The discussion in the comments section to my last post has turned to the old disagreement over the respective contributions of innate quality (however you want to try to measure it) and external circumstances to economic ‘success.’ Matthew Salganik and Duncan Watt’s research on cultural markets provides some very interesting insights into this question. “This paper”:http://research.yahoo.com/pub/2844 is the best overall survey of their findings that I know of. What they do is to set up a set of discrete artificial cultural markets, in which large numbers of experimental subjects listen to pop music, and rate it for whether they like it or not. All of these markets have the same music. Most of them have an effective recommendation system (in which subjects can see which are the more popular, and which the less popular tunes); two do not provide this information. Subjects are randomly assigned to different markets.
Salganik and Watts _do_ find that a song’s ‘appeal’ (they are reluctant for obvious reasons to talk about innate quality) has consequences – ‘more appealing’ songs tend to do better. However, this is a pretty noisy process – and is _especially_ noisy in markets where people can see which songs other people liked the most. These markets are both more unpredictable and more unequal.
bq. Overall, the results from Experiments 1 and 2 provided strong support for the argument that social influence at the individual level is simultaneously responsible for increased inequality and unpredictability in collective outcomes—in this case, the distribution of market share. Although simple to state, this finding nevertheless exhibits a curious paradox: On the one hand, by revealing the existing popularity of songs to individuals, the market provides them with real, and often useful, information; but on the other hand, if they actually use this information, the market inevitably aggregates less useful information. This result, which is analogous to ‘‘information cascades’’ in economics (Banerjee, 1992; Bikhchandani et al., 1992), suggests, in turn, that social institutions that make us aware of the behavior of others—the New York Times bestseller list, the Billboard album charts, and lists of top-grossing movies—do provide a useful service to individuals, but only at the cost of increasing the overall inequality and unpredictability of the markets themselves.
This may seem at first not to have implications outside pure cultural markets, but I suspect that it _does_ have more general implications for any market in which people are able to observe each other’s market choices (which is to say, nearly any market you can think of – think about Keynes’ discussion of animal spirits and investors here). In particular, I think that it has substantial implications for employment markets. Here too, potential employers ‘observe’ both each other’s choices and the choices made by non-employers while choosing employees. They are more likely to hire employees who appear to have done well in other positions, to have gone to ‘good’ universities etc. The point is twofold. First – that this can create substantial path dependence (Salganik and Watts discuss the congruence of their findings with Arthur’s). People who do very well at the beginning of their careers (perhaps through sheer luck; perhaps not) are more likely to keep on doing well, precisely because new opportunities open up to them which would not otherwise have been available, perhaps themselves leading to new opportunities etc etc). The second (which is forcibly born home by a very large body of sociology) is that these early opportunities (as well as other, later ones) are _not randomly generated_, in contrast to the advantages that fortuitously arise in Salganik and Watts’ experiments. Many of the initial informational signals that are sent out (attendance at good universities; prestigious internships) are disproportionately available to those who come from well-off backgrounds. And those who start out with advantages tend to end up doing better. Again, ability, or quality, or ‘appeal’ or whatever has real consequences. But it intersects with other, external advantages, which are usually not randomly assigned (and that’s not even to get started on more direct forms of market discrimination).
None of this is exactly surprising – but it is often ignored by those who have done well out of the system as it is. It also applies with especial force to academia. Kieran has an old post that I can’t locate easily (lazyweb, I invoke thee) on exchange practices among graduate programs, and how people from top ranked programs tend to do very well in initial job assignments. Obviously, your first academic job (if you can get one) has important consequences for the rest of your career – if you get a tenure track position at a well ranked program, you are likely to have research and funding opportunities that are unavailable to your less lucky peers, even if those peers are in some sense ‘better’ than you. And these advantages cumulate over time. This is something that my personal history makes me very aware of. I didn’t come from a top ranked program (although I did have some other advantages) – but my initial piece of luck was a two year post doc with minimal formal responsibilities and lots of research resources, which allowed me to write a risky article aimed at a top ranked journal in my field. Getting that early publication gave me exposure, which helped me get a good job, get various research opportunities, take further risks etc – all of which cumulated in the right way. But if I hadn’t had that initial advantage, I would have had a _much_ tougher time of it, and plausibly would have dropped out of academia. And others – who plausibly could have made as good or better use of that advantage if they had it – didn’t get it. The general point is not that ability doesn’t count at all – but that opportunities to exercise ability count too, and that a world where they are cumulative (so that more opportunities come to those who have had such opportunities in the past because of information sharing or another mechanism) is likely to generate high levels of inequality of outcome and substantial ‘noise’ in the relationship between ability and outcome.
