The Power of Placebo (Beyond Medicine)

When people talk about the placebo effect they’re usually talking about medicine. It brings to mind clinical trials and sugar pills, where doctors see if a group of suffering people get better by receiving a treatment that has no reason to work (ex. a sugar pill), in an effort to prove efficacy for a treatment that has some reason to work (ex. a “real” pill). Author and psychotherapist Gary Greenberg has explored the topic deeply* and makes me think we should be thinking of it much more often in our professional relationships. The placebo effect doesn’t just apply to medicine. Greenberg helps us to understand how and why it shows up everywhere  

Some medicinal healing happens when a good thing chemically resolves a bad thing. Put penicillin in a petri dish with some bacteria and the penicillin will take over. Take penicillin pills for a bacterial infection and the outcome will be similar. Killing the bad stuff isn’t all there is to healing, however. In vertebroplasty, a doctor puts cement into painful spinal fractures to reduce pain. In a trial, they demonstrated that the act of a patient going in for the procedure, smelling the cement come out, but then not actually having anything done produced the same pain-reducing outcome as the actual procedure. How can a “fake” treatment work as well as a “real” one?

Greenberg describes the socialized ritual that is our modern medical experience. We have an expectation that treatment should produce a positive result. Take a moment and reflect on the ritual of going to the doctor when you’re sick. From the check-in to the taking of vitals, to the examination, to the diagnosis, to the picking up of the script at your local pharmacy – what if the medicine isn’t the only thing working, but combined aspects of the entire process? What if the factor that has the greatest impact is different for different people? Separate placebo from just the medical field – how could this change our approach?

In the financial advice industry, where is the value? Is it the advisor, the office, the trading operations, the portfolio design, the plan, the birthday call, the holiday card, the…? Or, is it some aspect of the ritual that makes a client feel “better” because they’ve received “treatment?” The existence of the placebo effect may be telling us it’s some combination of all of these things, not any one thing. 

If we aren’t always able to know exactly what our penicillin is or even how it works, we should turn our attention to the entire ritual and the philosophical expectation of why it produces improvement at the individual level. The point is not to lie or trick people into thinking they’re getting something they’re not, but to recognize that getting better is about making improvements, and aiming for improvement is based on understanding the efficacy of multiple steps, not just one in isolation. From the waiting room to the pharmacy, from the financial plan to the portfolio allocation decisions.

Our world today is about experience and customization. Understanding placebo and the power of ritual is a competitive advantage. When our entire service experience is wrapped around curating an individual’s improvement, we can create something truly special.  

*Listen to Gary Greenberg on EconTalk here, or see his recent NYT feature, “What if the Placebo Effect Isn’t a Trick?”