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Influx interview: the authors of freakonomics

June 1, 2005

Freakonomics has emerged as one of the must read books of 2005. It currently sits at no5 on the Amazon bestseller list. Steven Levitt is one of the most interesting young economists around. He has set out through deep intellectual analysis to really understand some of the motivations that lie at the heart of human behavior. For an economist, this type of thinking is radical. Most economists want human beings to behave in very predictable ways.

In their book, Levitt and Dubner force us to challenge our conventional thinking and to constantly question what we told. Reading the book certainly forces one to think differently about real-estate agents and parenting.

Influx was fortunate enough to spend time with Steven Levitt and his co-author Stephen Dubner and ask them some questions relating to the book and the thinking that surrounds it.

Many marketers claim that they can understand consumers, through research polling and focus groups. Are they right or misguided?

There are surely insights to be gained from polling and focus groups but just as surely, real data would seem to do a much better job of revealing actual preferences. That’s what economists try to do daily, and what we try to do in Freakonomics: use actual data from any arena of life (crime, parenting, sports, etc.) to see what’s really happening underneath all the noise. Sometimes the results are exactly what you suspected but very often there are big surprises.

What’s the best example of a marketer who has capitalized on the strange paradox of human behavior?

Well, it’s unclear that human behavior is a paradox. Occasionally irrational, perhaps, but basically people tend to do what they need to do to get what they want, or need, especially when other people want or need the same thing. So in that light, Malcolm Gladwell (though not a marketer) seems to have done a wonderful job capitalizing on human behavior: providing a lot of smart people with true stories about other smart people doing interesting things. Gladwell’s taste is so good that one simply years to be in his company (well, in truth the company of his writing).

What’s the one thing that business can learn from reading your book?

As we define economics, it is really the study of incentives. And business, of course, is all about incentives. The tricky part is that every incentive scheme is different, and there are different types of incentives: moral, social, financial, etc. Freakonomics is really a survey of a number of case studies from business, education, crime, etc., that all try to get to the bottom of the relevant incentive schemes. The key is to figure out what incentive scheme you’re up against, and gather as much data as possible, and then hopefully you’ll see what lies beneath. So we find that real-estate agents sometimes abuse their informational advantage because the incentive scheme is set up to encourage it; but in other cases, we find that incentives work very much in the consumer’s favor.

Other than your book- what other books should people read to get smarter on your field?

The Tipping Point and Blink by Malcolm Gladwell; The Wisdom of Crowds, by James Surowiecki; maybe Everything Bad Is Good For You, by Steven Johnson; The Armchair Economist by Steven Landsburg; A Treatise on the Family, by Gary Becker.

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