Stumbling and Mumbling

Author: chris dillow   |   Latest post: Thu, 10 Jun 2021, 2:45 PM


Starmer, skill and luck

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Why is Sir Keir Starmer making such a mess of being Labour leader? A good perspective on this comes from a 2006 article (pdf) in the Harvard Business Review by Boris Groysberg and colleagues: I fear most journalists and Labour activists have overlooked this because the HBR is too left-wing for them.

They looked at what happened when senior managers at General Electric became CEOs of other companies. And they found that bosses with similarly impressive CVs had hugely different performances in their new firms. This, they say, is because what matters is not so much the individual boss's skills but the match between those skills and the job requirements. So if for example a cost-cutter took over a firm whose priority was to grow rapidly, he failed, whereas he succeeded if he took over a firm that needed to cuts costs in order to undercut its competitors. Starmer

Starmer's problem is that whilst there was a good match between his skills and the job requirements of being Director of Public Prosecutions, there is a less good match between them and what it takes to be a good Labour leader. As DPP one can occasionally get away with dumping blame upon an underling, but this is harder for a Labour leader especially when those underlings have a significant powerbase and mandate of their own. More importantly, a DPP needs mainly to just keep the organization running. He doesn't need a vision with which to inspire waverers. But a Labour leader certainly does. To use Groysberg's framing, moving from being DPP to Labour leader is like moving from running a monopolistic utility to a growth company needing to catch customers' attention in a competitive environment. It's no surprise that a man can succeed at one but fail at the other.

Of course, there's nothing at all unusual in a man being a good fit in one job and a bad one in another. It is the story of many football managers: Jose Mourinho was a great fit with Chelsea at least in his first spell there but not so much at Sp*rs, for example. Many successful businessmen who go into politics have mediocre careers. And countless men are geniuses in one field but fools in others: think of Bobby Fischer, William Shockley, James Watson, Richard Dawkins...

You might object here that this assessment of Starmer is founded upon hindsight.

Damn right it is. And that's the point. We often cannot tell in advance who will be the best fit for the job - which is why so many hiring decisions go wrong. As William Goldman famously and rightly said, nobody knows anything.

We should therefore change our frame. Success can be the product not of skill and intention but of the luck of being the right person in the right place at the right time. Think of politics and indeed business as being like natural selection: randomish chances spring up - particular individuals, companies or strategies - and the environment selects for and against these. For example, whilst they were MPs it was not at all obvious that Boris Johnson would make a more successful Prime Minister than Theresa May - which is why Tories voted her leader in 2015. But he has, because the environment has selected for his mix of strengths and weaknesses whilst it selected against hers. (Whether this will remain the case is, of course, another matter.) To take another example, John Denham says the Tories have "managed extraordinarily well to appeal to English-identifying voters". He's right. But Tory appeals to nationalism failed abysmally in the late 90s and 00s, so why are they succeeding now? Could it be because the environment that once selected against such appeals now select for them?

People are, however, terrible at distinguishing between luck and skill. The most striking evidence for this comes from experiments by Nattavudh Powdthavee and Yohanes Riyanto. They got students in Singapore and Thailand to bet upon tosses of a fair coin and found that they were willing to pay to back the bet of students who had correctly called previous tosses. "An average person is often happy to pay for what could only be described as transparently useless advice" they concluded. Startling as it seems, this has been corroborated by other experiments.

And people make this error even when they have real money at stake. Investors around the world (pdf) lose money because they buy unit trusts that have performed well for a few months, failing to see that short-term returns are largely due to luck. They "confuse risk taking with skill" says Christoph Merkle. They "lose money because they buy unit trusts after short periods of good performance, failing to see that this can be due to dumb luck rather than to fund managers' skill" say Andrew Clare and Nick Motson at Cass Business School.

Most fund managers are not skilful - but some get selected for by the luck of the environment. Maybe the same is true of politicians. And Starmer is being selected against and Johnson for - at least for now.

You might think that my depiction of success as owing more to luck than skill is a leftist mindset. But the left has a long (and I think ignoble and ineffective) habit of ignoring this principle and instead looking for heroes - from Napoleon through Ho Chi Minh and Che Guevara to Hugo Chavez. But there are no heroes, and even if there were we would lack the talent to find them.

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