October 19, 2010
“Bolton found that CEO education played a significant role in the hiring process of a new CEO, even though he observed no strong correlation between the quality of a CEO’s MBA education and the company’s long-term performance. He said that those companies performed no better than companies led by a CEO with any other type of education, MBA or not…The resulting puzzle, said Bolton, was the preference given to candidates with degrees from high level schools despite a lack of evidence indicating these candidates led to better company performance than their average degree-holding counterparts. In explaining why companies would place such emphasis on degree quality, Bolton suggested in the report that it was due to a lack of other identifiable and measurable criteria.”
“All else being equal, they rely on what they believe to be the observable pedigrees of the executive. Of course, all else is rarely equal, especially when dealing with something as nebulous and potentially unobservable as managerial talent,” he said in the report.”
July 4, 2010
Experts and Studies: Not Always Trustworthy
Interview with the author of Wrong
January 28, 2010
- Weather forecasting [this one probably unfair]
- Criminal Profiling
- Art Critics
- Wine Tasters
- Stock market experts
November 16, 2009
Wall Street Journal – A Hint of Hype, A Taste of Illusion
They pour, sip and, with passion and snobbery, glorify or doom wines. But studies say the wine-rating system is badly flawed. How the experts fare against a coin toss.
September 14, 2009
Here’s what happened. Shigeru Watanabe (a psychologist at Keio University in Tokyo and possibly a man in league with the birds) set up a nefarious experiment. Watanabe showed children’s paintings to pigeons; a panel of adults had deemed each work either good or bad. He trained the pigeons to distinguish between them with a system of tasty rewards. When the pigeons pecked correctly, he gave them some seed. Later, he presented 10 paintings to the birds they had never seen. Five of these paintings had been deemed good by humans, five bad. The pigeons recognized the good paintings as “good” twice as often as they recognized the “bad” paintings. In short, they came off as pretty good critics. There are those (names withheld) writing for major publications who might do markedly less well. Given these results, Watanabe claims, “pigeons are capable of learning the concept of a stimulus class that humans name ‘good’ pictures.”
September 12, 2009
“The Market for Lemons: Quality Uncertainty and the Market Mechanism” is a 1970 paper by the economist George Akerlof. It discusses information asymmetry, which occurs when the seller knows more about a product than the buyer. Akerlof, Michael Spence, and Joseph Stiglitz jointly received the Nobel Memorial Prize in Economic Sciences in 2001 for their research related to asymmetric information. Akerlof’s paper uses the market for used cars as an example of the problem of quality uncertainty. There are good used cars and defective used cars (“lemons”), but because of asymmetric information about the car (the seller knows much more about the problems of the car than the buyer), the buyer of a car does not know beforehand whether it is a good car or a lemon. So the buyer’s best guess for a given car is that the car is of average quality; accordingly, he/she will be willing to pay for it only the price of a car of known average quality. This means that the owner of a good used car will be unable to get a high enough price to make selling that car worthwhile. Therefore, owners of good cars will not place their cars on the used car market. This is sometimes summarized as “the bad driving out the good” in the market….
Both the American Economic Review and The Review of Economic Studies rejected the paper for “triviality”, while the reviewers for Journal of Political Economy rejected it as incorrect, arguing that if this paper was correct, then no goods could be traded. Only on the 4th attempt did the paper get published in Quarterly Journal of Economics. Today, the paper is one of the most-cited papers in modern economic theory (more than 5,800 citations in academic papers as of July 2009).
January 28, 2008
A recent study shows that raising the price of wine makes it taste
better. When tasting wines they’d been told cost more,
testers’ brains showed more pleasure than when drinking cheaper
wines…even when the wines were exactly the same! The
study’s lead author is California Institute of Technology
economics professor Antonio Rangel.
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