The Burdens of Devotion

Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States—A Review

A couple of years ago, I listened to an online lecture by one of my former professors about the collapse of the Soviet Union. One quote:

"In the Soviet Union, by the 1980s, there was a substantial decline in loyalty among both the elites and the citizens. Here you had a country led by a cadre elites who didn't believe in the ideology of the country...by this point, loyalty from citizens and the elites had simply dissipated."

The collapse seemed to be the result of psychological conditions well as economic ones.

In the lecture, the professor (Ian Shapiro) cited a specific book, calling it one of the top 3 most important books a student in the social sciences should read.

Since then, several other smart people have mentioned the book’s importance to me.

The title, released in 1970, is Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States by the economist Albert Hirschman.

Here I’ll summarize and discuss this fascinating book.

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Voice

As the title of the book suggests, Hirshman aims to delineate people’s options when they are no longer satisfied with their employer, organization, or country. The two key options are exit and voice:

• Exit: leaving the decaying organization and going elsewhere

• Voice: expressing discontent and attempting to improve the organization

Hirschman writes, “Under what conditions will the exit option prevail over the voice option, and vice versa?”

Generally, exit is used in economics and voice is used in politics. A dissatisfied customer of one product can purchase another (exit). A voter dissatisfied with one politician can express their unhappiness (voice) by voting for someone else.

Still, both options might be available in either domain.

An unhappy customer can call a firm or stage a boycott. A dissatisfied citizen can withdraw from the system or “change products” by moving to another country.

Voice is messier than exit. It is defined as any attempt to change, rather than escape from, an objectionable state of affairs. This can include petition, calling up the relevant authorities (manager, congressman, etc.), or protests to mobilize public opinion.

There is a continuum of voice, ranging from faint grumbling to violent rioting. Rather than just switching over to support the competition, dissatisfied members of an organization can “kick up a fuss” in an attempt to force the organization to respond.  

If, in response to decline, discontented members use voice rather than exit, then voice will become more effective. But only up to a point. However, voice, like exit, can be overdone. This is less true in the relationship between businesses and customers.

But in the realm of politics—where voice is most likely to be used—there can be negative returns to “too much” voice (e.g., violent protests tend to reduce support for social movements).

For exit to work as a mechanism of recuperation from decline, it is ideal for an organization to have a mixture of “alert” and “inert” members. The exit of alert members provides feedback to the firm — “People are leaving, maybe we should figure out why.”

Inert members provide the firm with time and financial cushion for the recuperation to take place. In other words, it’s best if most members are unaware of, or unperturbed by, decay.

If every person was a determined comparison shopper, instability would inevitably result. Organizations would lose the chance to recover from their lapses.

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Exit

People’s decisions to exit are often determined by the effectiveness of voice.

If organization members believe that voice works, then they’ll postpone exit. But voice relies on the threat of exit.

It’s important to understand that if you use voice, you can always exit later. But if you use exit, you’ve usually lost the opportunity to use voice—you’re no longer a member, so the organization no longer cares what you think.

So in some situations, exit is a last resort only after voice has failed.

The presence of exit can reduce the use of voice. For example, in advanced economy with many options, if we are unhappy with a product, we can switch to another. For this reason, voice is rarely used in the realm of business.

Exit can also accelerate decline. This is because, oftentimes, those who exit are the most quality-conscious and resourceful members.

Suppose that public schools deteriorate.

As a result, increasing numbers of education-conscious parents with means send their kids to private schools. Public schools might respond by improving their schools. But this response is now less effective because the public school’s most concerned and affluent parents have left.

People who care most about a product and who would be the most active and reliable members are often the first to exit in response to deterioration. They have more options—why stay?

The exit of capable and affluent people can paralyze the effectiveness that voice would have provided.

This applies to dating as well. Attractive and interesting people are more fickle because of the vast pool of options available to them. They are, relative to less desirable people, more likely to use exit (“it’s over”) rather than voice (“let’s talk this out”) in their relationships.

