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Hey there, Steven Dubner. Our annual tour of the Freakonomics Radio Network has reached our newest show, The Economics of Everyday Things. It is hosted by Zachary Crockett, a young journalist who has the remarkable ability to find a story anywhere. In his first year making the show, he has looked at dinosaur skeletons, pistachios, used hotel soaps, cadavers, private jets, a hit single from 1979 and much more. And he does it in episodes that are about one third the length of a regular Freakonomics Radio episode. That's why in the special episode you were about to hear, there are three of his stories. If you already follow The Economics of Everyday Things, you may have heard the first couple stories already, but they are even better the second time through. I say this from personal experience. And there is a brand new story waiting for you at the end. If you don't already follow the show, why not?
Do it right now. Just look for The Economics of Everyday Things in your podcast app. Okay, here we go.
SPEAKER_07: Hollywood has the Oscars, the music industry has the Grammys, Broadway, the Tonys. And then there's this.
SPEAKER_00: First category, we have Birthday General, $5 and below,
SPEAKER_15: Paper Salad, Great Aerographics,
SPEAKER_12: Fine Moments and Hallmark Cards.
SPEAKER_06: And the winner is? The winner is.
SPEAKER_07: Paper Salad. Paper Salad.
This is the Louie Awards, where a panel of judges selects the year's best greeting cards. More than a thousand entrants compete in 51 categories. Birthday, sympathy, thank you, all the major holidays.
In the friendship and encouragement category, the 2023 Louie Award goes to a card with a bunch of flowers. It says, remember, you're an infinitely iconic bitch having a human experience. The winner in the Christmas humor category reads, happy, collecting new material for your therapist, holidays.
Lines like those are now the backbone of the $7 billion greeting card business, a business that has found some new customers.
SPEAKER_05: The millennial generation is now the largest buyers of greeting cards from a dollar standpoint.
They've saved our industry.
SPEAKER_07: For the Freakonomics Radio Network, this is a special episode of the economics of everyday things. I'm Zachary Crockett. First up, greeting cards.
SPEAKER_04: Every year, Americans buy around 6.5 billion greeting cards.
SPEAKER_07: They come in all different shapes, sizes, colors, and designs. There are cards that sing to you, cards with LED lights, and cards with elaborate pop-up designs. Some are blank inside, others contain puns or sentimental poems. Two privately owned card giants, Hallmark Cards and American Greetings, control an estimated 80% of their greeting cards. The rest of the industry is fragmented. There are 2,000 additional publishers of greeting cards in the United States that range from people, you know,
SPEAKER_05: just producing a few cards that are sold to one retailer down the street, to companies like mine, which is what we would call a mid-size company. That's George White. He's the president of Up With Paper, a specialty greeting card firm based in Ohio.
SPEAKER_07: He's also a former president of the American Greeting Card Association. A trade group that represents card makers all over the world. White says the companies that sell you greeting cards divide them into two categories, everyday and seasonal. Everyday business would be birthdays, wedding, new baby, sympathy, thinking of you card.
SPEAKER_05: That is over half of the total business. But seasonal, there are huge spikes in seasonal. Christmas is the biggest holiday by far. So out of the six and a half billion, there's a lot of growth. So out of the six and a half billion cards we talked about selling a year, about 1.5 of those are Christmas. And then there's a big drop from Christmas to Mother's Day and another drop down to Easter. And then because not enough people care about fathers, Father's Day is even lower than that. Yeah. Yeah.
SPEAKER_07: Yeah. Yeah. Nine out of 10 US households buy greeting cards every year. And buyers tend to fit a certain profile.
SPEAKER_05: 85% of the cards are bought by women. And in general, the people who buy cards, one of my favorite phrases in the industry is kinkeeper. The kinkeeper's usually an aunt or something. And the aunt is the one who keeps connections with all the cousins and the uncles and the nephews and the nieces. Those are generally people between 40 and 60 to 65. Those people know the most people they'll ever know in their life, both younger and older, for whom they would send cards to.
SPEAKER_07: When baby boomers entered this age bracket in the 1980s and 90s, they bought cards like crazy. Christmas cards, Valentine's Day cards, birthday cards, thank you cards. Any occasion, big or small, was marked with a card. But that practice did not get passed down.
SPEAKER_05: The next demographic that came in was Generation X. And for whatever reason, Generation X did not buy greeting cards at nearly the rate of their preceding generation. And so there was a lot of panic in my industry as to what was gonna happen.
SPEAKER_07: Then the millennials came along.
Now, it's not every day you hear about millennials saving an industry. My generation is usually accused of killing things. Diamonds, cable TV, shopping malls, banks, nine to five jobs, business suits, movie theaters, fabric softener, beverage. But White says millennials, the folks born between 1981 and 1996, have jump-started a new era in greeting cards.
