Bryan Caplan  

Why Be Normal?

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Economists love to pour cold water on new ideas: "If your plan is so great, why aren't people already doing it?" And usually we're right to do so. Most of the economy's backseat drivers aren't fit to run an apple cart.

But still... There are a lot of ideas that seem to hold up to intense criticism, but the market still doesn't adopt them. Case in point: Why don't workers offer employers a money-back guarantee? "I'll work for free for a month; if you're not completely satisfied, you'll never have to pay me a dime." Do minimum wage laws forbid this? Well, they don't forbid unpaid internships. So call the money-back guarantee an internship, and away we go.

This plan sounds particularly appealing to people like me who believe that education is mainly a signal, rather than a place to acquire job skills.

So why don't we see this? Here's my answer. Suppose you're interviewing a smart guy, without a college degree, and he offers you a money-back guarantee. You might think "What a great deal" and accept. But then again, you might start thinking "What a weirdo. What's wrong with him?"

And this, I propose, is the stumbling block to lots of worthwhile innovations. A person with an unconventional idea may have a point, but is also unlikely to be "normal." He may not fit it with other people. He may have problems with authority. He may be deviant in more ways than one!

Confession: I'm one of the weirdos. I flout all kinds of social conventions. I wear shorts and flip-flops in the winter. I carry a funny cushion around wherever I go. (Don't ask!) I laugh at inappropriate times. So outside of the best weird economics department in the world, who wants to hire me?

If you hear me out, I think I've got some good arguments for wearing shorts and flip-flops in the winter. But even if I convinced you, you would probably hesitate to hire me, especially for a "real-world" job. My failure to conform in dress significantly raises the probability that I will fail to conform in more substantive ways. And even if you decide I can wear shorts while everyone else wears suits, what if a client sees me? He may start to think the whole firm is weird.

My argument about normalcy is an example of what economists call statistical discrimination. In a world of costly information, employers sensibly rely on a lot of statistical generalizations. One of these, I'll warrant, is that weirdos are, on average, worse employees than conformists. Admittedly, the truth of this probably varies from industry to industry. (Check out Peter Jackson!) But typically, usually, normally, normality is the best bet. The upshot is that some clever but unconventional ideas sit on the shelf, untried.


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TRACKBACKS (6 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/211
The author at The Club for Growth Blog in a related article titled Thursday's Daily News writes:
    Bush’s Social Security Blues - Robert Novak, RCP The Ownership Card - Wall Street Journal Editorial How Today’s Social Security Works - David John, Heritage The Coming Crackdown on Blogging - D. McCullagh, C|NET The Online Insurgency - T. D... [Tracked on March 3, 2005 10:31 AM]
The author at Stumbling and Mumbling in a related article titled Signaling in education writes:
    In a tangential remark in this typically fantastic post, Bryan Caplan revives an idea which has been unjustly neglected in recent years in the UK. He says: “education is mainly a signal, rather than a place to acquire job skills.” [Tracked on March 5, 2005 5:16 AM]
COMMENTS (16 to date)
Maestro writes:

I know you said not to ask, but what's the deal with the cushion? I pretty much agree with everything else you said, so don't think I'm ignoring your ideas, it's just that's the only thing you wrote that I don't understand.

B. Scot writes:

You're right Bryan; while I do enjoy reading your posts because you like to "stir the pot," your "signal" makes me wonder how you managed to land your job? :)

Xavier writes:

You mention internships as an example of employees working for free, but it's also often an example of a free trial period before a longer-term job. The difference between that and what you suggest is that the arrangement is proposed by the employer rather than the employee.

Even if free trial ideas were more widespread, I don't see employees initiating it. First, when employers do it there isn't as much risk of appearing weird. Second, employees are less likely to be innovative than employers. There are a lot transaction costs in designing a program like that and it would be much more efficient for an employer to do it because a large number of employees can use the program once it's established. Also, I think employers are naturally more inclined to be innovative. Creative, gutsy people are more likely to be entrepreneurs than employees.

