September 15, 2025 • 10 mins
What does it mean to have the ability to simply exit and walk away from a nation state or a company? What does it mean when you can’t? In the situations where it is harder or impossible to leave, what is the role of voice, of expressing your opinion, and trying to affect change in these relationships from the inside, and what happens when they don’t listen?
German economist Albert Hirschman wrote about these questions in his 1970 book Exit, Voice, and Loyalty: Responses to decline in firms, organisations, and states.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello, I am Cody Allingham, and this is the transformation of
Value, a place for asking questions about freedom, money
and creativity. When did you last stop to think
about the methods of reconciliation available for an
individual when they have a problem with a larger group?
What are the ways we can expressour discontent in our
(00:21):
relationship with the nation state, with companies that we
buy from, with the voluntary associations that we are members
of, or with other groups such aschurches, families, and
neighborhoods? What does it mean to have the
ability to simply exit and walk away, and what does it mean when
you can't in the situations where it is harder or impossible
(00:41):
to leave? What is the role of voice, of
expressing your opinion and trying to effect change in these
relationships from the inside? And what happens when they don't
listen? German economist Albert
Hirschman wrote about these questions in his 1970 book Exit,
Voice, and Loyalty Responses to Decline in Firms, Organizations,
(01:04):
and States. Hirschman's book explores the
two modes of peaceful expressionof discontent, exit and voice.
And I think these are useful concepts for us to frame our own
social relationships. Traditionally in economics there
is an emphasis on the role of exit, perhaps in part because
(01:24):
it's a lot easier to model in a theoretically perfect
competitive market. When a company lowers their
quality or puts their price up, customers will immediately exit
and go to a competitor until there is equilibrium.
This is the supermarket thinking, where demand is highly
elastic and as a consumer you just choose a different product
(01:45):
off the shelf. But in the realm of politics,
voice has always been the major consideration.
Democracy is supposed to be about voice and opinion, about
complaining and petitioning. Elected representatives are
ostensibly supposed to representtheir electorate.
Exit in a political sense has often been branded as desertion,
(02:07):
defection, and there are a lot of passions and preconceptions
which are not present in the economic realm.
However, there is of course a role for voice in the economic
realm. If we take a step away from the
supermarket and look at higher value purchases, people are
going to be a lot more vocal about their dissatisfaction with
(02:27):
a major investment like a car ora computer than with simple
purchases like laundry detergentor clothing.
There is a lot we can learn fromboth economics and politics when
it comes to resolving these interrelational problems through
voice and exit. I think a major take away for me
reading this book is to appreciate the power of voice in
(02:51):
particular, which can be lost when exit is made too easy.
When someone can just ghost a business or organization without
saying anything, they deprive that organization of learning
the reasons for their failure. Interestingly, when it comes to
public goods, this is revealed in sectors such as
(03:13):
transportation and education, which are often subject to
competition from the private sector.
With this competition, instead of stimulating better
performance from the public enterprise, it actually deprives
it of the feedback mechanism youwould have if they were a total
monopoly. It's possible in many situations
that the consumers who drop out first as price increases are not
(03:36):
the same as those who exit firstwhen quality declines.
In some cases there may be no net difference in the balance
sheet of the company at first, but the make up of the customer
base may begin to change and become more price focused and
less quality focused. This perhaps shows a financial
bias which may fail to take intoaccount things such as loyalty,
(03:58):
taste or other important factorsof who it is that you have a
relationship with. In the political realm.
This can also be seen in some situations where a political
party may attempt to move to thecenter to gain more votes, when
actually the policy compromises that they make to do that
actually alienate their most core membership, which means
(04:20):
there is less overall energy andenthusiasm for activism and
supporting the party, which results actually in a net
overall loss of votes. This doesn't happen everywhere,
but it is worthwhile to considerand keep in mind.
We must ask what is the relationship between the silent
(04:40):
majority and the vocal active voices?
Some other things that come to mind are open source software
projects. It's a common statement that if
you don't like what an open source software project is
doing, you can just fork it and make the changes on your own.
