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Freakonomics

Freakonomics. Chapter 3. Conventional Wisdom. We associate the truth with convenience. Conventional wisdom are explanations generally accepted as true. Many people wouldn’t believe that drug dealing would be similar to businesses like McDonalds or Wal -mart but it is.

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Freakonomics

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Presentation Transcript

  1. Freakonomics Chapter 3

  2. Conventional Wisdom • We associate the truth with convenience. • Conventional wisdom are explanations generally accepted as true. • Many people wouldn’t believe that drug dealing would be similar to businesses like McDonalds or Wal-mart but it is. • Also many people wouldn’t believe that crack cocain has anything in common with nylon stockings, but there are similarities.

  3. Story • Sudhir Venkatesh was asked to visit Chicago’s poorest black neighborhoods with a survey consisting of questions like how do you feel about being black and poor. • After searching for some time Venkatesh eventually found teenagers that could take the survey, but the teens refused to participate. Soon all of their gang membes came along, and they started to talk. • SudhirVenkatesh decides to leave and goes home to think of better questions to ask.

  4. Story Continued • J.T was their gang leader who graduated college as a business major but turned to selling drugs. J.T promised Venkatesh access to the gang’s operations as long a J.T. retained veto power over any information that, if published, might prove harmful. • Venkatesh lived with the gang for at least six years and noticed that it was just like any other business.

  5. Business • The gang Venkatesh was with was one of about a hundred branches (franchises). • J.T. reported to a central leadership called the board of directors • J.T. paid the board nearly 20% of his revenues for the right to sell crack in a designated twelve-square-block area. • The rest of the money went to where J.T. believed it should go.

  6. Charts

  7. Salary “ A crack gang works pretty much like the standard capitalist enterprise: you have to be near the top of the pyramid to make a big wage.”

  8. What did crack cocaine have in common with nylon stockings? • Stockings were made of expensive silk that were in short supply until DuPont introduced nylons. • Nylon stockings were easily affordable and appealing. • “DuPont had pulled off the feat that every marketer dreams of: it brought class to the mass.” • The making of nylon stockings were markedly similar to the invention of crack cocaine. • Cocaine was clean, white, pretty, and provided a beautiful high, but it was very expensive until crack (a form of cocaine) was invented. • Cocaine wasn’t a big seller in the ghetto being too expensive, but crack was ideal for people with low-income because it required a tiny amount of pure cocaine.

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