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scottynx

This is a bit off topic but this Sailer guy has gotten plenty of publicity by commenting here and adding:
"Please feel free to post comments on my www.iSteve.blogspot.com"
Was that really necessary ? It sounds like what a mediocre car salesman would do.

Lova, it could be a bit innappropriate, if only Malcolm Gladwell had not personally challenged Sailer to open up comments. Is it that much trouble for you pay attention a little bit? Furthermore, Gladwell is putting post after post up about sailer of his own free will, which is first and foremost good for open debate, and only incidently good for Sailers publicity.

elguapo

Look at a more obvious example: NYC taxi cab drivers -- even blacks fresh off the boat from Nigeria -- are reportedly reluctant to pick up black fares. Particularly young black men.

Is this conduct (1) deliberate; and (2) rational? Does anyone seriously think that the subconscious bias of the Nigerian cabbie (picked up in the 4 months since he came to this country)is limiting his income?

What if you interviewed a few taxi drivers and ask them if they discriminate on the basis of race? Would you believe their answers? What do you think that taxi drivers tell eachother in private?

BobbyOrr

in a perfect world, everyone would treat everyone fairly. but unfortunately, this is not a perfect world and people will try to take advantage of every edge they can get. if they find that they can get an edge on black men, then they'll take it. if they find they can get an edge on people wearing blue shirts, they'll take it. i think it is incredible naive of gladwell to think that a) there are no differences based on race (which i'm confused on - he says blacks are better athletes than whites, but he cries racism when anyone says that whites are smarter than blacks) and b) that people are treated fairly by salespeople. gladwell, you need to get out in the real world and get some experience.

Leisure Suit

I used to work in a restaurant when I was in college. At this restaurant, a large portion of the waiters were black and a good portion of the customers were black. When a black customer came in, the black waiters would try to push the customer on the white waiters (and say they were racist if they complained, which is kind of funnty) because they knew that black customers tended to be poor tippers and be very difficult to deal with. The black waiters even joked about this. Does this make the black waiters racist against their own race? I think it means that in their experience, they've found out that the work required to wait on a black customer is not rewarded in an adequate tip and would rather not take that customer. Just like a car dealer saying that they've experienced that they can charge black people higher prices.

I think looking only at black people is missing the forest for the trees - all different types of groups (based on race, demeanor, dress, etc.) are sized up when entering into an economic transaction.

Stephen Brown

I'm beginning to wonder if anyone posting on this topic actually has ever been involved in business or sales. The way individuals or even groups of individuals operate in the marketplace is rarely as simple as a=b and b=c therfore a=c. To suggest that if it weren't good business practice it wouldn't happen any more is such facile tripe as to be useless. Of course its good business practice seen through the "right" lens. So are drug prices, prositution practices and blackmail. On a purly economic level if I have pictures of you that you would pay more for than the tabloids my asking you for that amount is economically sound but morally reprehensible.

These controlled studies of the marketplace, while potentially illuminating, become rorshach tests for those who interpret the results and make wider assumptions about them. The study tells us only that, many things being equal, black people and females will be offered a higher price initially for a new economy model car. Period. Any discussion about the possible reasons for why the dealers do this based on this study is fraught with supposition and not support by this or any other study cited.

Also, I'm amazed that the culture of car salesmen hasn't been brought under further scrutiny by the commenters. Everyone seems to be comfortable with ascribing to them as a whole a finely tuned abilty to "read" their customers. Isn't it just as likely that they have a culturally ingrained contempt for women and minorities? Obviously the study doen't suggest anything of the sort and my making that leap would be cheap, even if it accurately encapsulated some of the actions of some of the salesguys.

So, even if the dealers have been accurate in their assumption that in the aggregate black people and females will ultimately pay more, or buy more often, by emloying this strategy, to then make statments like "black men like to be seen as spending a lot on their cars" is a leap that doesn't belong to the discussion but to the utterer.

