DUCKWORTH: Wait, what?!
DUBNER: “Wait, what?!” Exactly! That’s the proper response.
* * *
DUCKWORTH: I’m Angela Duckworth.
DUBNER: I’m Stephen Dubner.
DUCKWORTH + DUBNER: And you’re listening to No Stupid Questions.
Today on the show: What’s so bad about nepotism?
DUBNER: You think I want to put on my college resume that I worked for my father? That is the worst thing I could ever do!
* * *
DUCKWORTH: Stephen, we have an email from someone named John. And it starts off with: “Hi!” Exclamation moink—Exclamation point.
DUBNER: Are you high?
DUCKWORTH: No! I’m just trying to get your attention over here.
DUBNER: Attention granted.
DUCKWORTH: “Hi! I was recently thinking about how widespread nepotism is in the modern world — in politics, obviously, but finance, law, and such as well. And I started wondering whether or not there’s actually some data to suggest that it is bad. We talk a lot about how unfair it is that people who are less qualified get certain positions, but perhaps the trust and ease of communication that comes with someone being a family member or a friend is also important. When I try to imagine myself in a position of power, I also see myself hiring my friends precisely because of that.” Stephen, nepotism is one of those words that— I think I know what it means, but am not a hundred percent sure.
DUBNER: Here’s a — literally — a dictionary definition. This is from the O.E.D. “Nepotism, a noun: the showing of special favor or unfair preference to a relative in conferring a position, job, privilege, et cetera.” And then, some people would say that cronyism is, essentially, mixed in with nepotism. “Cronyism” meaning— The most benign form would be the appointment of friends. And the less benign would be colluding to make profit by not only appointing a friend, or a contact, but benefiting financially from that. We should also say that nepotism is not illegal. I’m looking at a law firm that specializes in employment law. They write, “Nepotism is the practice of giving jobs or favorable treatment to friends and family members. Nepotism, in and of itself, is not illegal. A company owner is allowed to hire a daughter, son, sibling, friend,” blah, blah, blah, “even if that person is not the most qualified for the job. In fact, hiring and promoting family is an extremely common employment practice dating back to the beginning of employment.”
DUCKWORTH: And it’s completely legal.
DUBNER: It is legal, but I do think that, in the institutional world, it’s become much more taboo over the past 50 years.
DUCKWORTH: At least an ethical violation, if not a legal one.
DUCKWORTH: Like, “Guess who’s the product manager? My son! Yay!”
DUBNER: So, you think about, “What’s the ultimate nepotistic system?” It’s royalty, right?
DUCKWORTH: Mm. Like, the royal family.
DUBNER But what John’s question really made me think about is about Russia right now. And I don’t mean to make this too big a tangent on Putin, and Russia, and Ukraine at the moment. But, you know, Russian history over the past 150 years has been wild, to say the least. We all know about the Revolution, and the Bolsheviks, and on, and on, and on, but, when Alexander III— Was he blown up? I think he was blown up. But then his son became the last czar. This was Nicholas II. And Nicholas II, according to one account that I’ve read, when his father died, one of the first things he said is, “I am not prepared to be a czar. I never wanted to become one. I know nothing of the business of ruling. I have no idea of even how to talk to the ministers.”
DUBNER: So, if one wanted to do a psycho-political dissection of the state of Russia over the past 100, 150 years, that would be a very interesting inflection point at which to say, “Hm. I wonder what would have happened had there been a different category of leadership in that country. I wonder if nepotism, and royalty, and passing a position on to a family member — or even hiring someone at a firm because they’re related to you or friends with you — is a very good idea.” At just a very basic level of logic, don’t you think that people like you and I would almost always say that the answer to that is, “No.”
DUCKWORTH: Somebody who’s grown up in a democracy and has been raised to think that judging people by the merits of their skills is better than their last name or their connections — I hadn’t really thought about political systems when John’s question came through. I was thinking about businesses, universities, and legacies being admitted to Ivy League schools. In other words, this is about, like, any political or social structure where somebody has power, and then there’s a choice about who’s going to come next.
DUBNER: For those who don’t know, “legacy” is the word that universities and colleges use to define the offspring of someone who graduated from that institution.
DUCKWORTH: Interesting term, by the way. Kind of euphemistic.