Danno writes:

Uhm, you're probablly already aware of this in some sense, but for the edification of anyone who reads the comments, what's being talked about here is simply the idea of Social Proof as applied to economics. Plainly, that the more people do something, the more people consider it acceptable and appropriate and the opposite as well.

jaimito writes:

Weird and creative people find employment, sometimes even well rewarded employment. Many employers are not afraid to try and in a tacit non-public way, recognize and reward productivity. But being weird has its costs: you are kept in the back room, you are forbidden to talk to clients, your letters out are scrutinized, you are not treated as an adult mature person during meetings, people make faces behind your back. I am talking from personal experience.

Chris Yates writes:

Some guy was hired by Warren Buffett after offering to work on a reverse salary basis.

Columbia Business School graduate, maybe he proved he was otherwise normal.

Bob Knaus writes:

Bryan, are you sure you aren't a UNIX system administrator? The description of your appearance certainly matches the profile.

Of course, that's a back-office function. UNIX sysadmins never see customers, or daylight for that matter. Doesn't matter how weird they are. Ditto for many programmers, network admins, and other IT support staff.

Surely IT isn't the only industry that tolerates, maybe even encourages, weird workers. Can anyone else name examples from their experience?

Randy writes:

Though I never offered to work for free, I did get the job I have by offering to work for less during a trial period. I told them I would ask for a raise once I had learned the job and that I would expect to get it. I got the job - and 6 months later I got the raise. I think this is a sound strategy, especially in the IT field with several hundred highly qualified applicants for every position. You have to get your foot in the door.

Jim Erlandson writes:

You have described the consultant or contract employee both functionally and by appearance.

In the next 30 days, I will do X and in exchange, you will pay me Y.
It is understood that if X doesn't get done, no check for Y will change hands.

The IT industry is full of people who work this way for lots of reasons. One is that they can work wearing shorts and flipflops while sitting on anything they want to -- often at home.

mark writes:

My dad said somthing similar, that going to college showed you were smart enough (or persistent enough ) to learn.

Lawrance George Lux writes:

Bryan,
I agree and disagree at the same time. Idea-testing is a strange process. Unconventional people always seem to find their own niche. No one who knew Bill Gates in high school or college would have believed. Other examples abound. It is the same with Ideas: the good ones survive the harsh environment. lgl

Butterfield writes:

I think the reason a person selling labor doesn't normally offer a money-back guarantee even though most businesses offer them on what they sell has more to do with employees not wanting to offer them than employers not being open to accepting them. Single employees are not well diversified. If they get called on their guarantee after say, two months, it is very costly. Business, on the other hand, are composed of a number of people and generally have sufficient capital on hand. The risk of offering a guarantee is more spread out, thus they are more able to do it.

"Do minimum wage laws forbid this?"

Yes. As well as a lot of other labor regulations. As someone else pointed out, it can effectively be done by hiring yourself out as a 'consultant', but the IRS has tests they apply that can make it difficult.

Another variation is the low salary + a piece of the action (revenue--profit sharing, straight commission sales). Or what this group did. http://www.columbia.edu/~xs23/invest.htm

Dan writes:

I'm an entrepreneur. The group that is angel investing in me basically finds smart weirdos and invests in their work. Essentially, they're arbitraging those biases against weirdos. Granted, this sort of thing is a bit more acceptable in Silicon Valley.

I don't know any exact numbers, but I'm they're averaging much higher returns than most of the venture funds (they are a smaller player, though).

Bernard Yomtov writes:

I think I've got some good arguments for wearing shorts and flip-flops in the winter

I'd first be interested in hearing why you think you need a good argument to dress the way you prefer.

Tim Worstall writes:

You’ve just about described the way entrepreneurs work...run with an idea and only get anything if it works....or alternatively, only get paid if you do it well.

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