The topic of family businesses has long been of interest around here. Stephen Dubnerwrote about it a few months ago, and our “Church of Scionology” podcast looked at the research on family firms. A new working paper (abstract; PDF) from Oriana Bandiera, Andrea Prat, and Raffaella Sadun explores how the behavior of family firm CEOs differs from that of professional CEOs, and why the former seem to perform worse. If you had to sum it up in one word: sloth. From the abstract:
Not an obvious common thread, perhaps. But I have long been interested in how family-run businesses succeed or fail — and in fact this week have just re-released an hour-long Freakonomics Radio podcast on the topic, “The Church of ‘Scionology’” (subscribe here). It features stories on a pair of family beer businesses — Anheuser-Busch and Yuengling — as well as the strange tale of adult adoptions in Japan in the service of corporate stability (i.e., if your son or daughter isn’t up for the job of running your company, then you can simply adopt your successor).
The Post and Journal were long-held family businesses, the Post by the Graham family and the Journal by the Bancrofts. The Times, in an ownership structure similar to the Post, is a public company whose voting shares are controlled by the Ochs-Sulzberger family, and Arthur Sulzberger, like his ancestors before him, is the publisher of the newspaper. I haven’t worked at the Times for some time but the feeling then — and I am told that the feeling persists — is that the Sulzberger family has done an extraordinary job of protecting the editorial integrity of the newspaper, as might be expected of a family steward, but has been less competent than one might wish in shepherding its business interests. (This is all speculation, of course, as there is no counterfactual.)
This is the first installment of a new Freakonomics.com feature from Sudhir Venkatesh. Each AI: Adventures in Ideas post will showcase new research, writing, or ideas.
A new book is garnering significant attention. In Going Solo, Eric Klinenberg, a sociologist at NYU, looks at a growing trend in contemporary adulthood: living alone. How we live, Klinenberg argues, is shifting, and it could be one of the most important developments of the last half-century.
+ Economists have found that family firms that pass the company down to the next generation perform worse than if they had brought in professional management.
+ Family firms are particularly dominant in less-developed countries, which tend to have weaker markets and rule of law. Here’s Vikas Mehrotra on that point:
In the developed world, you have good contracting environments, a good system of law enforcement, and so on. So, in the developed world, you can hire professional managers and expect a certain, you know, sticking to the contract law, and so on. It’s rather more difficult to have the same kind of adherence to the rule of law in emerging economies. So, in emerging economies, family firms sort of provide a second-best solution to this poorly developed institutional problem.
My younger son’s family visited the nearby Amish country and did a tour of several farms. The guide mentioned that the youngest son usually takes over the farm from his father. The older brothers typically learn trades. She thought this happens because the father isn’t ready to give up the farm when the older brothers reach adulthood.
My economic explanation is that this minimizes the frequency of paying estate taxes (no longer a very binding constraint, but it was until quite recently). Perhaps this “ultimogeniture” is an illustration of an unusual excess burden generated by estate taxes. Or perhaps there’s another explanation? (Related: check out Freakonomics Radio on “The Church of ‘Scionology.'”)
A while back, we ran a bleg in which a reader needed help dividing up a loved one’s furniture and other property. Now a reader named M. writes with a trickier and more philosophical estate-dividing problem:
My grandmother is 93 and in decent health. She has 4 biological children, 10 grandchildren, 23 great-grandchildren and a great-great-grandchild is possible (the oldest great-grandchild is married.) She has a decent amount of assets; barring unforeseen circumstances her estate will be a few million dollars.
From the perspective of fairness, one might say the estate should be divided equally between the four children. From a purely biological perspective, an individual wants to see that his or her genetics be passed on to future generations. In our case, while one of the children produced two grandchildren who in turn have only one of the great-grandchildren, another child produced 5 grandchildren and they in turn 10 of the great-grandchildren.
… Economic Lives: How Culture Shapes the Economy, by Viviana A. Zelizer, an economic sociologist at Princeton: Suppose for a moment that this is the year 2096. Let’s take a look at American families: although by now money often takes postelectronic forms unfamiliar to the twentieth century, in the “traditional” home, “housewives” and “househusbands” receive monthly stipulated sums of money as salaries from their wage-earning spouses.
In two previous posts, we examined laws exempting family members from prosecution for harboring fugitives and laws either granting or permitting sentencing discounts on account of one’s family status, ties, or responsibilities. These are two of the benefits defendants receive on account of their family status in the criminal justice system.
Should Parents Who Offend Receive Sentencing Discounts?