DUBNER: Well, do you know why that word works for colleges or universities? If you talk to a college president, or an admissions officer, or a board, and they’re being candid with you — in other words, if you talk to them off the record, which I’ve done, in part because we recently did a Freakonomics Radio series on college, and the off-the-record conversations are a little bit different. The reason that there are so many slots reserved for legacies is because it’s all about the money. Although this is changing, to some degree.
DUCKWORTH: Yeah, in the wake of “Varsity Blues.”
DUBNER: “Varsity Blues” was full of parents who didn’t have the legacy connection. And they were trying to shortcut it. Lori Loughlin and her husband Mossimo Giannulli paid a half a million dollars to help get their two daughters into U.S.C., where they applied under the guise of being rowers on a crew team. And U.S.C. happens to have — not surprisingly — a really good crew team. These young women not only were not that caliber of rowers, but they didn’t participate in the sport at all. So: Half a million dollars, a little bit of lying, a little bit of bribing the coaches, and so on. Why? In part, because the legacy system makes it really hard to get into some of the most exclusive schools, because those are the families that are contributors. And the offspring of a legacy is likely to contribute just the way the legacy generation did, and so on.
DUCKWORTH: So, by admitting a son or daughter of an alum, basically you’re saying that you’re increasing the expected donation of that family.
DUBNER: Not only expected, but already in-hand. In other words, if you look at the data on what legacy families give to the university before the application goes in— I mean, when I first heard of this, it blew me away. It seems unnatural. But I’ve learned it’s very common. There are parents who graduated from — fill-in-the-blank — rhymes with “Farvard.” There are parents who have graduated from “Farvard,” let’s say 20 years earlier, who start giving to the university in a very thoughtful and patterned way, from the time that their child is, let’s say, minus-six months.
DUCKWORTH: Strategic, maybe, more than thoughtful. But I guess I see your point.
DUBNER: So, by the time that their kid is ready to apply, it’s like, “Wow, they’ve given a half-million dollars.” And then there are other instances — I believe Jared Kushner was a case — where the money was given, kind of, all at once. And you see this with a lot of really wealthy applicants. “Here’s a box of money, and we’d like our son or daughter to attend your fine university.”
DUCKWORTH: But wait. If the money is given prior, then how does that benefit the university? Because you could turn down that legacy, but you already have the half-a-million dollars that’s been accumulated. What is the risk exactly? You can’t exactly go to The New York Times and say, indignantly, “I can’t believe that my legacy daughter didn’t get into ‘Varvard.'”
DUBNER: In fact, most people would say, “Good.”
DUCKWORTH: Another point, here, is that things are changing. And maybe it’s Varsity Blues, and maybe it would have happened for other reasons. I certainly think there’s more awareness and debate about equality, diversity, equity, and inclusion right now than there was four or five years ago.
DUBNER: It definitely is changing a little bit, partly because — and this was part of what we covered in the Freakonomics Radio series, as well — the most elite schools tend to not expand their enrollment very much. They like to keep their populations the size they are. And there are a lot of reasons for that, but one is in order to preserve exclusivity and prestige.
DUCKWORTH: You don’t think it’s because they don’t have enough dorm space and classroom space? Because that’s my understanding, but maybe it’s because I work at a university. But that’s what I’m told.
DUBNER: That is a very compelling argument that some schools do make. Although, you know, Stanford has a lot of room. Duke has a lot of space. Columbia actually has been expanding their classroom. They’ve built this whole north campus about 10 or 12 blocks north of the main campus. But mostly, the Ivies haven’t grown much in about 30 or 40 years. So, if you do want to make your student body more diverse, then, yeah, at some point, you’re going to have to say, you know, “The eighth generation of this family can only have one slot and not two slots.” But it makes me think: Isn’t the whole act of becoming a parent an exercise in nepotism? When you have a kid, aren’t you going to put every fiber of yourself into the betterment of that particular kid, as opposed to all the other kids around? Isn’t that just the way we’re wired?