{ 39 comments }
F 07.06.10 at 4:38 pm
Yes, yes, a million times yes. I have seen schools interview faculty candidates after the fact purely because they got an offer from a top school and therefore must have been worthwhile.
lemuel pitkin 07.06.10 at 4:45 pm
This is absolutely fascinating. Thanks, Henry!
Billikin 07.06.10 at 4:51 pm
“Although simple to state, this finding nevertheless exhibits a curious paradox: On the one hand, by revealing the existing popularity of songs to individuals, the market provides them with real, and often useful, information; but on the other hand, if they actually use this information, the market inevitably aggregates less useful information.”
It’s only a paradox if you ignore influence.
Bill Benzon 07.06.10 at 5:11 pm
Henry, You should look at Arthur De Vany’s Hollywood Economics, which I discuss briefly in the “Collective Culture” section of this longish post on cultural evolution. De Vany examines a 10-year run of box office stats for Hollywood movies and concludes that word-of-mouth is the most important factor in determining their success. He says nothing about quality — though he does recommend that studios make decisions on a well-structured portfolio of movies rather than deciding on projects one by one.
Bill Gardner 07.06.10 at 5:26 pm
This is great, Henry. I am struck by how hard it is to get this right. Having a system with a lot of path dependence on academic productivity at the early stages is a feature, not a bug. We want to advance people based on what they write (data), and not test scores, university prestige, etc (priors). But, as you say, there is considerable luck in those early outcomes, so we do not want too much path dependence. So we give people a long time — post-docs, then, for the lucky, 6-7 years in the assistant professor rank — which has other costs.
alex 07.06.10 at 5:27 pm
I don’t think the post mentions the word, so I will: isn’t this a clear set of examples of how reputation serves as a proxy for judgment? The point is not to be good, but to become known for being good; for which some things like institutional repute can also serve as second-order proxies for individual merit. A reputation can be earned, but it can also be fabricated, at least long enough to cash out/show your true worth…
Bruce Baugh 07.06.10 at 5:41 pm
Fascinating, Henry, thanks.
Alex, that’s a really elegant distillation. I imagine I’ll be swiping it for future use. :)
Bill Gardner 07.06.10 at 5:55 pm
Just to reinforce Henry’s message… There is luck in whether you participate in a scientific result. And there is further luck in whether you get credit for it (as alex notes @6).
y81 07.06.10 at 6:08 pm
That’s an interesting experiment, but it surely falls into the category of social science experiments which confirm what your mother always told you, i.e., try especially hard to do a good job on the first paper each fall so the teacher has a favorable impression, because first impressions are the most important (path dependence); you should always go to the best school you can get into (reputational considerations); people are always judging you so try to wear something nice (use of superficial signs as proxies for attributes that are hard to observe directly), etc.
The foregoing should not be understood as denying the value of experiments which attempt and analyze, explain and quantify “what your mother always told you.” It’s not quantum physics, though.
Earnest O'Nest 07.06.10 at 6:22 pm
The mechanism could work something like this: in a 1st stage people are selected with a will to break through in a certain field, in a 2nd stage the ones making the 1st cut and having the best ability are the winners (a more sophisticated feature of stage being the fact that stage 2 winners pick the stage 1 winners).
This model would allow (weak) correlation of ability and success, a strong perception that ability is correlated with success (looking at stage 2 only) & lots of wasted talents because of an inability to ‘sell themselves’ (or in newspeak: ‘effectively communicate’)
Current 07.06.10 at 7:20 pm
I generally agree with what Henry’s said.
