December 14, 2006

Readers respond on car salesmen and discrimination

Readers respond about car salesmen and price discrimination: A reader writes:

Gladwell fails to understand that it is the existence of the trait within a group that attracts the sharks, not a particular animus towards that group. The car salesmen couldn't care less if the trait is possessed primarily by blacks or Asians or whites. It's the fact that some traits/vulnerabilities do exist within groups that gives them their edge. He's making the issue black when it is green$$.

Example: I live in Utah, a state that is 70% Mormon, most of them white. The religion is weird, but the people are decent, hard working and trusting. Utah is known as the scam capital of the world; pyramid schemes, downline schemes, penny stock swindles, etc.

Why is this the case? Because Mormons have two traits easily exploited by con-men: thriftiness and gullibility. They save money and they trust people who are members in good standing with the Church. Almost all of the scam artists in Utah history have pulled off their swindles by attending LDS wards, getting in close with the bishops (think priests) and presenting themselves as faithful followers of Joseph Smith. Once you're in tight with one ward, it spreads like wildfire because of the tight-knit, trusting nature of the community. Indeed, those are the traits that the cons count on. And again, the LDS membership is overwhelmingly white.


About 15 years ago, we had a hilarious exchange in The Washington Post and The New Republic on a startling discovery by a team of crack Post investigative reporters. In downtown DC, it seems, many jewelry shops have locked doors during business hours. Owners have to 'buzz' new customers in through the door before these customers can check out the sparkling wares. The Post investigators found that young black males were buzzed in at a slower pace and less frequently than were other shoppers.

Much kibitzing followed. At least two-thirds was composed of either: 1) outrage at the insult to young black males undoubtedly looking for wedding rings; or 2) Gladwell-esque lectures on the unconscious biases that governed the behavior of the doltish jewelers. Only a few people pointed out that jewelers: 1) prefer to live; and 2) know nothing about new customers except their physical appearance. Thomas Sowell, who has heard all the BS before, called it a matter of "Bayesian inference" under fairly high-stakes circumstances.

I would distinguish between jobs where you can get killed by your customers, like jewelry store employee and taxi cab driver, and jobs where you can't, like car salesman (it's impractical to violently steal a car from a dealership).

Back in the early 1990s, several dozen cabbies were being murdered each year in New York City alone. When the government tried to force them to pick up black males, they would stage huge protest parades down Fifth Avenue. Too bad Malcolm Gladwell wasn't employed at the New Yorker back then to explain to the cabbies (many of them black immigrants from Africa and the Caribbean) that it wasn't really their fault they were discriminating; they were just suffering from "unconscious prejudices" against black males. Obviously, he would have told them, it would be completely irrational for a cabdriver to decide who it would be safer to pick up at 3 AM based on their skin color, so there can't be a rational explanation for the drivers' reprehensible conduct. I'm sure the slain cabbies' widows and orphans would have appreciated Malcolm's views.


Here's a quote from a very long and informative article entitled "Confessions of a Car Salesman" by a writer who went undercover and got a job as a new car salesman at a California dealership peddling Japanese models:

"My manager had, at one point, described the different races and nationalities and what they were like as customers. It would be too inflammatory to repeat what he said here. But the gist of it was that the people of such-and-such nationality were "lie downs" (people who buy without negotiating), while the people of another race were "roaches" (they had bad credit), and people from that country were "mooches" (they tried to buy the car for invoice price).

"I'll repeat what Michael, my ASM, told me about Caucasians. He said white people never come into the dealership. 'They're all on the Internet trying to find out what our invoice price is. We never even get a shot at them. I hate it. I mean, would they go (to a mall) and say, "What's your invoice price on that beautiful suit?" No. So why are they doing it here?'"


You wrote:

“Of course, a 99th percentile salesman would be precisely the one most likely to figure out what Mr. Gladwell wants to hear about the car business and feed it back to him.”

Maybe Borat should be sent to talk to the car salesmen.

Too bad Borat (or Ali G) didn't interview Malcolm.


The Inductivist blogs:

Do blacks bargain hunt as much as whites? This debate between Steve Sailer (I like) and Malcolm Gladwell (I'm indifferent to) has been very interesting. As is usually the case, my response to this sort of thing is what does the crystal ball (i.e., General Social Survey) say? Are blacks big spenders or bargain hunters, the same as whites?. (By the way, their reputation for cheapskate tipping suggests the latter).

According to the GSS, 51.5% of whites (138 out of 268) who bought a car in the past 5 years chose a particular dealership because, after searching out the best price, they decided that it was the place to go. The number for blacks: 47.8% (22 out of 46). A small difference. As much as I'd hoped these data would back up Steve, there's not much evidence here. Keep in mind the black sample is small, and doing one's homework before buying a car is a bit different than face-to-face interactions with a salesman.

I'm pretty much a penny pincher, and I do seem to see quite a few blacks shop where I frequently shop: Walmart, dollar stores, Big Lots. I don't care that being seen there makes me look like a tight wad, and some blacks evidently feel the same. (Of course, this is anecdotal, and I don't know if blacks are truly over-represented or under-represented in these stores. I believe there is a lot of data that blacks typically spend a lot more of their income on clothes than do whites.

Across Difficult Country cites a PricewaterhouseCoopers study of inner city black spending habits that finds poor blacks like spend a lot on ostentatious purchases:

"African-American inner-city shoppers are 35 percent more likely than the population as a whole to buy women's dress shoes. They're also 54 percent more likely to purchase teen boys' clothing, and 64 percent more likely than average to buy fine jewelry... "

While American households in general spend an average of $1,069 annually on apparel, inner-city African Americans spend $1,502."