SPEAKER_05: Not only do they like to send cards, but they like to send really highly differentiated cards. So they have no problem spending a lot more money on greeting cards.
SPEAKER_07: While boomers still buy the most greeting cards, millennials now spend more money on them than their elders. The market has shifted toward more expensive cards, and that has a lot to do with the way shopping habits have changed. So traditionally, the boomer would buy cards
SPEAKER_05: going into the big drug store or the big grocery store, and they would walk down this giant aisle of cards, and they would spend their five or 10 minutes and find the cards that they needed. The millennials have sets of friends that they can send a text to, happy birthday. They have friends they can post on Facebook or Instagram or TikTok, happy birthday. And then they have friends they call cardworthy, and that phrase comes up again and again in research, which is really cool. They're cardworthy friends that they have to find a card for. And that card can't be a run-of-the-mill card. When their friend receives that card, they want that card to reflect the relationship that they have with that person.
SPEAKER_07: The greeting card giants, Hallmark and American Greetings, they have their own branded retail stores. They also have distribution deals with huge national retailers like CVS and Walgreens. At many big retail chains, these two brands have a near monopoly on the card aisle. The more artisanal personal cards that millennials are looking for are more likely to come from smaller card brands, which can't compete with the likes of Hallmark for shelf space. So they tend to set up shop in different locations.
SPEAKER_05: Car washes, car washes are great sellers of cars in California, for example. What you're seeing with the millennial generation is a tremendous diversity of stores now carrying greeting cards that didn't used to. So a jewelry store, a dress store, anywhere where there are women with money and taste, you go into these little stores and they'll have 20 different suppliers of cards with just a handful of cards from each of these suppliers.
SPEAKER_07: But what exactly makes a greeting card appealing to a millennial? At George White's company, Up With Paper, the greeting card design process begins by looking at what's trending with younger demographics.
SPEAKER_05: A few years ago, llamas were hot. Don't ask me why these things happen, but they just do. Owls were big 10 years ago. And then you try to match what's trending with the sentiment. So, you know, does an owl work for birthday? Maybe. Does an owl work for sympathy? No.
SPEAKER_07: Up With Paper makes premium pop-up cards that sell for eight to $15 each. And they only make around a hundred new designs a year. Most small and mid-sized card companies like this don't have a budget for market research. They generally go with their intuition and hope that every card is a hit.
SPEAKER_05: We can't afford to have any that don't work.
SPEAKER_07: Hallmark, on the other hand, makes 10,000 new cards every year. And the process they use to come up with new ideas is a bit more scientific.
It involves focus groups, psychographics, and entire teams of writers and editors who focus on specific niches.
SPEAKER_12: My name is Mia Mercado. I used to be an editor at Hallmark. My job was to work with the editorial director and the art director, and basically decide what writing goes on the greeting cards. Mercado worked at Hallmark for five years.
SPEAKER_07: She says the company had a card for just about everything.
SPEAKER_12: Oh yeah, like Christmas cards. There were ones that were for mail carriers and hairdressers and pet sitters and teachers.
SPEAKER_07: Hallmark employees visit the card aisles at their own stores and at major retailers to find out how cards and categories are selling.
SPEAKER_12: There were people on the staff that their entire job was analytics. We would do like this analysis inventory of the cards that were out there. We would have information on how well the cards sold. And our job as people working on the writing would then be to come up with a writing proposal or writing plan that we would pitch to the writing team. Sometimes Mercado says the meetings
SPEAKER_07: would get a little surreal.
SPEAKER_12: It would literally be conversations like, so dogs are performing really well for birthdays for dads. It seems like cats aren't doing as well. Maybe we want to do less cat cards. And people saying this straight faced.
SPEAKER_07: There's also a specific art to coming up with the copy inside cards.
SPEAKER_12: Hallmark had the saying universally specific, which is very much an oxymoron. When you're working on something that in theory is supposed to be given to someone in a really intimate moment, like at a funeral or to my wife on our anniversary, things that you want that card to say need to feel emotionally relevant to that relationship, but not be so limiting that it would only appeal or apply to one specific person.
SPEAKER_07: Throughout all of these conversations, one thing is critically important.
SPEAKER_12: Pretty much every single card line that I worked on, there was at least a portion of that discussion that was about making cards that wouldn't turn millennials off.
For decades, greeting cards played it pretty safe.
SPEAKER_07: They were family-friendly, polite, and sappy. Those cards still exist and they continue to sell, but the designs that appeal to millennials tend to avoid traditional motifs. They're self-deprecating, brutally honest, and edgy.
SPEAKER_12: I remember doing a whole collection that every single card had some kind of explicit offensive word on the front. The tamest of those would be like, damn, or like hell. I mean, like most things at Hallmark, the things that were considered taboo were pretty mild.
