherland is talking about is our built-in survival instincts. It’s not always conscious or rational, but it’s always running alongside reason as a parallel system in the brain.
Both are essential to our survival and development as a species. Rational logic helps us solve problems in the realms of physics, math, and the like, but that same logical part of the brain is pretty useless when you suddenly get thrown into fight-or-flight mode. That’s when this subconscious “psycho-logic” kicks in.
Daniel Kahneman makes a similar distinction in Thinking, Fast and Slow. His “slow” thinking is the conscious, logical kind that you’d use to actively think through and solve complicated problems.
His “fast” thinking is the automatic and instinctive responses that come from the “alternative logic” hardwired into our DNA. And it’s this side that has kept humans alive for thousands of years.
The key takeaway is that this unconscious operating system is far more powerful (and far more common) than we usually realize. We tend to notice logic because it’s the part we can explain. But “psycho-logic” has been pulling the strings in the background all along, shaping our behavior without us even realizing it.
“To solve logic-proof problems requires intelligent, logical people to admit the possibility that they might be wrong about something, but these people’s minds are often most resistant to change—perhaps because their status is deeply entwined with their capacity for reason. Highly educated people don’t merely use logic; it is part of their identity.”
To solve difficult problems, you need smart people who can apply logic and reason. The problem, though, is that these same people tend to know they’re smart—and they make being intelligent part of their identity.
When your sense of self is based on your intelligence, being wrong feels like more than just making a mistake—it feels like a threat to your entire identity. That makes it much harder for these people to admit when they’re wrong, which ironically makes solving difficult problems even more difficult.
“Logic requires that people find universal laws, but outside of scientific fields, there are fewer of these than we might expect. And once human psychology has a role to play, it is perfectly possible for behaviour to become entirely contradictory.”
Logical people want to come up with universal laws that apply to everyone, everywhere, all the time. That kind of thinking works in physics—Newton’s Third Law hasn’t changed in 300 years—but it doesn’t hold up when you add human beings into the equation.
People are never perfect, precise, or predictable. We’re messy, chaotic, and often contradictory, which makes it impossible to come up with universal laws of human behavior.
“The problem that bedevils organisations once they reach a certain size is that narrow, conventional logic is the natural mode of thinking for the risk-averse bureaucrat or executive. There is a simple reason for this: you can never be fired for being logical. If your reasoning is sound and unimaginative, even if you fail, it is unlikely you will attract much blame. It is much easier to be fired for being illogical than it is for being unimaginative.”
It’s easier for smaller businesses to make unconventional decisions because they involve fewer people and don’t have to answer to anyone. But as a company grows larger—especially if it becomes publicly traded—it gets boxed into only making decisions that seem to make logical economic sense.
At that stage, they become beholden to outside forces like analysts, large financial institutions, and individual shareholders, who have little patience for out-of-the-box thinking that doesn’t appear logical on the surface. So even if an unconventional idea might be the best one, it’s way less likely to get greenlit in a big organization.
“For a business to be truly customer-focused, it needs to ignore what people say. Instead it needs to concentrate on what people feel.”
It’s no secret that people don’t always say what they mean, and they almost never say exactly how they feel. That’s why basing customer-focused decisions on what customers say can steer a business in the wrong direction.
If you really want to understand your customers, you have to look past the surveys and the feedback forms. The best indicator of how people truly feel isn’t what they tell you—it’s what they do. And the clearest signal of all is how they choose to spend their money.
“We don’t value things; we value their meaning. What they are is determined by the laws of physics, but what they mean is determined by the laws of psychology.”
This ties back to an earlier point from the book: an object’s value comes more from how people feel about it than from its actual, physical worth. Watches are a great example of this idea in action.
Let’s compare my Seiko solar diver (model SNE573) and the Breitling Top Time B31 I’ve been eyeing. Both tell time—and do so with great precision—but the Seiko cost me around $400, while the Breitling will set me back about $6,000.
That’s about fifteen times the price, which begs the question: if it’s fifteen times more expensive, is the product actually fifteen times better? Of course not!
The real difference between the two watches isn’t (entirely) in function—it’s in perception.
Seiko is seen as an affordable, yet still high-quality, entry-level brand. Breitling, on the other hand, sits up there with the likes of Rolex and Omega in the luxury tier.
In buying the Breitling over the Seiko, you aren’t paying for a watch that tells better time. You’re paying for what the watch says about you.
That’s the whole point of the quote. People will happily spend 10x more on something that does the exact same job, not for the product itself but for the status signal it sends.
Coming from someone who will likely make this decision more than once in my life, it’s not rational at all. But as this book keeps reminding us, logic is rarely in the driver’s seat.
“It is always possible to add functionality to something, but while this makes the new thing more versatile, it also reduces the clarity of its affordance, making it less pleasurable to use and quite possibly more difficult to justify buying.”
With Snapstock, for example, we could always add portfolio tracking. Some users have asked us to, and a lot of other platforms offer both (portfolio tracking + stock analysis) because they’re trying to be a one-stop shop.
But the problem is, the more stuff you add, the less clear it becomes why someone should use the platform in the first place. And once the purpose of the platform is split, each side is typically worse off since attention to detail gets spread too thin instead of being concentrated on doing one thing really well.
“Yet there are, when you think about it, two contrasting approaches to business. There is the ‘tourist restaurant’ approach, where you try to make as much money from people in a single visit. And then there is the ‘local pub’ approach, where you may make less money from people on each visit, but where you will profit more over time by encouraging them to come back. The second type of business is much more likely to generate trust than the first.”
