AimlesslyChasingAmyAlWAYS A SUCKER FOR A DRAW: POKER AND INVESTINGSep022013Confessions of a Union Free Rider“We believe that the American workers employed in the American way are unbeatable”– Thomas Watson, Jr. to Nikita Khrushchev (The Spokesman, September 22, 1959)On September 21, 1959, Nikita Khrushchev toured an IBM plant in San Jose, California. In Nikita Khrushchev and the Creation of a Superpower, Nikita’s son Sergei remembered how his father wasn’t particularly impressed with the state-of-the-art computers. Nikita was, however, enthralled by the company cafeteria.Then, and decades later when I was an IBM employee, there were no executive lunchrooms. Manufacturing operators, engineers — up to the plant manager broke bread together. The food was sold at cost and served by cafeteria workers, who were also company employees. Nikita noted that through the cafeteria’s design, “management was deliberatively trying to make a demonstration of democracy.”Of course there was another thing management was trying to do: discourage unionization.The Threat/Game Theory Union Wage ModelBack in the day, many of IBM’s peers and competitors were unionized. IBM didn’t want to go down that path. As I was to learn in my nine years of management, the company felt the best way to avoid unionization was to offer everything a union offered — and more. Hourly workers’ pay grids were set locally, to account for different geographical living standards, but always set above local union scale. Pension and health benefit plans were top shelf.IBM management school taught managers about Maslow’s hierarchy of needs to hammer home the importance of a living wage.IBM wasn’t the only non-union shop to mimic union employers. When the cable television industry began, it knew their employees would be working alongside unionized telecom and power company employees. Before it was acquired by Time Warner, NewChannels (a division of Newhouse Broadcasting)  paid better than union scale for precisely that reason.This behavior is well documented in academic literature.“The results suggest, inter alia, that an increase in the extent of unionization in an industry has substantial positive effects on the wages of nonunion as well as union workers.” – William Moore, Robert Newman and James Cunningham, “The Effect of the Extent of Unionism on Union and Nonunion Wages” in the Journal of Labor Research, Winter 1985, Vol. 6, Issue 1, p.21.Like all institutions, unions can be inefficient. The power base can fight hard to preserve the status quo that put them there instead of striving for more meaningful change. That being said, I personally benefited from unions without ever being a union member. Sadly, I am something of a relic.When unionization in an industry declines, so do the wage and benefit premiums for free riders. When IBM’s peers became less and less unionized, i