This also seems related to the “brain drain” phenomenon. I grew up in one of the poorest and most crime-ridden parts of California. I’m probably not moving back there. And this is occurring everywhere. Capable and curious people born into meager surroundings are opting for exit.

For voice to work—for their views to be taken seriously—they have to (or are told they have to) first graduate college.

They go off to college surrounded by similar people. It is rare for them to want to go back home after such an experience. This is happening not just in the U.S., but around the world. As travel has become easier and more affordable, more poor but capable people exit their communities in search of fulfilling economic, romantic, and social opportunities.

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Connoisseurs Can Create Collapse

Those who have the greatest influence on quality are more likely to leave at any slight deterioration, which in turn leads to further deterioration, which will lead to more exits, and so on.

In economics, price and quality are often treated as interchangeable.

Customers treat an increase in quality as the same thing as a drop in price. Getting an improved item for the same cost feels like a bargain (this is why advertisers often say “new and improved!”). And customers treat an increase in cost for a previously inexpensive item as identical to a decline in quality. “This thing isn’t worth this much.”  

But Hirschman claims that while interchangeability is assumed in economics, in real life the people who respond to increases in price are different from the people who respond to declines in quality.

Prosperous and capable people are among the first to drop out and seek alternatives when the quality of a product or organization declines. In fact, they would be willing to pay a much higher price for a non-deteriorated alternative.

Suppose you are living in a crumbling neighborhood.

Your community used to be beautiful, but now it is turning into a shantytown. Hirschman suggests, if you have the means, you may be willing to pay twice as much or more to live in a place that was as good as your neighborhood had been back when you’d first moved in.

Those who value cleanliness, safety, good schools, and so on are often the first to move out of a neighborhood at the first sign of decline. The neighborhood loses its most quality-conscious members.

As the book puts it, “the consumer who is rather insensitive to price increases is often likely to be highly sensitive to quality declines.”

Assuming a spectrum of goods ranging from cheap and low-quality to expensive and high-quality, a deterioration in any options except the top and bottom will lead to a mass exit.

In response to an increase in price (one form of deterioration), cost-sensitive people will switch to a lower-quality, lower-priced alternative. In response to a decline in quality (another form of deterioration), quality-conscious people will switch to a higher-quality, higher-priced alternative.

Gradually, people gravitate toward opposite ends depending on their means and preferences. Now, people with means use expensive and nice products. And people without means use cheap and faulty products.

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Social Mobility Increases Use of Exit over Voice

People in societies with flexible social mobility are more likely to use exit (leave their surroundings) rather than voice (attempt to improve their surroundings). Which means cleavages between upper and lower classes tend to widen in upwardly mobile societies.

In a society that prevents movement from one social class to another, voice is often strengthened.

If social position is frozen in place, everyone is driven to defend their quality of life at their own station. Voice loses its power when people can exit.

Hirschman seems to lament this, writing:

“it has not been an easy observation to make in a culture in which it had long been taken for granted that equality of opportunity combined with upward social mobility would assure both efficiency and social justice.”

In fact, a society with equal opportunity and upward mobility means that capable people born into unfortunate circumstances can rise to join another group. And they often leave their former communities to languish.

Sometimes it is in an organization’s interest to prohibit members from exiting.

This is especially true when exit doesn’t work as a recuperation mechanism. If a society has no interest in improving but doesn’t want to lose its most quality-conscious and alert citizens, then it may be wise to prevent such people from leaving. Often in these circumstances (totalitarian regimes), a society that has cut off exit also means voice no longer works.

In some instances (free societies), when exit is available, it reduces the effectiveness of voice. People who might have used voice decide to exit instead.

In other cases, when exit is not available (tyrannical state), voice doesn’t matter.

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Lazy Powerholders Pay Challengers to Exit (or to Shut Up)

A lazy powerholder would prefer competent challengers to leave because such people are the most demanding and inquisitive in response to deterioration. These powerholders want to create limited exit opportunities for those who might challenge them with voice.

As Hirschman writes, “Latin American powerholders have long encouraged their political enemies and potential critics to remove themselves from the scene through voluntary exile.”