Any number of factors affect the buying habits of individuals that could explain paying more for a comodity. Perhaps an individual doesn't have the luxury of time to shop at multiple dealers, or transportation access to make far ranging shopping trips. Maybe the members of one's family or community haven't had the affluence to purchase many new cars and are therefore less likely to pass on wisdom regarding the wrinkles in the market. Perhaps one is sensitive about the perception of one's race or gender position in society and doesn't want to add to the perception that one doesn't better so one asks fewer questions and "pushes back" less. Maybe you don't like dealing with car sales people and the sooner the whole thing is over the better. Some of these motivations could correlate with race or gender or socio-economic background or personal history etc., etc. Once again, to take up any of these threads may make great conversation but unless you have a study to support it, it's just that.

Thank You,

Stephen Brown

Orkney

Stephen Brown writes:

"Isn't it just as likely that they have a culturally ingrained contempt for women and minorities?"

The study suggests not, since it found that black and female salespeople quoted similarly differing prices to black and female customers as white salesman do.

juniper

i'm starting to think that this conversation is destined to circle around and around in infinite circles, because one side thinks that profits trump equity, and one side thinks it's probably better to behave fairly than make an extra $1,000. those aren't viewpoints that you can change someone's mind about through any amount of discussion. i have no problem with the free market; it doesn't bother me that a t-shirt costs more at the gap than it does at target, or that a gap t-shirt costs less at t.j. maxx than it does at the gap, and it doesn't bother me that some cars costs more than other cars, or even that some dealers sticker similar cars higher than other dealers (and i bought a new car in september, so i know plenty about it). but what's under discussion here isn't free-market policy, it's engaging in biased behavior to a selfish end. the playing field is level for everyone who walks into a particular store to buy a t-shirt; i think it should be level no matter what's for sale. dealers and shoppers are still more than welcome to haggle or not as they please, i just want the starting point to be the same. some other people think that's not so important. i don't understand that, and i'm doing what i can to avoid being beaten into accepting it. when you say that it should be all right in a capitalist society for people to do whatever they feel like doing in order to rake in an extra dollar, you're setting a pretty low bar for the society.

Jim

Hi all:

I'm new at this, but consider the car repair business instead of the car sales business. Isn't it common knowledge that car repair shops charge more for women, perform more unnecessary repairs, and use more pressure on the client, relative to men. This has been my experience, and I've heard it said by so many people that I just consider it to be common knowledge. I do not believe the car repair industry treats men and women differently because car repairmen have an unconscious prejudice against women. I believe car repairmen, and collectively the entire industry, are simply maximizing their income, doing what works best.

Half Sigma

"My initial response to that study was simple: it’s wrong to try and charge someone more for something because of his or her gender and skin color. Reading the comments to my earlier posts, I was somewhat surprised to learn that for some people that is a controversial position."

No, no one is denying that car salesman aren't scumbags. Only that their discrimination is rational. That they have figured out, through years of trial and error, that they make more money by quoting a higher price to black people.

KJB

Here's a non-car sales related example. A few years back, I worked at a hotel. I worked mainly at the front desk, but took at least one shift a week as a bellman.

According to my colleagues, blacks were lousy tippers. Except, in my experience, that wasn't the case at all. In fact, I routinely received generous tips from black customers. My "secret" was basically what Golomb and other top car sellers are saying -- I provided the same greeting, same offer of service, same quality of service to blacks as I did to white people.

I intentionally decided that I would not make assumptions about how a person would tip based on the color of their skin or how they were dressed. And I routinely earned more in tips than my colleages -- most of whom relied on cues like race and dress.

Obviously this isn't a peer-reviewed study. Just thought I'd share my experience.

Charles H. Green

Personally I think Gladwell is exactly right on the main point he raises: the notion that discrimination is bad business.

