Episode Transcript
Steve Levitt is my Freakonomics friend and co-author. He teaches at the University of Chicago.
DUBNER: Hey, Levitt, so, we are going to do something today that we’ve never done before on this program, which is beg. We’ve been putting out this podcast for I think almost 4 years, all free, and now we are going to ask people for some support. What do you think of that idea? Is that nuts?
Steve LEVITT: Good luck.
DUBNER: (laughs!)
LEVITT: Sorry to give things away for free and then ask for money later.
DUBNER: So, Levitt, you’ve worked with some nonprofits trying to raise money. What’s a good response rate? Let’s say I send out 1,000 mailers trying to raise money to help poor children around the world. What’s a good response rate?
LEVITT: So, if you are sending those out cold to people who have never given you money before, I think something like 1%, 10 out of 1000 would be a really good number.
DUBNER: But our audience is a little bit different, right? Anybody who is listening to this is not a cold call, so if we were to ask people to send money to make Freakonomics Radio and keep it free, what kind of response rate do you think we’d get here?
LEVITT: You know, what’s hard here is that the mechanism for getting people to send is more difficult. I would say once a day someone comes up to me and says, hey, I love the Freakonomics podcast, I listen to it while I jog or while I work out in the gym. I think if you could actually get someone in mid jog or on the bike at the gym to be able to press a button and send money directly to us, I think you’d actually do okay. The chance that someone’s going to get done with their run, go back and take a shower, and then log onto a computer and give you money? I think that is really close to zero.
DUBNER: So you think we’ll raise close to zero dollars?
LEVITT: I do, actually.
DUBNER: So, can I just tell you, listener, not Steve Levitt, this is a fantastic opportunity to prove a relatively smart person totally wrong.
LEVITT: Prove me wrong. I love to be proved wrong.
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Here’s something I’d like you to try. During the course of the next day, or week or month, whatever, keep track of how many different people and institutions come at you, in one way or another, with their hands out. Asking for a donation. They might be raising money to fight pediatric cancer, to protect a forest, or to get some maverick politician elected. (Or, even to make a podcast.) Now, why do so many people come at us with their hands out? Because it works! Americans are an extraordinarily charitable people:
John LIST: When you look at the data, what you find is that all the way back to 1971, people are giving about 2 to 2.5 percent of their wallets. So, what I mean by that is about 2.2 percent of personal income is given to charitable causes. So when you look at the data you have this feeling that, wow, Americans tend to give a ton of money. And when you look from 1971 to 2011, our giving rates have gone up by about twelvefold.
That’s John List. He, like Steve Levitt, is an economist at the University of Chicago. He’s done a lot of research, and a lot of experiments, on fund-raising. He’s tried to figure out, empirically, what really works. Fund-raising is one of those things – like education, or dating – where there is a massive amount of conventional wisdom, a lot of habits and tradition, but not much science.
LIST: What you have is a lack of strong statistical support that backs up exactly what those people are doing. So you say well why in the world do they do it? They do it because that’s what their boss told them to do. And in effect they do it so then if things go wrong they won’t get in trouble.
John List is trying to change that kind of conventional, defensive thinking. He and another economist, Uri Gneezy, have just published a book called The Why Axis — that’s “Why” as in W-H-Y. As in, why do people do the things that they do – like, giving away money. What could possibly make us give away more than 2 percent of everything we earn?
LIST: So, when you think about why all this money is given, the economist in me naturally says, well, what are the incentives for why people might give? And I think the traditional feeling is that people tend to give because of altruism. People just want to help another person who is not as well off as they are.
I have a feeling you’re going to tell us that that’s not as much of a driver as people would like to think.
LIST: You know, as the data would suggest, now we’ve done these experiments all the way back to 1998, and we’re still very actively doing experiments with several charities now, what you tend to find is that people are more driven out of pure self-interest. And what I mean by that is that people give because it gives them a warm feeling, as economists say, or as Jim Andreoni would say, people derive a warm glow from giving. So now what you have is this idea that if you want to expand your donor base, or if you want to induce people to give more money, you should really now be appealing to, hey, here’s what this can do for you; or, if you don’t give today this will actually be taken away and you will no longer be able to use it. Rather than appeal to, say, you know what? You can help this poor person over there. I think fundraisers for years have gotten it wrong, that they need to appeal more to the actual donor rather than the recipient of those dollars.
