How are the authors of Freakonomics like real-estate agents?

The answer is, that just like real estate agents and their clients, our incentives as authors are not perfectly aligned with the incentives of our publisher, William Morrow. As a consequence, we take actions that benefit ourselves and screw the publisher, just like real estate agents screw their clients.

Every extra copy of Freakonomics that is sold earns the publishers maybe $8-10 in profit. Every extra copy earns me a buck or two. So, on the surface, we both have strong incentives to sell more books. (Real-estate agents are no different, they get more when the house sells for more, although their cut is smaller than my cut as an author.) And believe me, I’m not complaining about my cut. I am quite handsomely rewarded and my publisher could not have been better to me. But, our incentives aren’t perfectly aligned when it comes to figuring out ways to sell more books. If the publisher puts a big ad in the New York Times, that is great for me. It doesn’t cost me anything, but I still get my share on every extra book. So authors love advertising, and publishers are ambivalent towards it.

On the other hand, when we sell more books because Dubner and I spend a week on the West Coast, the company loves it. It costs them a little to send us out there, but most of the costs are borne by us (and our families), in the form of hours spent in airports, bad nights’ sleep in airports, and missed opportunities to make money spend leisure time the way we prefer. So, the publisher would love the author to do as much touring and media as possible, but the author is much less likely to want to do this.

Of all the books that are likely to benefit from media/author tours, Freakonomics is very high on the list for a number of reasons:

1) Before the book came out, almost no one knew who Dubner or Levitt was. For celebrities like Jane Fonda or Goldie Hawn, getting media attention isn’t as critical to sell their book (although, of course, it is also easier for them to get media attention).

2) Without media coverage to explain to people that Freakonomics is not your typical economics book, no one would buy it.

3) People mostly like the book. So when one person buys it, they recommend it to other people enough to spur word-of-mouth sales. If everyone hated the book, like maybe “Juiced” by Jose Canseco, exposure is less valuable because it doesn’t have this word-of-mouth multiplier.

4) Now that the book is on bestseller list, it is easy for people to find, and we get big turnout at our author events.

Nevertheless, it depends whose perspective you are looking from as to whether our West Coast swing was worth it, as Dubner claimed in an earlier blog. There is no question the trip was a great success from the perspective of the publisher. We definitely sold enough books to give them a nice return on their investment in the trip. For me, however, even if you make a lot of optimistic assumptions about the extra books, I almost for sure would have preferred to not sell those extra books and stay at home for the week.

And, to be honest, I knew that before I ever went on the trip. So why did I go? There are two reasons.

First, as we write in Freakonomics, financial incentives aren’t the only ones at work. There are also social and moral incentives. I like the people at our publishing company. They have been kind and generous with us, and they have worked incredibly hard to make the book a success. So, sometimes I do things for them that I wouldn’t do if all I were thinking was financially (lots of other times I don’t — my dear publicist Dee Dee will sadly attest to that).

The other reason I went: they caught me at a weak moment. 🙂


Anonymous

WHOA! With all due respect, is this post for real?

Despite the hardships of travel, you've got a great gig having to come to gorgeous California for "work" selling books. There are many who would happily trade jobs with you.

And I'm sure you yourself gain much in terms of leverage by appearing at the Commonwealth Club, Yahoo, Google, and the Miliken Institute, etc., in addition to the immediate and tangible incentives (be they financial or whatever).

CAREFUL! :)

Rex Hammock

I agree with what "anonymous" said (although I don't agree with him/her being anonymous.) The longterm benefits of the appearances you made -- contacts made, marketing of future speaking or other types of fees, an increased value in future book negotiations -- must also be factored into the return on investment of your trip. However, I also agree with you -- those incremental gains, while more than a buck a book, are still perhaps not worth a week on the road. (However, I know there are some truckers who would love to trade the ROI for their week on the road with the ROI on yours.)

Princess Leia

Anonymity can sometimes be a good thing.

To add, it would be hard to agree to write such a book without expecting to do some promotional work. Next time, may I suggest you bring out your families and have a great time at Disneyland before heading home.

3612

I'm wondering if you get fewer and fewer questions about the book's title as time goes on. Freakonomics used to strike my ear as a pretty wild term, but through repetition it's become tame.

Saar Drimer

Steven,
Don't you also like the attention?
cheers.

Steven D. Levitt

Saar Drimer --

Actually, I'm one of those weird people who doesn't like attention.

Steve Levitt

lucia

I don't think people who don't like attention are either weird or uncommon.

We often think they are uncommon because a disproportionate number of those who get attention sought it. Those who seek it almost always crave attention. Those who don't often either don't crave attention, or positively displike it. But, generally, they don't come to our attention.

Classic conditional sampling!

Stephen J. Dubner

3612 said...
I'm wondering if you get fewer and fewer questions about the book's title as time goes on. Freakonomics used to strike my ear as a pretty wild term, but through repetition it's become tame.

