0:15

Pushkin in

0:30

a tin roof chack in a slum

0:32

of Manila, the capital of the Philippines.

0:35

Victoria Angelo lived with her

0:37

husband, Puanito, and their five

0:39

children. Puanito was

0:41

a rickshaw driver. He made around

0:43

four dollars a day. Life was

0:46

a daily grind. Hard work alone

0:48

offered no route out of poverty. So

0:51

when the Pepsi Cola company started

0:54

a new promotion in nineteen ninety two,

0:57

Victoria took notice. Number

0:59

fever seemed easy to understand

1:02

by a bottle of Pepsi, and under

1:05

the bottle cap you'd see printed a three

1:07

digit number and a cash

1:09

prize amount. Every

1:12

night, on the Channel two TV

1:14

news program, Pepsi would announce

1:17

a winning number. If you had

1:19

a bottle cap with that number, you'd

1:21

win the amount shown. The

1:24

prizes went up to a million paceos

1:26

some forty thousand dollars. It

1:28

would take Juanito thirty years

1:30

to earn that. Victoria

1:33

started buying Pepsi. Every

1:36

night, she watched Channel two for the

1:38

announcement of the winning number, and she checked

1:40

her growing collection of bottle caps,

1:44

and every night she

1:46

was disappointed until

1:49

one night the television

1:52

announced the number three four

1:54

nine hold on Victoria

1:57

was sure she had a bottle cap marked

1:59

three for nine. Here it is. Now,

2:02

what's the amount on the cap? One

2:05

million paceos. You can

2:08

feelish school, you can get

2:10

the gullege. She told her children.

2:13

We can buy a real house. It

2:16

seemed like a dream come true. But unknown

2:19

to Victoria, something very

2:21

strange was happening in

2:23

homes all across the Philippines.

2:26

Exactly the same scene was playing

2:28

out. Families were watching

2:30

Channel two checking their collection of

2:32

bottle caps, discovering that they had

2:34

one printed with three for nine and a

2:36

million Paco prize, and celebrating

2:38

their incredible good fortune. What

2:42

had happened, It's not clear exactly.

2:44

Instead of printing just two bottle

2:47

caps with three for nine on them, they'd

2:49

accidentally printed hundreds

2:51

of thousands, and nobody

2:54

at PEPSI had noticed the problem.

2:57

But three for nine had just been announced

3:00

as a winning number. PEPSI

3:02

would notice the problem soon enough.

3:06

I'm Tim Harford and you're listening

3:09

to cautionary tales. In

3:32

Worcester, England, a physicist

3:35

called Phil Calcutt was doing his

3:37

regular shop at his local supermarket Tesco.

3:40

As he strolled down the fruit tile, a

3:43

special offer caught his attention. Buy

3:45

a bunch of bananas and get twenty

3:47

five Tesco club card points. The

3:50

bananas cost one pound and seventeen

3:52

pence. The points were worth fivepence

3:55

each. Mister Calcutt did the math.

3:58

He'd get club card points worth eight

4:00

pence more than the bananas cost.

4:03

Could that be right? He double checked

4:05

his mental arithmetic. Yes, he'd

4:07

make a profit of eightpence on every

4:09

bunch of bananas he bought. So

4:11

mister Calcott piled his trolley seven

4:14

feet high with bananas. Then

4:16

he got another trolley and filled that with bananas

4:19

too. My living

4:21

room was stacked from floor to ceiling

4:23

with twenty five cases containing around

4:26

three thousand bananas.