SPEAKER_07: Hallmark may be the industry leader in greeting cards, but the company, which was founded in 1906, faces some steep competition when it comes to selling cards to the youths. Card makers are now competing with social media posts, text messages, and e-cards, which can be sent via email for free. And on platforms like Etsy and Fiverr, there are thousands of independent card artists who can make and ship custom designs in a matter of days.
A new Hallmark card from start to finish might take a year to hit the shelves. That's an eternity in today's creative economy, where trends live and die in a week.
SPEAKER_12: We definitely did a lot of things that were trying to capitalize on internet trends that then felt really dated by the time that they went out into the world. A lot of the things that are funny online are flash in the pan, so I don't know, nobody's gonna wanna buy a card that has a Twitter joke on it from seven months ago.
SPEAKER_07: Sometimes industry veterans also have a blind spot when it comes to millennial humor.
George White admits that at his company, there have been times when he didn't see the appeal of a card his younger colleagues pitched. One example sticks out in his mind.
SPEAKER_05: It was a possum in a trash can, and when you pulled the tab, a possum jumped out of the trash can and says, let's get trashed. And so I was like, I don't understand why you would send this to someone. And we have a lot of millennials and our creators down, and they're like, this card's gonna do great, trust us. And I did, and it's one of our best sellers. So, you know, I'm a young boomer. I would not send that to somebody, but they totally would.
SPEAKER_07: Possums in trash cans aside, the greeting card industry is involved in much more serious affairs. The greeting card association, which White previously oversaw, has played a surprisingly central role in the way our mail is delivered.
SPEAKER_05: Almost 60% of greeting cards are delivered to their final recipient by mail. If it costs over a dollar to mail one of my cards, then people start thinking when they see our cards in the store, I don't wanna spend a dollar to mail this. So it just becomes another part of the thought process.
SPEAKER_07: The greeting card association pushed for the creation of the forever stamp. That's a stamp that's always good for a regular letter or card, regardless of future price increases.
The organization has testified before Congress to ensure that mail remains affordable. And it's in constant communication with government officials.
SPEAKER_05: You know, we're talking about things like processing time and how the mail is sent around the country and how many workers there are and union contracts. And we get into all that sort of exciting stuff with the postal service.
SPEAKER_07: Greeting cards can be a way to express your feelings. Even if those feelings are just happy birthday, or I'm thinking about you, or let's get trashed.
Sending a card to say that might cost you $6. The store you bought it from probably paid half that much for it. And the company that created it made about 30 cents of profit. George White may be a little bit biased, but in his eyes, that's a pretty good deal.
SPEAKER_05: I think it's one of the best values in the economy today. On that day, in that moment, that person knows that I was thinking about them.
SPEAKER_07: That's pretty powerful, right?
SPEAKER_07: Mia Mercado has a more measured take.
SPEAKER_12: Now that I've been out of homework for a few years, I'm a little more back in the real world of thinking of greeting cards. Like, I don't know how anyone else thinks of greeting cards, which is just like, I don't really think about greeting cards.
SPEAKER_07: Hope you enjoyed our look at greeting cards. This is a special episode of the economics of everyday things from the Freakonomics Radio Network. I'm Zachary Crockett.
SPEAKER_08: After the break,
those flimsy boxes take about 20 seconds, 25 seconds to fold. The standard corrugated take me about seven or eight seconds, but the Domino's box about five seconds.
SPEAKER_07: That's coming up.
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SPEAKER_07: Back in 2008, Scott Wiener was on a trip to Israel and had a curious awakening in a restaurant.
SPEAKER_08: I noticed that pizzeria had boxes on the wall. It was this yellow, bright yellow with orange stripes, crazy pizza box. Growing up in suburban New Jersey,
all pizza boxes were flimsy, white, smudgy red ink. And you know, this was a yellow box. It just, it didn't seem legal. It stuck with me. And from then on, anytime I saw a box that looked different from the ones that I saw, looked different from the ones I grew up with, I would save them.
SPEAKER_07: Pizza boxes became Scott Wiener's obsession. He now holds the Guinness World Record for the world's largest collection of them, more than 1800.
Pizzerias from all over the world have sent him their packaging.
SPEAKER_08: I have every continent. I have a box from Antarctica.
SPEAKER_07: Who makes pizza in Antarctica?
SPEAKER_08: Apparently they have a commissary that has a pizza station. They sent me one with maybe 30 or 40 signatures of scientists working at the McMurdo station.
SPEAKER_07: Wiener's collection is a tribute to an everyday item that is often underappreciated by pizza lovers across the country, which is almost all of us.
Americans consume billions of pizzas every year, around 23 pounds worth per person. The majority of those pizzas are ordered for delivery or to go. And the boxes they come in have to be carefully engineered to uphold the integrity of the pies inside.