However, I’m not so sure about the interpretation of the pop music result. Isn’t pop music shared culture? When a person listens to something that’s popular they share in something with others. So, much later they can say “hey do you remember that tune?” That’s part of the value of it to the customer.
Even if the experiment didn’t bring out that aspect of it I think that people’s choosing habits would have been affected by it.
Tim Worstall 07.06.10 at 8:32 pm
“In particular, I think that it has substantial implications for employment markets. Here too, potential employers ‘observe’ both each other’s choices and the choices made by non-employers while choosing employees. They are more likely to hire employees who appear to have done well in other positions, to have gone to ‘good’ universities etc.”
Umm, yes, I guess so. And also slightly not. At various times (and in different countries and industries etc) I’ve been responsible for hiring people for businesses that I (part) own. That I’m not rich might be an indication that my hiring techniques aren’t all that good, to be sure. But I (and “we” when there have been “us” rather than me) have always tried to find those people who are not fashionable in this sense. Would much rather have the bright one who has struggled financially or socially to get into Crap Poly than someone who effortlessly glided into Pater’s College at Oxbridge.
As an example, we hired a book keeper straight out of prison. His sentence was for fiddling the books at his previous employer. But he *hated* prison, absolutely wasn’t going to go back there. We thought we were hiring the most honest book keeper in the country: as it turned out he most certainly was honest, although “most” might be an exaggeration, for we didn’t survey all the rest of them.
Matt 07.06.10 at 8:52 pm
Your experience is a classic example of Merton’s “Matthew Effect,” isn’t it? I always liked the cynical name. From Wikipedia:
The Matthew effect (or “accumulated advantage”) in sociology is the phenomenon where “the rich get richer and the poor get poorer”. Those who possess power and economic or social capital can leverage those resources to gain more power or capital. The term was first coined by sociologist Robert K. Merton in 1968 and takes its name from a line in the biblical Gospel of Matthew:
For to all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.
—Matthew 25:29, New Revised Standard Version.
[Myself and some other Philosophy Smoker readers will feel a certain twinge there.]
F 07.06.10 at 9:57 pm
@13
Oh, so that’s what it’s called. Now I have a more appropriate alternative to calling it “the real life version of the game of Asshole”.
Gabriel Rossman 07.06.10 at 10:17 pm
Here’s Kieran’s post you mentioned. He’s commenting on this article by Val Burris.
I also really like this theory piece by Gould, which makes more explicit the implications of endogenous status models for stratification.
The Reverend 07.06.10 at 10:17 pm
In Liberalism, L T Hobhouse refers to “Walker’s dictum,” from Francis Walker of MIT. According to a footnote in the Cambridge text, Walker argued that under such “impaired” competition as Henry describes, “the tendency of purely economic forces . . . is continually to aggravate the disadvantages from which any person or class may suffer in the beginning.”
Echidne of the snakes 07.06.10 at 10:22 pm
This may also link to the discussion of the way less represented groups in general, especially in the past, ended up with lesser careers because of those subtle but small steps. If your first job was just a little bit worse than might otherwise have been the case, then your next step was that much higher and so on.
The influence of critics matters here, too. If the critics have biases in what they deem noteworthy then who gets brought into the awareness of individuals will have similar long-term effects.
Tom Hurka 07.06.10 at 10:28 pm
I think the situation in academia that Henry describes is getting worse, at least in my discipline of philosophy, because of the gradual replacement of blind-review journals by invitation-only (or largely-by-invitation) “annuals.” To be invited to contribute to one of these you have to be well known, which, when you’re young, can be much more a function of where you are and who you studied with than of the quality of what you’ve actually written.
