Saturday, March 17, 2012
Stephen J. DUBNER: So Levitt, um, a college friend of yours once told me that your favorite meal during college was a dill pickle, beef jerky and grape soda. Is that true?
Stephen D. LEVITT: I did indeed have that for breakfast, but to tell you the truth, it sounded better before I ate it than after.
DUBNER: Steve Levitt, my Freakonomics friend and co-author, an esteemed economist at the University of Chicago, has an extremely refined palate.
DUBNER: All right, so you’ve got beef jerky, you’ve got dill pickle, what are your favorite foods? Like, what are your favorite places...like if you could drive across America and pick any place to stop and eat, what’s it going to be?
LEVITT: You know, I love the Billy Goat tavern. It’s the cheap place that was made famous in the 19-probably-70s on Saturday Night Live, with the ‘cheeseburger- cheeseburger, no Pepsi, Coke.’ Anyway, they have an incredible rib-eye steak sandwich. Pretty much the cheaper the food the better, there’s almost no fast food that I don’t adore.
DUBNER: So KFC?
LEVITT: Yeah, I like KFC. Burgers. Chipotle. I’d kill for Chipotle.
DUBNER: So how would you describe your palate?
LEVITT: Probably ‘underdeveloped.’ You know, but it’s good. The thing is, it’s a wonderful, wonderful gift to like cheap food. I mean, some people just happen to like expensive food and then they are unhappy most of the time, or else, they spend all their money on food. But if you just, by chance are born loving cheap food, then you can eat everything that you love.
DUBNER: Now, how much do you like wine?
LEVITT: Wine I do not like at all.
ANNOUNCER: From APM, American Public Media, and WNYC, this is Freakonomics Radio. Today, why wine experts should just put a cork in it. And, what happens when you’re eating in a restaurant and someone finds a [BLEEP] in their [BLEEP]? Here’s your host, Stephen Dubner.
DUBNER: Good wine, we’re told, is the province of smart, superior people. They taste things on a whole ‘nother level than people like you and me.
[WINE TASTERS] Smelling a little minerality...Freshly cut apple...George Clinton...This funky sort of...
DUBNER: But I have a question for you: is that superiority deserved? The wines that experts love -- the ones that bring out the natural beauty of the grape but aren’t too funky -- they cost a lot more. But are expensive wines really that much better than cheap wines? Or, is it possible that developing your palate just mucks things up? Complicates things? Maybe we’d all be better off if we had taste buds like Steve Levitt’s.
LEVITT: I’d kill for Chipotle.
DUBNER: After graduate school, Levitt was invited to join an elite club at Harvard called the Society of Fellows. A junior fellow like him was paid a modest salary to work on his own research, with few obligations -- other than a formal Monday night dinner with the senior fellows, who were some of the most remarkable scholars alive.
LEVITT: People like Amartya Sen and Nobel Prize-winning physicists and what not, and you sit around a table. I believe the table was Oliver Wendell Holmes’s table, initially, and he gifted it to the Society of Fellows.
DUBNER: Over dinner, they engaged in witty, learned conversation; they ate venison and other fine food; and they drank expensive wine -- bottle after bottle. To this budding young economist, with the beef jerky taste and the grape-soda budget, all that pricey wine wasn’t doing him any good. He had a thought.
LEVITT: Innocently, I was young, I didn’t understand how the world worked, I thought like an economist. I suggested that perhaps we should have two tracks at the Society of Fellows; there would be the drinking track and the abstinence track. And for those of us who chose the abstinence track, because the cost of the wine was perhaps $60 per meal, that over the course of 50 weeks of the year, that would work out to be about $3,000 and they could add $3,000 to the paycheck of those of us on the abstinence path.
DUBNER: And did you have any other people in your abstinence camp, or was this just Levitt?
LEVITT: Well, you know it didn’t really get that far because the reaction was quite negative.
DUBNER: Levitt is the kind of person who likes to use data, not a personal agenda, to make his arguments. So he set out to get some data. Wine data. The wine they were drinking at these dinners cost five or 10 times what a cheap bottle of wine cost. Was it really five or 10 times better? He hatched a plan. The Society of Fellows held wine tastings from time to time. He suggested that the next one be his to organize.
LEVITT: So I worked with the wine steward to select two excellent bottles of wine, expensive bottles of wine, you know, probably close to $100 bottles of wine. And then I went to the liquor store that was down the street and I said, ‘can I have the cheapest bottle of wine you have that was the same grape,’ I don’t remember which grape it was.
DUBNER: Levitt used four decanters. Into the first decanter, he poured one of the expensive bottles of wine. The other expensive wine went into decanter number two. In the third decanter, he poured the cheap wine, which cost around $8. In the fourth decanter, he repeated one of the expensive wines.
LEVITT: So as far as the people knew, there were four different wines and these were all wines that were coming out of the wine cellar of the Society of Fellows.
DUBNER: So you are tricking them from the outset. You’re leading them to believe the fourth, the cheap wine, is also from the wine cellar.