SPEAKER_08: Anything that's taken for granted, you know there's more depth to it. And with pizza boxes, once you scratch that surface, you realize, oh, there's so much more going on here.
SPEAKER_07: In the second part of this special episode of the economics of everyday things, pizza boxes.
The pizza box is a relatively modern invention. In Naples, where pizza was purportedly invented in the late 19th century, bakers used to transport their products in copper containers called stufas. Eventually they were replaced by paper bags. After World War II, the US experienced a pizza awakening. Scott Wiener knows a lot about this history.
SPEAKER_08: As pizza got more popular and it became more of a party food, really around the middle of the 20th century, that's when we switched to the box, which at first was like a pastry box. Like if you get a pound of cookies, it's that type of box. Between Southern Italy and the United States, pizza shifted, became larger, became more of a sharing food. And if you have 16 inch boxes that are flimsy, a stack of those, it doesn't make sense.
SPEAKER_07: When modern pizza delivery really took off in the 1960s, those flimsy boxes became a big problem for high volume transport. So a fellow named Tom Monahan, founder of then regional pizza chain Domino's, decided to do something about it.
SPEAKER_08:
His whole idea was I need something that could stack really neatly, that's gonna hold onto the heat and it's not gonna cost so much.
SPEAKER_07: Domino's worked with a manufacturer in Detroit. The solution they came up with was a box made out of corrugated cardboard,
SPEAKER_08: which is a much sturdier material. There's an outer liner, an inner liner, and then in between the two, there's a fluted piece of paper which is what gives it its thickness and it's what allows heat retention and it gives it strength.
SPEAKER_07: The box was called the Michigan style. It has a front flap that folds over with little side ears that tuck into the cracks and keep the box shut. 60 years later, this is more or less the same box design that most pizzerias still use today. When you go to a pizza shop, the odds are pretty good that they buy their boxes from a packaging conglomerate. A few big players control the pizza box market, including West Rock, based in Sandy Springs, Georgia. Patrick Kibitz runs the company's corrugated division.
SPEAKER_01: We make essentially every corrugated box that you're familiar with, you know, from an e-commerce box to anything that you can sell.
SPEAKER_07: Kibitz says that pizza boxes are a major part of the business.
SPEAKER_01: About 1.7% of the corrugated volume is pizza boxes. So there's about 3 billion pizza boxes a year that the US market consumes.
SPEAKER_07: West Rock sells pizza boxes to pretty much everyone, from dominoes to mom and pop joints.
The company is vertically integrated. It controls the entire pizza box supply chain.
SPEAKER_01: So we have our own forestry. We have mills in our system where we start producing the paper, our corrugated converting plants where we start making the corrugated materials. That's then eventually cut, printed, and they arrive at our customer size cleanly.
SPEAKER_07: West Rock has a team of graphic designers who make custom artwork for clients' boxes. They also sell boxes with generic artwork to restaurants that don't care as much about branding or can't afford custom art. Scott Wiener says that if you look closely enough, you'll see the same designs pop up at different pizzerias. The typical pizza box is a clip art box,
SPEAKER_08: you know, the image of the chef, the image of the pizza that's steaming. Maybe there's a border of typical pizza ingredients around the edge of the box. The boot of Italy, that kind of stuff. You still find that on most generic pizza boxes.
SPEAKER_07: West Rock also employs engineers who work on the functionality of boxes.
SPEAKER_01: The pizza companies want the pizza to arrive at their consumers' houses at the right temperature. So heat, preservation, moisture resistance, ventilation, making sure that there's not too much condensation on the inside of the lid. The height of the box, the integrity of the box is also important because transportation sustainability, we have as many boxes in a delivery vehicle as possible so that we reduce the delivery costs. So it's not as trivial as you may think.
SPEAKER_07: Another key consideration in the design process is to make sure boxes are easy to set up. They're sold to pizza chains flat and have to be assembled by the pizzeria's employees. Every second of that labor counts.
SPEAKER_01: The trends that we've seen over recent years is really about how do you make them easier to set up so that the large pizza brands can reduce labor.
SPEAKER_07: At the International Pizza Expo, an industry convention in Las Vegas, West Rock hosts a competition to find the world's fastest pizza box folder. Perhaps nobody takes pizza box agility more seriously than Domino's. In commercials, the chain has made it a central part of its identity. Aylamru, Domino's fastest pizza box folder.
Domino's has its own patented box, which is designed to be assembled in a few seconds. Scott Wiener has firsthand experience with it.
SPEAKER_08: A few years ago, I got a job at a Domino's, essentially for research. And part of my job every day when I showed up was fold pizza boxes. And those flimsy boxes take about 20 seconds, 25 seconds to fold. The standard corrugated take me about seven or eight seconds, but the Domino's box about five seconds.
