Thursday, August 06, 2009

Creators and Rulers

A friend pointed me to this post by AI researcher Eliezer Yudkowsky, in which he describes his shock at meeting a sample of the technology business elite.

EY's observations about the particular meeting he attended sound reasonable (I've been to similar meetings), but the group was highly selected and it's his only window into the business world. The people he describes are the elite in the world of innovation -- they, and their companies, Create the next generation of technology. But they are not typical of the richest and most powerful people in the world (see further below).

... I was invited once to a gathering of the mid-level power elite, where around half the attendees were "CEO of something" - mostly technology companies, but occasionally "something" was a public company or a sizable hedge fund. I was expecting to be the youngest person there, but it turned out that my age wasn't unusual - there were several accomplished individuals who were younger. This was the point at which I realized that my child prodigy license had officially completely expired.

Now, admittedly, this was a closed conference run by people clueful enough to think "Let's invite Eliezer Yudkowsky" even though I'm not a CEO. So this was an incredibly cherry-picked sample. Even so...

Even so, these people of the Power Elite were visibly much smarter than average mortals. In conversation they spoke quickly, sensibly, and by and large intelligently. When talk turned to deep and difficult topics, they understood faster, made fewer mistakes, were readier to adopt others' suggestions.

No, even worse than that, much worse than that: these CEOs and CTOs and hedge-fund traders, these folk of the mid-level power elite, seemed happier and more alive.

This, I suspect, is one of those truths so horrible that you can't talk about it in public. This is something that reporters must not write about, when they visit gatherings of the power elite.

Because the last news your readers want to hear, is that this person who is wealthier than you, is also smarter, happier, and not a bad person morally. Your reader would much rather read about how these folks are overworked to the bone or suffering from existential ennui. Failing that, your readers want to hear how the upper echelons got there by cheating, or at least smarming their way to the top. If you said anything as hideous as, "They seem more alive," you'd get lynched.

The comment below on EY's post (not written by me) is, in my judgement, a more accurate description of the business (and political) elite as a whole. It describes the Rulers -- people who run the world on a day to day basis. (I doubt EY would have been nearly as impressed by these people -- they fit his original stereotype of business executives.) The Creators and the Rulers are two partially disjoint groups within the elite.
I went to Harvard Business School, a self-styled pantheon for the business elite.

The average person was:
- top decile intellect (though probably not higher)
- top decile emotional intelligence (broadly construed - socially aware, self-aware, persuasion skills, etc.)
- highly conscientious / motivated

Few were truly brilliant intellectually. Few were academically distinguished (plenty of good ivy league degrees, but very few brilliant mathematical minds, etc.).

A good number will be at Davos in 20 years time.

Performance beyond a certain level in the vast majority of fields (and business is certainly one of them) is principally a function of having no cognitive and personal qualities which fall below a (high, but not insanely high) hygene threshold -- and then multiplied by determination, of course.

Conscientiousness, in fact, is the best single stable predictor of job success for complex jobs (well established in personality psychometrics).

Very high intelligence actually negatively correlates with career success (Kotter), probably because smart people enjoy solving problems, rather than making money selling things -- which outside of quant trading, show business and sport is really the only way of being really successful.

There are some extremely intelligent people in business (by which I mean high IQ, not just wise or experienced), but you tend to find them in the corners of the business landscape with the richest intellectual pastures: some areas of law, venture capital, some cutting edge technology fields.

Steve Ballmer - for instance - might deafen you, but he would not dazzle you.

To be precise, the Rulers are not just the most driven among the group described above, but also the luckiest. The Creators are actually drawn from a smaller population than the Rulers. In the world of Creators the ability threshold is higher and the volatility, although significant, is not as large as for HBS types trying to claw / smarm / cheat their way to the top.

In response to comments, further clarification:

Success in the Creator segment of the elite is more highly correlated with specific, observable capabilities like brainpower or creativity. A startup founder (or entrepreneur) has to have actually had (or at least recognized) a good idea and then, perhaps with help of team, implemented it. There is noise (luck), but signal to noise is not hopelessly small.