LEVITT: I don’t....you know. Uh, yes. (Laughs)
DUBNER: They swirled them a bit … sniffed them … and sipped. They wrote down their ratings. As he looked at the numbers, Levitt’s cold economist heart warmed.
LEVITT: The data could not have cooperated more completely with my hypothesis. So for starters the four wines received almost identical ratings on average. Although there were a wide spread among individuals, on average, tallied up, people did not prefer the expensive wines to the cheap wine. On top of that, and this was the thing that I was hoping for and dreaming of but didn’t believe would actually come true: It turned out among individuals if you compared how differently they rated any two of the wines that they had, it turned out that by a small margin, people actually rated the same wine from the same bottle but presented in a different decanter as being the most different among the two wines. So the two wines that were absolutely identical, when you looked at the gap between the ratings that an individual gave to those wines, the gap was bigger than they did between the other wines, which actually were different.
DUBNER: A few minutes after the tasting was over, Steve Levitt shared the results with the senior fellows.
LEVITT: The jovial mood in the room suddenly went dark. People realized they had been tricked. That there had been this cheap wine the same wine was in twice. And they really realized that the nature of the game had been somewhat different than what they thought. And when they heard the results -- that collectively they had no ability to identify wines, they were not happy. And, in particular, there was one senior fellow, so one of the professors at Harvard, who was quite outspoken about his knowledge of wine. And he loudly announced that he had a cold. Otherwise he clearly could have made the distinctions and he stormed from the room and left the party prematurely.
DUBNER: What was his discipline?
LEVITT: I think for the sake of anonymity, I should not reveal that particular piece of information. He was a humanist.
DUBNER: Not an economist, in other words.
LEVITT: No. No.
DUBNER: The opposite of an economist.
LEVITT: Yeah, exactly.
DUBNER: So what does Levitt’s evil little experiment teach us about wine? Maybe not all that much; it wasn’t a very scientific tasting, really. And perhaps the Society of Fellows was having an off night -- the humanist had a cold, right? Or maybe this was just a group of people who didn’t know nearly as much about wine as they thought they knew. You’d never be able to pull this kind of stunt on wine experts. Would you?
Brian DIMARCO: On my team we have a master sommelier, two master of wine candidates, four people who have been in the trade for many years. These are sophisticated wine professionals.
DUBNER: That’s Brian DiMarco, talking about the people he gathered for a blind tasting of his own. Before we get to that, let’s hear a little bit more about Brian.
DIMARCO: I specialize in helping customers, consumers, private collectors, and retailers and restaurants decide what wines to put on their list, what wines to collect, what wines to sell. And I have a small import business and wholesale company. And we distribute wine that we find all over Europe and South America in New York City.
DUBNER: Cool. So you’re almost a wine agent then, yeah, in a way? More than just an importer?
DIMARCO: In many ways, yes.
DUBNER: Brian DiMarco is one of the people who decide what we drink. He goes to France, Italy, California, tastes wine fresh out of the tank. So he determines what’s good -- or bad -- without any critics whispering sweet ratings into his ear. Then he puts his money where his taste buds are -- he writes a check. Now, according to DiMarco, he makes as much money selling a $15 bottle of wine to a restaurant or shop as he does selling a $50 bottle. If that’s true, DiMarco is an honest broker. His job is simply to find wine that you or I would want to drink -- because, think about it, there are thousands upon thousands of bottles to choose from. Just picture the rows of bottles lining the shelves at every wine shop. You kinda, sorta, maybe think you want to buy a merlot. Do you pick the one with the pretty flowers on the label? Do you go with the one that Robert Parker, the high priest of wine ratings, awarded a lot of his Parker points to? Or, like a lot of people, do you let price be your guide? If you believe even a little bit in the free market, you’d have to think that expensive wines cost more because they taste better, right? Brian DiMarco wanted to know how much people were tasting the dollars when they drank an expensive wine. So, like Steve Levitt, he conducted a little experiment, with some of the people who work for him. As DiMarco said, these were no amateurs.
DIMARCO: We did a tasting, brown bag. And we had the exact same wine in both bags. And we told them that one bottle was a $50 bottle and to write their reviews, and we told them the other was a $10 bottle, to write the reviews. Of course they were both $20 bottles according to what they would sell at any retail store. And then we reversed it and we said now the $10 bottle is really the $50. And everyone liked the $50 bottle better in both circumstances, because they perceived that the price there was either something they were missing, when really these wines are so similar. Yeah but they’re different. A lot of people, two or three people said, ‘is this the same wine?’ And we said that’s for you to determine, and the more they thought about it, the more they intellectualized it, the more they decided there were differences to the wine.
DUBNER: So this wasn’t a wildly scientific experiment either, but to Brian DiMarco, the message couldn’t have been clearer: When people know a wine is more expensive -- or even think it is -- it tastes better. Now, obviously this idea doesn’t apply just to wine. A house that costs $500,000 ought to be five times better on some level than a $100,000 house -- the size, the construction, the schools and neighborhood. So is a wine that costs $50 five times better than a $10 bottle? Or is it even better at all?