But how much talent and energy is wasted by doing this?
(05:05):
On the other hand, how much would instead be lost on
compromise and negotiation? There is an interesting
interplay here that is useful tokeep in mind.
If we happen to be in a positionwhere we are running a business,
community or project, we must ask ourselves, are we making it
easy for people to voice their concerns, or are we making them
(05:25):
walk away without even telling us?
The idea of loyalty is the otherbig part of Hirschman's book.
If someone has considerable attachment to a product or
organization, they will often search for ways to make
themselves influential enough toget it back on track if they
think it is going down the wrongpath.
(05:47):
But this will only work if they believe that their voice can
actually have an impact. When they feel like they're not
being listened to, these potential internal reformers and
leaders can actually become the most radical of antagonists.
There are many stories of voicesbeing ignored and turning into
(06:08):
exit. A customer once complained to
Enzo Ferrari about the quality of his car's clutches.
Ferrari insulted him, saying what did he know?
He was just a tractor builder. But that tractor builder went on
to found the competitor Lamborghini.
We see similar stories with numerous other businesses and
(06:29):
even with the foundation of the United States of America itself.
But there is an interesting contradiction where a little bit
of exit potential actually givesa lot more credence to the power
of voice in the 1st place. When someone is stuck in an
absolute monopoly that is not listening at all, you really
don't have anywhere to go and somanagement can choose to ignore
(06:52):
you. But a little bit of exit
possibility means the managementhave to at least pay some
attention. Boycotts are a fascinating
hybrid of exit and voice, where exit is actually performed
rather than just threatened. But it is undertaken for the
specific purpose of achieving a change of policy on the part of
(07:13):
the organization, which would usually be the goal of voice.
Now I wanted to just touch briefly on Exit and voice in
American ideology and practice, Lewis Hartz wrote.
In a real sense, physical flightis the American substitute for
the European experience of a social revolution.
(07:35):
I think this is very interestinggiven the cultural dominance of
the United States today. Hirschmann adds to this.
The present day cop out movements of groups like the
hippies is very much in the American tradition.
Once again, dissatisfaction withthe surrounding social order
leads to flight rather than fight, to withdrawal of the
(07:57):
dissatisfied group, and to its setting up of a separate scene.
In a sense, this provides the American paradigm for problem
solving, which we see emerge in many aspects of open source
software, business disruption, Bitcoin, and even libertarianism
itself. If we are running any kind of
business organizational community with a big or small,
(08:20):
we must ask ourselves what are the ways we are listening to
those we have a relationship with and what options do they
have to express themselves to us.
To sum up, I think Hirshman really brings to light an
interesting dynamic between exitand voice and loyalty actually
in a way that economics had not previously integrated and which
(08:40):
even today a lot of people may not think about.
For governments, legacy banks, Oregon, other monopolies that
were previously unchallenged. I think there is a lot of pride
and arrogance pinned to the difficulty of exiting a nation
state or a financial system. Though I think the opposite is
actually being clearly demonstrated by something like
(09:01):
the brain drain from my home country of New Zealand where
talented people are leaving, or even the increased interest in
things like Bitcoin. I think there should be
indicators that something is wrong with the management of the
existing system and it would repay the incumbents to pay
attention. Closely underneath the idea of
(09:22):
political exit, there was a kindof finality.
If I leave my home country, it'sa much higher stakes decision
than changing my laundry detergent brand.
In small amounts this can slip through the cracks as flight,
but at a larger scale it does run the risk of becoming fight.
Over the last five years, a lot of people have been alienated
(09:44):
and perhaps even radicalized with actions of various
governments and the manipulationof the monetary system and all
sorts of scandals. And importantly, they have not
been listened to. So what does it mean to engage
the art form of voice and discussion?
What are the political pathways for negotiation and compromise
(10:04):
when it comes to questions of money and state?
Having exit as a looming threat is very important, and I think
it's a powerful tool for change.At the same time, is there a way
to turn potential radical exit into internal reform?
I do recommend checking out Albert Hirschman's book for
details on these fascinating topics.