DUBNER: So, first of all, the first two incentives that you’ve just named, one would be, we’ll call it pure altruism, and number two would be impure, or we’ll call it warm glow altruism; I know that’s what you economists often call it. And you’re saying that while people often think that pure altruism is the primary driver, but warm glow altruism is a much stronger driver. Let me just ask you this: There’s nothing wrong with that is there?
LIST: No. Absolutely not. Absolutely not. As an economist, I really don’t care why people give.
DUBNER: Yeah, you care that you know the real reason so that you can appeal to that, right?
LIST: Absolutely. What I care about is people giving, because it’s very important to have private organizations provide the great public goods that we have all over the world. So it’s important to know exactly what drives a donor to give and what keeps that donor committed to the cause. Once we know that, we can be more successful in our fundraising drives, and then we can provide more public goods, or more of these goods that the government or private markets fail to provide.
DUBNER: What about a couple other incentives to give? I’m thinking let’s call it guilt or social pressure, maybe.
LIST: Right, so these other reasons why we might give, such as social pressures, or guilt, these are very powerful as well. Things like a Brownie scout knocking on your door. Once you open up that door, you feel a lot of social pressure to actually buy a few boxes of cookies. Now, if you could do it all over again, if you could do an instant replay…
DUBNER: You wouldn’t answer the door, would you?
LIST: You would stay and watch the Jets play against the Steelers. Although both of those teams are terrible, I’m sorry about that, Stephen. You would rather sit on the couch, but once you’re at the door, then you feel obliged to help out the Brownie Scouts. That is very, very important. Now, that’s very important not only for the small givers, but that’s a very important influence as well for these very, very large givers, these people who write checks for $1 million or $10 million, social pressure or what society tells them they should be doing is an important driver of their behaviors as well.
DUBNER: What about the herd mentality, just the idea that if people hear that others are giving to a cause, or that the cause itself announces that there’s a big pile of seed money, then that will spur others to give?
LIST: I think you’ve hit on something that’s very important, or you’ve pinpointed what economists would call herding or information cascades. And you’re exactly right. When others see a person of influence, or a person who they think has good knowledge of that charitable cause, if they see them giving, they are much more likely to give themselves. Likewise, if you see a friend giving to a cause, you’re much more likely to give to that cause as well.
DUBNER: Some years back, John List did some interesting research at East Carolina University. He was sending people door-to-door, raising money for a hurricane-relief fund. He wanted to know what methodology worked best – is it a good idea to entice donors with a lottery, things like that — but he also wanted to know if it mattered what the person who knocked on your door looked like. Did an attractive person raise more money than an average-looking person? Now, how do you go about doing that – how do you measure it? First, the researchers hired a bunch of college students who would go door-to-door. Then they took a photo of each of these student solicitors – and sent their pictures to students at a different college, and they now rated every solicitor’s looks, on a scale of 1 to 10. Then the solicitors were sent out to knock on doors. What do you think happened?
LIST: What we find is that, one obvious result is that the beautiful women ended up raising the most money of all the solicitors that we had.
DUBNER: I’m shocked.
LIST: Now, interestingly that result was entirely driven by men answering the door.
DUBNER: Now I am…
LIST: So, I don’t know…
DUBNER: So women didn’t give more to good-looking women, you’re saying?
LIST: No. So women don’t give more to good-looking women, women don’t give more to good-looking men. This entire physical attractiveness result is driven by men answering the door and they see this beautiful woman. They say, oh, tell me more about this relief fund, tell me how I can help, oh I’d love to help. They get out the wallet, they give more money. Now, again, that’s more money going to the relief fund. I can guess why they gave. They probably did not give because they really cared that much about the relief fund. But at the end of the day the charitable organization didn’t care because they had more money coming in. Now, scientifically this turns out to be really interesting because it tells you that if altruism was the sole explanatory variable for why people give, beauty shouldn’t matter. But this is changing an incentive for the solicitees, and yes indeed, the male solicitees end up responding, I want to give more money to beautiful women.
DUBNER: Give me a sense of how big this beauty effect is. So, let’s say one solicitor is ranked a 9 out of 10 by unbiased or disinterested parties and one is ranked a six. How much more does the nine raise than the six?
LIST: Right, you’re looking at roughly a 100 percent increase when you look at going from a six to a nine.
DUBNER: Oh my goodness. And what about hair color?
LIST: So, hair color ends up being important as well. And it turns out that blondes certainly have more fund raising more money. You just can’t beat a beautiful blonde who’s going door to door to raise money for your cause.
