Social Contagion Theory and Collective Behavior

The feature story of the Sunday, September 13th NY Times Magazine addressed the recent phenomenon of social contagion and was titled, "Are Your Friends Making You Fat?". The enticing title led to an overlong - but interesting - story outlining the discussion of "contagious behaviors" today. Social scientists, Nicholas Christakis and James Fowler, have spent years analyzing mounds of data and have come to the conclusion that not only are your behaviors influenced by your friends and family, but they're also affected by your best friend's brother's friend, and your coworkers niece.

The concept of behavior being contagious has been around since the 1930's, but it's regaining popularity and finally being backed up by studies and data. The NYtimes article focused on weight gain or loss, smoking and happiness. However, collective behavior has proven pervasive in the recent economic downtown. The explosion of the real estate bubble was largely caused by the herd effect - everyone is just gushing about the importance of "investing in real estate" and the profits you are guaranteed and... how could you not want to be a part of it all? As Felix Salmon of Wired Magazine points out in his article, "Recipe for Disaster: The Formula that Killed Wall Street," the inclination to follow what those around you are doing is so strong that wildly intelligent people that we trusted our money to disregarded statistics and numbers and rationality. The reliance of Wall Street on David Li's formula for correlation contributed significantly to the market crash in 2007.

So what is collective behavior and how does it work? We see our neighbors, friends, family doing something and we're influenced to do the same. I think a great example is smoking (it's much easier to understand than market behaviors). A group of friends has always smoked together; maybe the most rebellious one in the group started when she was 16 and the others soon followed. They all smoke together for years and years. Then one of them decides to quit, then another is influenced by that first one, then another. Pretty soon, only the original girl is still smoking. She feels uncomfortable being the only one lighting up, having to step outside during group dinners because they now sit in the 'non-smoking' section of restaurants. Pretty soon, she too will quit.

This example can be multiplied over and over and over and proven in endless instances. We're seeing it now in our economy. Scientists now have numbers and research to back up this seemingly obvious pattern. However, the problem may now be determining how to break it. After all, how do we pull out of this economic recession when we are all spending less and saving more; when shoppers feel like they have to hide their purchases because no one else is spending. That is the true challenge today.

A Story about Wal-Mart... uh-oh

When I was growing up, my family would spend the summers at the Lake of the Ozarks. My grandparents had a great lake house there, and it was all fun and swimming and boating. We're from St. Louis, so typically the drive would be around 2 and a half hours to reach the Lake.

Now, at this time, the Lake was nothing like it is now. Now, you can go to Target, Starbucks, Panera Bread Company, Paul's Market, HyVee, etc. for all your grocery and household product needs. All that development has really only come along in the last 3 to 5 years though. Before that, there was really only a Wal-Mart Supercenter (one of the first Supercenters, I believe), your local convience store gas station and a terribly shady Carl's (where it was discovered they were putting new expiration stickers on top of the old ones on the meat, "extending" its shelf life). Back then, the Lake was not even close to looking like it does now: you could still ski on the Main Channel and EVERYONE shopped at Wal-Mart because you had no choice.

When thinking of spending summers as a kid at the Lake, I cannot help but think of the ordeal of loading the car. My family is staunchly opposed to Wal-Mart. My dad is a pretty staunch Republican, but then he shocks you by being a recycling freak and a Wal-Mart hater. He is a business owner himself and employs about 60 Union electricians, believes Union is the only way to go and is a big supporter of local and family-operated businesses. Because of this beef we had with Wal-Mart, we refused to shop there, even when it was the only option around. So that meant that my mom would do this enormous grocery trip at our Schnuck's or Dierburg's the day before we left for the Lake, and we would then have to somehow fit all these coolers full of meat and produce and dairy into my dad's Expedition. Even though that's a big car, add 4 kids and all the baggage that goes along with that and it makes for a ride from hell.

The point of this story is that, Wal-Mart is a remarkably polarizing company. People love it or hate it, but they definitely have an opinion either way. Some people hate it so much they go to great lengths (2 to 3 coolers, to be exact) to avoid it at all costs. Some people love it so much they'd shop there everyday if they could; I overheard a girl say she'd love to live there, actually. Personally, I can spare the few bucks they would save me per trip and go elsewhere with my business. I don't think the money saved is worth what they had to do to get those low prices to you. But that's just me.

Patagonia and Corporate Social Responsibility

Patagonia, a privately owned outdoor apparel and equipment company based out of Ventura, CA, receives a great deal of media attention and praise for their policy of "corporate sustainability". In May of 2007, they were featured on the cover of Fortune magazine and lauded as "the coolest company on the planet," for their commitment to "Build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis" (part of their mission statement found on the company's website).

Patagonia applies this attitude at pretty much every step of the way. For example, they train their "quality insurance staff" to review the factories where the clothing is produced with a "contractor relationship assessment" and also hire a third party auditing company to do the same. This is to ensure that all the cogs linked back to the company promote the same values Patagonia does. In 1996 they switched over to organic cotton and every cotton garment they've made since then has been from organic fabric. Patagonia has implemented a recycling program for old clothes, where customers can bring back old coats or other apparel items to have its fibers recycled into new products. Employees at Patagonia's HQ in Ventura get the day off when the surf is high. They subsidize child-care for their employees. They only employ factories where turnover rate of staff is low. Patagonia pledges either 1% of annual sales, or 10% of pre-tax profits (whichever amount is greater) to environmental causes yearly. They allow their employees time off and grant money to study the environment. And on and on, you see the direction this is going.

Patagonia is something of an anomaly in the debate over corporate responsibility. What would Milton Friedman say about this tree hugging company? It's interesting, Patagonia is a privately owned company so it is difficult to get yearly concrete sales figures. It would seem though, that the draw of Patagonia is largely in their attitude towards the environment. Who buys their products? Mainly, outdoorsy people who have a great love and appreciation for the planet. They are rock climbers, hikers, runners, they camp, they fish, they cross-country ski. Their philosophy about the relationship between people and the planet is basically in line with Patagonia's. Why else would they spend $33 on a pair of heavy duty mountain climbing socks?

So what would Friedman say? Being privately owned, they don't have stockholders to be conscious of. Additionally, it would seem that their profits and publicity are directly linked to their environmental awareness. At what point to the lines between corporate social responsibility and the pursuit of profits blur and become one and the same? Would Patagonia be Patagonia without social responsibility? I would argue not. The brand is built on its foundation of sustainability and corporate responsibility - that there is a larger picture out there that we are all a part of, and to be oblivious to that idea is to mark your brand as antiquated.

I think Edward Freeman and and Yvon Chouinard, Patagonia's founder, would go out for drinks and spend hours patting each other on the back for their convictions. Freeman's support of corporate social responsibility to all the stakeholders in a company is practiced to perfection by Patagonia. They don't draw the line of consciousness at their employees or products, they extend it to the planet at large, the factories that produce the clothing, to the very fabric they use. Patagonia sees the big picture - all the stakeholders - and embraces it.

If the recent trend in green marketing and corporate sustainability is any indication, social awareness is here to stay. Patagonia is a shining example for those companies attempting to update their mission statements and show the consumer that they are aware of their footprint on the planet. It will be interesting to see if Patagonia's profits will increase with increased consumer awareness of the environment or if other companies will become savvy of the trend and out-green the original green company.