This question of wanting to be seen as a big spender versus driving a hard bargain is extremely circumstance specific. Ethnic groups differ -- a friend who is a small businessman in LA tells me the most difficult customers tend to be Armenians, Koreans, and Israelis, while the most aristocratically insouciant tend to be South Americans.

But even within ethnic groups, the classes differ, with the hereditary rich and the poor tending to be more embarassed about being seen as overly concerned with getting their money's worth.

And then even within each class, whom you are supposed to impress with your largesse differs. For example, among Oxford undergrads back in the Brideshead Revisited days, honor demanded that gambling debts be paid immediately and in full. But it was perfectly gentlemanly to ignore bills from your tailor, since he was just a tradesman. In contrast, an American corporate executive who is hard as nails negotiating in the board room might tip his caddy lavishly. To him, the golf club is the place to spend the money you save at the office. Social rules vary a lot.

That's what makes Malcolm's frenzied denunciation of me -- "Is the comment malicious or intended to wound? Again, yes" -- for mentioning that black males tend to "enjoy being seen as big spenders" so hilarious. Malcolm betrays his extremely bourgeois upbringing. An awful lot of people around the world prefer being seen as big spenders that as tightwads. And just about everybody likes to be seen as a big spender at some time and place.

African-Americans tend to be poor tippers of service workers. Ian Ayres, who did the car salesman study, went on to document:

We collected data on over 1000 taxicab rides in New Haven, CT in 2001. After controlling for a host of other variables, we find two potential racial disparities in tipping: (1) African-American cab drivers were tipped approximately one-third less than white cab drivers; and (2) African-American passengers tipped approximately one-half the amount of white passengers (African-American passengers are 3.7 times more likely than white passengers to leave no tip).

Many studies have documented seller discrimination against consumers, but this study tests and finds that consumers discriminate based on the seller's race. African-American passengers also participated in the racial discrimination. While African-American passengers generally tipped less, they also tipped black drivers approximately one-third less than they tipped white drivers.

Of course, car salesmen work hard to establish in the eyes of male customers that they aren't lowly waitresses you can stiff and still feel good about yourself. They are real men, major players. Are you man enough to earn their respect? Or are you some wimp who doesn't expect to ever earn much money, so you haggle down the price of the crummy DX model and refuse the undercoating? Blacks tend to have the large but fragile male egos that are particularly vulnerable to this sales approach.

One of the major themes of Tom Wolfe's work from The Right Stuff onward is the interpersonal power of masculinity. When I mentioned to him that I had to be on the lookout all the time not to be intimidated or cajoled into doing something I didn't want to do by more masculine men, Wolfe replied that they also were always on the lookout for opportunities to intimidate guys like me.


If Malcolm would move away from the typical American thinking about race, that there are only two, black and white, and observe a culture outside the continental United States, you'd see that the car salesman discrimination phenomenon is alive and well in other places and (gasp!) with other races.

Take Hawaii, for example -- car salesman there who I've talked to have a whole system of who-will-buy-what-at-what-price, and it has nothing to do with blacks and whites -- it's exclusively about the various types of Asians which are so richly represented in Hawaii. I.e. Chinese are the most difficult to do a deal with, the hardest to rip off, while Japanese are the easiest, etc. Wake up, Malcolm -- racial and ethnic diversity exists, and those in the trenches will make assumptions based on their observations about various groups out of necessity (and greed) even when the subjects are not black and white.

There's a big difference between Japanese and Chinese on the sensitivity v. brusqueness dimension. I wonder why?


Am tremendously enjoying your fisking of Gladwell. (Perhaps with a bit too much Schadenfreude on my part.) Wanted to point out a couple things.

It is clear that Gladwell, sadly, does not really understand business and/or sales. When he writes:

"This is the context for Ayres' study of car salesmen. Cars are high-ticket items with an awful lot of discretion built into their price—and because of a variety of cultural and historical quirks in the car marketplace there isn't a lot of freely available information about who paid what for what. (Imagine, for example, if we bought cars the same way we bought real estate. You would ask the salesman about the Passat, with the sport package and the leather interior, and the salesman would give you "comparables" for every Passat sold in the United States in the past six months with the sport package and the leather interior. End of story. But for the inability of car dealers to join the 21st century, we wouldn't be having this discussion about price discrimination)."

He is actually undercutting his own argument. Both markets, real estate (and especially real estate) and automobiles, are characterized by strong information asymmetry. The seller has all the info (costs, market conditions) and has been through the process hundreds of times, you, the buyer, have very little info (depending on how much research you have done/purchased), and probably don't purchase that many homes or cars throughout your lifetime, so don't have the equivalent experience either.

Regarding his comparables example, this is laughable and a horrible fit. As if the selling real estate agent would actually seek to not maximize his commission and show comps that don't suggest the highest price possible for his product? Neither is the buyer's agent always properly incentivized either. The buying agent will always show the highest price-point comps to gain the business of the prospective seller -- what the market will bear might be a bit different. (Plus, you don't have the equivalent of a buying agent in car shopping.)

Anyhow, keep on keepin' on.

Perhaps Gladwell should try reading Steven D. Levitt's Freakonomics, which has a chapter on real estate agents as the source of all evil in this world. Of course, Gladwell provided the front cover blurb for Freakonomics, but maybe he didn't have time to read it.

My published articles are archived at -- Steve Sailer

1 comment:

Anonymous said...

It seems to me that the clothing comparison is potentially misleading, since inner city blacks are being compared to whites as a whole. I'd be willing to bet a lot of money that white families living in Manhattan spend a lot more per year on clothing than black families in Manhattan.