DUCKWORTH: Yes. I was talking to Dana Suskind, who we both know. She is a pediatric surgeon, and she wrote this book called Parent Nation. It’s about what we have to do as a society to take care of all children. And it’s very much about the kids who are overlooked — the kids who don’t have advantages. And Dana wrote a book prior to that called Thirty Million Words. And that also had some things to say about good parenting. But that one was more easily digested by a parent as, like, “These are the things that I need to do for my kid.” The book seemed to have so much warmer a reception than Parent Nation. And I was saying to Dana, “I wish I could say that I cared as much about all children as I do about my children, but I think — like most parents — there is this, you know, pretty biased way of putting my kids first.” And maybe that’s what she’s experiencing with her second book. It is evolutionarily wired.
DUBNER: I will say, in defense of the second book — which I think is really good — Parent Nation, it is really a policy book more than a behavioral, family book. So, I think the intended audience is also a little bit different. But the fact that it’s such a hard argument to make really made me take a step back and say, “Wow. She’s pointing to something really important here. We don’t really care about other people’s children very much. We say we care.”
DUCKWORTH: Especially if you believe in revealed preference, right? What are the core values of our society, if this is the way we act?
DUBNER: I will say this: My daughter — who’s 20 now — she talks about nepotism a lot.
DUCKWORTH: Anya talks about nepotism?
DUBNER: Yeah. When you grow up in a place like New York, it’s pretty easy to notice the advantages that accrue to the offspring of families who have money, who have power, who have leverage, and that it’s much, much easier if you have all those resources. And, look, my family, we’re very fortunate.
DUCKWORTH: Right. She’s on the advantaged side of the equation.
DUBNER: And she’s come to think that nepotism is just super sleazy. So, I’ll give you an example. She’ll help me out on research for, like, this show, or for Freakonomics Radio. I’ll say, “Hey, I want to talk about this or that. If you have a couple of hours, why don’t you do some reading for me, and a little research.” And she does. And, honestly, I love it. I love working with her. I think she’s really good at it. And so I thought, out of fairness, I should name her in the credits on the show when she does contribute. And she was kind of split on that. But then, there was a time when I was looking to hire a summer intern. And I though: You know, Anya would be really good. Because, first of all, I can really control her hours. I can make sure that she works 18 hours a day, which I can’t really do with all the other interns. And she was like, “There’s no way I’m going to do that.” And I said, “Why not? Would I be that terrible to work with?” She said, “No, the work could be really fun. There’s no way I’m going to spend my summer doing work that I can’t put on my resume. I’m going to be a college junior.” And I said, “Why can’t you put it on your college resume?” She says, “You think I want to put on my college resume that I worked for my father? That is the worst thing I could ever do.” And I have to say, that is not something I think a teenager one, or two, or three generations ago would’ve said.
DUCKWORTH: Yeah. That’s a change.
DUBNER: I think so, because everyone is more concerned with not only actual fairness, but the appearance of fairness. And I think that’s a good thing. Do you think that’s a good thing?
DUCKWORTH: I think it is definitely a good thing to be concerned with fairness. The part where you said, “It’s a good thing to be concerned with the appearance of fairness,” it’s, like, annoying to me sometimes — virtue-signaling in general. But I guess you could make the argument that because we have to look like we’re fair, sometimes we’re just forced into being fair so that we don’t look bad. I hadn’t thought about how this generation is thinking about it in ways that are a little more enlightened than our generation. But I do think it is still pervasive, even if there is more sensitivity to being more inclusive. It’s partly because social networks, by their nature, are very dense and interconnected. And by that I mean, “Who do I know? Oh, I know Stephen. Stephen also knows Steve Levitt. But I also know Steve Levitt. And by the way, Steve Levitt knows John List. But I also know John List, and John List is married to Dana Suskind.” My point is: This idea that we milk our own social networks, like, “We need a collaborator who knows how to do structural equation modeling,” I only have my social network. So, I think it’s a bigger question. Like, how would you really escape the gravitational pull of nepotism?
