Cheating the Bagel Guy, Part II

A year ago, I wrote a piece about cheating the bagel guy. This bagel guy used to be an analyst at the company that I used to work for. He retired some 20 years earlier to deliver bagels. He would deliver about 10 dozen bagels and 6 dozen doughnuts to the office on Fridays. He would leave out a simple plywood "honor box" for the employees to leave money in. He would sometimes complain with messages that people were cheating him.

I recently found this interesting article about this same fellow in the Freakonomics blog:

He had also -- quite without meaning to -- designed a beautiful economic experiment. By measuring the money collected against the bagels taken, he could tell, down to the penny, just how honest his customers were. Did they steal from him? If so, what were the characteristics of a company that stole versus a company that did not? Under what circumstances did people tend to steal more, or less?

As it happens, his accidental study provides a window onto a subject that has long stymied academics: white-collar crime. (Yes, shorting the bagel man is white-collar crime, writ however small.) Despite all the attention paid to companies like Enron, academics know very little about the practicalities of white-collar crime. The reason? There aren't enough data.

A key fact of white-collar crime is that we hear about only the very slim fraction of people who are caught. Most embezzlers lead quiet and theoretically happy lives; employees who steal company property are rarely detected. With street crime, meanwhile, that is not the case. A mugging or a burglary or a murder is usually counted whether or not the criminal is caught. A street crime has a victim, who typically reports the crime to the police, which generates data, which in turn generate thousands of academic papers by criminologists, sociologists and economists. But white-collar crime presents no obvious victim. Whom, exactly, did the masters of Enron steal from? And how can you measure something if you don't know to whom it happened, or with what frequency, or in what magnitude?

They mention that honesty seemed to fall in the 1990's. But I suspect that he was not holding constant a very important variable: relative bagel quality. His bagels were really low quality and many people might have thought that they were not worth the dollar charged. Of course, it isn't right to not pay for something you have already consumed - infact it isn't right to consume something first and pay for it later - but some people might be more inclined to rip you off if they feel cheated by you.

From the statistics listed in the piece, it is clear to me that he was making essentially nothing from his hard work. If his gross sales after 20 years were only about 1.5 million dollars. His net was maybe a quarter of that (at best). His pay as an analyst was the equivalent of 100,000 dollars per year. He really gave up a lot to deliver bagels. I don't really understand his choice.

I would think that companies would be really interested to know who might cheat the bagel guy. That same person might be ripping the company off in multitudes of ways. But I also wonder how well correlated this kind of crime and other kinds of corporate crime. There are many people who would never cheat the bagel guy but would rip off a big corporation.

1YAT: The Value of Quick Thinking

One year ago today, I wrote:

Often times I only think of the perfect response to a question hours later, when it does me no good. But occasionally it comes to me right away.

Yesterday, my little boy was practicing his piano lessons. He wanted to quit and do something else but I wanted him to practice the last tune one last time: “Tomorrow is your piano class. Practice that tune again. You want to show your piano teacher that you can play it perfectly.” I only meant “perfect” in the sense that he should be able the play it with obvious errors, not that I expected him to be Mozart.

My wife took offense to that statement. She angrily whispered: “ What do you mean ‘perfect?’ Don’t put pressure on him. What do you do that is ‘perfect?’”

I was in the doghouse now. I needed to think quickly – and I did!

“I married the perfect wife.”

My wife considered that answer for a brief moment as if she might have appreciated that reply.

“Name one other thing you can do perfectly."

“I gave the perfect response to the previous question.”

“Ha, ha. Very funny.”

But then she let the subject drop. I breathed a sigh of relief.

I recall that Rahul Bhatia liked this one. Now he is married, he will have to think quickly on occasion.

My son plays the piano really well now.

1YAT: Magic in the Marketplace

One year ago today, I wrote Magic in the Marketplace:

The key to wealth is having a magic technology. Technology, in the sense that I’m using the word, is any means that you might use to take inputs (labor, capital) and turn it into a finished product or service that customers will buy. McDonald’s might be considered low-tech, but in reality that have sophisticated technology since it isn’t so easy to take high-school students and transform them into a force that produces a consistent quality product. Likewise, Wal-Mart is a very sophisticated technology. There are lots of people who would like to know how they do it.

Technology comes in two types: clone-able and magic. Clone-able technology can be duplicated by anyone simply be observing the end product. A chocolate-dipped frozen banana is clone-able. A really big paper clip is a clone-able. You don’t make any money from going into business by trying to create a new market with a clone-able technology. If you want to make money, you must have a magic technology – a technology that no one can figure out how you are doing it.

This was easily the best piece I wrote in the month of April 2005.