Coming up on Freakonomics Radio: John List says that one of the best things you can to do to raise money is offer a lottery prize…
LIST: So, my guess is there are millions of people that would love to have dinner in New York City with Stephen Dubner and Steven Levitt…
Millions? I seriously doubt that. But we can get it a try. And if that doesn’t work, I wonder if the Beauty Effect would work on the radio…
SAUNDERS: I personally would donate money to Freakonomics and I think you should too.
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So, if you’re trying to raise money for some kind of charity or project, what’s the best way to get people to give? The economist John List has been studying this very question for years. He’s learned a good bit. Donors love lotteries, for instance — a chance to win a big prize for donating a little bit of money. Matching grants are also a great idea – but a 3-to-1 match is no better at raising funds than a 1-to-1 match, so instead of throwing that extra money out there, you could maybe use it to buy a bunch of blonde hair dye. Here’s something else that John List says is incredibly useful in raising money: put the power in the hands of the donor.
LIST: I think the power of control — what I mean is, to control the communications, so I control how often you contract me. It seems like every day when I get home I have five mailers that I just throw away, and it irritates me because I think that organization must not be very efficient, because they’re wasting a lot of money continuously sending me this junk. And I also think the power of providing the good that I want to consume. So, think about Freakonomics’ podcasts, one way you can think about raising more money is to say, look, we really want you to help our cause. We need you to give money to help us. And you could say, look, we’re going to change our relationship, we want you the listener to help dictate what we talk about, at least a fraction of the things we talk about will be determined by our donors. You could think about linking the gift itself to a probability of winning a prize. So my guess is there are millions of people that would love to have dinner in New York City with Stephen Dubner and Steven Levitt. So why not link that kind of prize, say something like every dollar you give will give you one chance to win this lottery prize, which is a night on the town with Dubner and Levitt.
DUBNER: You know, because, okay, I’m actually going to exploit you because you are the master of fundraising. And as it happens we actually are starting our first ever fund-raising campaign for Freakonomics Radio. So, we’ve been producing this free podcast for almost four years, and we finally are beginning to ask our listeners to pitch in to subsidize the costs. And so, in some ways, you know, we’re a victim of the success of the podcast, in that one of the biggest expenses is bandwidth, literally digital distribution, so the more people download, the more it costs. And we have about 3 million downloads a month, which is great news, but it gets expensive, and we have producer salaries, and equipment, and music licensing and all that kind of stuff. So if we wanted to, right here, on the spot, with you, John List, the master of fundraising, craft a little fundraising appeal that would really work, you know, we don’t want to be just one of those people who begs for money and puts on the whole Public Radio voice and says support us. We want to…and that may work, but I don’t know, but we want it to work. So can you, would you mind giving us a hand walking us through some specific that we can try to do to raise money?
LIST: Sure, absolutely. So, a first general theme should be that you appeal to exactly what the donors want to consume. You have to tell the donors here’s what we provide and here’s what you will lose, importantly lose…
DUBNER: See, I’m uncomfortable saying that. That feels like a “give us money or we’ll kill your kitten.”
LIST: Is it true? If you will really kill the kitten if you don’t receive money?
DUBNER: No, it’s not true.
LIST: Oh, if that statement isn’t true, then you don’t want to say it.
DUBNER: Right, if people don’t give us any money…
LIST: We’re off the air.
DUBNER: Eh, you know, I guess in a matter of time we would be. But…I guess I’m not comfortable with that appeal. Because, you know why? Can I tell you why, John?
LIST: Absolutely.
DUBNER: It feels desperate, and I, and the way I feel is, we neither are desperate nor, maybe even more so, [do] I want to appear desperate. Because I don’t like to be around people who are desperate, even if they are.
LIST: I’m with you. I’m with you…but also, if you came in and told me that if you would just give $50, we can for another year put out these podcasts, you know what? I’d turn from a free-rider to a giver, because I value the podcast at more than $50. Now, I get that you don’t want to be desperate. So, let’s just say a general theme is you want to focus your call on the services that you provide to your listeners. Not that they’re going to help somebody else become a better person. So that’s a general theme, is what you can do for your givers. Now, secondly, I think it’s important to link the podcast dollars that come in with a private good that these people like.