SPEAKER_07: Domino's delivers 1.5 million pizzas every day. So saving three seconds per box adds up to more than 1200 hours of labor. That's great for business, but when it comes to improving the consumer's experience, pizza boxes still have a ways to go.
When he's not collecting pizza boxes, Scott Wiener runs Scott's Pizza Tours in New York City. And he's found that even the best boxes on the market are flawed.
SPEAKER_08: The problem with pizza is that it's a baked product, it's a bread, but it's also a high humidity product with tomato and cheese and whatever topping you have. So, you know, bread and humidity are enemies. The box is not good for the pizza. It traps in steam. Sometimes you do get some breakdown of the paper and then you taste a little cardboard aftertaste.
SPEAKER_07: In recent years, there have been numerous efforts to re-engineer the pizza box from the ground up.
SPEAKER_08: Somebody has made a version of it that breaks down into a storage container for your leftover pizza plus plates. Then there's a version of it that turns into its own table where the lid flips over and it becomes a stand. Then there's the one that's got the built-in spatula that has a perforated edge, so you can use it to cut up the pizza a little bit smaller. It's totally bonkers.
SPEAKER_07: A number of inventors have patented round pizza boxes. Even the technology giant Apple took a stab at one for use in its corporate cafeterias. It's shaped like a clamshell and it's made out of compressed fiber. But the best pizza box design that Wiener ever saw came out of Mumbai, India.
SPEAKER_08: It's an amazing box that plays with the corrugated structure. It also adds ventilation that creates these channels within the fluted medium, which allows steam to escape indirectly. So this way steam gets out, the relative humidity inside the box lowers without it being open with 25 different vent holes. It's really brilliant, it's beautiful.
SPEAKER_07: These boxes are all better in some way than the existing models on the market. But it's unlikely that any of them will disrupt the status quo. Small to medium-sized shops spend around 30 cents per box. The big guys order higher volumes and spend much less. For them, keeping expenses low is more important than marginally improving the pizza experience.
SPEAKER_08: You know, normal humans just think, oh, the box that works better should be the one that we all use. And as soon as costs go up by two cents, nobody will use it. They don't make economic sense.
SPEAKER_07: ["The Price is Right"] Probably the most important part of the pizza box supply chain is what happens to boxes after a pizza is consumed. Eric Nelson has been in the recycling and compost business for more than a decade. He spent seven years working in the waste reduction program at the University of Kansas. And the pizza box was among his chief concerns.
SPEAKER_06: We would see, you know, 20 or 30 pizza boxes for a dorm room party, or three or 400 for a back-to-school event. Just constant stream of pizza coming in. Yeah, it was definitely one of our larger waste streams on campus.
SPEAKER_07: When he was on campus, Nelson says he saw all kinds of stuff inside of pizza boxes.
SPEAKER_06: Anything from cheese stuck to the pizza box to a lot of times the Parmesan and red pepper packets were in there. We saw a lot of pepperoncinis, a lot of marinara.
SPEAKER_07: These tarnished boxes rarely ended up in the recycling bin.
SPEAKER_06: Historically, the messaging was that a pizza box is too greasy and dirty to recycle, so you need to throw it away.
SPEAKER_07: In reality, that's a myth. In most municipalities, pizza boxes can be recycled up to seven times, grease and all. The boxes that do get recycled are broken down and tied up into giant bales that weigh more than a thousand pounds. Those get sold on the spot market as a commodity, just like oil or wheat under the name OCC, or Old Corrugated Cardboard.
Recently, the going rate for this old cardboard has fallen as low as $30 a ton, down from well over a hundred in previous years. That's good news for pizza box manufacturers who buy it and turn it into new boxes.
SPEAKER_06: This is bought by Paper Mills and they have a recipe basically where they'll add the mixed paper bale, they might add some virgin pulp, and then it's turned into a slurry and pressed into paper.
SPEAKER_07: For Eric Nelson, the pizza box is part of a beautiful cycle. But Scott Wiener feels differently.
SPEAKER_08: I mean, the irony of my life is that I collect pizza boxes. I have 1800 of them in a storage unit that I pay for. I'm obsessed with them, but I do not eat pizza out of pizza boxes.
SPEAKER_04: No pizza will ever taste as good coming out of the box
SPEAKER_08: than it did going into the box. That's it for pizza boxes. After the break.
SPEAKER_07: I'm sitting in my studio right now. I see a teleprompter. I see all our TV equipment because we want to be prepared.
SPEAKER_13: If there's a mass accident here that would require me to film a commercial in 10 minutes. I'm Zachary Crockett, and this is a special episode of the economics of everyday things. We've got one more story to share with you.
SPEAKER_07: We're going to be talking about the future of pizza. Everyday things. We've got one more story for you after the break.
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SPEAKER_03: You want more? All the money you deserve? Get it done. Call free right now and tell the insurance company you mean business.