A Guest Post
By Jennifer Collins, Ethan J. Leib, and Dan Markel
Many states expressly tell judges to calibrate a sentence based, in part, on one’s family ties and responsibilities in sentencing offenders.
Following up on our earlier introductory post about our book on criminal justice and the family, we thought we’d start here with an examination of the same topic that initially sparked our interest in the intersection of criminal justice and the family — namely, how the law treats persons who refuse to cooperate (or actively interfere) with law enforcement on account of trying to protect a family member.
A reader named D.J. writes in with a problem that requires some sensitive game theory, trickier than the roommate dilemma. Note that he is wise enough to flatter you as “intelligent and thoughtful,” so do your best to live up to his bias.
A reader named Joel Margolese of Andover, Mass., while on holiday vacation in Boca Raton, Fla., wrote the following:
Doing the annual pilgrimage to South Florida this holiday season, we’ve all been struck by how
everywhere seems to be more crowded than usual. Parks, beaches, even stores are jammed. We could barely find a parking space at our favorite park, which is usually empty.
I often get emails from blog readers asking me to shed light on some issue that, in the mind of the email writer, is a pressing social or economic issue. Sometimes it is a big issue like immigration or the financial crisis. More often it is something less mainstream, like election fraud or an unusual application of incentives. And then . . .
Nancy and Harry Chapin’s song, “Cat’s in the Cradle,” is one of my favorites, partly because of the beat, and partly because it illustrates one of the essential trade-offs in life. For those who don’t remember the lyrics, it sings of the life of a busy man who isn’t there when his son grows up and who, in old age, . . .
Over the past several weeks, we’ve hosted discussions on obesity, street charity, real estate, and environmental conservation. Here now is a quorum that lets people relive the just-about-gone summer. The participants below were asked the following question: What’s your idea of a nightmare family vacation? Here are their responses. Feel free to give yours as well. Dan Gilbert, Harvard psychology . . .
Bad news for retirees (and others) who want gigantic houses in Boulder, Colo.: local officials may enact home size restrictions. Under the proposal, residents would be allowed to build homes larger than 4,000 square feet only if they agree to invest in the preservation of agricultural or rural land in other regions. (Hat tip: J.C. O’Connell.) Here’s more on the . . .
An article from the Cox News Service that was published in the State, the daily newspaper of Columbia, S.C., tells the story of a family camping trip gone wrong. You should read the article here. For those who don’t feel like clicking through, I’ll summarize: 1. A suburban Atlanta man named Chris Everhart, a former Marine who now works as . . .
My dad claims he reads this blog. I guess now we will figure out whether he is telling the truth or not. Here is an article from Discover magazine highlighting some of my father’s greatest contributions to science. (If you never click through anything on this blog, this is definitely the link to follow.) Links to a few of his . . .
Google’s new Street View feature has caused a predictable sort of hubbub. Privacy advocates are upset; one woman freaked out when she could see her cat through the window of her house; one man was caught peeing by the side of the road. (We interviewed Google’s project manager on our site; his answers, hardly earth-shaking, were still interesting.) I understand . . .
We came to Vegas so my wife, Jeannette, could play in the Ladies Event at the World Series of Poker. It is my dream for her to win, and she kindly humors me with it. She played well, but got no cards — or, that’s what she says at least. She outlasted a number of big name pros, but went . . .
We are still getting e-mails, like this one, concerning our New York Times column a while back about the leisure/work distinctions in “hobbies” like gardening, cooking, knitting, etc. But the following message, from economist Shoshana Grossbard, is easily among the best. She teaches at San Diego State and is the founding editor of the Review of Economics of the Household. . . .
Steven Landsburg has an interesting column on the impact that delaying having a family has on a woman’s lifetime income. It is based on a study by Amalia Miller who is an economist at the University of Virginia. The column is less about the specifics of the problem Miller solves than about her approach: cobbling together four of five different . . .
Po Bronson is, among other things, the author of five books. The first two were novels. The third, The Nudist on the Late Shift, was a rat-a-tat chronicle of Silicon Valley during its most chaotic and muscular era. His fourth book became a big best-seller; it’s called What Should I Do With My Life? and constitutes many different chapters on . . .
I met one of (the elder) Richard Daley’s grandsons yesterday. Great guy. At the risk of poisoning a possible friendship, I just had to ask him whether his grandfather really stole the election for Kennedy in 1960 through vote fraud in Chicago. He said no. And I believe him. I once had a research assistant spend a month going through . . .