The career path of starting at a low-rank institution, publishing well in blind-review journals, and then moving up the institutional ladder is less open now, it seems to me, than it was thirty years ago. Just as social mobility has declined in Western countries in recent decades, so has academic mobility. Even more than before, the rich get richer …
Cannoneo 07.07.10 at 12:42 am
My granny used to say if ye have the name of an early riser, ye can sleep until dinnertime.
dsquared 07.07.10 at 1:30 am
I wrote a piece a while back on the related subject of how a reputation for intelligence is much more difficult to get rid of than one for bestiality – once someone is known for being “incredibly smart” (cf Larry Summers, Enoch Powell), there is apparently no limit to the number of stupid things they can say and do without ever being considered less clever.
Matt McIrvin 07.07.10 at 1:43 am
The “paradox” is really just a sort of informational free-rider problem, isn’t it? The accumulated preferences of others are useful information, but people using that information to form their own preferences are just consuming the information. It behaves almost like a finite resource, since when those later preferences are included, the usefulness of the information gets diluted.
Matt McIrvin 07.07.10 at 1:46 am
And nobody’s mentioned Google PageRank yet, so I will: How about Google PageRank?
bad Jim 07.07.10 at 2:39 am
I want to second Tim Worstall’s point: there’s an advantage to hiring talented people with less than sterling credentials. I have a good friend and former colleague whom my father hired straight out of the Navy. The Navy had seen his potential, educated him in electronics and put him on a survey ship, and we got a fledgling engineer for a technician’s wage.
A bit about luck, since that was a salient point on the previous thread: in the company I helped to start and run, it was commonly acknowledged that our rapid success was largely due to luck, both in the market niche we entered and in our earliest business decisions. The rest was perhaps due to our talent and hard work, but most of the first was due to luck as well, as inherited from our parents and supported by the society into which we were born, and the same may be true of the second.
It’s been suggested that Hollywood is unusually liberal for a group of millionaires precisely because they’re aware their success is due to luck, the accident of being born beautiful or talented, or being in the right place at the right time.
Charles St. Pierre 07.07.10 at 3:20 am
Malcolm GLadwell has a chapter on the Matthew Effect in “Outliers The Story of Success,” and discusses all sorts of cases of this sort of thing. In Canadian junior league hockey the vast prepondernce of players are born in the first four months of the year. Why?
“It’s simply that in Canada the eligibility cutoff for age-class hockey is January 1. A boy who turns ten on January 2, then, could be playing alongside someone who doesn’t turn ten until the end of the year- and at that age, in preadolescence, a twelve month gap in age represents an enormous difference in physical maturity.” Outliers p 24.
So who gets selected as an all star, and gets the extra coaching and practice and play and attention? Who’s the better player? And who then gets to go on to play in the junior leagues, and then the big leagues?
The exact same effect happens in education: “…the teachers are confusing maturity with ability.”
…
“At four-year colleges in the United States–the highest stream of postsecondary education—students belonging to the relatively youngest group in their class are underrepresented by about 11.6 percent. That initial difference in maturity doesn’t go away with time. It persists. And for thousands of students, that initial disadvantage is the difference between going to college–and having a real shot at the middle class–and not.” Outliers p29
He discusses other examples where circumstances affect chances of success, and small initial advantages become multiplied. A must read.
Jeremy A 07.07.10 at 3:46 am
@13 & 14:
Speaking of games, the social phenomenon is mirrored in popular game shows like Jeopardy! and Wheel of Fortune. At the end of Wheel, for example, some prize like $50K or a car may be won (much larger than the other payoffs on the show), but only one player gets a chance at it. Players who make it to the final round are unlikely to be doofuses, but the fact that they are there and the other players eliminated beforehand is partly a matter of luck.
I’m sure these games were designed that way increase the suspense as the show goes on by raising the stakes, in order to to motivate viewers to stay on through all the commercial breaks. But I wonder if Merv Griffin had any inkling that he was mirroring American society, with its way of lionizing a few and forgetting the rest.
nnyhav 07.07.10 at 6:15 am
The general point is not that ability doesn’t count at all – but that opportunities to exercise ability count too, and that a world where they are cumulative … is likely to generate high levels of inequality of outcome and substantial ‘noise’ in the relationship between ability and outcome.