In comparison, I think the selection of Rulers from the population of people who, e.g., are admitted to HBS, has a significantly larger stochastic component, so that, when you actually meet one of the Rulers, they tend to resemble the HBS population as a whole (they are the subset who won the lottery), as opposed to a sub-population that has been further selected for ability (e.g., the smartest or most charming or most determined HBS people). If the stochastic component dominates, the most successful ones will resemble the average (you can't directly detect that they are actually the "most lucky" HBS people), not a particular tail. I am more familiar with the Creator population, but have met plenty of Rulers (typically, MBAs who have climbed the ladder within a big organization and are now at or near the top), and my impressions seem to confirm the model I described above -- there are more supermen among the Creators, and more boring suits among the Rulers. However, as the commenter above notes, there ARE areas in business where you tend to find higher concentrations of supermen. Perhaps you could say that those are areas of business where there is a well-functioning meritocracy, or special abilities really matter.


Alphadominance said...

Advantageous genetic gifts tend to correlate with one another, like intelligence and beauty. Believing the contrary is wishful thinking. Less able people tell themselves that they don't in order to get out of bed in the morning. It's like the old saw, money doesn't bring happiness. Maybe not but the type of person who is happy and well adjusted is more likely to be successful as well, and money enables freedom which aids in achieving happiness. Correlation is good enough for me, causation is moot in such cases.

Ian Smith said...

If HBS admitted by GMAT alone its students would be in the top 1%.

It is ridiculous that B-schools rely on other criteria.

gs said...

Perhaps the behavior of these elites can be interpreted in terms of how primates act when they are near the top of their troops. If the social validation that they are at, or on the road to, the top were taken away, I suspect that many--not all--in the elite would act differently.

I once happened across a prison photo of L.D. Landau (unfortunately I didn't save the link). Not surprisingly, the look-and-feel differed from pictures taken in academic settings. The imprisoned Landau most certainly did not project his usual aura of a magisterial intellect.

LondonYoung said...
This comment has been removed by the author.
LondonYoung said...

To me EY's comments and the HBS alum's comments don't feel fairly compared, one vs the other, in this post. You are focussing on "creators vs rulers", but I would instead focus on "accomplishers" vs "unfiltered products of a university admissions committee".
An alternative first-hand description of a group of actual "rulers" might be more interesting.

LondonYoung said...

The clarification helps. EY kinda says "the rich and powerful are actually cool, moral, and smart even though the MSM plays to the public's desire to be told otherwise". You then kinda say "nah, I think that only applies to the entrepreneurs". Fair summary?

For myself, I don't see that the "successful MBA's" I meet seem any more like the typical campus MBA student than the supermen creators seem like the typical troll earning a Physics PhD while black-taping up photomultiplier tubes.

For rulers outside business, the list of backgrounds of U.S. Presidents on Wikipedia is pretty interesting.

RNB Research said...

I chanced upon to view your blog and found it very interesting. Great ... Keep it up!

Steve Hsu said...

LondonYoung: ..."nah, I think that only applies to the entrepreneurs". Fair summary?

Plus a few areas: "...but you tend to find them in the corners of the business landscape with the richest intellectual pastures: some areas of law, venture capital, some cutting edge technology fields." Plus some areas of finance... "Perhaps you could say that those are areas of business where there is a well-functioning meritocracy, or special abilities really matter."

Are you claiming that top level execs at, say, Proctor and Gamble or Ford don't resemble the profile given by the HBS alum in the original post? I'm not talking about Co-head of GS, rather CFO/SVP/CEO of big old-economy companies. There is a basis for the "suit" stereotype, but EY didn't meet those people at his heavily filtered meeting.

LondonYoung said...

