Chocolate and Gold Coins

Saturday, April 22, 2006

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.


  • Cheating on expense account comes to mind. A long time ago, when I was a Marketing Manager of a company, one of my direct reports was a larger-than-life Renaissance man based in Washington DC. This gentleman would order the finest of food and wine when traveling on company business. We were once catching a flight out of some little airport in Georgia, and went to the little bar for a drink. He asked the waitress if she had Pernod. The waitress sneered at him as if he was a pervert and replied, "We ain't got no porno here."

    During the Holiday season one year he called me to ask if he could give away boxes of Godivas to his top customers. The company did not have a budget for boxes of chocolates, much less Godivas. So I had to say no. His response was, "Don't worry, it will be on my expense account but you will never catch it." And I couldn't.

    I think this goes on in the world of business every day.

    By Anonymous Anonymous, at 2:31 PM  

  • "I don't really understand his choice." I haven't read the book, but given the tendencies of stock analysts, maybe he felt that it was an honest living versus say, being a corporate analyst pressured to pump client stocks despite fundamentals. Maybe selling bagels bought him years of peaceful sleep which hundreds of thousands of dollars ripping off brokerage clients would have prohibited.

    By Anonymous Anonymous, at 10:06 PM  

  • 'I don't really understand his choice.'
    i see this line has attracted other readers too. i think you're not trying to (understand, that is). by quitting the company he freed himself from working on someone else's goals and deadlines. as a colleague you're possibly aware of the kind of stresses associated with his line of work- chucking it all is probably an extreme reaction but it is explained by his refusing to fix a price on the bagels he sold - he's turning the stress on the market for a change. also, doesn't bagel-selling seem like the kind of work he'd kind consider mere'play' compared with what he was doing earlier? he wasn't exactly doing a gauguin (in the sense,he probably didn't consider bagel-selling as the thing he had to do) but i guess he'd a lot of complaints about what he was doing.
    and the freedom of running one's own business probably gave him the satisfaction of winning the rat race by staying away from it- he must have felt 'superior' to his ex-colleagues still engaged in it. and..

    By Blogger kuffir, at 12:08 PM  

  • hey.. the bagels did have a price?
    that changes the picture i've made up of him a little, i guess.

    By Blogger kuffir, at 12:11 PM  

  • i liked the final part of the essay where levitt summarized the behaviour of corporate environments in respect to the bagel story...

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