DUBNER: So tell me your name kind of what you do, and how you describe yourself.
Robin GOLDSTEIN: My name is Robin Goldstein. I write about wine and food. Basically my book “The Wine Trials” has been my principal outlet for writing about wine, but I’ve also been publishing academic papers on topics of taste from a cognitive perspective, and an economic perspective, usually coauthored with colleagues from different academic fields. So I’ve been exploring the neuroscience side of it a bit. I’ve been exploring the behavioral side of it. And in particular I’m interested in price signals and how people’s knowledge of price affects their experience of wine on the most basic sensory level.
DUBNER: Now, first let me just ask you, I’ve heard good things about this lovely little restaurant in Milan called Osteria L’Intrepido, You ever been there?
GOLDSTEIN: I’ve been to the restaurant, but it’s actually located in my friend Giuliano’s former apartment in Milan. The restaurant, I wouldn’t say it’s great. Mostly. they serve left over pizza, and their wine cellar consists mostly of some leftover bottles of Montepulciano d'Abruzzo from three weeks ago.
DUBNER: Meaning it’s not really a restaurant, is it?
GOLDSTEIN: It’s an apartment. So it’s just an address really.
DUBNER: Osteria L’Intrepido doesn’t exist; it’s a fake restaurant that Robin Goldstein made up. Why? Well, it’s a strange story. Goldstein’s research and writing on wine made him skeptical about critics and awards. He believed that so-called experts were, at best, subjective, and that they carried way too much influence. He wondered about the awards that magazines like Wine Spectator gave to restaurants for their wine lists. Did an award like that really mean the wines at that restaurant were excellent? So he invented Osteria L’Intrepido, or “Fearless Restaurant.” He created a fake menu, a fake website, and a fake voicemail message, saying the restaurant was closed for vacation…
[IN ITALIAN: OUTGOING MESSAGE]
DUBNER: As for the Osteria L’Intrepido wine list -- Goldstein made that up too. He included several expensive wines that Wine Spectator itself had given bad reviews in the past. One of them was a 1982 Brunello di Montalcino, which the magazine had given 67 points, or a D+ rating, calling it "barnyardy” and “decayed." He listed another vintage that Wine Spectator had reviewed as “Unacceptable … sweet and cloying … [and] smells like bug spray.” Then off his application went, with the fake wine list and a real money order.
GOLDSTEIN: My hypothesis was that the $250 fee was really the functional part of the application. In other words, the entire awards program was really just an advertising scheme, and that it was being fraudulently misrepresented as an exercise of expert judgment by Wine Spectator.
DUBNER: I see, was a little piece of you expecting that when you applied for this that they would send someone around to drink some of your wine or eat some of your food?
GOLDSTEIN: Well of course that’s the experiment, right? So, I didn’t know. I wasn’t sure going into this that I would win an award. There were two questions being tested here. One was, do you have to have a good wine list to win a Wine Spectator award of excellence? And the second was, do you have to exist to win a Wine Spectator award of excellence? So I thought that it was quite possible that my experiment would fail.
DUBNER: His experiment didn’t fail. Wine Spectator called to tell him that Osteria L’Intrepido had won … and, by the way, they asked, would Signore Goldstein like to maybe take out an ad in the magazine to publicize that fact?
DUBNER: And what was the name of the award that you won for your fictional restaurant?
GOLDSTEIN: The Wine Spectator Award of Excellence.
DUBNER: So congratulations, that’s awesome that you’re a winner. I too could be a winner presumably?
GOLSTEIN: Yeah, if your wines are bad enough.
DUBNER: Coming up on Freakonomics Radio: Steve Levitt is served something fishy at another Society of Fellows dinner.
LEVITT: Payback! I never even thought about that! But given the evil geniuses that walk around that place, it’s quite possible.
DUBNER: And … I stumble upon another dining disaster, this time in a restaurant.
ALTUCHER: Yeah, right behind me. And she was sort of crying and half screaming.
ANNOUNCER: From WNYC and APM, American Public Media, this is Freakonomics Radio. Here’s your host, Stephen Dubner.
DUBNER: In August 2008, the American Association of Wine Economists -- that is a real thing -- held its annual conference in Portland, Oregon. That’s where Robin Goldstein revealed the Award of Excellence he got from Wine Spectator magazine for the fake wine list from his fake restaurant. The press drank it up. From the New York Post: “Wine Mag Humbled by Hoax.” According to theL.A. Times, Wine Spectator was now “Drinking a Hearty Glass of Blush.” Wine Spectatorvigorously defended its award system. The executive editor said the magazine never claimed to visit every restaurant, and that it did its due diligence on Osteria L’Intrepido -- looking over its website and calling the restaurant -- but that it kept reaching an answering machine.
Robin Goldstein, for his part, was convinced: The wine system was fundamentally flawed. If a fake restaurant with a wine list that included bad, expensive wines could win an Award of Excellence from one of the most prestigious wine magazines in the world, who are we supposed to trust?