There was, for instance, a law in Colombia that essentially bribed former presidents to move abroad. It was an incentive to get these potential influential troublemakers to exit.

Relatedly, a lazy powerholder can eliminate troublesome members by extending just to them high-quality, “gold-plated” service. Essentially, this is bribery to silence these vocal challengers.

This is preferable to other methods. The communist regimes in the Soviet Union and China targeted doctors, intellectuals, artists, successful peasants, and so on and sent them to labor camps or outright murdered them in order to eliminate potential leaders who might have organized against communist subjugation.

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Loyalty is Irrationally Rational

Loyalty is a crucial factor determining when people use exit and voice.

Suppose you’re paying a certain cost to be a member of World Gym. And you know that Gold’s Gym offers membership at the same price. Now imagine World Gym is deteriorating—why would you not just switch over to Gold’s?

One reason is that staying at World Gym means you might be able to “do something” about its decline. Only by remaining a member will you be able to exert influence (voice).  

Of course, this implies that you care about the fate of World Gym. Voice is most likely to be used for substantial organizations we’re involved in. If we don’t care, we’ll simply exit to an equally appealing substitute.

The more loyal a person is, the less likely they are to exit. The likelihood of voice increases with a person’s loyalty. Devotion to an organization suppresses exit and energizes voice.

In fact, people with a deep attachment to an organization will often search for ways to make themselves influential to amplify the power of their voice. This is especially true when they believe the organization is moving in an unfavorable direction.  

Disgruntled people with no influence are unlikely to remain loyal unless they believe influential people will improve matters.

Recall that quality-conscious members tend to be the first to exit. But if they are loyal, they will stay on longer than they otherwise would have. If their neighborhood is deteriorating, and they have the means to leave, they’ll stay if they have some emotional attachment to the community, and attempt to repair it.

Loyalty is often at its most functional when it looks most irrational.

Loyalty means strong attachment to an organization that doesn’t deserve it, because an equally appealing or superior alternative is available.

Put differently, when an organization is obviously superior, it doesn’t need loyalty to keep its members. Loyalty is only needed when the organization has serious competitors.

Intriguingly (remember, this book was released in 1970), Hirschman suggests that as countries start to resemble one another because of advances in technology and communication, the dangers of excessive and premature exit will arise.

Developments in technology have risen in tandem with a decline in loyalty. I would imagine the typical American today is less loyal to their country than in Hirschman’s day.

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Self-Deception and Backlash

Loyal members of an organization, Hirschman writes, may be prone to self-deception. They may suppress awareness that their favored organization is deteriorating.

They are especially prone to overlook this possibility if they have invested, economically or emotionally, in their membership.

Furthermore, those who worked the hardest to join the organization are more likely to ignore its faults. But once they accept awareness of the decline, they become the most likely to use voice.

The high cost of entry delays voice. But once the member reaches a certain level of dissatisfaction, they become the most motivated to point out the organization’s flaws.

The member who worked the hardest to enter will display more initiative and will be more of an activist after a period of passivity and complacency.

I can give an example as it relates to elite colleges. I looked on with dismay at the mass student protests at Yale in 2015. That was my first semester in college. I was a new member of that community. I tried to convince myself that these student eruptions were unusual. Upon realizing that they were usual, I became forthcoming with my growing concerns.

Those who pay a high cost to join a group go from a state of liking a deteriorating organization more than others, to a state of liking it less.

At first, they tend to defend their group against criticism. They double down on loyalty. But once the shortcomings become too apparent, they become the most critical of the group. Loyalty evaporates, and they respond with exit or voice.  

Remember, these members worked the hardest to join the group. They tend to be highly driven. This drive will be directed against the group.

They often, compared to those who didn’t work as hard to become members, proselytize to actively undermine the group.

Sometimes voice comes too late. Hirschman writes that on some occasions “by the time the member is no longer able to close his eyes to what is going on, deterioration has become such that exit appears as the only possible reaction to the sudden revelation of rottenness.”

In what the book calls a “distortion of the model of loyalist behavior,” organizations can sometimes force devotion by exacting a high cost for exit.