Read the extant literature on selling. The more complex the sale, the more knowledgeable the buyer, and the more transparent the market, the more a profitable salesperson is likely to be one who is trasnparent, customer-oriented, honest, and to deal with customers as individuals. By contrast, the more "hit-and-run," commoditized, one-off, low-ticket-price, and opaque the market, the more you'll find scams, hustles and blunt force sales tactics.

Malcolm is simply pointing out a couple of those factors, and he's exactly right. The more transparent the market and the more individual-focused the salesman, the more money he's going to make.

Cars, and used cars in particular, are the epitome of the low-end market. In my seminars, I ask people to close their eyes and envision something when I say they word "sell;" about 1/3 come up with "used car salesman," more than any other image, and most can describe the image vividly, down to the polyester plaid suit. That's a lot to fight against, but the best salespeople do exactly what Malcolm suggests, even in that sleazoid business. Introduce some market transparency, and it'll be even more true.

Now extrapolate. The future of business is more transparent, not less; information databases are more, not less, available; buyer help services are increasing, not decreasing; reputations are more visible to all, not less visible. All these factors argue for an increasing connection between profit and sales tactics that are "fair" and individual focused.

I fail to see the difficulty in appreciating Malcolm's straightforward point here. To me it also applies vis a vis racism, i.e. sunlight is the best cure for rot and mildew. What goes around comes around, particularly when all the vehicles for getting "around" become more and more efficient.

If anyone wants to compare their views with what I consider to be good books on selling, I have high regard for books by Jeff Thull (e.g. "Exceptional Selling"), or Stephen Covey Jr's "The Speed of Trust," or Brooks and Travesano's "You're Working Too Hard to Make the Sale," or if I may be so bold, my own book "Trust-based Selling."

Sean OBrien

Well, Sailor only had 3 comments this time, so that's good. Anyway, Malcolm, you need to just ignore the comments section. Read it, but do not respond. It is onyl going to fuel the fire. There are parasites everywhere in this "Hater Nation" trying to gain fame/notoriety by attacking famous people. There is an entire website devoted to ripping on every single Bill Simmons column and he is probably the greatest sportswriter of this decade. The bigger you are (and you are pretty damn famous), the more people will try to gain by attaching themselves to your work. Just look at all the haters that came out of the woodwork in order to attack Dan Brown when The Da Vinci Code blew up. Fact is, many people read your books and love them. If some faux intellectual wants to attack you for personal gain, just let it go. You can't escape it.

Doctor Jay

The reason that the market wouldn't drive out price discrimination of car salesmen is poor information flow. Malcolm even mentioned this.

It's hard to get direct evidence that this discrimination even exists, let alone that it's bad business practice.

The evidence that we have is the testimony of top salesmen. But do all car salesmen have access to that information? Do they trust it? Confirmation bias is huge here, since customers won't tell you, maybe can't tell you always why they didn't buy, or whether they would have paid a higher or lower price.

Sweetness

Charles Green writes: "Cars, and used cars in particular, are the epitome of the low-end market."

Aren't cars usually the second-most expensive purchase people make, after their house?

Mr. Green also writes: "I fail to see the difficulty in appreciating Malcolm's straightforward point here."

Malcolm's point is not helpful to transparency. Sailer argues that blacks should be told that car salesmen are deliberately discriminating against them, and should make efforts to counteract that (such as increasing the amount of information they review before buying a car). Gladwell argues that the salesmen aren't discriminating deliberately -- they are biased too deeply for it to be on the top of their minds.

Sailer's approach puts the discrimination out front and offers a way to combat it. Gladwell's approach makes the discrimination part of a larger, and seemingly intractable, deficiency in American society.

Jesse

Fascinating topic.

What is interesting here is that every car salesman has a price in his head that he would be willing to sell it for. A buyer (assuming this is a standard, arms length transaction) is never going to know what that price is, and while the buyer may get close to it, he'll probably never hit exactly on the price. My question is, what do we want the salesman to do (assuming we do not change the way cars are sold)?