In many cities, ads for personal injury lawyers
SPEAKER_07: have become a part of the landscape. Attorneys deliver cheesy one-liners in daytime TV spots. Their faces loom over us on billboards and bus stops. They hold up wads of cash and give themselves nicknames like The Hammer and Tarzan the Lawman. These ads might be funny or annoying, but in the personal injury business, they've become a necessity.
SPEAKER_13: If you're gonna be successful as a personal injury lawyer on a big time scale in today's market, that really is a marketing circus. We have a seven figure budget for sure.
SPEAKER_07: In the last part of this special episode of the economics of everyday things, personal injury lawyers.
You'd be hard pressed to find a more lawyer-y lawyer than Jason Abraham.
SPEAKER_13: My grandfather and father were both lawyers. And I said from a very young age that I wanted to be a lawyer. And I really didn't know what that meant, but I followed that dream. Today, Abraham is the managing partner of CUPE and Abraham,
SPEAKER_07: the largest personal injury law firm in the Midwest. He oversees 11 offices across Wisconsin, Iowa, and Illinois.
And over the past 30 years, he and his team have recovered more than a billion dollars in settlements for 70,000 clients. He's the guy people call when they have a slip and fall, a car accident, or a medical malpractice incident.
SPEAKER_13: You see all the gamut of stuff, whether it be the injuries aren't all that serious or someone dies or loses a leg. It just turns people's life upside down when they have an accident that isn't their fault. I can tell you this, you're not in good hands like the insurance companies want you to think when something happens, because their job is to pay you as little as possible.
SPEAKER_07: Americans file around 400,000 personal injury claims a year. And there are 50,000 firms vying for that business.
Across the industry, verdicts and settlements from these claims amount to $53 billion in revenue. Most of that money is paid out by insurance companies.
SPEAKER_13: There used to be this common perception
that the value of your personal injury case is three times your medical bills.
SPEAKER_07: But it's actually a little more secret and a lot more complicated than that.
Many insurance companies use a program called Colossus. It contains around 600 codes for different injuries, each with an accompanying monetary value. The program adjusts that value according to a bunch of factors, any lost wages, who the claimant's attorney is, how frequently that attorney goes to trial, and then it spits out a number.
SPEAKER_13: I don't know what they have on their end in their computers and values, but generally every case is different because every length of treatment is gonna be different. The medical bills are gonna be different. Your wage loss will be different. For some people that use their hands for work, a wrist injury is gonna be worth more than for someone that isn't working at all.
SPEAKER_07: Another factor is what's known as pain and suffering. That's compensation for any emotional hardship a wrongfully injured person might go through. And it tends to be the most nebulous part of any settlement.
SPEAKER_13: What they're gonna look at is the nature and differences of your injuries. Did you damage five different things in the accident or just one? How long of a period of time did you go to the doctor? Is it gonna be permanent? And then generally how it impacted your life as you were going through treatment.
SPEAKER_07: Settlements can range from a few thousand bucks for a soft tissue injury to hundreds of millions of dollars for wrongful death suits. One study found that the average across all personal injury claims is around $31,000. Clients can represent themselves, but those who retain counsel receive significantly more money on average.
That's in part because personal injury lawyers have a strong incentive to win. They're usually paid on contingency. The client doesn't pay a retainer upfront. The lawyer only makes money if they win a judgment or settlement. At that point, they might make 33 to 40% of the payout. It's a good model for people who don't have the resources to pay for representation out of pocket. And it can also be very lucrative for the lawyers.
SPEAKER_13: If you do it well, there's the reward at the end of the day of sizable compensation. But if I'm an hourly billing lawyer, whatever my rate is, that's the most I can possibly earn.
SPEAKER_07: But a contingency arrangement also means that when a case flops, Abraham has to eat the cost.
SPEAKER_13: I would say maybe 5 to 10% of your cases get dropped for one thing or another, and it could be no insurance, could be bad facts, could be client disappears. That's just the cost of doing business.
SPEAKER_07: There's a stigma that personal injury law is clogged with frivolous lawsuits filed by naive clients.
But the contingency model disincentivizes lawyers from picking up cases they can't win.
SPEAKER_10: Good lawyers are very selective. Investing your time and your money in a case that is a bogus case is a really bad financial idea.
SPEAKER_07: That's Nora Engstrom. She's a professor at Stanford Law School who has written extensively about personal injury law. She says that the costs lawyers assume for a client, filing fees, expert witnesses, transcription, travel costs, they can add up fast if a case goes to trial.
SPEAKER_10: In a big case, it's not unusual to have six figures worth of costs and expenses of litigation.
But in today's landscape, personal injury trials are rare.
SPEAKER_07: 96% of all claims are settled out of court.
