Moo, Baa, Ka-Ching Ka-Ching

Go and read this profile of the artist/author/songwriter Sandra Boynton. Not only is it nicely written (by Phyllis Korkki — great last name, BTW, with 50 percent Ks) but it is also a fascinating business story about how Boynton juggles and, more importantly, measures such variables as time, enjoyment, money, creative thrill, etc. The article is full of surprises — how Boynton was disappointed by her freshman year at Yale after the stimulating curriculum at Germantown Friends school in Philadelphia — but even better, it shows how a one-woman enterprise follows and breaks the rules of business and economics. Here, for instance, is Boynton on why she is not a profit maximizer:

“To me, the commodity that we consistently overvalue is money, and what we undervalue is our precious and irreplaceable time. Though, of course, to the extent that money can save you time or make it easier to accomplish things, it’s a wonderful thing.”

And here is Boynton talking about the music-making part of her business:

“At the level of detail I think is necessary to make them what they are, they simply can’t pay for themselves,” Ms. Boynton says of the CDs. “In purely business terms, it’s an irrational enterprise. And it’s also the best work I do.”

What’s most interesting to me about this article is that it beautifully illustrates how a given person approaches business in a way that, at many turns, seems to fly in the face of standard economic reasoning. Boynton is devoutly not a profit maximizer; she admits to her irrational thinking, and she believes that money is overvalued. She also sounds really happy.

Granted, it’s a lot easier to be an irrational, non-profit-maximizing, time-loving person when you work for yourself, as opposed to a public or even private company whose shareholders clamor daily for all of the opposite things. But I also think that Boynton is a great example of how real people make real decisions about allocating their talents and resources, and we might do well to think about such insights even in the context of companies that do worry about shareholder value.


Bryan

As a PhD economist, I could not disagree more with this post. Sandra's behavior is hyper-economic. She is a UTILITY MAXIMIZER, and a pretty darn sophisitcated one at that. Economics asserts that people and organizations maximize UTILITY not financial profit. She simply has a slightly different utility function that the standard business owner.

Larry

I never heard of her before people started giving us some of her books when my son (now 18 months) was born. I also never knew that there were quality differences among children's books. Boy was I wrong. Sandra Boynton's books are consistently among the most interesting and creative (as judged both by me and my son). Whatever her methods, she's on to something.

Your favorite Civics teacher

First, my wife and I love Sandra Boynton's books, and whenever we find a used one we always pick it up.

Secondly, the authors of the blog are getting killed over the fact that this is just "utility maximization instead of profit maximization" and this is nothing novel.

I would suggest that outside of the Econ department of a university, this idea IS a rather novel. Read a newspaper, watch CNBC, etc. and you would be led to believe that profit maximization is the only POSSIBLE viewpoint.
I guess if you believe that consumers are purely rational (Homo-Economicus in the flesh) then you would assume that everyone does this type of utility equation in their head. I can tell you, from the 'real world,' that they do not.
I have seen teachers work an additional 5 years based on their economic interests (90% pension instead of 80%) to the detriment of their health, and quality of life. It is a commonly held belief that The State Teacher's Retirement System worked an actuarial table that showed workers who worked the additional years would cost less to the retirement program because they would die sooner. Yet, despite this, most teachers work the additional years.
Ergo: utility maximization as a real business practice is extraordinarily rare, and indeed does fly in the face of conventional thinking.

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Kitt

I was recently torn between two job opportunities; one in the same town where I am moving to, the other an hour to an hour-and-a-half away. I was trying to put a price on my commute -- even if I worked at home two days a week, I'd still spend about 8 hours a week (a full work day -- overtime at that point) in my car commuting.

What would you charge for your commute? In the end, 8 hours of time-and-a-half was the number I picked, and it generated a number that no way would the company be willing to pay for me. So I'll be working close to my (new) home.

TheAccidentalPhysicist

Economy: "The system for producing, distributing, consuming and owning goods, services and wealth"

"Economic reasoning" as I took it pertains to the accepted model of optimizing production and distribution in an attempt to maximize profits. It's the baseline, or rather control model we maintain when comparing economic ideas.

Just because someone "Flies in the face" of an accepted model doesn't mean it is bad or wrong. Most of our greatest innovations came about that way. Rebels are necessary, and celebrated when they make a positive difference. She is a model for getting back to a healthy work-life balance.