DUBNER: It makes me think of a paper by Sophie Calder-Wang. It’s called “Diversity and Performance in Entrepreneurial Teams.” And we looked at this paper in a Freakonomics Radio episode that was called “How Much Does Discrimination Hurt the Economy?” This is really about a flip side of nepotism, or something that feeds into — or maybe out of — nepotism, is an exclusion. If you are working with, or promoting, the people that you already know and like, who are you excluding? And so, this paper was really interesting. It was based on an experiment that was carried out at Harvard Business School where there was a class that was about starting up a small company. And they put students together to do this entrepreneurial exercise. And, in some cases, the groups were formed randomly, by algorithm. And so, the people would not form their own groups. They were put together with people who were inherently, often, unlike them — either different gender, different race, different background, different country of origin, and so on. And then, in other cases, they let people form their own groups. Essentially, they found that the randomly-assigned groups performed worse than the others. There was about a 15 percent degradation in their performance. But when people were allowed to choose on their own, the diverse teams performed very well. The problem lies with what she called “forced diversity.” Because, there, you’re being put with people that you don’t know, and that you don’t have any background with, social network, and so on. So, that would be an argument, I guess, in favor of what John is calling nepotism — and what you’re calling “strong networks,” right?
DUCKWORTH: Well, is the finding of the study that, when you do choose on your own who to work with and it’s a diverse set of people, then you perform better?
DUBNER: If I remember correctly, the diversity itself was not really much of a factor.
DUCKWORTH: It’s just the choosing of your own team.
DUCKWORTH: Look, I don’t think that this bias that we have towards the people that we already know is ever going to go away. In part, because, if you had to form a team in the next six months, you could not interview all of the people on the planet for your team. It’s not possible. But I do think there’s got to be a way to incentivize looking beyond the social network.
DUBNER: And that’s hard. Don’t you think?
DUCKWORTH: I think it is hard. And I’m, actually, at this moment in time, looking to recruit somebody to work with me. You know, where does my thought process go? I’m like, “Oh, I’ll ask my friend Shalini if she knows anybody. I’ll ask this other friend—” Your Rolodex is your Rolodex. But I guess the question is, how would you work against that?
DUBNER: I will say this, in startups it’s all like, “who I know and who I trust.” Right?
DUCKWORTH: Is that right? I guess so, because they’re, like, really small teams.
DUBNER: Yeah. And also, it tends to be the people that you went to school with, or some preexisting network. But once you get into big, corporate hiring, I think American firms, in particular, take really seriously the appearance of nepotism. I will say, there is some interesting economic literature about firms that are run by X person and then taken over by X person’s offspring. In fact, one of the first big pieces of Freakonomics Radio we did, we called “The Church of ‘Scionology’” — meaning “scions,” like, the offspring of people who run firms.
DUCKWORTH: Oh, S-C-I-O-N.
DUCKWORTH: It’s like “Succession,” right?
DUBNER: It is like “Succession.” Are any of those people remotely qualified to be the best next leader of that firm?
DUCKWORTH: Not on “Succession,” anyway.
DUBNER: So, okay. If we wanted to say a few words in support of nepotism, let’s say that you, Angie, started a company. Let’s say you make beer. Okay?
DUBNER: You love beer.
DUCKWORTH: Let’s say I do.
DUBNER: And you’re really good at making beer.
DUCKWORTH: All right.
DUBNER: And then, you’re getting on in your years and you say, “Hey, I’m so grateful and fortunate that this company has succeeded. And I have a few options here, what I can do. I can sell to a bigger company. I can maybe go public, but, you know, if you had a child, or maybe a niece or nephew, who also loved beer, or just —
DUCKWORTH: Wanted to make a lot of money making beer.
DUBNER: You might think, “Oh, well, they should be the next C.E.O.” So, I’ll give you an example. There are two such beer families with which I’m familiar. One is the Yuengling family in Pennsylvania. They’re a German family.
DUCKWORTH: We have a lot of Yuengling in our refrigerator, believe it or not.
DUBNER: Oh, you do? Why is that?
DUCKWORTH: Well, because I live in Pennsylvania, and Jason really likes Yuengling.
DUBNER: So, I wonder if Jason knows the story of who makes his Yuengling. I believe that the current owners of Yuengling were the fifth or sixth generation of the Yuengling family who had come to America. Interestingly, the one that came to America, if I recall, to make beer here was from this German beer-making family. And he was, like, the younger brother or something who couldn’t break into the family business back in Germany and said, “Dammit, I’m going to America.”
DUCKWORTH: Very American story.
DUBNER: And they were really successful. And if you ask why, you’d say, “Well, these are people who cared about the business, who knew the business very well, who understood the processes and traditions.” So, that could be a really good argument for promoting someone from within the family. On the other hand, there’s another beer called Budweiser.