Steve - I just did the following exercise (no cherry picking, I promise, just the first things I tried). I looked up the largest Fortune 500 company, it is Exxon Mobile (big and old-economy). I looked up the CEO on Wikipedia. He's a Civ E from UT Austin. Apparently he started at the bottom, as a real producer, not a manager, and worked his way up. His kids are all getting engineering degrees. In my amazing due diligence, which amounted to no less than three full minutes on google, he looks a legit merit guy - but I admit I found no leads on his parents.

Next I looked up P&G, since you mentioned it. The CEO there got an Engineering degree from West Point, and an MBA from the mighty University of Utah (but looks like one of those military deals). Looks like he did 5 years in the 82nd Airborne.

Then I turned to Ford, the other company you mentioned. The CEO there is, once again, an Engineer, with a BS degree from U of Kansas. He got an MBA from MIT as a Sloane Fellow - but it looks to have been and "Exec MBA" earned later in life.

So, relying only on a few minutes with google, I am thinking we might in fact have 3 for 3 engineers who worked their way up from line engineering positions just out of school without power-elite support. Nobody from HBS - and not even an Ivy degree in the lot, and nobody from a priviledged family either.

So, at this point, I don't see any good case for assuming the HBS alum's thoughts are legit. I am sure we can find some of the suit stereotypes out there but, at this moment (though my mind can easily be changed!) I think most of our business leaders are meritocratic people who worked their way up by doing an outstanding job of producing real value.

Steve Sailer said...

Having spent 18 years in the corporate world, much of it as a staff guy working for CEOs and one level down, I would suggest that "energy" is a crucial component in making it to the top. I always say that America is ruled by the Frequent Fliers, the people who can make the 7am flight to Dallas for a sales conference and the 4:15pm flight to Houston for a dinner meeting, and do that week after week for decades.

This kind of schedule selects for people who can function well on little sleep, who can nap refreshingly on airplanes, and who can constantly make decisions that are at least not bad.

LondonYoung said...

To Steve Sailer's point, looking over those three CEO's, I noticed a lot of "bumming foreign assignments" - I don't think we can deny HBS alum's point that conscienceness and hard work are keys to success. But I think that is common to creators and rulers. We all know the tales of the supermen creators who forget to eat for days, just as I think you've noticed CEO's going without sleep for days.

On my mind, though, is Steve Hsu's belief that the Rulers are "luckier" than Creators. I'm open to the case, but I haven't seen it made yet. In fact I can see the other side. IMHO, Jerry Yang is not very impressive at all. He was a huge creator at the right place right time, but he never created again, and as a CEO he destroyed enormous shareholder wealth as he let Google eat his investors for lunch. The Wright brothers were great creators, but within a couple of years a dozen groups independently recreated their work since it was, again, right place right time.

Unknown said...

An interesting idea struck me for the first time, regarding the Singularity.

I read an article about dogs, and I wonder if we will enhance dog's (dogs are currently at the average of a 2 year old)(or cat's) IQ's to that of a human (current), or even to the IQ which will be the equivalent to enhanced humans--post-Singularity.

- Shawn

Ian Smith said...

LY's sample was very lucky to have picked up so many engineers. In America the CEO with an engineering background is uncommon even at manufacturig companies. The background of CEOs at these companies is more typical:

Microsoft (Baumer was a math and econ BA)

In addition to being in the right place at the right time, knowing someone, having rich parents, etc. one way that successful people are lucky is in having good parents, parents that give a damn about their children and their children's future. This is true even in the case of athletes and entertainers.

Ian Smith said...

There is a word for the idea that those at the top are at the top because they are the most virtuous and the most talented --- ideology.

Ian Smith said...

Conoco not Chevron

Steve Hsu said...

Steve Sailer: yes, the CEO position requires exceptional energy and determination. Less so for other senior exec positions. That quality isn't easy to detect in a social gathering, though.