4:28

But when I popped back for some more, they said they

4:30

would only sell me one case, which

4:32

is quite understandable because they seemed to be

4:34

making a loss on it. When he'd redeemed

4:37

his Tesco club card points, mister

4:39

Calcott ended up with a profit of twenty

4:41

five pounds and twelvepence, a

4:44

modest sum, perhaps, but far

4:46

more valuable was all the fun he had distributing

4:49

free bananas like some comic book

4:51

superhero around his neighborhood. Children

4:55

in the street. Now shout banana man

4:57

whenever they see me. Whoever

5:02

in Tesco's marketing department had

5:05

proposed that promotion evidently

5:07

hadn't done the math, nor had

5:09

the manager who signed off on it, nor

5:12

had any of Tesco's millions

5:14

of other customers. Only

5:16

one man had noticed banana

5:19

man. Is

5:22

that surprising? Probably

5:24

not if you're the mathematician John Allan

5:26

Paulos, who wrote the classic book

5:29

in Numeracy. Paulos

5:31

tells the story of watching the TV news

5:33

with a friend, a notoriously

5:35

pedantic friend, the sort who'd

5:37

correct you for saying continuously

5:39

when you mean continually. The

5:43

weather forecast came on. There's

5:45

a fifty percent chance of rain on

5:47

Saturday and a fifty percent chance

5:49

on Sunday, so there's

5:51

certain to be rain this weekend. Paulos

5:54

turned to his friend. Did

5:56

you hear that? How embarrassing? What

5:59

was I'm sure you've noticed the

6:01

forecasters mistake. In fact,

6:04

there's a one in four chance of no rain,

6:06

the same probability of flipping a coin

6:08

twice and getting two tails. It's

6:11

the seventy five percent years of weekend

6:14

rain. Obviously it

6:16

is. I mean, oh yeah, sure, when

6:18

it comes to numbers, said Paulos. Even

6:21

the smartest among us are unobservant.

6:25

Companies know that they take

6:27

advantage of it all the time. We

6:29

see the low monthly payment in big

6:31

type and forget to multiply by the

6:33

number of months we keep paying

6:35

our monthly gym membership instead

6:38

of dividing it by our monthly visits,

6:40

and seeing we should switch to pay as you

6:42

go. We buy extended

6:44

warranties on household appliances

6:47

when some simple probability would suggest

6:49

we should take our chances. Number

6:53

fever played on that numerical laziness.

6:56

Flip the cap off your bottle of PEPSI,

6:58

see a three digit number and a million

7:00

pay so prize, and you might naturally

7:02

get the impression that you have a one in a thousand

7:05

chance of winning. Not too shabby

7:08

and not of course, think

7:10

about it, and you'd quickly realize that Pepsi

7:13

must have printed far more losing

7:15

numbers than winning ones, wouldn't

7:18

they The true chance of

7:20

winning was vastly smaller than one

7:23

in a thousand. When

7:26

consumers fail to do the sums, we

7:28

get screwed. But what

7:31

happens when it's the companies that mess up?

7:33

As we'll see the answer is often

7:36

that consumers still get screwed,

7:39

often, but not always.

7:47

An engineer called David Phillips

7:50

was shopping in his local supermarket in

7:52

Davis, California, in nineteen

7:54

ninety nine. He noticed a new

7:57

promotion by a food brand called Healthy

7:59

Choice. Send in ten barcodes

8:02

from their products and they'd give you five

8:04

hundred air miles. They'd double it

8:07

to a thousand if you sent them in before a

8:09

certain deadline. Just like

8:11

banana man Phil Calcutt, mister

8:13

Phillips paused to do the math. How

8:16

much is an air mile worth? That

8:18

can vary depending on how you redeem them,

8:21

but Phillips calculated one air

8:23

mile was surely worth at least

8:25

two cents. His family

8:27

liked Healthy Choice frozen meals, which

8:29

cost two dollars. Ten

8:32

frozen meals twenty dollars.

8:35

Send in the barcodes and he'd get a thousand

8:37

air miles, also worth at least

8:39

twenty dollars. Who said

8:42

there was no such thing as a free lunch,

8:45

Phillips filled his freezer. Then

8:48

he thought, what else is

8:50

in the Healthy Choice product line? If

8:53

he could find products for cheaper than two

8:55

dollars, he'd be getting back more

8:57

in air miles than he would spend on the

8:59

food. I found Healthy

9:01

Choice soups that were less than a dollar tin

9:05

soup perfect, it would

9:07

keep forever and didn't need more freezer

9:09

space. David bought all the

9:11

Healthy Choice soups in his local supermarket.