SPEAKER_10: The mentality is, you know, interact, get a check.
SPEAKER_07: Engstrom calls these firms settlement mills.
SPEAKER_10: I think of settlement mills as something like a lawyer light. It's kind of like a lawyer, not entirely. And it's just fast, simple, efficient resolution of claims. By nature, many personal injury firms
SPEAKER_07: are high volume, quick turnover businesses. They need new claims to keep the lights on. And that model requires an unrelenting stream of advertising.
SPEAKER_10: Most people are tortuously injured once, if at all. It's a one-off client situation. And for personal injury lawyers, that means you've got to repeatedly attract new clients in the door. There was a time not long ago when lawyers were not allowed
SPEAKER_07: to advertise their services. In 1908, the American Bar Association deemed ads to be unethical and many states banned advertising altogether.
SPEAKER_10: It was thought that if lawyers advertised, they wouldn't be professionals. They would act like commercial actors.
There actually are reported cases, for example, lawyers getting in trouble for handing out matchbooks with their law firm names on it, law firms handing out calendars, or even having boldface names in the yellow pages. All of these things were problematic according to the bar because they ran afoul of this very strict advertising prohibition. Personal injury lawyers had to rely
SPEAKER_07: on more direct customer outreach.
SPEAKER_10: What they did was a lot of ambulance chasing, which is to say, walk the halls of the hospital or look for a car wrecks in the breakdown lane.
SPEAKER_07: The ban on advertising stayed in place for 69 years. But in 1977, everything changed. Two Arizona lawyers were struggling to find clients. They illegally took out an ad, they were sanctioned by the bar, and they decided to fight the case in court.
SPEAKER_10: They challenged it all the way to the US Supreme Court. And the Supreme Court in this 1977 groundbreaking opinion struck down the bar's long standing prohibition on legal advertising.
SPEAKER_07: Bates versus State Bar of Arizona opened the flood gates, especially for personal injury attorneys like Jason Abraham.
SPEAKER_13: If the advertising rules didn't change to allow lawyers to advertise on TV, radio, newspaper, and all the other mediums, we'd never have offices throughout the Midwest. We'd never be this big.
SPEAKER_07: At a large firm like Hupy and Abraham, advertising is almost as important as the council itself. Abraham has his own seven person in-house marketing team.
SPEAKER_13: I'm sitting in my studio right now. I see a teleprompter, I see all our TV equipment. I'm on my podcast equipment. We have green screen, black screen, white screen, because we wanna be prepared. If there's a mass accident here that would require me to film a commercial in 10 minutes, you'll see us on billboards. You'll see us inside the Milwaukee Brewers Ballpark. Sometimes you'll see us on big trucks. You'll see us at events all around the Midwest for motorcyclists.
SPEAKER_07: Abraham's firm spends well into the seven figures on advertising each year. Last year, the largest personal injury firm in the nation, Morgan & Morgan, spent more than $200 million on ads. This kind of spending has made it very hard for new personal injury firms to break into the business.
SPEAKER_13: If you're a brand new player and you wanna get in, you're almost gonna have to spend three or four times what we're all spending right now to really make a name for yourself. If you're in, you're in. And if you're not in, the cost of admission is just so high.
SPEAKER_07: After all, it's not just any firm that can afford to hire William Shatner as their spokesman.
The ad you heard at the beginning of this episode, that's a Hupy and Abraham classic.
SPEAKER_13: You start peppering the airwaves with TV, well, you have William Shatner and it gives the message. They must really be successful if they can afford to have William Shatner be on their commercials.
SPEAKER_07: One thing that has to be in every commercial, the firm's catchphrase.
SPEAKER_03: Tell them you mean business. Tell the insurance company you mean business.
SPEAKER_00: Call Hupy and Abraham. Tell them you mean business.
SPEAKER_07: By personal injury law standards, Abraham plays it pretty safe with his ads. That can't be said for others in the industry.
SPEAKER_02: Brian Wilson, the Texas law, Callens of Justice, Do process, do wheelies.
SPEAKER_07: Surveys in the legal field have shown that potential clients want their lawyers to be confident and aggressive. They don't care much for friendliness. And that's probably why the same motifs show up in ads from so many personal injury lawyers.
SPEAKER_02: Greedy insurance companies play dirty. Bring it on. I'm Jim Adler, the Texas Hammer.
SPEAKER_09: In the land of Kentucky, Darrell Isaacs, the Hammer, makes the fight for justice.
SPEAKER_13: Lowell, the Hammer Stanley, 459 Cash.
SPEAKER_02: 459 Cash.
SPEAKER_07: So who makes all these ads for lawyers anyway?
SPEAKER_14: Kyle Hebenstreet, I'm the Chief Executive Officer of PMP.
SPEAKER_07: PMP is short for Practice Made Perfect. They're one of a handful of advertising firms working exclusively with personal injury lawyers.