1YAT: The Tipping Game

One year ago today I wrote:

I think tipping is a simple example of the problem with non-cooperative game theory. Non-cooperative game theory might do well enough to explain the behavior of firms because firms are so motivated by profits that they are not motivated by what others expect them to do. But individuals would rarely behave in the manner that non-cooperative game theory would suggest is rational behavior, because individual are programmed instinctually to cooperate. We tend to do what we are expected to do.

The tipping game is like a two-stage prisoners’ dilemma game. First the server either cooperates (good service) or not-cooperates (poor service). The customer observes the service and then either cooperates (gives a tip) or not-cooperates (gives no tip). Both would be better off cooperating than both not cooperating but the customer would have more money in his pocket if he doesn’t tip even when he receives good service. But people are hard-wired not to behave that way.

I remember receiving a nice letter about this post.

1YAT: Go Start a Blog or Something

One year ago today I wrote Go Start a Blog or Something

I love reading India Uncut each day. Amit Varma, the great blogger of India is so entertaining. I have to say, however, it is not a good idea to read India Uncut before meals because some posts might turn your stomach. But most of his post are just interesting.

There was one post he made about traditional sari embroiderers losing their jobs due to cheap embroidery machines imported from China that I found interesting. At the end of post he said:


And if you're a hand embroiderer, well, no one owes you a living. Go start a blog or something.


I have to admit that I loved that last line in part because it sounded so cold. I wrote to him: "I have to say that if Marie Antoinette were alive today, she couldn't have said it better herself." A little context is needed here. I had earlier written to him to ask about whether he thought anybody blogging today was thinking perhaps that it would lead to fortune someday (because nobody could make a living doing a blog today).

Of course, it would be silly for India to protect the jobs of sari embroiderers. They are going to be the principle beneficiaries of the new opportunities created by the new global economy. They need to leave traditional jobs to take advantage of the new jobs be created. Some have already taken the carrot, and the rest will get the stick, but change is inevitable. And we should not, for a moment, lament the loss of the old way of life. Without change, we would still be living in caves.

Anyway, Amit took my comment as a criticism and he wrote a long rebuttal, (and he linked to me, thanks Amit). As for the sari embroiderers, I am certain that they will find much better ways of making a living than starting blogs. Of course, some of them might get rich starting a web-based business, it could happen.

The Big Screen Television Set

When we bought our new home a year and a half ago, it came with a big screen television set in the basement. It came with speakers installed in the walls and in the ceiling to give a cinema-hall quality sound. We thought that would be a nice thing to have with our house.

Well, we moved in and discovered that the television only played the Spanish channel. I figured that we could reprogram the television so that it would get all channels but it wasn’t at all obvious how to do this. We had the cable television guy look at it and he was no help. Unfortunately, the manual for the television set was missing and the guide for stepping us through the reprogramming was so complex, we never could get it to work.

I spent hours and hours fiddling with it. I thought of connecting the cable wires to the VCR and the VCR to the television to circumvent the problem. It did give us the sound but not the picture.

The television had the logo of a local satellite dish company. I figured that maybe the television was cleverly designed so that it would only work with the satellite dish so that the owner would have no choice but to pay for their service. But we didn’t want satellite dish.

We could watch movies with the big screen television – the DVD player worked. But the speakers were useless because the previous owners decided to take some of the necessary equipment out at the last moment (and never told us about it). So for a year and one half we have had a big screen television and speakers and they were only of partial use.

Then this weekend we decided to do something about that. We decided to buy real furniture for enjoying our television. We have been watching television on a screen about half the size of our big screen television. And since we had that television set up in the exercise room so my wife could watch here aerobic exercise videos, we would watch television while lying on the carpet. Lying on a carpet is fine when you are in your twenties but when you reach 40, it really is a pain in the back – literally.

So I went to Best Buy (the electronics store) to ask if about the equipment to make the speakers work and I also ask again (maybe for the fourth or fifth time) if there might be a way to get that television to work. The young man suggested that unplug everything and try to reprogram the channels again. Well – I had tried that before.

But I tried it again - still no luck. I was about to give up for the tenth time when my wife decided to try it again. She noticed that the television was in a slightly different mode than before – at least now the television channel number showed up in the upper right corner but we still only got Spanish channel. She went through the setup a few times.

And then, like a miracle, something happened. The step that I had been looking for literally for years came up and the television began searching for channels. And then we were getting all of our cable channels – right there on the big screen television!

But I feel useless. I don’t know which make me feel more useless: not watching television on a perfectly workable big screen television for a year and a half because I could not figure out how to reprogram it or the fact that my wife was the one who eventually did figure it out. Well, anyway, it works now.

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