9:14

Then he went to other nearby supermarkets

9:17

and bought all their Healthy Choice soups

9:19

too. Soon he had accumulated

9:21

eight hundred cans of soup. By

9:26

this point, David's wife, Cindy was

9:28

wondering if this might all be a little too

9:30

good to be true. Are you sure

9:32

you haven't missed something in the small print? Maybe

9:34

there's a limit on how many miles you can claim.

9:37

David poured over the terms and conditions.

9:40

In return. For every ten barcodes

9:43

and proof of purchase, it said Healthy

9:45

Choice would issue a certificate

9:48

for air miles. The certificates

9:50

could be redeemed with six different airlines,

9:53

and while two of them did indeed

9:55

stipulate a limit on how many certificates

9:58

they would redeem, the other four

10:00

didn't. In fact, the offer

10:02

told consumers to remember there was no limit

10:04

to the number of miles they could earn with

10:07

just three weeks to go. For the deadline,

10:10

mister Phillips stumbled on a startling

10:13

new opportunity. One

10:15

supermarket chain grocery

10:17

outlet had started selling

10:19

Healthy Choice chocolate puddings

10:22

for just twenty five cents.

10:24

Remember, Healthy Choice was effectively

10:27

offering air miles worth at least

10:29

two dollars on every one

10:31

of those puddings. There was no time

10:33

to lose. I drove to about

10:35

fifteen grocery store outlet stores

10:37

in a weekend. I filled up my van with chocolate

10:39

pudding. After that, I made contact

10:42

with a local grocery store outlet manager

10:44

had him special order me sixty more cases.

10:47

David Phillips now had over

10:49

twelve thousand chocolate

10:52

puddings and a problem.

10:55

Two problems in fact, how would

10:57

his family ever eat all those

10:59

puddings? The second problem

11:02

was more pressing, how would he

11:04

managed to peel off twelve thousand

11:07

barcodes in just three weeks?

11:10

But mister Phillips was a resourceful man,

11:13

and he realized he could solve both

11:15

problems at once. He

11:17

contacted his local food bank and

11:19

offered to donate all the chocolate

11:21

puddings if their volunteers would

11:23

do him the favor of taking off the barcodes

11:26

for him. They said yes. Phillips

11:29

meticulously organized his barcodes

11:32

into bundles of ten and filled

11:34

in the claims forms over a thousand

11:37

of them, enough for over a

11:39

million air miles. That

11:41

would basically be all the long

11:43

haul holidays his family could ever

11:45

want. David Phillips

11:47

posted off his barcodes and

11:50

waited. There

11:53

was no immediate reply from

11:55

Healthy Choice, but he had read the small

11:57

print that said it would take six

12:00

to eight weeks for the air mile certificates

12:02

to arrive. Six weeks

12:04

past, then eight

12:06

weeks. Now, Phillips

12:08

was to get worried. With still

12:11

no response from Healthy Choice,

12:13

he phoned them up Disaster.

12:18

They said they had no record

12:20

of receiving any barcodes

12:22

from him at all. Cautionary

12:28

tales will return after

12:30

this message. After

12:39

Channel two News announced that three

12:42

four nine was the winning number on the Pepsi

12:44

bottle tops, crowds of jubilant

12:47

customers descended on Pepsi plants

12:49

to claim their prizes. It

12:53

soon became clear that something

12:55

had gone horribly wrong. How

12:58

much would it cost Pepsi to honor

13:00

all the prizes? Upwards

13:03

of fifteen billion

13:05

dollars It was roughly half

13:07

the Philippines gross domestic product.

