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. 🙂