LY: I'm not sure what those bios reveal about my model. I'm not claiming that the Rulers are all from HBS (although a disproportionate number are). None of the life history details you give suggest those people are very different from the ones described by the HBS guy (i.e., in terms of cognitive and personality traits). UG engineering degree is not exactly a strong filter. Just because someone made it "the hard way" via engineering or a public school background doesn't mean he wasn't lucky. There are numerically a lot more of those guys than HBS guys, and a model with large noise component would bring many of them to the top as well.

Re: Creators and luck, I don't deny luck plays an important role in almost *any* area (even in theoretical physics or the NFL). But you find far fewer individually mediocre Creators than Rulers ("suits").

I've met senior execs who do not actually understand key aspects of their own industries (this is common in the g-loaded tech industry; many senior execs come up on the sales side). How did they rise to their positions? There are many possible reasons, including internal politics, signaling games which allow incompetent people to appear competent, the difficulty of assigning credit for a team outcome, nepotism, etc. Noise! Signal to noise ratios vary from area to area -- surely you don't dispute that.

One final comment: the very existence of McKinsey, BCG, Bain, etc. is due to the mediocrity of the average Ruler. Think about what management consultants are selling and ask yourself why a senior exec. with 20 years experience in his industry needs a report prepared over 6 months by a 30 year old MBA.

LondonYoung said...

My issue is with the statement "you find far fewer individually mediocre Creators than Rulers (suits)". I am looking for the case to support this - I guess my CEO bios are just a dabbling of data, not supporting any position except to de-emphasize pedigreed MBA's. Also, we're surely defining suits and creators differently, and our sample sets are gonna be very different.

You say there are "many possible reasons" for tech execs rising, and often on the sales side, even though they lack a technical mastery of their products. I don't deny that some self-promoters advance without benefitting others, but I also think there are some terrific salespeople out there too. Working with hammer-producing engineers who think every client problem is a nail is a much harder job than us geeks tend to give credit for. Remember, Google is an advertising firm - but since most people at Google have trouble understanding that they will never advance to the executive office.

For McKinsey, I often think of them as executive office outsourcing. If I am a catfish canner wondering about expanding sales outside the south, there is an enormous amount of scut-work that will need to be done to study my options. If my expertise is maintaining a top-rate catfish supply line to compete with other catfish canners, I might lack the expertise to look at introducing the product to traditional non-consumers. So, rather than staff up and burn time looking at the problem, I'll hedge myself by outsourcing - perhaps looking at my McKinsey team as "rent with an option to buy" - the career paths of McKinsey-ites seems to back up this model.

To pick up on a key theme of your blog, my prior is that highly desirable jobs are hotly competed for and usually end up in the hands of the most meritorious (and I understand where this prior comes from). And I was deeply impressed during the internet bubble with just how random the so-called creators often are, especially when it comes to software - a very low barrier-to-entry field. But absent a strong case, we don't move far from our priors, do we?

EY's point is that he thinks creators and suits are cool people, and thinks the MSM panders to the public's desire to hear otherwise. If you think of yourself as a creator and not a suit, perhaps you wanna give the suits the benefit of the doubt? Remember, those who are neither creator nor suits usually think you are all just lucky.

(Proviso - I am referring mainly to the U.S. here. I think the U.S. is unusually accomodating to creators and holds suits to higher merit standards than one finds in most other countries)

Gail Margolis said...

You're wrong about Ballmer, he did well on the Putnam exam (Top 100, I think), which is amazing since he majored in Econ at harvard, so you know he had no special math/competition preparation, his performance was based on mostly raw intelligence and problem-solving ability.

Matthew Maloney said...

Certainly not as experienced in life as anyone here or anywhere near the pedigree, but I suspect the difference between rulers and creators lies in the fact that non-intelligence variables like sociability, testosterone, risk taking, physical appearence and a plethora of other things that demarcates a genius from a computer are the reasons there's a fracture. Not knocking creators at all, in a true meritocracy (of intelligence and academic proficiency like old China) they would also be the rulers.

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