Charlie Munger says the most important rule in management is "Get the incentives right". Munger argues that the power of incentives is constantly underestimated. In FreakonomicsSteven Levitt shows us how pervasive incentives are in society, and what we can learn from that. Value investors who can grasp the power of incentives put themselves in a position to understand which companies are utilizing the full potential of their managements.
For example, the public will not challenge or doubt a statistic if it sounds reasonable or would be socially inappropriate to question. Therefore, individuals and groups have been able to manipulate statistics to their benefit without resistance.
Police departments successfully painted a picture of crack dealers with state-of-the-art weapons, working one of the most profitable jobs in America. However, after seeing the manipulation of previous statistics the reader is immediately left questioning how crack dealers could actually have greater resources than police.
The accuracy of this statistics is the premise for the discussion of the chapter. To determine the condition and means of crack dealers the authors examines the research of Sudhir Venkatesh. He also was lucky enough to meet J.
Through the documentation and budget reports that J.
However, these were not the individuals selling crack on the streets the police were referring to. The boys who were selling crack on the street earned slightly more than three dollars an hour, which was below minimum wage at the time. As a result, the corner neighborhood crack dealers, as the name chapter suggests, was living with their mothers without bottomless pockets and state-of-the-art guns.
According to Venkatesh the reported wealth of crack dealers by police stations during the period was only half true. Although, there were crack dealers making a lot of money the corner crack dealer certainly was not.
The authors then examine the prevalence of the effects of crack in African American community by comparing its evolutions from cocaine to the evolution of silk stockings to nylon stockings. Originally, silk stockings were a luxury only the very wealthy could afford like cocaine.
After the advent of nylon stockings, stockings were available to the masses for very cheap similarly to crack. The advent of crack, however, had detrimental effect to African American communities totally stopping and reversing the progress made after the civil rights movement.
In the Black Disciples the top 2. The reader has been set up to be distrustful of the police claim because of the inaccuracy of the prior statistics. Finally later in the chapter the forth statistic disproves the financial situation of crack dealers reported by police.Feb 10, · Chapter three begins with a discussion of a famous quote by economist John Kenneth Galbraith who stated, “we associate truth with convenience” (86).
This statement is the basis for the beginning of the author’s line of reasoning to conclude that statistics are easily manipulated. For example, the public will not challenge or doubt a statistic. Freakonomics Chapter 2 - How is the Ku Klux Klan like a Group of Real-Estate Agents?
That is how the KKK is similar to a group of real-estate agents, they both controlled information that allowed/allows them to have an edge over everyone else. The KKK is built . In Freakonomics Levitt and Dubner use emotion to grab the readers attention. When emotions are put into play, the reader becomes more attentive.
In chapter 4, the abortion laws in Romania are discussed. "Legalized abortion leads to less unwantedness; unwantedness leads to higher crime; legalized abortion, therefore leads to less crime.". The provocative and entertaining Freakonomics is a testament to Steven D Levitt's eclectic approach to economics, says Stephen Bayley.
Freakonomics is one of those films that tries to make a complex subject accessible to a mainstream audience. Here, there subject in question is economics, and how it is everywhere.
Although trying to reach a wider audience in a fun way we can relate to is admirable, it can't avoid a patronizing tone.
Chapter 2 was merge into topics into. Consider the opening chapter. In two separate academic studies, Levitt analyzes schoolteachers and sumo wrestlers. Freakonomics points out that they share a .