GOLDSTEIN: My takeaway is that expert sources in the media are trusted too much, and that they’re prone to abusing their positions of power as a way of making money. So the phenomenon where what’s really an ad is posing as real expert judgment is very problematic for consumers, because consumers really put trust in these magazines. We put trust in experts. There are so many fields out there where we don’t know as much as the experts do. And so we use experts as an information intermediary, as a proxy for good judgment, in an area where we don’t know as much as the experts are supposed to. When we trust experts too much, and they sell their awards to entities that are really their customers that’s quite problematic.
DUBNER: Robin Goldstein also had an academic paper to present at that conference of wine economists. The paper was called “Do More Expensive Wines Taste Better?” If the Osteria L’Intrepido stunt was just a stunt, and if the Steve Levitt and Brian DiMarco blind tastings we heard about earlier were just unscientific tricks -- well, Goldstein’s paper was the opposite of that. It gathered up data from 17 blind tastings that Goldstein himself organized. The data included more than 6,000 observations from more than 500 people, from amateur wine drinkers to sommeliers and wine makers. He tested red wines, whites, roses. The prices ranged from $1.65 a bottle to $150 a bottle. It was as rigorous as you could get.
And what did Goldstein learn? That, overall, people liked expensive wines...less than cheap wines. When you don’t know what a bottle of wine costs, apparently you don’t know how good it’s supposed to taste. Even the most expert tasters could barely tell the difference between expensive wines and cheap ones.
It’s unsettling, isn’t it? Buying a bottle of wine shouldn’t be as complicated as buying a house. But thanks to the layers of experts between us and the grapes, we’ve got performance anxiety. Wine isn’t supposed to be a drag. It’s a celebration, a beloved recipe, civilization in a bottle. You’re drinking the hand-crafted fruit of some farmer’s vines that may go back hundreds of years, grown under the same sun that’s been shining for billions of years. Wouldn’t it be nice to drop the pretense -- to set aside the ratings and price -- and just drink? Brian DiMarco, the wine importer, that’s what he’s really after.
DIMARCO: Who are we to tell the Connecticut housewife that that oaky chardonnay that she’s been slamming down for the last ten years from California that she’s not deriving pleasure from that? She surely is. But there are so many other things. It’s like limiting your musical notes to only playing F and C notes the rest of your life. It’s only eating cheeseburgers and hamburgers, you know, the rest of your life, if you want to try other foods and other cultures and other things. If opening this bottle of rioja somehow takes you to Spain and makes you feel like you want tapas, then it’s done its job. And whether it’s a $15 bottle or a $30 bottle is irrelevant at that point. Then you’re getting into nuances of good and great. But I think the bottle of wine is the ability to either change your day from an alcoholic standpoint, getting to a certain point where you’re like. ‘OK this is’ -- or for people like myself who are in the trade -- it’s something you have with food. Growing up in an Italian household we weren’t drinking great wine, but to me wine wasn’t alcohol. Wine was Carlo Rossi in a jug that was poured into juice glasses for my grandfather and that was what you had with dinner. Drinking to me was Budweiser and Jack Daniels. You know, sneaking out on Friday night to go drink.
DUBNER: Let just ask you, we’re sitting here in a radio studio in downtown New York with kind of mucus-colored sound padding, and artificial light. There’s basically nothing good about this space, there’s no air, there’s nothing. But--
DIMARCO: It’s soulless.
DUBNER: But transport me for a minute. So tell me, Brian, the room that you would like to be sitting in right now, and the food that you’d like to be eating right now, and most of all what the wine is with that food, what that wine tastes like to you.
DIMARCO: I think a crisp sancerre would be perfect right now with some sort of croque monsieur, and maybe a salad with a little vinaigrette would be kind of perfect. Not too decadent, but definitely has its place. And maybe have a backup bottle on ice.
DUBNER: Has your table got room for another guy there?
DIMARCO: You’re sitting with me right now. This pressed, wood table, I think it can hold an ice bucket, I’m pretty confident.
DUBNER: Not too long after Steve Levitt conducted that sneaky wine experiment at the Society of Fellows, he attended another dinner there.
LEVITT: There was smoked fish one night. I ate it. Seemed to taste fine. And about a half an hour later, the room was starting to spin. I was like sweating profusely. I felt awful. And I turned to the guy next to me – a guy named Brad Gregory, a great historian. And I looked at him and I was going to say, ‘how do you feel?’ But I didn’t even have to ask him because the sweat was dripping off of him! He looked absolutely sick. I looked at him and I said, ‘I think we ate something bad.’ And he said, ‘oh, my God!’ It turned out that one of the pieces of fish was bad and one wasn’t. So about seven people around the room were virtually on their death bed. Staggering home. Barely alive. And the other 24 people in the room felt perfectly fine.
DUBNER: I’m just curious – you pulled this stunt on the Society of Fellows wine experts. Do you think this might have been a little bit of wine experts’ revenge on Levitt? ‘Let’s give Levitt the bad fish.’