13:10

More to the point, it was close to the entire

13:13

market capitalization of the Pepsi

13:15

Corporation, not just in the Philippines

13:18

but the whole world. There was

13:20

simply no way that

13:22

Pepsi could afford it. Panicked

13:25

executives held a crisis meeting

13:27

at three o'clock in the morning. They apologized

13:30

for the computer glitch. They pointed

13:32

out that every bottle cap also contained

13:34

a security code, and explained

13:37

that this would identify the two bottle

13:39

caps they had intended to be winners,

13:42

and for everyone else with a three four nine

13:44

bottle top, they decided to offer a

13:46

goodwill payment of five hundred

13:48

pasos, a mere twenty

13:51

dollars. The

13:55

bottle tops came flooding in four

13:58

hundred and eighty six thousand, one

14:00

hundred and seventy of them. The goodwill

14:02

payments cost PEPSI about ten

14:05

million dollars, five times

14:07

what they'd initially budgeted for the tire

14:09

number fever campaign, but

14:11

it wasn't enough to quell everyone's

14:13

outrage. Thousands of

14:15

people kept hold of their three four nine

14:18

bottle tops. They'd thought

14:20

their lives were about to change forever.

14:23

Now they were being offered just twenty

14:26

dollars. That wasn't going to buy

14:28

their goodwill. They were

14:30

determined to make PEPSI

14:33

pay. David

14:38

Phillips was determined two. He'd

14:41

gone to all that trouble, buying eight

14:44

hundred tins of soup and twelve

14:46

thousand chocolate puddings, organizing

14:48

all the barcodes, filling in all the

14:50

forms, and now he

14:53

learned that the package he had sent to Healthy

14:55

Choice had apparently gone

14:57

missing. This seemed pretty incredible,

15:00

given that I mailed the package registered

15:02

and someone on their end signed

15:04

for the package. But would

15:06

a man as meticulous as David

15:09

Phillips failed to plan for

15:11

that eventuality Not

15:13

likely. Phillips had photocopied

15:16

everything. He'd even videotaped

15:19

himself buying the chocolate puddings

15:21

and stacking them up in his house, just

15:23

to be on the safe side. Presented

15:26

with this evidence, Healthy

15:28

Choice quickly caved. Mister

15:31

Phillips got his air miles

15:36

think for a moment about what David Phillips

15:38

did. He hadn't just done

15:40

one calculation, the numerical

15:43

one that showed the sums on the chocolate

15:45

puddings didn't add up. He'd

15:47

made a second kind of calculation, too,

15:50

a pragmatic calculation about

15:52

how things work in the real world. All

15:55

along, I was somewhat worried that Healthy

15:58

Choice wouldn't honor the deal. Packages

16:00

do sometimes go missing, It's true,

16:03

so he'd taken practical steps

16:05

to make it expensive for Healthy Choice

16:08

to refuse him his air miles, ensuring

16:10

that if the company tried to back out of the deal,

16:13

the media would have a field day with

16:15

the story. Companies,

16:17

too, make both kinds of calculations

16:20

about their marketing offers, numerical

16:23

and pragmatic. Sometimes

16:25

they fall down on the numbers. It makes

16:28

no sense to pay shoppers to

16:30

buy bananas, But on some

16:32

marketing offers, they know the numbers

16:34

wouldn't add up if everyone took advantage,

16:37

and they rely on the pragmatic calculation

16:40

that many customers won't bother. That's

16:43

what's happening when retailers offer

16:45

rebates on a purchase. Rather

16:47

than simply reduce the price, they

16:50

make you pay full price, then

16:52

mail off the receipt or the barcode to

16:55

claim your rebate. Whether such

16:57

promotions pay off depends

16:59

on what proportion of customers actually

17:01

do claim. There's even

17:04

a term of art for the percentage of

17:06

consumers who fail to follow through

17:09

a breakage rate. Marketing

17:12

professors Tim Silk and Chris Yanishevski

17:15

study the factors that affect breakage

17:17

rates. There are principles from

17:19

psychology textbooks, such as

17:21

hyperbolic discounting. That's

17:23

the tendency to put higher value on

17:25

more immediate rewards. Promise

17:28

a rebate check quickly and you'll motivate

17:30

people to apply. Promise it in

17:32

six to eight weeks, and maybe they

17:35

won't bother then there are sneaky

17:37

little tricks putting the barcode

17:39

on tough, thick cardboard that's

17:42

