So this person (I think it's a woman) says the best way to defuse a racist joke is to pretend you don't get it.

Co-worker: Did you hear that Angelina Jolie adopted another kid, this time from Vietnam?

You: Oh really?

Co-worker: Yeah. The poor kid probably doesn't even know he's Asian yet. He certainly doesn't know he's going to be a horrible driver. Or that he's going to be amazing at doing nails. He has no idea! (Laughs heartily.)

You: (Look perplexed.) Sorry, I don't get it.

Co-worker: What do you mean?

You: I guess I'm missing something. Why is that funny?

Co-worker: (Looks embarrassed.) Um, well you know how people say that Asians are bad drivers. And a lot of people who work at nail salons are Asian.

You: But those are just stereotypes, aren't they?

Co-worker: Well, all stereotypes have some truth to them.

You: So you actually believe that all Asians are bad drivers and are good at doing nails?

Co-worker: No, no, it's just... Never mind.

***

Racist jokes rely on an unspoken, shared knowledge of racist stereotypes. Without the stereotypes, there is no humor.

When you play dumb and ask someone to explain the joke, you are able to draw the racist stereotype out into the open, address it directly, and demonstrate how absurd and offensive it is. But because you are feigning ignorance, you can accomplish all of this without alienating your co-worker and putting your working relationship in jeopardy.

For the record, I didn't find this Vietnamese-Angelina-Jolie joke particularly funny, but it's not because the joke racist. I find Peter Russels to be very funny, for example, and almost all of his jokes are racist ("against" Asians).

If I were the one telling joke, the conversation would have probably started the same, but ended up like this:

Her: But those are just stereotypes, aren't they?

Me: Well, they're not just stereotypes, but they are stereotypes, yes.

You: So you actually believe that all Asians are bad drivers and are good at doing nails?

Me (possibility 1): I didn't say that. I said the stereotype is that they are bad drivers and good at doing nails, not that it's factually true that they are bad drivers and good at doing nails.

Me (possibility 2): No, only the women.

In the first possibility, I would end up being annoyed that the person I was speaking to didn't share the same stereotypes I did (for the record, I don't think Asians are particularly bad at driving, but I'm playing along for this hypothetical situation). In the second possibility, I'm toying with the (over-)sensitivity of person I'm speaking with.

In case I need to say it explicitly, I don't think the advice given is very effective -- however, I don't actually know what the speaker's goal are, so I can't say for sure what the effectiveness is. If the goal is to stop racists jokes, I doubt it'll work. They'll stop telling racists jokes (and perhaps jokes in general) to you, but they'll keep on telling them to people who actually "get" the jokes.

If, instead, the goal was to defuse the situation without straining the work relationship, I think her solution is not particularly effective either. Her contrasting "just a stereotype" versus "you actually believe all Asians" etc. implies that she believes "stereotype" is a synonym for "outright lie". I dread having to explain to her that a stereotype is a widely known belief about a class of people (Asians in this case). I'd have to emphasize that "widely known" does not necessarily mean "widely held", and that I can know of a belief (for example, the belief of the existence in the Flying Spaghetti Monster) without actually holding that belief myself.

The exchange would leave me concluding that she is stupid. And I mean "stupid", and not "ignorant". I'm fairly confident she knew what the definition of "stereotype" was, but she didn't actually go through the intellectual motions of understanding the definition that she knew, not thinking it through, seeing everything that the definition entails. Actually, it's not even so much stupidity, because I think once I force her to go through these intellectual motions, she'll understand. It's more intellectual laziness. She was too lazy to actually think these thoughts, but she's fully capable of understanding the thoughts if she had bothered to think them through. If she's too lazy to think about stuff, then how the hell did she get this job working with me? Did she sleep with the boss? etc. As you can see, not a very effective strategy for maintaining good working relations.

I think the author is assuming that racism (and probably sexism) is "bad". Well, in a way it is, but not in the way that she is probably thinking. Racism is bad in the same way that any incorrect information is bad: it leads you to making poor decisions. If I think I have $20 in my wallet, but I actually have $5 in my wallet, then I have incorrect information, and that's "bad", but it's not morally bad. I'm not necessarily harming anyone (except perhaps myself) by having this false information in my head. By having this incorrect information, I may make a morally bad decision (I can't think of any examples), or I may make a morally good decision (I decide to donate money to charity, since I believe I am richer than I really am). Prejudice is exactly the same: there is no moral component to prejudice. Prejudice is "bad" in the same way that misinformation is bad, but it is not morally bad, in that the information itself does not directly harm anyone. By thinking, for example, that Asians are good at doing nails, I may harm them (by assuming they are therefore good at nothing else) or I may help them (by favoring an Asian nail salon over a non-Asian nail salon).

Now while I have said that prejudice is bad in the same way that incorrect information is bad, not all prejudice is bad, and not all prejudice is incorrect information. To clarify, when it's bad, it's only bad in that incorrect information in general is bad. But sometimes prejudice is neither "correct" nor "incorrect", but merely opinions about stuff. For example, I am much more willing to have sex with a girl than a guy. That makes me sexually discriminatory. I am making available or revoking certain opportunities to people based exclusively on their gender.

Not only is trying to abolish prejudice infeasible, from the example above, it's not even clear whether or not it's desirable. "Should" everybody be perfectly bisexual? Even if we restrict ourselves to abolishing racism in the workplace, I'm not even sure whether or not that is desirable either. Without checking, I'm fairly confident that there exists a porno DVD out there with a title like "Asian Chicks and Black Dicks". The DVD is trying to cater to a specific fetish. The only way that the producer of the DVD could actually produce this DVD is if they specifically discriminate who they hire based on race. Similarly, when you go to China town, and try to find a "real, authentic" Chinese restaurant, you expect the waiters and chefs in there to be Chinese. When you go to a sushi place, you expect the chef to be Japanese. Customers simply have these expectations. A business owner who tries to do some "affirmative-action" type shit, therefore, will tend to lose clients to the business owner who let the races naturally segregate themselves (and the segregation does happen natural; it's quite rare for a white guy to try to apply for a job at a Chinese restaurant).