LEVITT: Payback. I never even thought about that! But given the evil geniuses that walk around that place, it’s quite possible.
DUBNER: Our next story is about another dining experience gone wrong. Very wrong.
DUBNER: So I’m on Broadway, walking down Broadway in the low 90s, and I’m about to get to this restaurant where I used to go to all the time, and its called Le Pain Quotidian. And I used to go quite often and eat healthy delicious food and then something happened that one day that led to my not coming back here once, and today is the day that I’m gonna revisit the scene of the crime.
DUBNER: I brought one of our producers with me, Chris Neary.
Chris NEARY: How do you feel? Are you nervous?
DUBNER: No, I’m not really nervous. I mean, am I nervous about something bad happening again? No, because the thing that happened was bad enough that it has to be very unlikely, because if it happened more frequently then there’s no way this place would still be in business. So I know that its a very rare event and logic tells me its a very rare event.
DUBNER: Le Pain Quotidien is a nice place – a chain, but it doesn’t feel like a chain. The founder is a Belgian baker, and the place feels like this beautiful old Belgian farmhouse. It’s got thick wooden tables – including one massive communal table – and simple, healthy food: good pastries and strong coffee.
DUBNER: The place is rustic and civilized at the same time -- a lot of MacBooks, a lot of enlightened conversation, classical music playing in the background. The one I’m talking about is on the Upper West Side of Manhattan, Broadway and 91st Street. I used to go all the time with my friend James Altucher.
James ALTUCHER: And it was very comfortable because of the big tables. We had a lot of space. We could spread out. So we would meet there at 11:45 which was always crucial because you beat the lunch crowd by about 15 minutes without sacrificing on your appetite or anything.
DUBNER: James is a neat guy, a smart guy. He’s done a lot of things -- he’s been an investor, a financial writer, a dot-com whiz, he was a nationally ranked chess master. James and I play backgammon, usually over lunch -- these long-running, 101-point matches that might take a couple years to complete if we play every two or three weeks. For a long time we played at City Diner, on Broadway and 90th Street but the waitress James liked quit. So we moved uptown a block, to Le Pain Quotidien. For the most part, we were really happy there. Until one day, we were in the middle of a game, when the incident happened.
ALTUCHER: I noticed this woman was crying next to us.
DUBNER: Right behind you, she was sitting right behind you.
ALTUCHER: Yeah, right behind me. And she was sort of crying and half screaming. You know, I don’t know if you could imagine that because it doesn’t normally happen. Like, little kids don’t cry like that. Like, you know, you don’t usually see adults like kind of crying and screaming at the same time.
DUBNER: And what was your first thought?
ALTUCHER: Curiosity. So I wanted to know what was going on. Like, one, the woman who she was with was walking around. The manager was coming over, and this one woman was kind of like paralyzed, crying, screaming.
DUBNER: What did you think might have happened to her? Because I remember my thought.
ALTUCHER: Well what was you initial thought?
DUBNER: My thought was that these were two old friends. These were two ladies who were maybe, I don’t know, in their sixties or so, it seemed like.
ALTUCHER: Maybe someone had died?
DUBNER: I thought that they were old friends, and one of them, her husband had recently died--this was just the scenario that my mind conjured in a millisecond—and that they were having a discussion about it, and the emotion just welled up, and she kind of lost it, which seemed like a perfectly natural thing to happen.
ALTUCHER: I didn’t feel like that because that, that sort of crying is sadness, and I didn’t quite feel, I felt more of a terror thing happening. And so that’s why I stood up and basically walked over to the table.
DUBNER: And what happened then?
ALTUCHER: Well, she’s crying, and the manager’s over there. And there was a dead mouse in her salad.
DUBNER: Say it again.
ALTUCHER: So, Le Pain Quotidien, I walked over there, there was a dead mouse in her salad, kind of curled up, almost something like a little fetus baby. But it was a fully grown mouse.
DUBNER: Yep: a mouse carcass in the salad. I had James take a picture of it with my cell phone. We weren’t done eating, and we were in the middle of our backgammon game, but we decided to leave. I think you can understand why. We packed up and I asked to talk to the manager.
ALTUCHER: You offered the manager the opportunity to price the meal, it was very Freakonomics-ish of you.
DUBNER: I said to the manager, we’re leaving now because the mouse grossed us out and we’ve eaten some of our food and if you want us to pay we’ll pay but I don’t think we should pay.
ALTUCHER: And you said to me in advance what you thought the manager should do, and in fact he did do that, which is he said, ‘Look, the meal’s on us, don’t worry about it, I hope you and your friends come back here.’ So, he did the absolute right thing.
DUBNER: I offered him the chance to set the price but only after I suggested what the price should be, which is zero. I was engaging in a little anchoring as behavioral economists call it. That simply means trying to influence the outcome of a decision by establishing a numerical anchor whether or not that number actually makes sense.
Richard THALER: The original experiment was they asked people a question, I think it was ‘what percentage of African countries are represented in the United Nations?’