(10:26):
There is a lot more than I'm able to express here, but I
think he presents some powerful ideas through which we can look
at our own social relations. Thank you for listening.
If you would like to reach out to me, send an e-mail to Hello
at the Transformation of value.com and I will get back to
you.
Hello, I am Cody Allingham, and this is the transformation of
Value, a place for asking questions about freedom, money
and creativity. When did you last stop to think
about the methods of reconciliation available for an
individual when they have a problem with a larger group?
What are the ways we can expressour discontent in our
(00:21):
relationship with the nation state, with companies that we
buy from, with the voluntary associations that we are members
of, or with other groups such aschurches, families, and
neighborhoods? What does it mean to have the
ability to simply exit and walk away, and what does it mean when
you can't in the situations where it is harder or impossible
(00:41):
to leave? What is the role of voice, of
expressing your opinion and trying to effect change in these
relationships from the inside? And what happens when they don't
listen? German economist Albert
Hirschman wrote about these questions in his 1970 book Exit,
Voice, and Loyalty Responses to Decline in Firms, Organizations,
(01:04):
and States. Hirschman's book explores the
two modes of peaceful expressionof discontent, exit and voice.
And I think these are useful concepts for us to frame our own
social relationships. Traditionally in economics there
is an emphasis on the role of exit, perhaps in part because
(01:24):
it's a lot easier to model in a theoretically perfect
competitive market. When a company lowers their
quality or puts their price up, customers will immediately exit
and go to a competitor until there is equilibrium.
This is the supermarket thinking, where demand is highly
elastic and as a consumer you just choose a different product
(01:45):
off the shelf. But in the realm of politics,
voice has always been the major consideration.
Democracy is supposed to be about voice and opinion, about
complaining and petitioning. Elected representatives are
ostensibly supposed to representtheir electorate.
Exit in a political sense has often been branded as desertion,
(02:07):
defection, and there are a lot of passions and preconceptions
which are not present in the economic realm.
However, there is of course a role for voice in the economic
realm. If we take a step away from the
supermarket and look at higher value purchases, people are
going to be a lot more vocal about their dissatisfaction with
(02:27):
a major investment like a car ora computer than with simple
purchases like laundry detergentor clothing.
There is a lot we can learn fromboth economics and politics when
it comes to resolving these interrelational problems through
voice and exit. I think a major take away for me
reading this book is to appreciate the power of voice in
(02:51):
particular, which can be lost when exit is made too easy.
When someone can just ghost a business or organization without
saying anything, they deprive that organization of learning
the reasons for their failure. Interestingly, when it comes to
public goods, this is revealed in sectors such as
(03:13):
transportation and education, which are often subject to
competition from the private sector.
With this competition, instead of stimulating better
performance from the public enterprise, it actually deprives
it of the feedback mechanism youwould have if they were a total
monopoly. It's possible in many situations
that the consumers who drop out first as price increases are not
(03:36):
the same as those who exit firstwhen quality declines.
In some cases there may be no net difference in the balance
sheet of the company at first, but the make up of the customer
base may begin to change and become more price focused and
less quality focused. This perhaps shows a financial
bias which may fail to take intoaccount things such as loyalty,
(03:58):
taste or other important factorsof who it is that you have a
relationship with. In the political realm.
This can also be seen in some situations where a political
party may attempt to move to thecenter to gain more votes, when
actually the policy compromises that they make to do that
actually alienate their most core membership, which means
(04:20):
there is less overall energy andenthusiasm for activism and
supporting the party, which results actually in a net
overall loss of votes. This doesn't happen everywhere,
but it is worthwhile to considerand keep in mind.
We must ask what is the relationship between the silent
(04:40):
majority and the vocal active voices?
Some other things that come to mind are open source software
projects. It's a common statement that if
you don't like what an open source software project is
doing, you can just fork it and make the changes on your own.
But how much talent and energy is wasted by doing this?
(05:05):
On the other hand, how much would instead be lost on
compromise and negotiation? There is an interesting
interplay here that is useful tokeep in mind.