DUCKWORTH: Heard of that.
DUBNER: Very similar! German family came over. I think the first one was an Anheuser, but then it got to be a Busch. And then there was another Busch and another Busch. And I think the guy who was running it up until roughly the 1990s or so was Augustus Busch III, I believe. They called him “The Third.”
DUCKWORTH: Like, “Hey, pass the salt, The Third.”
DUBNER: I don’t know if the people who were eating at his dinner table called him that, but generally he was known as “The Third.” And his son was known as — can you guess?
DUCKWORTH: I’m going to go with “The Fourth.”
DUBNER: Excellent guess.
DUCKWORTH: That’s why they pay me the big bucks.
DUBNER: And Augustus Busch IV, his ultimate reign over the company was — I believe the technical term is “a [BLEEP] show.” There was all kinds of bad behavior. Corporate behavior was not so good. Personal behavior was not so good. He kind of went down in flames, and the company ultimately was bought out by a firm called InBev. Anyway, that was a case where they just kept passing the company on to the next son, the next son, the next son. And it blew up. The Yuenglings, however, are one where they kept passing it onto the next son, the next son, and it’s still thriving. So, as in any of these stories, it’s never “all-or-nothing.”
Still to come on No Stupid Questions: Stephen and Angela discuss a system where meritocracy and nepotism successfully coexist.
DUBNER: Unlike, let’s say, Anheuser-Busch, where I’m just going to give the company over to this guy who drives his car 180 miles an hour.
DUCKWORTH: My good-for-nothing scion.
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Before we return to Stephen and Angela’s conversation about nepotism, let’s hear some of your thoughts on the subject. We asked listeners to share their experiences with nepotism. Here’s what you said.
Sean GLEASON: Hi. My name is Sean. I’m from New York. And when I was 13, my uncle hired me to work at his hot dog stand. I ended up selling a total of one hot dog to my mom, and I ate seven hot dogs. So, not super successful.
Steve CASE: Once upon a time, I did work at a small company where the wife and children of the owner were employees. He was a real taskmaster and drove some of the employees to tears, but not his family members. They lived right up above the office, and they just let it run off their backs. I don’t think the problem was nepotism so much as poor management skills.
Dan PIERRON: Hello, Stephen and Angela. I’m Dan Pierron from Melbourne, Florida. When my dad was a kid, my aunt was in the spelling bee. And the word she got was “nepotism,” which she then proceeded to spell incorrectly and was kicked out of the spelling bee to which my dad consoling her afterwards said, “Well, don’t worry, you can always work for dad.”
That was, respectively: Sean Gleason, Steve Case, and Dan Pierron. Thanks to them and to everyone who sent us their thoughts. Now, back to Stephen and Angela’s conversation about the consequences of keeping it in the family.
DUBNER: If you want to look at family firms generally, and what happens once the next generation takes over, there are a few economists who have studied this. One is Antoinette Schoar. Another is Francisco Péréz-González. When they look at what happens when a firm goes from the parent to the offspring, Antoinette Schoar found that there were drops of between 10 and 20 percent of profitability.
DUCKWORTH: So, nepotism, on average, is —
DUBNER: Expensive. Now, you might think, “Wait a minute, maybe they’re becoming less profitable, but maybe somehow, if your shares are trading publicly, maybe you make up for it in share price. But then, this other study by Francisco Péréz-González looked at what happens when a publicly traded company is handed over from the founder, or the parent, to the heir. And, in that case, there’s this drop in the stock price of about 10 to 15 percent. So, that looks pretty bad. Now, there’s an interesting wrinkle here: Péréz-González found that the underperformance of family C.E.O.s was basically explained by the group of family C.E.O.s that did not attend a good college.
DUBNER: In about 40 percent of the cases in his sample, the person who took over the company did not attend college inside the top — something like 200 — even though they’re coming from a wealthy family. What kind of story do you concoct in your head when you hear those numbers?
DUCKWORTH: Well, I’m thinking about regression to the mean.
