When saying sorry is worth millions

The economics of apologies

If economics is actually the study of trust and reciprocity, then economist John List chose a brilliant question to study: “When people are let down by your service, how much is an apology worth?”

List was both Chief Economist for Uber, and is a behavioural economics researcher at the University of Chicago, and his findings about the economic power of an apology were worth tens of millions of dollars to the rideshare service.

How?

Well, he answered Uber CEO Travis Kalnick’s concern: “What's the best way to keep Uber customers loyal, even when they've had a miserable experience?" (A miserable experience is having to wait too long for a ride - yes, I’ve had them too).

List examined how loyal customers would remain when one of three options were presented:

1. A status apology: “Sorry, we stuffed up”
2. A commitment apology: “Sorry, we’ll do better next time”
3. A compensatory apology: “Sorry, here’s $5 towards your next ride”

In Uber’s case, can you guess which worked best, to keep customers coming back?

They all worked to a point, but the most potent was #3.

Now, this doesn’t mean that compensation is always the best option, but experimenting to find the best combination of apologies for your business is likely to pay substantial dividends. Also, recall that List embarked upon the study when he discovered that, after stuff-ups, Uber wasn’t apologising at all!

Question: How can you use apologies to keep your customers loyal, even when they’ve had a miserable experience?

Not big goals

Have you noticed there are two types of people in the world? No, not the people who fill their car with petrol to an exact dollar amount (versus those who just fill it till it’s full). I’m talking about those who set big goals — versus those who like ‘small wins’.

Now, I’m a big goal kind of person and I’ve set mine for 2022.

And, in doing so, something very interesting occurred to me. That most of my big goals aren’t actually goals. They’re what James Clear calls systems, rather than goals. They are coherent bodies of activity that lead to the goals I want.

Let me explain by showing you, transparently, what mine are:

1. Develop ideas with my clients and write lots about public value, social impact and net positive strategy (This is the world my clients inhabit — or are heading towards — and multi-impact strategy is a new frontier for government, for businesses and for financiers).
2. Reach out to more people (I know that every 50 people I connect with regularly (for instance, via this newsletter) yields one long-term client (and several one-off clients), and also that a lot of non-clients speak about me to potential clients).
3. Grow cash-producing investments (I’m at that stage of life where people have started asking me about retirement. What?? I’m only 56! Seriously, though, it’s time for me to look at the next 10 years as the time to make sure the things I invest in will throw off cash for when I can’t, or don’t want to, work for it).
4. Be very smart about time distribution (I know that I deliver more value when I focus on the high-value activities and delegate to others. Also, when I balance ‘productive’ time with ‘downtime’: with my family, relaxing, and exercising.)

Notice that all of these are levers for success, not the success itself. They’re systems that will lead to the goals I want: impactful projects, great clients, stimulating work, with time to travel and enjoy myself, now and into the future. And, note that none of these are easy. In fact, I could justify avoiding any of them quite easily (“I’m too busy”, “I don’t need to just yet” or “It’s really not necessary”).

Question: What are your 3 - 4 ‘systems’ that lead to the big goals you want?

Flaws of sequential thinking

Speaking of two types of people, here’s another one.

There are those who think about nearly everything sequentially, and those who think in terms of multiple eventualities and options. The first group are planners; the second are strategists. Now, it’s no surprise that I’m a strategist, most of my clients are and, if you’re a regular reader, you probably are too.

But, have you noticed how hard it is to get sequential thinkers to think strategically? Why is this? I believe it’s because of three logical flaws:

1. Sequential thinkers see everything as having an identifiable end. Yes, if you’re baking a cake, or constructing a building, but not when you’re planning an extension of services to a new target audience, or an engagement approach to a segment of the community. The solution: Show them examples of when innovations yielded unexpected results, such as when IBM’s payroll calculating machine ended up being the basis for every computer on our desks today.
2. Sequential thinkers believe that it pays to wait. By this, I mean they want to put everything in an orderly sequence and wait for each to have its turn. Again, this works for an IT rollout, or to diagnose a disease. But, what about the things that should occur in parallel, not in sequence? Like securing financing while designing a core concept, while speaking to potential customers. The solution: Bring multiple perspectives or disciplines onto a project and ask, “What can we each do simultaneously?”
3. Sequential thinkers are convinced risk can be anticipated. Many like to locate risks on a neat matrix with likelihood on one axis, and consequence on another, and write out lists of mitigating actions. Problem is that the world doesn’t work like that. The solution: Discuss with them that most of the big risks aren’t actually captured on those tables at all (who saw COVID coming?).

So, we strategists need to continually flex the mental muscles that help us think about multiple eventualities, parallel processes, and multi-faceted big risks. But, we also need to help others have ‘comfort with discomfort’, be good at ‘not knowing’ and hold contradictory ideas in their heads at the same time.

Question: What can you do to to enable your team to think less sequentially?

I love knowing that you enjoy reading, so please click the 'like' below. Also, drop me a line or, even better, pass on 5MSM to someone else.

During the week, enjoy setting big goals (that are actually systems), and I’ll see you same time next week.

Andrew