Some businesses are like tourist restaurants, where most customers are one-and-done. Because of that, the goal shifts from building loyalty to maximizing profit per visit (If you want to see this in action, look no further than the Las Vegas Strip. It’s everywhere here).
The opposite approach is what you might call the local pub model. Here, customers aren’t just passing through, so you have the opportunity to turn them into regulars.
With this approach, the focus isn’t on how much you can get out of them in one visit, but on how many times you can get them to come back.
And you don’t build that kind of relationship by squeezing every dollar out of people. You build it by giving them a reason to return—through fair prices, special perks (like Red Robin’s bottomless fries or chips and salsa at Mexican restaurants), and a genuinely good experience.
Over time, the local pub approach builds trust. And trust—more than anything else—is what turns first-timers into loyal customers.
“Effective communication will always require some degree of irrationality in its creation because if it’s perfectly rational, it becomes like water, entirely lacking in flavour.”
If you want to get people’s attention, you have to give them something that deserves attention. Something that breaks their pattern, surprises them, or makes them feel something.
If your communication is too rational, too neat, or too predictable, it just blends into the background. It might make perfect logical sense, but it won’t spark emotion. And without emotion, there’s no connection.
At the end of the day, people don’t remember logic. They remember how something made them feel. And the emotion your message evokes becomes the emotion they associate with your brand.
So your job isn’t just to communicate clearly — it’s to communicate in a way that sticks. And that almost always requires a touch of irrationality, which isn’t easy to come up with.
“Without the feedback loop made possible by distinctive and distinguishable petals or brands, nothing can improve. The loop exists because insects or people learn to differentiate between the more and less rewarding plants or brands, and then direct their behaviour accordingly. Without this mechanism there is no incentive to improve your product, because the benefits will accrue to everybody equally; in addition, there is an ever-present incentive to let product quality slip, because you will reap the immediate gains, while the reputational consequences will hurt everyone else equally. This explains why it is necessary for markets to endure the apparent inefficiency of supporting different and competing products with expensively differentiated identities, in order to reward quality control and innovation.”
In a nutshell, brands (or any kind of distinct identity) are what make improvement possible in the first place. Without them, there’d be no feedback loop.
If a product is good, an identifiable brand allows it to be recognized and rewarded. If it’s bad, the brand takes the hit. That differentiation is what creates the incentive to get better.
Without branding, everything is just generic. You can’t tell who’s responsible for what, so the best products don’t get rewarded and the worst ones don’t face consequences.
In that kind of environment, there’s no reason to innovate or create a high-quality product because any effort you put in would benefit everyone the same. Some people think branding is inefficient, but it’s actually what makes progress possible since it creates accountability.
“The fact that something does not work through a known and logical mechanism should not make us unwilling to adopt it. We used aspirin to reduce pain for a century without having the faintest idea of why it worked. Had we believed it was made from the tears of unicorns, it would have been silly, but it wouldn’t have made the product any less effective.”
Put simply: just because something doesn’t have a scientific explanation doesn’t mean it’s not effective.
As an example, golden age bodybuilders—guys like Arnold Schwarzenegger and Franco Columbu—had no scientific basis for how they trained. It was all trial and error and just seeing what worked.
Even though they couldn’t necessarily explain why something worked, they knew that it did, and that was enough. They didn’t overthink it—they just kept doing what produced results.
“You cannot describe someone’s behaviour based on what you see, or what you think they see, because what determines their behaviour is what they think they are seeing. This distinction applies to almost anything: what determines the behaviour of physical objects is the thing itself, but what determines the behaviour of living creatures is their perception of the thing itself.”
You can’t project your own perception onto someone else and then assume that’s what drives their behavior. You can do that for yourself—because you understand how you see the world—but not for anyone else.
With that said, when it comes to human beings, it’s not reality itself that determines our behavior. It’s our perception of reality.
The way each of us perceives the world shapes how we act within it. And since everyone’s perception is slightly different, so is everyone’s version of reality.
“To use the analogy of the needle in the haystack, more data does increase the number of needles, but it also increases the volume of hay, as well as the frequency of false needles — things we will believe are significant when really they aren’t.”
In other words, more data isn’t always better.
Information is important, but too much of it can cause you to overthink what you’re looking at. And when that happens, it’s easy to start misinterpreting the data or reading too much into things that seem important when they really aren’t — which can ultimately sway your decisions.
We see this all the time in investing. There are an unlimited number of metrics you can look at — both fundamental and technical — but when you boil investing down to its essence, there are really only a handful of basic things that actually matter when evaluating a business.
The same goes for lifting weights. More data and research can lead you down rabbit holes of “optimized” exercises or “perfect” diets, but at the end of the day, the tried-and-true basics — things like bench press, pull-ups, and lunges — work just fine. They always have, and they always will.
Overall, it’s fine to go deep into the things you’re interested in. But it’s easy to get too deep in the weeds, which creates unnecessary overcomplication. Still, I think you have to let yourself go through that process to really understand it.
The typical evolution looks like this: you start with the basics → go way too deep → then come back to the basics — because through trial and error, you realize that’s all you really needed in the first place.
Alchemy is Rory Sutherland’s deep dive into the weird ways people make decisions, and how out-of-the-box thinking can solve problems that reason alone can’t.