第 10 页

Unlike street crimes, they do not leave behind a corpse or a broken window.

Unlike a bagel criminal—that is, someone who eats one of Paul Feldman’s bagels

but doesn’t pay—an information criminal typically doesn’t have someone like

Feldman tallying every nickel. For an information crime to reach the surface,

something drastic must happen. When it does, the results tend to be pretty

revealing. The perpetrators, after all, weren’t thinking about their private actions

being made public. Consider the Enron tapes, the secretly recorded

conversations of Enron employees that surfaced after the company imploded.

During a phone conversation on August 5, 2000, two traders chatted about how a

wildfire in California would allow Enron to jack up its electricity prices. “The

magical word of the day,” one trader said, “is ‘Burn, Baby, Burn.’” A few months

later, a pair of Enron traders named Kevin and Tom talked about how California

officials wanted to make Enron refund the profits of its price gouging.

KEVIN: They’re fucking taking all the money back from you guys? All the

money you guys stole from those poor grandmas in California?

BOB: Yeah, Grandma Millie, man.

KEVIN: Yeah, now she wants her fucking money back for all the power you

jammed right up her ass for fucking $250 a megawatt hour.

If you were to assume that many experts use their information to your detriment,

you’d be right. Experts depend on the fact that you don’t have the information

they do. Or that you are so befuddled by the complexity of their operation that

you wouldn’t know what to do with the information if you had it. Or that you

are so in awe of their expertise that you wouldn’t dare challenge them. If your

doctor suggests that you have angioplasty—even though some current research

suggests that angioplasty often does little to prevent heart attacks—you aren’t

likely to think that the doctor is using his informational advantage to make a few

thousand dollars for himself or his buddy. But as David Hillis, an interventional

cardiologist at the University of Texas Southwestern Medical Center in Dallas,

explained to the New York Times, a doctor may have the same economic

incentives as a car salesman or a funeral director or a mutual fund manager: “If

you’re an invasive cardiologist and Joe Smith, the local internist, is sending you

patients, and if you tell them they don’t need the procedure, pretty soon Joe

Smith doesn’t send patients anymore.”

Armed with information, experts can exert a gigantic, if unspoken, leverage: fear.

Fear that your children will find you dead on the bathroom floor of a heart attack

if you do not have angioplasty surgery. Fear that a cheap casket will expose your

grandmother to a terrible underground fate. Fear that a $25,000 car will crumple

like a toy in an accident, whereas a $50,000 car will wrap your loved ones in a

cocoon of impregnable steel. The fear created by commercial experts may not

quite rival the fear created by terrorists like the Ku Klux Klan, but the principle is

the same.

Consider a transaction that wouldn’t seem, on the surface, to create much fear:

selling your house. What’s so scary about that? Aside from the fact that selling a

house is typically the largest financial transaction in your life, and that you

probably have scant experience in real estate, and that you may have an

enormous emotional attachment to your house, there are at least two pressing

fears: that you will sell the house for far less than it is worth and that you will not

be able to sell it at all.

In the first case, you fear setting the price too low; in the second, you fear setting

it too high. It is the job of your real-estate agent, of course, to find the golden

mean. She is the one with all the information: the inventory of similar houses, the

recent sales trends, the tremors of the mortgage market, perhaps even a lead on

an interested buyer. You feel fortunate to have such a knowledgeable expert as

an ally in this most confounding enterprise.

Too bad she sees things differently. A real-estate agent may see you not so much

as an ally but as a mark. Think back to the study cited at the beginning of this

book, which measured the difference between the sale prices of homes that

belonged to real-estate agents themselves and the houses they sold for their

clients. The study found that an agent keeps her own house on the market an

average ten extra days, waiting for a better offer, and sells it for over 3 percent

more than your house—or $10,000 on the sale of a $300,000 house. That’s $10,000

going into her pocket that does not go into yours, a nifty profit produced by the

abuse of information and a keen understanding of incentives. The problem is

that the agent only stands to personally gain an additional $150 by selling your

house for $10,000 more, which isn’t much reward for a lot of extra work. So her

job is to convince you that a $300,000 offer is in fact a very good offer, even a

generous one, and that only a fool would refuse it.