DUBNER: That’s Richard Thaler. He teaches at the university of Chicago. Many people, myself included, would call him the godfather of behavioral economics. When I think of anchoring, I think of Dick Thaler.
THALER: And they had a wheel of fortune they spun with numbers between 0 and 100 and it would stop at some number, say 35, and they would say, ‘do you think the answer is above or below 35’ and then ‘what do you think the answer is?’ And people’s answers were influenced by the number that came up on that wheel of fortune, even though they saw that the number was generated at random. So if you ask people, ‘do you think the percentage of African countries represented in the UN has anything to do with the number that came up on the wheel of fortune’ they’d say ‘No, of course not. What are you, crazy?’ But if they started at 35 they’re gonna come up with a lower number than if they started at 85; its pretty much inevitable.
DUBNER: So the starting point influenced the final number even if the starting number is meaningless, that’s how anchoring works. At Le Pain Quotidian when I talked to the manager on the way out, I set the anchor of the price of our lunch at zero. If he wanted to charge us for our mousy meal, he’d have to dislodge the anchor. I asked Richard Thaler how he thought I handled it.
THALER: Well I think it is the case that in many situations you want the other side to make the first offer.
DUBNER: You do? I would think that’s exactly wrong.
THALER: Well that’s because sometimes they’re going to offer you a deal better than you would have asked for.
DUBNER: The manager looked pretty shaken up himself by the mouse, and really, he couldn’t have handled things much better. Look, bad things happen in life. It’s what you do next that matters, right? A few months after it happened, I asked James to put on his investor hat and talk about what that mouse meant.
ALTUCHER: Every chain that goes from regional to national goes through this, not necessarily these types of health issues. But you know, Starbucks, McDonald’s, they all had their growth issues, and this one is having its growth issue in this particular way.
DUBNER: But, you know, is this a growth issue? Or is this one mouse in a salad? I mean it’s just a mouse in the salad. I mean, it’s…
ALTUCHER: No, this is a growth issue, because too many things went wrong. So, each one thing has a low probability. So a mouse gets into an open salad bag that happens to be lying around. That’s inappropriate. The mouse dies there. So, I don’t know, was it there overnight? The guy takes his hand in and puts it in a bowl and didn’t see the mouse. The waitress or waiter brings the mouse over and didn’t notice it. So, four or five things went wrong. Maybe the salad was delivered with the mouse in it to the store to begin with. So, we don’t know where it went wrong. This is a typical thing that could happen, not this exact thing, but this aspect of things breaking down, multiple things breaking down happens when you’re doing that regional-to-national surge of a business.
DUBNER: Le Pain Quotidien is a growing company -- it started in Brussels in 1990 and now has more than 150 locations around the world, including a couple dozen in Manhattan alone. And it’s planning to grow some more. But I wondered: is that growth responsible for the mouse in the salad? I wondered a lot of other things too, like: What did the 91st Street location do after the mouse incident, to prevent a replay? How did they make amends to the customer who got served the mouse? And most of all, when you’re running a business and something bad -- something really bad -- happens, how do you regain the trust of your customers?
These were some of the questions I wanted to ask Le Pain Quotidien, and that’s why, one day, I went back. I found the manager on duty -- a nice-enough guy -- and asked if we could talk. I pulled out a picture of the mouse in the salad. Suddenly he wasn’t quite as nice. He remembered the incident, to be sure. But he said he wouldn’t talk, couldn’t talk about it. He gave me a card from Le Pain Quotidien’s New York headquarters, suggested I talk to corporate communications. So I gave them a call. A very nice woman told me the appropriate party would get back to me soon. But it didn’t happen. I kept calling. I was told that a lawyer, and then a P.R. person would answer my questions about the mouse in the salad. But neither one did. I thought this was strange -- if something like this happened at your company, wouldn’t you at least want to return some reporter’s call and explain yourself, maybe offer an apology, as pro forma as that apology might be? Since Le Pain Quotidien wasn’t talking to me, I called someone else, someone with his own disaster experience.
Andrew GOWERS: I’m Andrew Gowers. I’m a consultant on communications.
DUBNER: After a long and storied career in journalism, Gowers went into corporate communications -- first at Lehman Brothers, not long before it collapsed, and then straight to BP, where he worked during the Deepwater Horizon spill. His job in each case was to represent his company to the public. It puts one little mouse in the salad into perspective, doesn’t it? I asked Gowers what a company, large or small, needs to do when disaster strikes.
GOWERS: I do think there’s a serious premium on doing your best to be as transparent and clear about what’s going on as possible. I say that in an appropriately cautious way because I said before, in crises it’s very often not possible to know everything that’s going on, but if there’s any suggestion that you are behind the curve in terms of withholding information, or worse still disguising or gilding information, then you are on a heading to a very difficult place.
DUBNER: Le Pain Quotidien wasn’t being very transparent, were they? I gave them another call. They still wouldn’t talk. It was frustrating -- and, I’ll be honest, puzzling. And then finally, after many weeks and many requests, my cell phone rang. It was the company’s CEO. He agreed to meet me back at the scene of the mouse …
DUBNER: Coming up on Freakonomics Radio …
Vincent HERBERT: This whole incident started to question our basic philosophy of food.
