Should America Be Run by … Trader Joe’s?

The quirky little grocery chain with California roots and German ownership has a lot to teach all of us about choice architecture, efficiency, collaboration, and team spirit.

One of the joys of making this show is going after stories that simply seem interesting and worthwhile, without any set agenda to follow; you never know which episodes are going to strike a chord. Last week’s episode, “Ten Myths About the U.S. Tax System,” was one that did, judging by the response we got. This week, we’re going into the archive to play one that drew a similar response when it was first published. It’s called “Should America Be Run by … Trader Joe’s?”

Michael Roberto is a business professor at Bryant University, formerly of the Harvard Business School. There’s one lecture he likes to start by giving his students a fictional pitch, as if he were appearing on Shark Tank:

I’d like to open a new kind of grocery store. We’re not going to have any branded items. It’s all going to be private label. We’re going to have no television advertising and no social media whatsoever. We’re never going to have anything on sale. We’re not going to accept coupons. We’ll have no loyalty card. We won’t have a circular that appears in the Sunday newspaper. We’ll have no self-checkout. We won’t have wide aisles or big parking lots. Would you invest in my company?

The students typically respond, “That sounds like the stupidest company ever.” That’s when Roberto reveals that such a grocery store already exists, and it’s crushing the competition.

There is a good chance you’ve never shopped at a Trader Joe’s, maybe never even heard of it. It only has 600-some stores. The big chains like Kroger and Albertson’s have well over 2,000 each; Walmart sells groceries in more than 4,000 of its stores. But Trader Joe’s doesn’t just have customers; it has fans. It’s never been easy to run a grocery chain: The grocery business is famous for low profit margins and lots of competition. But Trader Joe’s makes it look easy — and, weirdly, fun.

We wanted to find out how they do it. We tried asking — but Trader Joe’s is a fairly secretive company. So we put on our Freakonomics goggles in an attempt to reverse-engineer the secrets of Trader Joe’s. Which, it turns out, are incredibly freakonomical: things like choice architecture and decision theory. Things like nudging and an embrace of experimentation. In fact, If Freakonomics were a grocery store, it might be a Trader Joe’s, or at least try to be. It’s like a real-life case study of behavioral economics at work.

I don’t mean to heap undue praise on a grocery chain just because they’ve found a way to make their appealing food cheap and treat people pretty well along the way. But I will say this: We spend a lot of time on this show, and in modern society at large, pointing out problems and failures and sundry idiocies. It’s nice, once in a while, to come across an institution — even if it’s just a grocery store — that seems to work well, for several constituencies on several dimensions, and to see what can be learned from it.

Which led us to ask: If Trader Joe’s is really so good, should their philosophy be applied elsewhere? Should Trader Joe’s be … running America? If you’ve heard this episode before, I hope you enjoy the chance to revisit it. If not … welcome to Trader Joe's. Can we help you find anything?

You can hear this week’s episode of Freakonomics Radio, “Should America Be Run by … Trader Joe’s? (Update),” on Apple Podcasts, Spotify, or wherever you listen to podcasts. A full transcript is available on our website.

Also on the Freakonomics Radio Network this week

The Economics of Everyday Things: Mall Cops

Security guards make malls feel safer, but what can they do when there’s trouble? Zachary Crockett observes and reports.
Apple Podcasts | Spotify | transcript