SPEAKER_14: There's probably about five to seven agencies in the United States who do what we do and have been doing it for a long time.
SPEAKER_07: PMP works with around 30 firms with client budgets ranging from 120,000 to $6 million a year. Hebenstreet is the first to admit that conversion metrics for advertising can be a little loosey goosey.
But going by what can be measured, the investment in marketing is worth it for most firms.
SPEAKER_14: We typically focus on what the average cost per case would look like for our clients.
SPEAKER_07: Hebenstreet says attracting a $15,000 case would usually cost around 1,000 to $3,000. It's a good investment. Part of the company's strategy is placing ads in areas where workers might have higher on-the-job injury rates.
SPEAKER_14: A billboard by a shipyard, for instance, would be a strategy that we would employ to expand the messaging to that potential target audience. A good lawyer billboard needs to be big, bold, and simple.
SPEAKER_14: We find that people specifically with respect to billboards have about two to seven seconds to actually see the imagery and read the copy. It's like firm name, logo, and an image. Typically, you're gonna want a picture of one of the attorneys in a suit and tie, and then some sort of copy that speaks to accident or injury.
SPEAKER_07: Legal advertising firms are also increasingly focused on digital ads. One study found that between 2014 and 2018, the 10 most expensive Google search keywords were all related to personal injury law. Law firms paid as much as $226 per click, over 100 times more than the average keyword.
["The New York Times"] Nora Engstrom says that all of these ads have democratized access to legal counsel.
SPEAKER_10: There was a time when your likelihood of going to a lawyer depended a lot on your wealth and personal circumstance, and rich folks were more likely to go to a lawyer, even for personal injuries than poor folks. Rich people knew the secret handshake to find a lawyer and to initiate a lawsuit. We now see, I think, less of a gap between the haves and the have-nots when it comes to the initiation of claims.
SPEAKER_07: But that doesn't mean everyone loves all those ads. In a Florida Bar Association survey, 85% of respondents said they thought ads harmed the public perception of lawyers.
SPEAKER_10: Lawyers tend to be really down on attorney advertising and say that this has eroded the profession, it's tarnished the dignity of the profession. Jason Abraham chalks this up to envy.
SPEAKER_13: I think that's, in some ways, competitive jealousy because they understand that the personal injury lawyers have the ability to be very successful, which means make a lot of money.
SPEAKER_07: He understands the reputational risks he's taking when he runs a silly ad on TV. But like most lawyers, he doesn't need to be loved.
SPEAKER_13: I don't have any problems with people making fun of what I do or calling me an ambulance chaser. If it makes somebody laugh and it can be sensationalized, at the end of the day, that's fine with me. But I'll tell you this, if someone has an accident, we're the ones they're calling.
SPEAKER_07: For the Economics of Everyday Things, I'm Zachary Crockett.
SPEAKER_16: And I am Stephen Dubner. I think you can see why we love this show so much around here, I hope you love it too. Please go to your podcast app and start following the economics of everyday things. If you have a topic idea for Zachary, send it to everydaythingsatfreakonomics.com. You can also reach us at radioatfreakonomics.com. Coming up next time here on Freakonomics Radio, universities are having some big troubles these days. I do think there needs to be a reckoning. But not the kind of troubles you may be thinking.
SPEAKER_15: That paper has three experiments and at least two different people appear to have committed fraud for at least two different studies.
SPEAKER_16: It turns out that academic misconduct is much more common than you'd think. Why is there so much? Publication is the currency of advancement. But don't universities punish their cheaters? The most likely career path
SPEAKER_08: for anyone who has committed misconduct is a long and fruitful career.
SPEAKER_16: And does anyone care enough to fix it?
SPEAKER_15: It's okay to be making very small steps towards really important goals.
SPEAKER_16: Who cheats in academia and why and how? That's next time on the show. Until then, take care of yourself. And if you can, someone else too. Freakonomics Radio and the economics of everyday things are produced by Stitcher and Renbud Radio. This episode was produced by Sarah Lilly and mixed by Jeremy Johnston and Greg Rippon. We had help from Julie Canfer, Lyrick Bowditch and Daniel Moritz-Rabson. Our staff also includes Alina Cullman, Eleanor Osborn, Elsa Hernandez, Gabriel Roth, Jasmine Klinger, Morgan Levy, Neil Carruth, Rebecca Lee Douglas, Ryan Kelly and Zach Lipinski. If you ever wanna read a transcript for one of our shows or sign up for our newsletter, that's at freakonomics.com. As always, thanks for listening.
SPEAKER_12: Like any creative thing, there's only so much science that you can put into it. There's only so far that a number can go before you're like, well, I think people just like this card because there's a cute puppy on it.
The Freakonomics Radio Network, the hidden side of everything.
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