DUBNER: How much can one dead mouse resonate in a restaurant chain?
[ONE MINUTE BREAK]
ANNOUNCER: From WNYC and APM, American Public Media, this is FREAKONOMICS RADIO. Here’s your host, Stephen Dubner.
DUBNER: Yes, I saw a woman get served a salad with a mouse corpse in it, at a very nice restaurant called Le Pain Quotidien. I wanted to know how it happened, and what happened next.
HERBERT: So, my name is Vincent Herbert. I’m from Belgium. I’m 46. I have three kids, a fantastic wife, living in New York for 20 years. And I’m currently very busy and living a great journey with Le Pain Quotidien as I am overseeing the strategy, and I am overseeing Le Pain Quotidien worldwide.
DUBNER: So Vincent Herbert, Le Pain Quotidien’s CEO, sat with me at one end of the very long communal table, mere feet away from where the incident occurred. I asked what he did about the mouse in the salad.
HERBERT: So, we had a crisis. We had a crisis, it’s unfortunate, I regret it. I don’t understand, or I didn’t understand how it happened. But it gave me a couple of opportunities. One, the fact that you were there, it took a certain momentum. As a leader, traveling around the world, et cetera, et cetera, I’m not sure I would have gotten the full story if you wouldn’t have been there. So, maybe it happened before, but at least now I know. And this opportunity is that as a leader it invited, it requested me, it made me dig into my business to double check if everything was fine. So, that’s already a positive. There is a crisis happening, and if you look at it, and if you do introspection, in fact it tells you, ‘Vincent, go and dig into the business,’ which I did. I went to see, you know, I asked all the questions. Why did it happen? What about the quality assurance? What about the vendor? What about all the processes? What did we do about the customer? You know, how do we respond to the media if the media comes to us? And by asking those questions, I’m coming to realize that there are a couple of things that I could do better. And I think that is the opportunity of owning things that are happening to you.
DUBNER: Vincent, let me ask you this, tell me what you were told when you were first told about it, and I want to know what your reaction was, whether internally or externally. What did you think? What did you say?
HERBERT: When I heard about the incident it was told to me in a very clinical way, in a very corporate way, in a very rational way, so in a very sequential way. What I was missing, and it’s my gut feeling, what I was missing was a healthy dose of emotions--and I’m saying healthy--and a more honest, transparent, no a certain suggestion, or game plan, or action plan that would stick more to our values. And when I’m saying values I’m talking about authenticity. We’ve got to be transparent and honest. That is the most important thing of Le Pain Quotidien and we’re doing this with our menu, with our people, we just want to be genuine. And again, here, things happen. You know, we’ve got to be brave enough to say ‘this is it, this is ours.’ I take responsibility, and we’re going to be transparent. And we are going to pick up the phone when people ask us what happened and we’re just going to be, we’re not going to blush. We’re going to be sorry, but we’re going to do the best we can with it.
DUBNER: Talk to me about the fact that you wanted to come here and talk to me about this incident. Whereas the other people who work in your firm took exactly the opposite tack, and what that says about the way firms handle bad news these days.
HERBERT: Well, I think…Well, for us it’s a very new occurrence to have the media coming to us. We’re pretty shy to the media, and therefore what I realized through that incident, another good opportunity, good lesson, is that we need to get better at understanding how to partner with the media so that we are open and transparent in the right context. The first reaction, indeed, of my team was scared and paralyzed, you know, like don’t know what to do, it’s only going to be negative, it’s a huge liability, the less we say the better it is, kind of avoiding. And as a person, and as a leader of this organization, I very much disagree with that. I think, I think this is an opportunity again to tell the people what we stand for.
DUBNER: O.K., so Herbert is pulling his company down the road toward transparency. The first thing I wanted to know is: What happened? How’d the mouse get in that poor lady’s salad? Was the kitchen overrun with mice? Was there a disgruntled worker back there who thought he’d have some fun? Or maybe the victim wasn’t really a victim – maybe that lady was a full-on grifter, who goes into restaurants all over town with dead mice in her pocket, trying to set up a shakedown.
HERBERT: Yeah, so we went through all the processes, asked many questions to all the people, and we determined with the vendor that it came from the field. So, it came from the lettuce from the field, and it was very, very interesting, and a very important moment when in fact this whole incident started to question our basic philosophy of food, which is our philosophy of Le Pain Quotidien is organic food. You know, we believe in organic farming. And with an incident like this, it’s amazing how an incident like this could make people think about well, do we keep going organic? Because this is a business, and something like this, if it’s taken out of proportion, out of context, and we jump all over this, it could destroy this business. It could destroy this small, growing company. It was amazing how in my team, even in my team we knew, and some people say, well we’re just going to change, we’ll knock organic. You know, we’re just going to use…
DUBNER: So some people are saying because the mouse came into the salad from the field, and because it’s an organic vendor, presumably if we go non-organic salad, we would not have a mouse. So there are people putting the pressure on to do that. What did you say to that?