DUBNER: We have. So we actually have just drawn up some prizes. They’re not that shocking, but they’re kind of fun. So, like for $60 bucks a year, someone gets a Freakonomics mug. We’re making a great mug that’s a Freakonomics Radio mug; it’s actually got content on it from the radio. Seventy-five bucks a year: Freakonomics Radio t-shirt. And for $360 bucks a year, so these are monthly sustaining memberships, a certain amount a month, $360 a years, or $30 bucks a month, they get the signed book. But what you’re saying is, as good as those may be, the lottery component is really good. So if we say that everybody that contributes anything at all, or even just pretends that they want to contribute could be entered into a lottery and we’d bring them out to New York and take them out to dinner, maybe have them spend the day here at WNYC at the radio studio and see how we make the sausage. You’re saying that’s a no-brainer, we should definitely do that.
LIST: I think so. I think as long as you can do that under the laws of gambling, which of course you need to check out, I think that is a no-brainer.
DUBNER: Now, what about, you mention that maybe the most prominent driver of philanthropic giving is what’s called warm glow altruism, that people feel…they get something good that makes them feel, that makes them glow for giving the money. Is there any way that we could pitch Freakonomics Radio, you think, in that direction? I can’t think of any. I find us, you know, not very glowy.
LIST: Yeah, so when I think about warm glow, I think about it as, if you give money to that cause, you can actually sit around the Thanksgiving table and brag to you mom about how good of a person you are because you just gave money to that specific cause.
DUBNER: Yeah, I don’t see that working for us, do you?
LIST: I don’t. For Freakonomics Radio, If I sat around the Thanksgiving table and said, hey, mom and dad — remember my dad’s a truck driver, my mom’s a secretary — and I say, I just, you know, you know, what I’m going to give you for Christmas is $100 charitable contribution to the Freakonomics podcast. Look, I might be out in the snow bank eating my Turkey. I have to think about it further, but I don’t see, I don’t see warm glow. I see the Freakonomics podcast as more of a private good, actually. Even though I get that it’s a public good, and I get that once you provide it, people can free-ride, but the consumption of it ends up being one that, look, I want to consume it because it’s going to help me. And if I don’t have these podcasts for some reason, I might not be as good of a person.
DUBNER: So, should that be our message? Which is that if you don’t help support us, you will become an idiot?
LIST: Yeah, this is a nuclear button that you said you didn’t want to push.
DUBNER: No, no, the nuclear button that I didn’t want was, if you don’t support us, we won’t make it. Because I’m not will[ing] to do that.
LIST: But what are you going to do then, you’re going to make lower quality?
DUBNER: Exactly, it’s just like, if we don’t have the…We’re just going to make these stuff that’s going to make your ears bleed after a while and you won’t get out of it what you want out of it.
LIST: Yeah, so I’ll call that the quasi-nuclear button. We’re going to give you something, but it’s going to be crap. But I do like the angle of, you know, appealing to what they’re getting individually out of this. I think that has to be it.
DUBNER: Is there any kind of positive message that you could imagine, like, you know, keep your brain cells alive, you know.
LIST: Or keep your neurons firing.
DUBNER: There you go, I like that.
LIST: Here’s what would be really cool, Stephen. If we put one guy in an fMRI listening to some ordinary radio show, and then put another guy in the fMRI listening to one of, or a series of your podcasts, and we found that parts of the brain that importantly lead to good things in society, deeper thinker, more analytical. And you can say, look, we can keep providing this, look at this guy, here’s a brain on Freakonomics, here’s a brain on crap.
DUBNER: That is awesome, John. So, let me ask you this, when you sent solicitors door-to-door to raise money, you found that good looking people do better, they raise more money. Now, this is radio, podcast/radio, and I think I have a great face for radio, so no one’s seeing what we look like. But since some people do know what we look like versus other people, should we just get some really good-looking, well-known people, one or two, to ask for us?
LIST: I would say both. I think some people want to see you and Steve, and I think other people want to see others who they want to emulate tell them that this is a good product and that they should consume it too.
Okay, podcast listeners. That was John List, the mad scientist of fund-raising. We’d be fools to not follow his advice. So, as John suggested, I asked Steve Levitt to pitch in on our fund-raising appeal. Here’s what Levitt said:
LEVITT: Knowing you, I don’t think your objective is really to raise the most money. Your objective is to make the listeners as happy as possible by giving them the option to be happier by giving us some money.
DUBNER: Oh. That’s such a nice way of putting it. We are trying to please our listeners by giving them the option of participating.