hard to cut with household scissors. Increasing

17:45

the breakage rate is a serious

17:47

and cynical business. When

17:50

the UK branch of Hoover launched

17:52

a big new promotion in nineteen ninety

17:55

two, they gambled on a high

17:57

breakage rate. They were

17:59

offering two free flights to Europe

18:02

to anyone who spent one hundred pounds

18:04

on a Hoover appliance. That's about

18:06

two hundred and fifty dollars in today's

18:09

money. It's not a bad deal at

18:11

all. In fact, it's such

18:13

a good deal that Hoover knew they couldn't afford

18:16

for too many customers to take up the

18:18

offer, so they made it logistically

18:20

difficult. You had to snail mail

18:23

the receipt for the item you'd purchased and

18:25

wait for Hoover to send you a form, fill

18:27

that in, and wait for Hoover to send you a

18:29

voucher. Then you had to choose three

18:32

possible dates and destinations and

18:34

wait for Hoover to let you know if any of them were

18:36

available, and on and

18:39

on.

18:42

Only the most determined customers

18:44

had the patients to persevere to the point

18:46

where they actually got on a plane. It

18:49

looks like Hoover managed to keep the breakage

18:51

rate high enough to make their giveaway

18:54

deal profitable. Then

18:56

Hoover became overconfident

18:59

they decided to expand the offer

19:01

to include flights to America.

19:04

This was a much bigger incentive

19:06

to return. Flights from Britain to America

19:09

cost about five times the price

19:12

of a Hoover vacuum cleaner, and

19:14

Hoover's pragmatic calculation about

19:16

breakage was way off. Beam

19:19

far more people applied for flights than

19:21

they'd expected. Crucially, the

19:24

applicants also proved far

19:26

more tenacious than Hoover had

19:28

hoped, many initially

19:30

heard nothing back. When they

19:32

followed up, Hoover said their application

19:35

forms must have been lost in the post. They

19:38

became frustrated and suspicious.

19:42

David Dixon, a horse trainer

19:44

in Cumbria, was among the disgruntled

19:46

customers who had bought a Hoover appliance

19:49

a washing machine in his case, and

19:51

then had trouble claiming his free

19:53

flights to America. I have fucked

19:55

them, I have retner them, I

19:57

have formed them, And then, to

19:59

add insult to injury, his

20:02

washing machine broke down. Hoover

20:05

sent a technician who failed

20:07

to sympathize with mister Dixon and plight.

20:10

According to the technician, the offer

20:12

was obviously too good to be true. Mister

20:14

Dixon should surely have realized there must

20:16

be some kind of catch. If do you think

20:19

bang a washing machines are going to get you two tickets

20:21

to America, you must be an

20:23

idiot, an

20:25

idiote. We'll see about that.

20:28

While the technician was fixing his washing machine,

20:31

mister Dixon drove his horsebox

20:33

in front of the Hoover truck, blocking

20:35

it in. He told

20:37

the technician to walk home and pass

20:40

on a message to his employers, well, I'll

20:42

get me tickets. They'll get there vun.

20:46

Mister Dixon became something of a folk

20:48

hero. The BBC meanwhile

20:51

sent an undercover reporter to investigate

20:53

what was going on. She

20:56

got a job in the agency that was processing

20:58

the applications for free flights

21:00

on who was behalf. It went something

21:02

like this, So what would

21:04

you like me to do. Here's a list of people,

21:07

contact them and offer them flights London.

21:10

These people all live in Glasgow. That's four

21:12

hundred miles from London. That's right. But

21:16

the person sitting next to me is phoning people who

21:18

live in London and telling them we can only offer

21:20

them flights from Glasgow. He

21:22

gets you one fast love. When

21:25

the BBC investigation was broadcast,

21:28

it did not play well for Hoover. They

21:31

eventually begrudgingly bought

21:34

over two hundred thousand

21:36

flights at a cost of over seventy

21:39

million dollars. The majority

21:41

of customers had given up without

21:43

getting their flights, but the company's reputation

21:46

had taken a hit, so had

21:48

their market share in the UK. Part

21:51

of the problem was that anyone who wanted

21:53

a Hoover appliance could find plenty

21:56

of attractive deals in the classified

21:58

ads never used still

22:01

in their original packaging. People

22:03

had bought them just to get the air tickets.

