Steve Waldman at Interfluidity today has an important post on what he calls “rational astrologies” or when it makes sense to hew to widely accepted belief systems, even when you know following them won’t necessarily produce the best outcomes. You really must read his post in full; I think the first part is terrific but have some quibbles when he tries extending his observation.
Waldman describes how a man, transported back a few hundred years but with significant memory loss, manages to recall when his wife is afflicted with a serious illness that the medical practices of his current era are as likely to do as much harm as good. Waldman describes how it is nevertheless rational for him to follow the recommendations of the healers of his day, even though it will cost him a lot of money, because his wife and colleagues expect it, and he can’t remember specifically which of the practices used are ones to avoid. He then contends that this sort of “buy IBM” behavior operates in many realms, such as hiring (preference for Harvard grads) and investing (continuing reliance on rating agencies).
While Waldman raises important issues (and to be clear, I really do like his post a great deal), I find his definition and assumptions questionable:
Rational astrologies refer to conventional beliefs adherence to which confers important benefits. In order to gain the benefits, an individual must persuade himself that the favored beliefs are in fact true, or else pretend to believe and know himself to be a cynical prevaricator…. In financial terms, behavior in accordance with conventional wisdom comes bundled with extremely valuable put options that are not available when we deviate. If, after an independent evaluation of the evidence, I make a medical decision considered “quack” and it doesn’t work out, I will bear the full cost of the tragedy. The world will blame me. I will blame myself, if I am an ordinarily sensitive human. If I do what authorities suggest, even if the expected outcome is in fact worse than with the “quack” treatment, then it will not be all my fault if things go bad. I will not be blamed by others, or put in jail for negligent homicide…
I see rational astrologies everywhere. I think they are the stuff that social reality is made of, bones of arbitrary belief that masquerade as truth and shape every aspect of our lives and institutions.
While this may be true for many people in the population, this strikes me as an overgeneralization. First, narcissists don’t blame themselves, and the percentage of the US population that is narcissistic is rising. Second, he uses medicine as his leading example because it is a field in which most members of the public defer to experts, and what is considered to be sound practice has changed considerably over time. Even so, there are significant minorities who reject conventional medicine (and other conventions). The most extreme version is cultists who place their faith in other belief or treatment systems ranging from the religious/magical, like laying of hands and voodoo, to alternative medicine, such as homoeopathy, Ayurveda, acupuncture, and Chinese medicine. Notice also that the conventional/alternative medicine split is much more pronounced in America than elsewhere. In the US, most doctors see alternative medicine as quackery, while in Australia, it is called “complimentary medicine” and doctors don’t recoil if you tell them you are, say, using Chinese herbs or seeing a chiropractor.
Now admittedly, in the US, alternative medicine has become more respectable over time. I been dabbling in it for some time, for instance, I was using acupuncture to treat inflammation when it was widely depicted as a sham here; research has now confirmed that it is effective in treating certain types of joint pain. And even 20 years ago, there was a significant community that would use alternative medicine before conventional medicine or take a horses for courses approach. At the same time, there was clear disapproval in the media when Steve Jobs first sought to treat his cancer outside the conventional medical paradigm. So even in the medical arena, the societal pressures to conform are not as great as Waldman suggests.
In other words, there is not a unitary “rational astrology” of medicine as there was, say, 50 years ago (ex some groups like Christian Scientists). The existence of multiple “conventional” belief systems allows many people more independence of action than Waldman depicts.
Similarly, Waldman contends that the “buy IBM” behavior is rational in the hiring market, so that preferring Harvard grads is perfectly sensible even if they are no better than candidates that attended other schools:
People hiring for more prestigious and lucrative positions attract larger pools of applicants, and have greater ability to find Harvard grads not very much less promising than other applicants, and so rationally hire them. People hiring for less remunerative positions attract fewer prestige candidates of acceptable quality, and so must do without the valuable protection a candidate’s nice degree might confer. Candidates with prestige degrees end up disproportionately holding higher paid jobs, for reasons that have nothing to do with what the degree says about them, and everything to do with what the degree offers to the person who hires them.