DUCKWORTH: The basic idea with regression to the mean is that, when you have lots of tries at something, that, if the first try is above the mean for you, you could make a prediction that the second one will go back toward the mean. You know, you told me recently, Stephen, that you had a P.R. for golf. It was a really good game for you. It was above your mean. What’s the likelihood that you’re going to have as good a score in your next golf game?
DUBNER: Minus-one is the likelihood.
DUCKWORTH: It’s not likely. And it goes in both directions, by the way. So, if you have a really bad game, you’re likely to regress to your mean, as well. So, applied to nepotism, if you have an outlier C.E.O. who’s just amazing, what is the probability that when you shuffle the genetic and experiential deck and you get another person that is their offspring, what is the likelihood that person’s going to be also an outlier C.E.O.? Well, regression to the mean would say: Not knowing anything else, not very likely.
DUBNER: Okay, I have to say, that is a great explanation. I also would argue that your explanation is more generous than my explanation by a factor of about 10.
DUCKWORTH: Okay, what’s yours?
DUBNER: Well, mine is: If you are the offspring of a person who has built and is running a big successful company, and you go to college, and you can’t get into a top-200 college, despite the advantages that you have, you must not be a very diligent person.
DUCKWORTH: You probably had access to tutoring, and private schools, and nevertheless— I mean, I’m not saying that everybody should want to go to a selective school, but one could argue that, in that demographic, most young people are trying to go there.
DUBNER: Right. So, here’s someone who has those advantages, who doesn’t have it together enough to go to a decent school. And yet, the parent still thinks that they should be running the company.
DUCKWORTH: I think that’s true. That’s arguably in addition to regression to the mean, which is always operating for everything.
DUBNER: Okay. I have a riddle for you that, to me, is one of the most interesting riddles about nepotism.
DUCKWORTH: It’s a nepotism riddle.
DUBNER: And it’s maybe not a long list. So, if you look around the world, in some countries, you’ll find that founders of companies almost always hand off the business to their offspring — in part because they don’t have enough structure to, let’s say, take a company public. Or they don’t have a tradition of professional management. So, there are many different circumstances. But if you look around the world at countries that have successful firms, you’ll find that family firms in those countries almost always perform worse, over the long run, than firms that bring in professional management. But there’s one country where family firms do not just okay, but quite well. Can you name what that country might be?
DUCKWORTH: A country where nepotism works.
DUBNER: It’s a country where family firms are at least as successful as non-family firms.
DUCKWORTH: Mm. Mm. Mm-mm-mm.
DUBNER: I’ll give you a really good hint. Because there aren’t that many countries that start with a J, but it does start with a J.
DUBNER: It is Japan. Very good. Now, Japan has had an unbelievable culture and history of entrepreneurship and companies of all different sorts. But can you think of another reason why Japan might be particularly good?
DUCKWORTH: I have two thoughts. In Japan, you have a very conscientious culture. So, maybe, when you have a handing of the baton to a daughter or son, because the whole darn country is so conscientious, hardworking, dependable, attentive-to-detail, et cetera, that they do at least as well, because anyone tasked with that responsibility, you would take it really seriously.
DUBNER: Nice theory.
DUCKWORTH: And they really are. They’re incredibly conscientious, though they rate themselves as lower in conscientiousness, because they are so conscientious.
DUBNER: That is so Japanese.
DUCKWORTH: So Japanese. But maybe so human, right? The higher your standards are, the harder they are to reach. The second thing I was wondering about: I’ve heard that the compensation — the salaries — of executives in Japan is very different from, for example, the United States and other parts of the world. You don’t have C.E.O.s in Japan who make a hundred X the least-paid person. It’s much tighter. And I guess, in an American system, maybe I can recruit any hot-shot and pay them an obscene amount of money. And maybe you just don’t have that dynamic. But I have no idea.
DUBNER: Those are such good thoughts. Except, I guess I’m going to say that they’re wrong.
DUCKWORTH: Okay. Minus two — my final exam is being graded.
DUBNER: Let me put it this way: What you just described, I think, was very sensible, and may very well contribute to the general story of why firms in Japan may be successful — and maybe even family firms, as well. But that is not the factor that accounts for the success of family firms in Japan. There has been a study. This was by a scholar named Vikas Mehrotra. He’s a finance professor. And he had seen that firms that hand off the running of the firm to the offspring — like I said — in most countries, do worse. And even in Japan they often do worse, but there was one circumstance in which they did better. So, I’ll give you another clue. Do you know anything about adoption in Japan?