You are exactly right, 3612. As Levitt said once before, perhaps on this blog, the first few thousand times you hear the name "Oprah," you think ... Oprah? But now, it's ... Oprah! Yeah, Oprah! Not that "Freakonomics" has a chance of ever sounding as normal as "Oprah" -- it would have be be repeated millions of times for that to occur -- but the same effect is at play.

Birkel

Surely you enjoyed doing the NYC tour (especially the Daily Show). No?

qualityg says

"Before the book came out, almost no one knew who Dubner or Levitt was. For celebrities like Jane Fonda or Goldie Hawn, getting media attention isn't as critical to sell their book (although, of course, it is also easier for them to get media attention)."


Goldie Hawn - Yes.

Hanoi Jane - You guys don't need that kind of exposure.

Let Barbara Walters do it on her upcoming special.

JA Konrath

Hi guys!

Enjoyed the book, but your numbers are off.

Assuming you have a standard book contract, your $25.95 cover price is earning you $3.89 in royalties for every copy sold. It might be more if you have a bestseller escalator.

Since you are a bestseller, your publisher is discounting the book 50% to major chains and stores (Walmart, Costco, Sam's Club).

Since those chains are selling your books at a 30% discount off the cover price, the stores are profiting about $7.82 per book (or less if they discoutn more, like Costco.)

The publisher is making about $12.97. But lets look at the costs to the publisher.

The costs include shipping (about a buck a book), printing (paper, ink, binding, and production cost), corregation (making all of those boxes to ship the books and those big Freakonomics dump boxes and displays), layout and cover design, copy editing, overhead, the distributor's cut (Bowker, Baker & Taylor, CDS, Ingram), advertising and promotion (including co-op to the bookstores) and finally the author royalties.

When all is said and done, the publisher's profit is very close to your profit--about four bucks a book.

While I can understand your feelings about sharing marking cost with the publishers, many of us authors who haven't attained your degree of success spend between 1/4 and 1/3 of our earnings from writing on self-promotion and marketing, and we're making a heck of a lot less than you are.

Some midlist authors spend their entire advance on travelling to promote their books. When they have signings, which they pay for on their own dime, they don't speak to a room of people. They speak to a few people, if they're lucky. The average book signing event sells less than five books.

For hard numbers to corroborate what I've mentioned, check out http://sfwa.org/bulletin/articles/profit-motive.html.

If you'd like more detailed explanations of what co-op is, or what distributors do, feel free to email.

all best,

JA Konrath
author of Bloody Mary, A Lt. Jack Daniels thriller

Read more...

Ralphie

Oprah, Uma.

Uma, Oprah.

Anonymous

All respect to other posters, who cares what other people would want? Look, if you don't like strawberry ice cream, nobody standing over you with a ruler and lecturing you about how many people would be glad to eat strawberry ice cream is going to make you enjoy it.

I hate bookstore readings. Yes, it's very nice of people to come out. An enormous percentage of the question-askers seem to be unhinged and needy in one way or another, though. Plus you have to be nice to them, no matter how off-base or obstinate they are. And the whole thing seems to me a little ridiculous anyway -- after all, the whole point of books is that the other person doesn't have to be there telling you the story word by word. It's written down in the book.

Anonymous

WHOA! With all due respect, is this post for real?

Despite the hardships of travel, you've got a great gig having to come to gorgeous California for "work" selling books. There are many who would happily trade jobs with you.

And I'm sure you yourself gain much in terms of leverage by appearing at the Commonwealth Club, Yahoo, Google, and the Miliken Institute, etc., in addition to the immediate and tangible incentives (be they financial or whatever).

CAREFUL! :)

Rex Hammock

I agree with what "anonymous" said (although I don't agree with him/her being anonymous.) The longterm benefits of the appearances you made -- contacts made, marketing of future speaking or other types of fees, an increased value in future book negotiations -- must also be factored into the return on investment of your trip. However, I also agree with you -- those incremental gains, while more than a buck a book, are still perhaps not worth a week on the road. (However, I know there are some truckers who would love to trade the ROI for their week on the road with the ROI on yours.)

Princess Leia

Anonymity can sometimes be a good thing.

To add, it would be hard to agree to write such a book without expecting to do some promotional work. Next time, may I suggest you bring out your families and have a great time at Disneyland before heading home.

3612

I'm wondering if you get fewer and fewer questions about the book's title as time goes on. Freakonomics used to strike my ear as a pretty wild term, but through repetition it's become tame.

Saar Drimer

Steven,
Don't you also like the attention?
cheers.

Steven D. Levitt

Saar Drimer --

Actually, I'm one of those weird people who doesn't like attention.

Steve Levitt

lucia

I don't think people who don't like attention are either weird or uncommon.

We often think they are uncommon because a disproportionate number of those who get attention sought it. Those who seek it almost always crave attention. Those who don't often either don't crave attention, or positively displike it. But, generally, they don't come to our attention.

Classic conditional sampling!