Better to be lucky and smart, but the luck is often chance association with someone who was, and who remembers their prior chance association, and the opportunities to exercise their ability … which likely cumulatively dampens some of the noise.
Earnest O'Nest 07.07.10 at 9:07 am
Jeremy@25: good catch!
novakant 07.07.10 at 11:44 am
Well, if you take a really big picture view of the matter, innate ability is sheer luck as well.
alex 07.07.10 at 11:51 am
Really? I don’t know about you, but I chose my parents with great care…
Harald Korneliussen 07.07.10 at 11:53 am
Thank you, Henry, for bringing this fascinating study to my attention, and also current, for bringing up the shared culture argument (I notice the study mentions it, too).
I often feel like John shouting in the desert when I assert that the majority of value Star Wars or Harry Potter has, wasn’t created by their authors.
lemuel pitkin 07.07.10 at 4:31 pm
Since Tom Slee is apparently too modest to do so himself, I feel obliged to point out there’s a lot of good stuff about this on his blog Whimsley, especially this post on Online Monoculture and the End of the Niche.
tomslee 07.07.10 at 5:01 pm
Aww shucks. Thank you lp.
Cryptic Ned 07.07.10 at 7:06 pm
I wrote a piece a while back on the related subject of how a reputation for intelligence is much more difficult to get rid of than one for bestiality – once someone is known for being “incredibly smart†(cf Larry Summers, Enoch Powell), there is apparently no limit to the number of stupid things they can say and do without ever being considered less clever.
“Give a man a reputation as an early riser, and he can sleep until noon.â€
usually attributed to Mark Twain
Cannoneo 07.08.10 at 12:21 am
Ned@33, I should know by now, having come across most of my old Irish gran’s best sayings in Ben Franklin, that she would have cribbed that one from an American too.
It’s actually sort of interesting that they got into circulation in remote parts in the early 20th century (probably through newspapers and country-life circulars etc.), and by the time they were uttered to grandchildren, had taken on the aura of anonymous ancient wisdom.
alex 07.08.10 at 7:24 am
Or, they ARE folk-wisdom, that Franklin, Twain and others cunningly marketed as their own…
John Quiggin 07.08.10 at 8:10 am
@ Tom H. For all its faults as a discipline, economics hasn’t undergone anything like the process you describe. Blind review journals are still the main route to success, and I think are becoming more open, as the relative influence of journals with a particular university affilation (J Polit Econ, Quart J Econ) has declined.
Hidari 07.08.10 at 8:23 am
#20
There’s an old joke which argues the contrary…
Aidan Kehoe 07.08.10 at 4:34 pm
Hah, is that really common knowledge? As far as I can see, it’s exactly correct, but my mother was a teacher and I never heard it from her. That said, in my extended family she wasn’t the most skilled of the social climbers.
ScentOfViolets 07.08.10 at 9:46 pm
To be fair, this also explains the prevalence of so many people who were born on third base and thought they hit a triple: They’re not as aware of their lucky circumstances as perhaps they should be because because they’re competing on their ability and work ethic against other people who mostly have enjoyed the same luck. Yes, Mr. Gates, nobody denies you worked very hard to get where you’re at today, or that you were a very intelligent, very studious young man.
But . . . be honest. Were you really of humble origins? Poor? Or even just solidly middle-class? No. You were by all accounts in the top strata of the upper middle-class, and the odds are you would never have been able to make your pitch to IBM – you know, the one that most people say was your big break – if your mother hadn’t been sitting on IBM’s board of directors.
But of course, Bill (I’m probably being uncharitable, but only for the sake of an example) tends to discount these advantages. Not because he’s trying to play himself up, but because being upper middle-class is all he knows, is as normal to him as water to a fish (and is as unthinkingly accepted), and also the same pool from which his competitors were mostly drawn.
In those circumstances, it would seem to be more natural to discount luck for ability, and in fact, I’m wondering when exactly situations are encountered by most people where they can see that their obvious privileges have beaten out someone of humbler origins but of obviously greater talent. Offhand, I’d say that it doesn’t happen terribly often, even for those inclined to be brutally fair-minded about their advantages.
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