Go Sandra!

Matt

To say this flies in the face of economic reasoning is silly and I would give an F to my students for such sloppy reasoning.

She is simply a utility maximizer.

Clyde Kahrl

Back in the '80s the Ohio Bar Association Corporate Law Committee injected into the Ohio Corporate Code, the doctrine that the Board of Directors of an Ohio Corporation could consider factors other than shareholder wealth maximization when making decisions concerning an Ohio Corporation. Although the Law & Economics guys might think this is an abomination that should arouse some Old Testament wrath, to the contrary, corporate law has always been clear that a corporation is a bundle of multilateral contracts. For example, shareholder wealth may not be maximized screwing the bondholders. So, it isn't really clear that it should be maximized by screwing the suppliers, the workers, or the community, all of whom have a stake in the corporation.
Ironically, of course, it always seems the most successful corporations don't seem to be profit maximizers. HP was never about profit maximization, but year in, year out they did better than average; until, of course, profit maximizer Fiorina almost destroyed the corporation as well as its profits. (not her profits though).

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Kyle S

My daughter (though she knows it not) is a huge fan of Sandra's. We have many of her books strewn around various parts of our home. I think my favorite is Barnyard Dance. Never heard any of the music, though.

DQKennard

It's certainly easier to seek to maximize utility other than financial/profit when one has more than enough for life-long comfort and security with no further effort. Is a person who won 50 million dollars in a lottery "breaking the rules of economics" and being "irrational" if he follows personal whims of activity or interest, or even hangs about idly? Boynton says that "money is overvalued", but (in economic terms) that really only applies to that amount of money beyond "enough" to meet financial needs and goals. Further, what *that* would seem to imply is that it is the person/corporation with no/infinite sense of "enough" that is economically irrational. Publicly held corporations by their structure are necessarily focused on there never being "enough" profit; other factors (e.g. long-term corporate health/survival factors like workforce quality and morale, etc.) serve that quest for infinite profit. Individuals and privately held companies can pursue utility other than financial as a "goal" without it necessarily being accounted for a "cost." This might imply that the individuals making economically irrationally decisions are many CEOs: they have or are making way more than enough for financial security and comfort (even luxury), yet still many set aside other utilities such as their relationships with their families, personal non-work activities, etc., in their (irrational) drive for more, ever more.

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Jeanette Welch

I have a Ph.D. in political science and am widely read, and I've never heard of this woman. I must have missed something. How does she support herself? Does she have a family, mouths to be fed and bodies to be clothed? Or is she independently wealthy? Just wondering how to get on easy street. Maybe I should have gotten my degrees in economics.

Matt

I don't understand how this flies in the face of standard economic reasoning. Boynton is a typical utility maximizer with a typical utility function that is dependent on consumption and leisure and she assigns more weight to leisure.

Since it seems that she is the owner of the equity in the business, she can make these choices rather than just maximize shareholder value.

Andrew

Sandra is a life maximizer. This is not an economic concept, particularly. For better or worse (well, better AND worse) our culture is competitive and that competition is focused on material wealth and everything that flows to, and through that idea. As #8, #10 and others suggest, the premise of the article is misguided -- choosing not to focus entirely on making money isn't irrational. Choosing not to focus on figuring out how to make yourself happy while being productive is irrational -- yet people at all strata do just that daily. I grew up around and again now live in a notoriously affluent community (Greenwich, CT). At one point I gave into the pressure to "compete," and made a fairly good amount of money, working ridiculous hours, traveling to places I didn't want to go, dining with people I didn't want to talk to, and found that that wasn't very satisfying once I bought a few indulgences. Now I work smarter (still hard), and make a fine living, albeit a "middle class" living in my chosen neighborhood. The interesting thing I have found with the hedge-fund types (some of whom are friends) is that they cannot intellectually accept that those who do not dedicate their lives to making a gazillion dollars may actually not want to make those trade-offs; their assumption has to be, you're not ultra-rich because you can't win that game, i.e. because you can't be. As Sandra and others demonstrate, not everyone wants to play. If that's irrational, long live the wackadoodles, my peeps. Money matters, but it doesn't matter singularly, once you have enough to house/feed/clothe/medicate/educate and occasionally entertain yourself.

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