22:06

No wonder Hoover's parent company,

22:09

the executives who had approved the promotion

22:11

and quietly sold off the European

22:14

arm of the company for a knock down

22:16

price. For

22:19

Pepsi executives in the Philippines,

22:21

merely getting fired might have seemed

22:23

like a relief compared to the continuing

22:26

disaster of number fever. They

22:29

were getting so many death threats they

22:31

needed round the clock security.

22:34

Pepsi erected barbed wire barricades

22:36

around its processing plants. Dozens

22:39

of its trucks were attacked. In

22:41

one tragic case, a

22:44

grenade thrown at a Pepsi truck

22:46

in Manila bounced off and

22:48

killed a schoolteacher and a five

22:50

year old girl. The

22:53

small print of the number fever adverts

22:55

did mention the existence of a security

22:58

code on the bottle tops, but was

23:00

it sufficiently clear that the prize

23:02

depended on the security code, not

23:05

just on the three digit number. PEPSI

23:08

found itself fighting thousands

23:10

of lawsuits after

23:16

this message. Cautionary tales

23:19

will return, even

23:24

as the number fever lawsuits

23:26

raged on. Pepsi found itself

23:29

once again in a numerical

23:31

dispute described in Matt

23:33

Parker's book of mathematical mishaps,

23:35

Humble Pie. This dispute

23:38

followed yet another promotion called

23:41

Pepsi Points, this time running

23:43

in the United States. A

23:46

thirty second advert starts with

23:48

the caption Monday, seven

23:50

fifty eight am and an

23:52

external shot of an ordinary suburban

23:54

house. Cut to the inside

23:57

of the house, A cool young dude

23:59

is wearing a T shirt with a Pepsi logo.

24:01

He slicks back his hair, T

24:04

shirt seventy five Pepsi

24:06

points flashes the on screen

24:08

caption. He dons a leather

24:10

jacket. Leather jacket fourteen

24:13

hundred and fifty Pepsi points, ongo,

24:16

the sunglasses one hundred and seventy

24:18

five Pepsi points. Then

24:21

a voiceover the introduce Pepsi

24:24

stuffed chaveler. Now

24:26

the more Pepsi a drink club, more of great

24:28

stuff. You're going again. Meanwhile,

24:32

on screen, there's a school classroom.

24:35

From outside, there's some kind of loud

24:37

noise and strong wind blowing books

24:40

and papers everywhere. Other students

24:42

watch in amazement as the cool

24:44

dude arrives in a Harrier

24:47

jump jet doing a vertical

24:49

landing in the school yard. He

24:51

steps out sipping a can of Pepsi,

24:55

and on screen Harrier Fighter

24:58

seven million Pepsi points.

25:01

Sure beat the bush?

25:07

Yes, very good? Held

25:09

on? Has anyone done the math

25:12

on this? A can of Pepsi

25:14

was one point, but once you had a few points

25:16

from Pepsi purchases, you could buy additional

25:19

points for ten cents apiece, So

25:22

a T shirt at seventy five points

25:24

was effectively seven dollars fifty

25:26

fair enough, a leather jacket one

25:28

hundred and forty five dollars not unreasonable.