HERBERT: Well, there was no pressure. There was again, a rational, deductive suggestion to say well if we don’t want this to happen again, we just change our philosophy and we go from organic to conventional. We use pesticides, and we use all those crazy things, and yes, there are not going to be any baby field mouses in lettuce, and it’s not going to happen again. There was nobody on the team that suggested that we had to change the philosophy. That was very comforting to me to say my team are still die-hard believers in the core philosophy of Le Pain Quotidien. And for me there was no question.
DUBNER: So as Herbert describes it, the mouse in the salad became became an internal referendum on whether Le Pain Quotidien should carry on its organic mission. And the answer, he says, was a big, fat yes. Now, is it true that using organic greens created this problem? That is, if Le Pain Quotidien bought conventionally farmed greens, would the mouse have necessarily been eliminated before it got to the salad bowl? Apparently not. We talked to some agricultural researchers who told us that typical pesticides don’t actually address rodents. So Le Pain Quotidien may have all kinds of reasons for sticking to its organic guns, but that doesn’t really explain the mouse. That said, Herbert told me that he stopped using that salad vendor after they sold him a mouse.
The woman who was served the mousy salad -- the woman whom I had imagined was distraught over some kind of private loss, rather than a public mouse - she didn’t want to be interviewed, and she didn’t want me to use her name on the air. But we did exchange a few e-mails. You want to know the most amazing thing? She still eats at Le Pain Quotidien - that same Pain Quotidien - all the time. She said she respects and admires their organic mission; she forgave them for the mouse entirely. I asked Vincent Herbert how that happened. He said Le Pain Quotidien kept her trust…
HERBERT: … by being brutally honest. And I think that honesty, the transparency, the empathy, with that incident was very important. I think the customer understood, one, that this is something that is very unusual. And we’re talking about an incident that happened in one store, and this and that. And she understood that we felt for this, we were sorry, we were going to do everything we can, but we were honest. We were just human beings talking to another human being, and saying ‘this happened.’ You know, we’re not going to run away from it, it happened and we’re sorry. But this is life. And I think, I mean, this is a great person. She understood that this is life. There are no guarantees. The only thing that is given to us is to do our best efforts.
DUBNER: Beside all that, beside communicating with her in a very human, humane way, did you let her eat here for free for a year, for a lifetime, was there any kind of arrangement like that?
HERBERT: Not that I know. I think, I think monetary stimuli and those kinds of things, I don’t think that would make any difference. At the end of the day, you know, it’s like motivating people to work in a company. It’s not the money that you pay, it’s more the culture, the honesty, the transparency, the way you treat people, the way you talk to them. I think that’s more important. I think that’s where the team did a good job, is they weren’t all hiding. They were just like, ‘hey this doesn’t reflect, this is not what we represent, we’re trying to do our best, we have a setback, and we really going to try to do better.’
DUBNER: I mean, let’s be honest, you’re talking to me, this is a story that will work its way into the public bloodstream. Someday somebody might write Harvard Business Review case study of ‘this is the way Vincent Herbert took a bad incident at a restaurant and turned it into a positive.’ Is that…
HERBERT: Yeah, it is, and I think what everybody, what I know, and I spoke with a couple of friends and my wife, and she is definitely my big mentor - by the way she’s an animal psychologist, so she’s understands those instincts, and she definitely understands me very well - and we were thinking a little bit about the fear factor. And, you know, when things like this happen, the first instinct is kind of like fear -- scared, you know, I got to go hiding, you know, this is bad. And I think that the fear factor can push you to do something extraordinary. And I’m nervous about this because I don’t quite know well enough what your intentions are with this. But, again, I’ve got to trust that being brutally honest within an environment of a setback, that it’s not going to be taken out of context, that we’re going to get stronger out of this. This is an opportunity to tell the people that we have integrity, resilience, tenacity and I think we will keep gong organic we are not going to jeopardize, compromise our vision to provide organic food to our people. And its about taking certain risks and managing them.
DUBNER: How can you help but respect Vincent Herbert? Yes, it took a while for his company to answer the call, but here he is now, front and center, taking ownership of the mouse in the salad. I mean, good for him! Bad things happen in life. It might be your fault, it might not be. But at some point, someone’s got to put up his hand and say, I’m. Taking. Responsibility. For better or worse. For the incident itself -- and for the aftermath. That said, when I finally went back to Le Pain Quotidien for the first time after the mouse affair, I ordered the quiche. Just didn’t have the stomach for a salad.
ANNOUNCER: Freakonomics radio is produced by WNYC, APM, American Public Media and Dubner Productions. This episode was produced by Collin Campbell, Andrew Gartrell, Suzie Lechtenberg and Chris Neary. Our staff includes Diana Huynh, Katherine Wells, Bourree Lam and Chris Bannon. David Herman is our engineer. If you want more Freakonomics Radio subscribe to our free podcast on iTunes and go to Freakonomics.com where you can find lots of radio, a blog, the books and more.