This can be tricky. The agent does not want to come right out and call you a fool.

So she merely implies it—perhaps by telling you about the much bigger, nicer,

newer house down the block that has sat unsold for six months. Here is the

agent’s main weapon: the conversion of information into fear. Consider this true

story, related by John Donohue, a law professor who in 2001 was teaching at

Stanford University: “I was just about to buy a house on the Stanford campus,”

he recalls, “and the seller’s agent kept telling me what a good deal I was getting

because the market was about to zoom. As soon as I signed the purchase

contract, he asked me if I would need an agent to sell my previous Stanford

house. I told him that I would probably try to sell without an agent, and he

replied, ‘John, that might work under normal conditions, but with the market

tanking now, you really need the help of a broker.’”

Within five minutes, a zooming market had tanked. Such are the marvels that

can be conjured by an agent in search of the next deal.

Consider now another true story of a real-estate agent’s information abuse. The

tale involves K., a close friend of one of this book’s authors. K. wanted to buy a

house that was listed at $469,000. He was prepared to offer $450,000 but he first

called the seller’s agent and asked her to name the lowest price that she thought

the homeowner might accept. The agent promptly scolded K. “You ought to be

ashamed of yourself,” she said. “That is clearly a violation of real-estate ethics.”

K. apologized. The conversation turned to other, more mundane issues. After ten

minutes, as the conversation was ending, the agent told K., “Let me say one last

thing. My client is willing to sell this house for a lot less than you might think.”

Based on this conversation, K. then offered $425,000 for the house instead of the

$450,000 he had planned to offer. In the end, the seller accepted $430,000. Thanks

to his own agent’s intervention, the seller lost at least $20,000. The agent,

meanwhile, only lost $300—a small price to pay to ensure that she would quickly

and easily lock up the sale, which netted her a commission of $6,450.

So a big part of a real-estate agent’s job, it would seem, is to persuade the

homeowner to sell for less than he would like while at the same time letting

potential buyers know that a house can be bought for less than its listing price.

To be sure, there are more subtle means of doing so than coming right out and

telling the buyer to bid low. The study of real-estate agents cited above also

includes data that reveals how agents convey information through the for-sale

ads they write. A phrase like “well maintained,” for instance, is as full of

meaning to an agent as “Mr. Ayak” was to a Klansman; it means that a house is

old but not quite falling down. A savvy buyer will know this (or find out for

himself once he sees the house), but to the sixty-five-year-old retiree who is

selling his house, “well maintained” might sound like a compliment, which is

just what the agent intends.

An analysis of the language used in real-estate ads shows that certain words are

powerfully correlated with the final sale price of a house. This doesn’t necessarily

mean that labeling a house “well maintained” causes it to sell for less than an

equivalent house. It does, however, indicate that when a real-estate agent labels a

house “well maintained,” she is subtly encouraging a buyer to bid low.

Listed below are ten terms commonly used in real-estate ads. Five of them have a

strong positive correlation to the ultimate sales price, and five have a strong

negative correlation. Guess which are which.

Ten Common Real-Estate Ad Terms

Fantastic

Granite

Spacious

State-of-the-Art

!

Corian

Charming

Maple

Great Neighborhood

Gourmet

A “fantastic” house is surely fantastic enough to warrant a high price, isn’t?

What about a “charming” and “spacious” house in a “great neighborhood!”? No,

no, no, and no. Here’s the breakdown:

Five Terms Correlated to a Higher Sales Price

Granite

State-of-the-Art

Corian

Maple

Gourmet

Five Terms Correlated to a Lower Sales Price

Fantastic

Spacious

!