25:32

And a Harrier Fighter, let's

25:34

see seven million times ten

25:36

cents, that's seven hundred

25:39

thousand dollars. Doesn't

25:41

that sound cheap for a

25:43

fighter jet? The US

25:46

military paid over twenty million

25:48

dollars for each of its AV eight

25:50

Harrier two jump jets. If

25:53

you could get one from Pepsi for seven

25:55

hundred thousand dollars, that

25:57

would be an absolute steal. There

26:04

are a few cultures now very

26:06

rare, whose counting words only

26:08

cover one two

26:11

big number, but that's because

26:13

they rarely need to talk about large

26:16

numbers. Modern marketing

26:18

executives do, and yet

26:20

when it came to the Harrier, Pepsi's

26:23

decision makers were helpless. Once

26:26

those Pepsi points started mounting up,

26:28

all they could seem to think was big

26:31

number. Enter twenty

26:33

one year old business student John

26:35

Leonard. He somehow raised

26:38

seven hundred thousand dollars, which

26:40

he deposited with a lawyer. He

26:42

bought fifteen cans of Pepsi and

26:45

sent off his fifteen Pepsi points

26:47

with a check for seven hundred

26:50

thousand and eight dollars and

26:52

fifty cents. That was to cover

26:54

the remaining six million, nine hundred ninety

26:56

nine, nine hundred and eighty five Pepsi

26:59

points plus the ten dollars

27:01

delivery charge. Pepsi

27:04

wrote back politely, the

27:06

item that you have requested is not included

27:09

the catalog or on the order form

27:11

the Harrier jet and the Pepsi commercials. Fanciful.

27:14

We apologize for any misunderstanding or

27:16

confusion that you may have experienced. Mister

27:20

Leonard had his lawyer swing

27:22

into action. Your letter of

27:24

May seven, nineteen ninety six

27:27

is totally unacceptable. We have

27:29

reviewed the videotape at the Pepsi stuff

27:31

commercial and it clearly offers

27:33

the new Harrier jet for seven

27:36

million PEPSI points.

27:38

This as a formal demand that

27:40

you honor your commitment and make

27:43

immediate arrangements to transfer

27:45

the new Harrier Jet

27:47

to our client. The

27:50

case went to court, where District

27:52

Judge Kimba Wood had to decide

27:54

if the advert was serious.

27:57

She came to the understandable conclusion

28:00

that it wasn't. The callow

28:02

youth featured in the commercial

28:05

is a highly improbable pilot.

28:08

The teenage's comment that flying

28:11

a Harrier Jet to school sure

28:13

beats the bus evinces

28:16

an improbably ensusian

28:18

attitude toward the relative

28:20

difficulty and danger of

28:23

piloting a fighter plane in a residential

28:26

area as opposed to taking

28:28

public transportation. Might

28:31

some other court take a different view? Probably

28:34

not, But Pepsi decided

28:36

to edit its commercial just in

28:38

case. Harrier now

28:40

cost seven hundred million

28:42

PEPSI points. Again big

28:45

number, but this time big

28:48

enough. I

28:51

assume John Leonard knew that his chance

28:53

of winning the case was small, and that

28:55

if he lost, there'd be lawyers fees

28:57

to pay. It must have been a calculated

29:00

gamble. Judge Kimbawood

29:02

summed up why she wasn't letting that gamble

29:05

pay off. An objective reasonable

29:08

person would conclude that purchasing

29:11

a fighter plane for seven

29:13

hundred thousand dollars is

29:15

a deal too good to be true.

29:18

Fair enough, But can we

29:20

predict if a corporate marketing

29:23

bungle is likely to have a happy

29:25

ending? Can we come up with a taxonomy

29:27

of the too good to be true from

29:30

these stories? Perhaps we can.

29:33

It's all about that pragmatic calculation.

29:36

Imagine if you will a tool beloved

29:39

by marketing types, a two by

29:41

two matrix, how much will

29:43

it cost the company to pay up and

29:45

how bad will it make the company look to

29:47

wriggle out? In one

29:50

corner, expensive promises

29:52

with an easy get out. In

29:55

this corner is John Leonard with his

29:57

video of the Pepsi staff ad Harrier

29:59

jets are expensive and did

30:02

it make Pepsi look unreasonable to fight

30:04

the case? Not really. At

30:07

the other extreme, cheap promises

30:09

with no means of escape, here

30:12

stands David Phillips with

30:14

his stack of chocolate puddings. Giving

30:17

one customer a pile of air miles

30:20

wasn't especially expensive set against

30:22

the entire healthy choice marketing campaign,

30:25

and thanks to his videotape,

30:28

they could hardly wriggle out. The

30:30

other two corners of the two by two

30:32

matrix are more ambiguous. Giving

30:35

Tesco club card points to banana

30:37

man was a trivial expense, but

30:40

nobody would have cared much if they'd refused.

