794
n
Gods and villains
The same is often true for fund managers, and other people
who are trying to make money on the stock market. The
top-performing funds are not necessarily the best ones when it
comes to ability. For example, have you ever come across these
competitions in which people receive a starting sum to “play
the stock market” and after six months or so the person with
the highest return wins a prize or even a job? Stupid scheme by
design: the person with the highest return is by denition the
one that really did not have a clue, because the only way to win
such a contest is by making the most silly, illogical, and risky
allocation of funds, and get lucky. Skillful, careful players will not
lose their money, and likely get a
decent return, but won’t be the
ones to come out on top.
And the issue is: some bloke will
get lucky. Ninety-nine out of a
hundred cases it will go wrong,
but the ultimate winner is dumbo
number one hundred. The contest
by sheer design ends up picking a
nitwit as the winner.
Hence, watch out for “top
performers” in any business or
situation which involves risk.
The one coming out on top is
likely to be a moron who just got
lucky.
Executives: superhuman after all . . .
Where the previous deliberation may be extreme, I do think it is
true that we are usually not very good at explaining and attrib-
uting success – especially when it comes to ourselves.
It is a well-known aspect of our everyday behavior: when we
perform well, we take the credit ourselves; when something
goes wrong we blame something (or someone) else. This effect –
Business Exposed80
known as attribution bias – has been well-documented by social
psychologists, but I guess we didn’t really need their research; it
is a common phenomenon in everyday life.
Professors John Wagner and Richard Gooding, at Michigan State
University, examined whether managers suffer from the same
bias. They rounded up 102 executives and subjected them to
some lengthy experiments and statistical analysis – I won’t bore
you with the details because the answer was (surprise, surprise)
“yes”. When a company’s performance is great, executives claim
(and actually believe!) that it is due to their brilliant efforts; when,
vice versa, their company’s performance sucks, it’s someone else’s
fault and they’re really, really not to blame, honest. Yep, execu-
tives are just like humans.
Then, however, John and Richard did something rather inter-
esting. They not only asked these executives to interpret the
performance of their own companies (as explained above); they
also asked them what they thought caused the performance of
their peers/competitors.
As I said, when their own company was performing well they
attributed it to their own efforts, while when they were performing
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