Let's say a salesman knows that his bottom-line price he will sell a Civic for is $20,000 and not a penny less. This salesman believes that he can offer higher prices to black people than white men and still sell the same percentage of cars per customers seen (he can offer higher prices to blacks and still sell a car to 1 out of 10 that come in, the same ratio he sells to white men). I (a black man) walk in the door and the salesman offers to sell for $21,500. I scratch my chin, kick the tires, smell the interior, but make no counter offer. After 30 minutes, he then offers $21,000, which I accept. Two hours later, an identically equipped Civic with the same 20k bottom line price is being looked at by a white guy. Dealer offers $21,000 (because he believes white guys require lower offers to buy), white guy scratches chin, stares at the car for 30 minutes, and then counters with $19,000, and the salesman says "Let's meet somewhere in the middle -- $20,250." Car is sold.

Clearly, race has entered his thinking, but what is the problem? Are we looking at process or results? If I had offered $20,000, the dealer would have accepted the price, just as if the white guy had. Is it better if the salesman is not "racist" (hates black people), but just uses race as a proxy for access to education, information and bargaining sense? What if a Jewish man came in and somehow identified himself as such to the salesman and then the salesman offered $20,750 as the opening offer because "You know those Jewish guys..." Should the dealer just offer the sticker price and then stand stoically like the Sphinx until the he hears the first counter offer over his bottom-line price? Is it “fair” to price discriminate at all? Would it be okay for the salesman to charge attractive women invoice price but unattractive women $1,000 more? My initial response to the study was that in an imperfect world, I would be willing to settle for a dealer willing to give me his best price regardless of race, even if I have to jump through a couple more hoops. But then this all starts to feel like The Matrix -- are the hoops real, or is there such a thing as an objectively fair price? etc.

Sean

One more thing I forget: The price information for new car sales is readily available at Edmunds.com. They have a TMV (True Market Value) which functions basically as the real estate "houses in the area" situation Malcolm describes.

Sweetness

There might be two related but distinct phenomena going on here:

1. Information assymetry - as Jesse says, the seller knows the lowest price he'll sell at, and the buyer knows the highest price he'll buy at, but they have to go thru an elaborate signalling ritual (i.e., negotiation) before even a little of this information gets out. The information is likely never completely disclosed, on either side. The end result of the negotiation (the final selling price) is a close approximation of the synthesis of this information.

2. Cultural differences - the cultural or emotional component of making a large purchase, e.g., wanting to feel like a 'big spender' (Sailer's contention about blacks) or not wanting to look 'cheap' or wanting to end the haggling as quickly as possible (or not even knowing that you are supposed to haggle).

The problem is that if this is correct, then the cultural issues identified as #2 are harming some people's abilities to most effectively engage in the process described in point #1. If this is known by the sellers (and Sailer and Posner claim it is), then they are simply using the information assymetry more effectively than they are able to do with other buyers.

So the two remedies would be: (1) encourage greater transparency; and (2) encourage greater awareness within the groups paying higher prices about their own habits, expectations, etc., that are negatively affecting their negotiating outcomes.

Gladwell would probably not agree with this, but would instead substitute:

3. Unconscious racism by the sellers.

I just don't see how that explanation (a). fits within a market paradigm; and (b). helps anyone get a better price for a car.

Numbers 1 and 2 are more consistent with economic theory. Number 3 is a bit abstract and seems to spring from a grievance culture rather than economic analysis.

Jim O'Sullivan

So now you're saying your point was that it's reprehensible. Before, you were saying that it's unconscious.
So, one can only conclude either of two things about this post. (1) You believe that car dealers are among those with unconscious minds that have reprehensible features. (2) You are tacitly admitting that you were wrong.

albatross

There seem to be a bunch of interesting questions here:

Do the top 1% salesmen really offer the same prices to blacks and whites?