Erm, Waldman is missing something here. The reason Wall Street, white shoe law firms, and top tier consulting firms strongly prefer fancy school grads is that it is part of their branding. If their staff are working with clients of similar age levels who are making a lot less, there needs to be a way to justify the disparity, and the educational credentials are a biggie. The general counsel of a mid-sized public company may not like the fact the law firm partner he has hired makes a lot more than he does, but he accepts it because he knows he could not have gotten himself into that role. (In addition, one has to wonder whether any out-performance by the graduates of “better” colleges is due to expectancy theory, rather than either the native capabilities of the individuals or the caliber of their schooling).
But there is another reason these employers prefer “fancy school” grads: it is easier to pick from a constrained universe. Remember how numerous studies show that more choices make people less happy? Focusing on a smaller number of elite schools makes life much easier for the recruiters. And some of that is for informational reasons. As we wrote in 2007:
There is a simple reason (beyond narcissism) why people like to hire in their own image: They understand and can readily evaluate their backgrounds. That’s why the old-school tie isn’t necessarily a cabal dedicated to self-promotion. Re- cruiters can probe course selections and extracurricular and social activities, and have an informed view of the candidate’s character. An interviewer simply won’t have the same comfort level with a can- didate when he can’t calibrate her accomplishments…
This preference for the familiar also leads companies to adhere to the same hiring rules of thumb, whether or not they are correct. In many industries, one encounters a pat- tern of hiring certain types for specific roles. For example, former members of the armed forces are prized as drug detail men; trading firms take particular interest in candidates who have been successful at blackjack or poker.
Despite firms’ faith in their hiring criteria (and many cases, having the comfort of seeing competitors use broadly similar screens), there is no way to know for sure that your decision rules are correct. Even if you went to the trou- ble of keeping tabs on candidates whom you turned down, you could not determine whether their success or failure elsewhere was a valid indicator of how they would have done with you.
This is a long-winded way of saying that while Waldman is correct to stress the large role that heuristics and conventional thinking play in areas like recruiting and medicine where knowledge is far from perfect, he may be placing undue emphasis on pressures for conformity, as opposed to simple inertia. People don’t question a formula if it appears to be working, and if everyone similarly placed uses the same formula, it will appear to work, as in there will be no evidence that a different approach will produce better outcomes.
The flip side is having been involved in recruiting at Goldman and McKinsey (pretty much everyone was) and later having hired people to work for me at a much less prestigious employer, it was obvious even in the 1980s that plenty of smart, talented people didn’t get to the top schools. It took a bit more effort to do the job market equivalent of value investing. I have to confess I got some perverse pleasure from messing with client’s heads (as in watching how they reacted when they first encountered the Sikh I hired. They’d inevitably go on tilt at the sight of his turban, and then get even more confused since he was clearly likable and technically very competent, plus his British accent got him attributed extra IQ points). Given the insane increase in higher education costs, no doubt even larger numbers of promising students are going to less-fancy colleges.
By virtue of a combination of defective mental wiring and general contraryness, I don’t have much respect for a lot of conventional wisdom. I’ve long been a big believer in the Will Rogers saying, “The problem ain’t what people know. It’s what people know that ain’t so,” and as a result, in the importance in being aware of the limits of your knowledge. So I think he is unduly pessimistic when he writes:
The process by which rational astrologies are chosen is the process by which the world is ruled…Policy is largely a side effect of the risk-averse behavior of political careerists, who rationally parade their adherence to this moment’s conventions as enthusiastically as noblemen deferred to pronouncements of a court astrologer in an earlier time. We can only hope that the our era’s conventions engender better policy as a side-effect than attention to the movement of the stars. (As far as I am concerned, the jury is still out.) But it is not individuals’ independent judgment of the wisdom of these conventions that guides collective behavior. Our behavior, and often our sincere beliefs, are largely formed in reaction to the terrifying accountability that comes with making consequential choices unconventionally. Our rational astrologies are at the core of who we are, as individuals and as societies.
But this is true only when existing institutions and norms remain unchallenged. The idea that an unarmed man preaching non-violence could defeat the British Crown would have been dismissed as impossible in 1930. The Arab Spring uprisings were completely unheralded. Most Americans labor under the delusion that America is a nation of laws even as elite miscreants go unpunished, large investors have found they cannot get contracts enforced, victims of wrongful foreclosures have trouble getting recourse, and ordinary citizens can be executed simply by being designated a suspected terrorist. Belief systems, even ones that are widely held, are more fluid and malleable than Waldman suggests. While that gives some cause for hope, there is no assurance that the most misguided shared beliefs will necessarily be the ones that change.