30:42

The financial stakes were low, and

30:45

so were the publicity stakes. It

30:47

could have gone either way. Tesco's

30:49

one crate banana limit seems

30:51

a reasonable compromise. It

30:54

can also go either way when both

30:56

stakes are high. That's

30:58

why some Hoover buyers got their

31:00

flights and some didn't.

31:03

It was the worst possible combination

31:05

for any company. They looked awful

31:07

for trying to wriggle out of their own promises,

31:10

and those they were forced to keep

31:12

were ruinously expensive. But

31:15

perhaps Hoovers marketers had

31:18

always had their doubts deep down.

31:20

The tagline for their free flights campaign

31:23

was two return seats

31:26

Unbelievable. In

31:30

the Philippines, number fever left

31:32

the three four nine bottletop holders

31:35

facing their own pragmatic calculation.

31:38

Take Pepsi's goodwill twenty

31:40

dollars or fight. Fifteen

31:44

thousand Filipinos joined

31:46

a pressure group called Coalition three

31:49

four nine, set up by Vicente

31:51

Delfiero junior, a public relations

31:53

consultant and a fiery preacher.

31:56

Mister Delfierro flew to New York

31:59

to file yet another lawsuit

32:01

against Pepsi, modestly

32:03

describing himself as a Philippino

32:05

or Don Quixote, a biblical

32:07

David growing up again Stagg Global

32:10

Goliath. The Pepsi three

32:12

for nine fiasco mirrors

32:14

how irresponsible multinational

32:16

organizations abuse consumers

32:19

in developing countries. Vicente

32:22

del Piero was tapping into a sense

32:25

of injustice that runs

32:27

much deeper than one botched soft

32:29

drinks promotion. Recall what

32:32

the thought of winning a million pasos

32:34

had meant to Victoria Angelo.

32:37

You can finish school, we can buy

32:39

a real house. These

32:42

shouldn't be unrealistic ambitions

32:45

for anyone. But it's

32:47

hardly Peps's fault that life

32:49

is so unfair. And was it

32:52

ever really likely that a court would

32:54

make PEPSI pay a sum that was

32:56

almost its entire market value?

32:59

Remember, nearly half a million

33:01

bottletop holders had accepted

33:03

the good will payment, far more

33:05

than joined mister Delfierro's coalition.

33:08

The aragmatically calculated that

33:10

this was the most PEPSI could reasonably

33:13

be expected to do after

33:15

well over a decade of legal wrangles,

33:17

the courts agreed it

33:21

would be wonderful to imagine a bottletop

33:23

printing error lifting hundreds

33:25

of thousands of Filipinos out of poverty.

33:28

That that was always going to

33:30

be too good to be true.

33:40

Key sources for this episode include

33:43

reporting from the Los Angeles Times, the

33:45

BBC, and The Independent, and

33:47

a paper on consumer rebates in

33:49

the Stamford Journal of Law, Business and

33:51

Finance. For a full list of references,

33:54

see Tim Harford dot com.

33:57

Cautionary Tales is written by me Tim

34:00

Harford with Andrew Wright. It's

34:02

produced by Ryan Dilley and Marilyn

34:04

Rust. The sound design and original

34:06

music is the work of Pascal Wise.

34:09

Julia Barton edited the scripts. Starring

34:12

in this series of Cautionary Tales

34:15

Helena Bonham, Carter and Jeffrey Wright,

34:17

alongside Nazzar Elderazzi,

34:20

Ed Gochen, Melanie Gutteridge,

34:23

Rachel Hanshaw, copnaholbrook

34:25

Smith, Greg Lockett, Messiah

34:27

Munroe and Rufleus Wright. This

34:30

show wouldn't have been possible without the work

34:33

of mil LaBelle, Jacob Weisberg,

34:35

Heather Fane, John Schnarz, Carlin

34:38

mcgliory, Eric Sandler, Emily

34:40

Rostick, Maggie Taylor and

34:43

Yellow Lakhan and Maya Kanick.

34:46

Cautionary Tales is a production

34:49

of Pushkin Industries. If

34:51

you like the show, please remember to rate,

34:54

share, and review.