It's possible that really good salesmen integrate a lot of information into their decision about what first offer to make, while mediocre salesmen fall back on a simpler evaluation based on obvious stuff like race, age, sex, and dress.

It's also possible that the good salesmen do offer blacks higher starting prices, but don't realize that this is the result of their complicated evaluation. Experts are notoriously bad at explaining how they make complicated decisions.

And it's possible that the salesmen Malcom interviewed just flat lied, because they didn't want to sound bad or to discourage blacks from buying cars from them.

Another question is, what makes this self-sustaining? (That is, why doesn't the market get rid of this kind of discrimination.) I suggested one way this could happen (which is almost exactly the description of one way unthinking agents can get a discriminatory strategy going in _The Evolution of Cooperation_).

And finally, is there anything that can fix this at a social level? Perhaps this is one more reason not to like the legal barriers thrown up by dealerships to prevent competition from internet car sellers and manufacturers?

And what should blacks and women do now, when they need to buy a car? I assume research, walking in with the no-haggle prices of similar cars on a visible printout, along with the Edmunds and Consumer Reports pages on cars you're considering, and hard bargaining all help. But it would be nice to have some strong evidence about how individuals can help themselves without having to solve the broader social problem.

Craig

I apologize if I'm repeating any arguments here, but a couple of things occur to me.

The first thing everyone in sales learns is that it's stupid and arrogant to try to guess what a person will buy or spend on first impressions. The worst ones forget this principle or decide to ignore it. The best salespeople meet everyone on a level playing field. It seems the research confirms this "conventional" sales wisdom works, as evidenced by the interviews with those in the top 1%.

Henry Ford revolutionized the car industry not just by introducing the assembly line, but also by meeting a price point his own employees could afford. He thus expanded the market greatly, though he was surely ridiculed by those in the upper classes.

The same argument worked for race. If you sell cars to blacks and other non-whites, it turns out that they will buy them and the market is expanded again. Our nation is just now figuring out that translating marketing messages into Spanish has the effect of expanding the market of available buyers again.

Anyone who thinks businesses maximize profits outside the context of their social position has never been around many executives. For instance, wouldn't it make sense to push health care costs out to the government? Talk about a sweet margin to go after. But executives are loathe to discuss it. Why? Because in their social position it's not an appropriate "ideology".

It seems to me the simplest explanation is that the salesmen want blacks (who they can't prvent from buying) to pay a premium to belong to their social class. If they're not willing to do so, the salesman is willing to forego the business.

Even economists have to admit that racism is the simplest and most powerful explanation here--even if Occam's razor cuts them the wrong way. They can add epicycles all they want, but just the basics of behavioral/social/congitive economics described above are sufficient (in this case) to understand the situation.

Stephen Brown

Orkney writes that:

The study suggests (car dealers don't have a culturally ingrained contempt of women and minoroties), since it found that black and female salespeople quoted similarly differing prices to black and female customers as white salesman do.

The study does't suggest anything of the sort. That could be a conclusion to what it suggests, but that conclusion would be externall to its findings and would require different study to prove.

A culture populated by predominantly white males would be capable of pressuring non-whites or non-males to emulate their behavior overall. Workplace pressure to conform is in many ways greater than the well documented and agreed upon pressure to toe the line in teen-aged school settings. Bucking the trend in HS in most cases leads to wedgies and insults. Doing so at work can lead to missed rent payments and loss of medical coverage.

Having worked in a number of sales environments (and been courted by many others only to back away slowly from them), I think I can say that generally the culture of sales units across the piece tends to be behind the curve in terms of progressive attitudes toward minorities, women, business practices, etc.

The number of businesses, sales groups and salesmen/saleswomen that are exceptions to this trend are, I'm sure, legion. Never the less, this seems to be the trend I have observed and certainly resonates with the popular view of this sub-culture (see Glengary Glen Ross, etc.) The pressures that sales reps are placed under are peculiar and require peculiar psychologies to deal with them. In no other job role is compensation and job security so tightly tied to performance and performance tied so tightly to factors beyond one's control.