DUCKWORTH: I know nothing about adoption in Japan.
DUBNER: What would you say if I told you that roughly 99 percent of all adoptions in Japan are not babies, or even children?
DUCKWORTH: Wait, what?!
DUBNER: “Wait, what?!” Exactly! That’s the proper response. What would you say if I told you that roughly 90 percent of adoptions in Japan are not only not babies or children, but they are 25- to 35-year-old adults?
DUCKWORTH: Families in Japan adopt adult children? Is that what you’re saying?
DUBNER: To be the C.E.O.s of their companies.
DUCKWORTH: Are you kidding?
DUBNER: I am not kidding. This is a thing.
DUCKWORTH: Why do they do that?
DUBNER: They say: We’re a family firm. We’ve been a family firm for X generations — one generation, five generations, whatever — but unlike, let’s say, Anheuser-Busch, where I’m just going to give the company over to this guy who drives his car 180 miles an hour—
DUCKWORTH: My good-for-nothing scion.
DUBNER: —I think we should actually turn it over to somebody who’s going to be a good manager, and that could very well be someone who’s been working at this firm since they got out of college and is now really ready to take over the company, but we are a family firm.
DUCKWORTH: So, it’s meritocratic nepotism. It’s so bizarre. I wonder if you get, like, a birthday party with it, and all the other trappings of family.
DUBNER: When I learned about this, and I interviewed Vikas Mehrotra, he gave some examples. Toyota, about 70 years ago, adopted a new head of the company. Suzuki, the current chairman was an adopted son. And I asked him what share of family firms in Japan that do hand off to a family member, hand off to an adopted family member. And he said it was in about 20 percent of succession events.
DUBNER: So, it’s not that everybody wants to adopt their next leader. But then, I asked him, “If you subtract that 20 percent from the economy, how would family firms do versus the rest?” And he said that was pretty much all of it. That would lower them way back down to where we would expect them to be.
DUCKWORTH: So, I think we have a solution for nepotism, which is that we basically have a meritocratic system, but we add back the family part in there. That’s good.
DUBNER: In other words, if I really want someone beloved to me to take over Freakonomics Radio eventually, and I know that my kids are not interested, I should probably consider adopting someone — like Angela Duckworth, maybe?
DUCKWORTH: I guess that could work. I have some other things going on here, but in principle, I am with you.
No Stupid Questions is produced by me, Rebecca Lee Douglas. Before we move on to the fact-check, we’d like to give listener John — our question asker — the last word.
John OPAWSKI: As a European, your college admissions system sounds [BLEEP] wild. Oh, I probably shouldn’t swear. I cannot imagine something like this happening here. I found the Japanese system that they talked about just crazy.
And now here is a fact-check of today’s conversation.
In the first half of the show, Stephen says he thinks Russian Emperor Alexander III died by being “blown up.” This is incorrect. His cause of death was actually nephritis (or kidney disease). However, his father, Alexander II, was, indeed, blown up. After surviving multiple assassination attempts, the emperor was ultimately killed by a bombing carried out by Russian revolutionaries in 1881.
Later, Stephen says that the “Varsity Blues” scandal included parents who didn’t have legacy connections, but designer Mossimo Giannulli did actually attend University of Southern California — the school that he and his wife, actress Lori Loughlin, deceived into admitting their two daughters. However, it is true that Giannulli never graduated from U.S.C. — he dropped out in 1987 to pursue a career in fashion.
Next, Stephen says that colleges reserve so many slots for legacies in order to encourage alumni to donate money. However, research from the public policy research institution The Century Foundation found that, after controlling for wealth, there was “no statistically significant evidence” that legacy policies made alumni more likely to donate.
Also, Stephen says that the Anheuser-Busch brewing company started with an Anheuser, but was then inherited by a Busch. The company actually originated in 1852 with German-American brewer George Schneider. German soap manufacturer Eberhard Anheuser purchased it in 1860. Anhesuer’s daughter married Adophus Busch, who later became a co-owner of the company.