The military does this. If a recruit engages in desertion, they are thrown in jail. The death penalty is legally available, too. Hirschman writes, “If an organization has the ability to exact a high price for exit, it thereby acquires a powerful defense against one of the member’s most potent weapons: the threat of exit.”

Gangs are known to kill members who leave. In The Sopranos, Eugene Pontecorvo begs Tony to let him exit their criminal organization. Why didn’t Eugene simply leave without asking? Because Tony would send someone to kill him.

There is a tradeoff to raising the cost of exit, however. Eliminating exit can also suppress voice. This is the case in totalitarian states and criminal gangs.

Eliminating voice and exit deprives the organization of recuperating mechanisms. Any increase in organizational coercion comes with a cost in terms of the flow of information to power-holders.

One thing that differentiates the military from gangs is that the military has mechanisms in place that allow anonymous feedback from disgruntled members.  

Finally, there’s the guilt of leaving.

A loyal person may want to remain in a crumbling organization because they believe things would go from bad to worse if they left. Such a person, even if they exit, might still care about the deterioration. They don’t think “Who cares, not my problem anymore.” They think “This is depressing, I really used to like this place.”

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Exit Wounds

In some cases, full exit is impossible. The quality of an organization can affect a person even after they exit.

For example, even if a family “exits” public education and sends their kids to private school, they cannot fully “get out” in the sense that they still have to live in a society with fellow citizens who are educated in public schools.

This is also true for countries. You can leave your country. But you might still care about what happens to it if it wields powerful influence on the rest of the world.

In other words, you are still subject to external effects from which there is no escape.

Thus, some members choose to stay. During the deterioration process, members compare the unpleasantness of remaining a member to the prospective damage that would be inflicted on them and others by the additional deterioration if they were to exit.

There is a paradox here. The motivation to exit does not always become stronger as deterioration proceeds. If the member is loyal or believes leaving would make things worse, their motivation to exit might shrink as decay grows.

Unfortunately, the worse things get in an organization or state, the more unhappy the member becomes. And the more convinced the member is that they must stay to avert further decline. “The worse things get, the less I can afford to leave.”

Hirschman:

“The ultimate in unhappiness and paradoxical loyalist behavior occurs when the public evil produced by the organization promises to accelerate or to reach some intolerable level as the organization deteriorates; then…the decision to exit will become ever more difficult the longer one fails to exit. The conviction that one has to stay on to prevent the worst grows all the time.”

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Exit: An American Tradition?

Hirschman discusses exit and voice in relation to the U.S.

Americans have historically favored exit over voice. In fact, the U.S. owes its existence to millions of people choosing exit. The book quotes the political scientist Louis Hartz:

“The men in the seventeenth century who fled to America from Europe were keenly aware of the oppressions of European life. But they were revolutionaries with a difference, and the fact of their feeling is no minor fact: for it is one thing to stay at home and fight…it is another to leave it far behind. It is one thing to try to establish liberalism in the Old World, and it is another to try to establish it in the New.”

Hartz also wrote, “In a real sense physical flight is the American substitute for the European experience of social revolution.”

Americans prefer the neatness of exit over the messiness and heartbreak of voice, and it has “persisted throughout our national history.”

Why raise your voice and get into trouble when you can quietly extricate yourself from the situation?

The traditional American idea of social mobility is similar. The successful individual who begins at the bottom and necessarily leaves his own group as he rises into the next group.

This exit by capable people weakens the power of voice for those who they leave behind.

There are paradoxical facets of exit. For example, exit is usually not taken for the purpose of gaining more influence than one had as a member. Quite the opposite—people exit when they feel they no longer have any influence. But exit is unsettling to those who stay behind, because there is no “talking back” to those who have left.

By exiting, people often render their arguments unanswerable.

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Final Thoughts on Decline

Interestingly, Hirschman observes that as conditions in a society improve, their scope for deterioration increases. He describes it as a “penalty of progress” that the better things get, the worse things can get, because as society advances, it has a longer way to fall. In other words, economic progress positively correlates with latitude for deterioration.  

Which means more people may feel they must make the crucial decision: Voice or exit?