"What works" in sales is ephemeral and to assume that sophisticated economic thought goes into every transaction (or even every business unit's culture and policies) is to underestimate the degree to which a swaggering hunter gatherer mindset permeates this kind of work from the ground up. We have all been witness to individuals, organizations and even entire business sectors being shockingly blinkered to the degree to which a particular practice is counter-productive. Why are so many commenters so naive as to believe that car salespersons are the only segment of the busness world who are immune to this shortsightedness. It is entirely possible that charging different rates for different people is counter-productive, that that is demonstratable, and that the practice continues regardless because of internal cultural inertia that resists changing it.

Again, I don't know that this is the case, but nothing the studies cited so far eliminates this very real possibility.

Thanks again,

Stephen

Robyn

Hi,

I really enjoy these columns, but I see a few problems with these conclusions. First, while it may seem like you can learn more from speaking only to the best salesmen, their comments mean little without comparison. Any good experiment has a variable and a control, and it seems plausible that even mediocre salesmen would attribute their actions to behavioral cues rather than race or gender. Frankly I have a hard time imagining any salesman who's not a total idiot saying something like, "Yeah, I think black men are chumps so I quote them higher prices." Of course they're going to try to excuse their actions--especially if they're beieng interviewed by a black man and even more especially if they know they may be quoted in a book.

Second, as Gladwell himself points out in Blink, what people say they do is not necessarily what they really do. So it's possible that these good salesmen claim they look at behavioral cues, but in reality they look harder for signs of confidence in white men and harder for signs of nervousnes in black men and in women (I believe this is called the confirmation bias). So if a white man walks into the car dealership with straight shoulders, the salesman may think, "He must be confident," but if a black does the same, the saleman might think, "Huh, look how straight his shoulders are--he must be overcompensating to hide anxiety."

Or, alternately, it's possible that women and black men really so show more signs of nervousness because they're aware of the views the car salesmen hold against them. I know that whenever I go to the mechanic, I act nervous--part of this is because I know nothing about cars, but part of it is also that I know the mechanic is going to see a young woman, think I'm an easy mark--which makes me self-conscious. It seems entirely plausible that, whatever their economic status, women and black men are more self-conscious when buying a car, which the car dealers might pick up on.

Ultimately, it seems like Ayers' experiment is flawed. It doesn't really matter what price the salesmen initally quote--it matters how many cars they sell and what price they sell those for. As another poster pointed out, it's possible that salesmen see black men as better bargainers, so they start out with an initially higher quote. It seems like a more successful experiment would compare final sales prices versus overall sales--this would help confirm or disconfirm Gladwell's theory that discrimination here hurts sales.

Stephen Brown

Sweetness writes:

Gladwell's approach makes the discrimination part of a larger, and seemingly intractable, deficiency in American society.

Well Duh! It is part of the big picture of how American business deals with race and gender. Anyone who watches American TV commercials can see the misogyny and racism that permeates the treament of its customer base by businesses in the aggregate. Gladwell didn't come up with anything new there and if you can't see it on its face, I doubt my mentioning it to you will help you recognize it.

Sweetness

Nice tone, Stephen Brown. I wrote a longish and somewhat nuanced analysis of what might be going on here, and put it in economic terms. I then contrasted that wiht Gladwell's reductionist interpretation.

You respond by saying "well, duh" and insinuating that I'm somehow too dense to see that Amerikkka is just this biased place, and no amount of economic analysis will ever provide a better or more convincing interpretation than The Man is keeping folks down.

Duh, indeed.

tomfunk

No big diatribe here. I'd just like to add a quiet note of support for Malcolm Gladwell's lively and thought-provoking writing - - which is what brought me here. I can see that your blog is a lively and provocative place as well, as long as one doesn't get mired in the "Comments" . . .

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