Finally, while August Busch IV did experience quite a few legal and personal troubles while helming Budweiser, his tenure wasn’t a complete show. As C.E.O, he led the famous Budweiser Frogs advertising campaign. In 1996, the year after the ads launched, Anheuser-Busch stock rose by 27%. And in 1998, the company experienced its best ever sales year.
That’s it for the fact-check.
Coming up next week on No Stupid Questions: A listener asks Stephen and Angela about the ethics of paying to use a public bathroom.
DUBNER: I have to say, urination, hand hygiene, tipping — these are some of my very favorite topics in the world.
That’s next week on No Stupid Questions. For that episode, we want to hear your own washroom stories. Tell us about the best — and the worst — public restrooms that you’ve visited. And let us know how you think we could improve these spaces in general. To share your thoughts, send a voice memo to NSQ@Freakonomics.com with the subject line “Public Restroom.” Make sure to record in a quiet, indoor space with your mouth close to the phone, and please keep your thoughts to under a minute.
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No Stupid Questions is part of the Freakonomics Radio Network, which also includes Freakonomics Radio, People I (Mostly) Admire, Freakonomics, M.D, and Off Leash. All our shows are produced by Stitcher and Renbud Radio. This show was mixed by Eleanor Osborne. We had help on this episode from Lyric Bowditch and Jacob Clemente. Our staff also includes Neal Carruth, Gabriel Roth, Greg Rippin, Morgan Levey, Zack Lapinski, Julie Kanfer, Ryan Kelley, Jasmin Klinger, Emma Tyrell, and Alina Kulman. Our theme song is “And She Was” by Talking Heads — special thanks to David Byrne and Warner Chappell Music. If you’d like to listen to the show ad-free, subscribe to Stitcher Premium. You can follow us on Twitter @NSQ_Show and on Facebook @NSQShow. If you have a question for a future episode, please email it to firstname.lastname@example.org. To learn more, or to read episode transcripts, visit Freakonomics.com/NSQ. Thanks for listening!
DUCKWORTH: Are you a whistler?
DUBNER: I am a whistler. I’m told that I whistle all the time. Even when I shouldn’t.
DUCKWORTH: Like at the opera?
DUBNER: I don’t whistle at the opera.
- Sophie Calder-Wang, professor of real estate at the University of Pennsylvania.
- Vikas Mehrotra, professor of finance at the University of Alberta.
- Francisco Péréz-González, professor of finance at ITAM.
- Dana Suskind, professor of surgery and pediatrics at the University of Chicago.
- Antoinette Schoar, professor of finance at MIT.
- Parent Nation: Unlocking Every Child’s Potential, Fulfilling Society’s Promise, by Dana Suskind (2022).
- “Diversity and Performance in Entrepreneurial Teams,” by Sophie Calder-Wang, Paul A. Gompers, and Kevin Huang (NBER, 2021).
- “The Real Reasons Legacy Preferences Exist,” by Joe Pinsker (The Atlantic, 2019).
- “For This Anheuser-Busch Heir, Trouble Followed,” by Kristin Stoller (Forbes, 2019).
- “The Man Who Really Started What’s Now Anheuser-Busch: Part I,” by Chris Naffziger (St. Louis Magazine, 2019).
- “David Gottlieb Yuengling,” by Eike Reichardt (Immigrant Entrepreneurship, 2018).
- “The Story Behind Jared Kushner’s Curious Acceptance Into Harvard,” by Daniel Golden (ProPublica, 2016).
- Thirty Million Words: Building a Child’s Brain, by Dana Suskind (2015).
- “Adoptive Expectations: Rising Sons in Japanese Family Firms,” by Vikas Mehrotra, Randall Morck, Jungwook Shim, and Yupana Wiwattanakantang (Journal of Financial Economics, 2013).
- Affirmative Action for the Rich: Legacy Preferences in College Admissions, by Richard D. Kahlenberg (2012).
- “Why Adult Adoption is Key to the Success of Japanese Family Firms,” by Stephen Dubner (Freakonomics Radio, 2011).
- “The Role of Family in Family Firms,” by Marianne Bertrand and Antoinette Schoar (Journal of Economic Perspectives, 2006).
- “Inherited Control and Firm Performance,” by Francisco Pérez-González (Journal of Economic Perspectives, 2006).
- “College Admissions Scandal,” (The New York Times).