Charming

Great Neighborhood

Three of the five terms correlated with a higher sales price are physical

descriptions of the house itself: granite, Corian, and maple. As information goes,

such terms are specific and straightforward—and therefore pretty useful. If you

like granite, you might like the house; but even if you don’t, “granite” certainly

doesn’t connote a fixer-upper. Nor does “gourmet” or “state-of-the-art,” both of

which seem to tell a buyer that a house is, on some level, truly fantastic.

“Fantastic,” meanwhile, is a dangerously ambiguous adjective, as is “charming.”

Both these words seem to be real-estate agent code for a house that doesn’t have

many specific attributes worth describing. “Spacious” homes, meanwhile, are

often decrepit or impractical. “Great neighborhood” signals a buyer that, well,

this house isn’t very nice but others nearby may be. And an exclamation point in

a real-estate ad is bad news for sure, a bid to paper over real shortcomings with

false enthusiasm.

If you study the words in the ad for a real-estate agent’s own home, meanwhile,

you see that she indeed emphasizes descriptive terms (especially “new,”

“granite,” “maple,” and “move-in condition”) and avoids empty adjectives

(including “wonderful,” “immaculate,” and the telltale “!”). Then she patiently

waits for the best buyer to come along. She might tell this buyer about a house

nearby that just sold for $25,000 above the asking price, or another house that is

currently the subject of a bidding war. She is careful to exercise every advantage

of the information asymmetry she enjoys.

But like the funeral director and the car salesman and the life-insurance

company, the real-estate agent has also seen her advantage eroded by the

Internet. After all, anyone selling a home can now get online and gather her own

information about sales trends and housing inventory and mortgage rates. The

information has been set loose. And recent sales data show the results. Real-

estate agents still get a higher price for their own homes than comparable homes

owned by their clients, but since the proliferation of real-estate websites, the gap

between the two prices has shrunk by a third.

It would be na.ve to suppose that people abuse information only when they are

acting as experts or agents of commerce. Agents and experts are people too—

which suggests that we are likely to abuse information in our personal lives as

well, whether by withholding true information or editing the information we

choose to put forth. A real-estate agent may wink and nod when she lists a “well-

maintained” house, but we each have our equivalent hedges.

Think about how you describe yourself during a job interview versus how you

might describe yourself on a first date. (For even more fun, compare that first-

date conversation to a conversation with the same person during your tenth year

of marriage.) Or think about how you might present yourself if you were going

on national television for the first time. What sort of image would you want to

project? Perhaps you want to seem clever or kind or good-looking; presumably

you don’t want to come off as cruel or bigoted. During the heyday of the Ku

Klux Klan, its members took pride in publicly disparaging anybody who wasn’t

a conservative white Christian. But public bigotry has since been vastly curtailed.

(Stetson Kennedy, now eighty-eight years old, attributes this evolution in some

part to his long-ago “Frown Power” campaign.) Even subtle displays of bigotry,

if they become public, are now costly. Trent Lott, the majority leader of the U.S.

Senate, learned this in 2002 after making a toast at a one hundredth birthday

party for Strom Thurmond, his fellow senator and fellow southerner. Lott made

a reference in his toast to Thurmond’s 1948 campaign for president, which was

built on a platform of segregation; Mississippi—Lott’s home state—was one of

just four states that Thurmond carried. “We’re proud of it,” Lott told the

partygoers. “And if the rest of the country had followed our lead, we wouldn’t

have had all these problems over all these years either.” The implication that Lott

was a fan of segregation raised enough of a fury that he was forced to quit his

Senate leadership post.

Even if you are a private citizen, you surely wouldn’t want to seem bigoted

while appearing in public. Might there be a way to test for discrimination in a

public setting?

Unlikely as it may seem, the television game show The Weakest Link provides a

unique laboratory to study discrimination. An import from the United Kingdom,

The Weakest Link for a short time became wildly popular in the United States.

The game includes eight contestants (or, in a later daytime version, six) who each