If we happen to be in a positionwhere we are running a business,
community or project, we must ask ourselves, are we making it
easy for people to voice their concerns, or are we making them
(05:25):
walk away without even telling us?
The idea of loyalty is the otherbig part of Hirschman's book.
If someone has considerable attachment to a product or
organization, they will often search for ways to make
themselves influential enough toget it back on track if they
think it is going down the wrongpath.
(05:47):
But this will only work if they believe that their voice can
actually have an impact. When they feel like they're not
being listened to, these potential internal reformers and
leaders can actually become the most radical of antagonists.
There are many stories of voicesbeing ignored and turning into
(06:08):
exit. A customer once complained to
Enzo Ferrari about the quality of his car's clutches.
Ferrari insulted him, saying what did he know?
He was just a tractor builder. But that tractor builder went on
to found the competitor Lamborghini.
We see similar stories with numerous other businesses and
(06:29):
even with the foundation of the United States of America itself.
But there is an interesting contradiction where a little bit
of exit potential actually givesa lot more credence to the power
of voice in the 1st place. When someone is stuck in an
absolute monopoly that is not listening at all, you really
don't have anywhere to go and somanagement can choose to ignore
(06:52):
you. But a little bit of exit
possibility means the managementhave to at least pay some
attention. Boycotts are a fascinating
hybrid of exit and voice, where exit is actually performed
rather than just threatened. But it is undertaken for the
specific purpose of achieving a change of policy on the part of
(07:13):
the organization, which would usually be the goal of voice.
Now I wanted to just touch briefly on Exit and voice in
American ideology and practice, Lewis Hartz wrote.
In a real sense, physical flightis the American substitute for
the European experience of a social revolution.
(07:35):
I think this is very interestinggiven the cultural dominance of
the United States today. Hirschmann adds to this.
The present day cop out movements of groups like the
hippies is very much in the American tradition.
Once again, dissatisfaction withthe surrounding social order
leads to flight rather than fight, to withdrawal of the
(07:57):
dissatisfied group, and to its setting up of a separate scene.
In a sense, this provides the American paradigm for problem
solving, which we see emerge in many aspects of open source
software, business disruption, Bitcoin, and even libertarianism
itself. If we are running any kind of
business organizational community with a big or small,
(08:20):
we must ask ourselves what are the ways we are listening to
those we have a relationship with and what options do they
have to express themselves to us.
To sum up, I think Hirshman really brings to light an
interesting dynamic between exitand voice and loyalty actually
in a way that economics had not previously integrated and which
(08:40):
even today a lot of people may not think about.
For governments, legacy banks, Oregon, other monopolies that
were previously unchallenged. I think there is a lot of pride
and arrogance pinned to the difficulty of exiting a nation
state or a financial system. Though I think the opposite is
actually being clearly demonstrated by something like
(09:01):
the brain drain from my home country of New Zealand where
talented people are leaving, or even the increased interest in
things like Bitcoin. I think there should be
indicators that something is wrong with the management of the
existing system and it would repay the incumbents to pay
attention. Closely underneath the idea of
(09:22):
political exit, there was a kindof finality.
If I leave my home country, it'sa much higher stakes decision
than changing my laundry detergent brand.
In small amounts this can slip through the cracks as flight,
but at a larger scale it does run the risk of becoming fight.
Over the last five years, a lot of people have been alienated
(09:44):
and perhaps even radicalized with actions of various
governments and the manipulationof the monetary system and all
sorts of scandals. And importantly, they have not
been listened to. So what does it mean to engage
the art form of voice and discussion?
What are the political pathways for negotiation and compromise
(10:04):
when it comes to questions of money and state?
Having exit as a looming threat is very important, and I think
it's a powerful tool for change.At the same time, is there a way
to turn potential radical exit into internal reform?
I do recommend checking out Albert Hirschman's book for
details on these fascinating topics.
(10:26):
There is a lot more than I'm able to express here, but I
think he presents some powerful ideas through which we can look
at our own social relations. Thank you for listening.
If you would like to reach out to me, send an e-mail to Hello
at the Transformation of value.com and I will get back to
you.
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