All right, so if that doesn’t appeal to you, let me remind you that we are offering Freakonomics Radio swag if you come to Freakonomics.com and make a donation. There’s a Freakonomics Radio t-shirt, a Freakonomics Radio mug – all brand-new. I don’t mean new as in not used by other people – which they are not – but brand new designs, just for this Freakonomics Radio fund-raiser. You can also get a signed copy of our book, if that would make you happy… Now, John List also told us that it’s a good idea to mention the other people. Four are already donating. So let me say this – we’ve only just turned on the fund-raising button on Freakonomics.com and already we’ve got donations pouring in from Roberto in Brazil… from Chris from New Zealand and Christian from Malta… Mark from New Jersey and Daniel from Washington state. But I know what you’re thinking. You’re thinking: I don’t know any of those people and, moreover, I don’t know if they’re good-looking. Remember what John List said about the Beauty Effect?
LIST: What we find is that, one obvious result is that the beautiful women ended up raising the most money of all the solicitors that we had.
All right, then, in the name of science:
Savannah SAUNDERS: I’m Savannah Saunders. I’m a student at Swarthmore College. I’m also a model and I think you should donate to Freakonomics today.
She’s with the Wilhelmina Agency, in Miami.
SAUNDERS: I advocate for Freakonomics to my family, friends…it’s my very favorite.
DUBNER: Are we taking off in the Wilhelmina modeling community?
SAUNDERS: I haven’t yet seen it taking off there, but I’m sure it will. I will be spreading the word at castings.
DUBNER: All right, Savannah, and as you spread this word…what will you actually tell people?
SAUNDERS: Well, Freakonomics Radio is great because it opens people’s minds to the hidden side of everything, which is just really special, and no other economists do it like Stephen Dubner and Steven Levitt. I personally would donate money to Freakonomics and I think you should too.
Now, we also asked John List if good-looking men raised more money.
LIST: Yeah, we didn’t see a lot of that in our data, that beauty effect was really not driven by better looking men. That’s not anywhere in our data.
John List is probably right, but you know what? This is important to us. So, just to be sure, I want to cover all our bases:
DUBNER: Okay, hey Adrian.
Adrian GRENIER: Hey, what’s up?
DUBNER: How’s it going?
GRENIER: Fantastic. And yourself?
DUBNER: Great. What are you working on?
GRENIER: Oh, quite a number of things.
DUBNER: So, Adrian, you are an actor and director and musician, you’ve also made some really good documentary films, you’re an environmental activist, which a lot of people may not know about you. But at this stage, you may still be best, best known for playing Vincent Chase on Entourage. Do you think that’s the case?
GRENIER: I’d say that would be accurate, yes.
DUBNER: Okay, and would you also say it’s accurate that you are, well, I guess this is a matter of opinion, but it strikes me that you are the best looking human male I’ve ever met, or maybe that has ever existed.
GRENIER: Wow, you always were such a big flirt, weren’t you, Stephen?
DUBNER: But, I mean, you are a good looking fella, we can agree on that?
GRENIER: Well, thank you.
DUBNER: All right, here’s what I am getting to. So, even though this is radio and people can’t see you, they do know what you, Adrian Grenier, look like. So I am wondering if you would just turn on your good looking-ness over the radio and help us out.
GRENIER: All right, 1, 2, 3… How was that?
DUBNER: That was good, I’m hearing it, I’m feeling it. Um….so, what are you willing to say for us, you know? Are you willing to say that, hey, I’m Adrian Grenier and I’m a certified attractive person? I mean, it’s up to you.
GRENIER: Well, you know, beauty is in the eye of the beholder, I really do believe that, but if it will help you out, you can go to my Instagram @AdrianGrenier and if you like what you see, well, then support Freakonomics Radio.
All right, we’ve almost emptied our bag of tricks. But as John List told us, people love a lottery. So let’s do it. If you go to Freakonomics.com and click on the donate button, you’ll automatically be entered into a lottery to come to New York, have some lunch with me and the Freakonomics Radio team, and even spend the day with us if you want, watching us make the podcast – which, I have to tell you, is very exciting to watch. We’ll fly you to New York from anywhere in the U.S., put you up in a hotel, and give you more Freakonomics swag than you can possibly carry home. Which means you may even have to buy an extra bag and pay a bag check fee, and you know what, we’ll pay that, too. You don’t even have to make a donation to enter the lottery, but of course we hope you will. So thanks to all of you for listening as always – and a special thanks to anyone who goes to Freakonomics.com to make a donation – and I look forward to meeting one of you very soon.
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