Wednesday, April 20, 2016

Luck - III

According to the economist Sherwin Rosen, inequality comes about because of a tournament effect where a person who is only slightly better gets the entire jackpot while others get next to nothing. The effect of asymmetric results can also come from an initial arbitrary push ultimately giving that person cumulative advantage even when no initial skill difference is involved. The sociologist Robert Merton also showed how an initial advantage can follow a person through life which he called the Matthew effect.

The idea of cumulative advantage is that once a person gains a small advantage over other persons, that advantage will compound over time into an increasingly larger advantage. This idea applies to anyone who benefits from past success - individuals, companies, actors, etc. Disadvantages are also cumulative with an initial failure due to random reasons stalking the person for the rest of his life.

When stock markets collapsed following the bursting of the housing bubble many fresh graduates in the US got caught in the ensuing recession. They had to take up lesser paying jobs in industries that were not their first choice. When the economy started recovering a few years later, these people had to start at the bottom of the ladder if they wanted to go back to their preferred sectors and had to compete with younger fresh graduates because their experience was not relevant for the new job. Hence an event entirely outside their control has saddled them with a disadvantage that will dog them throughout their lives.

In Outliers, Malcom Gladwell writes about the concept of the 'self-fulfilling prophecy' by Richard Merton. Here is how Merton put it in his original essay:  “The self-fulfilling prophecy is, in the beginning, a false definition of the situation evoking a new behavior which makes the original false conception come ‘true’.  The specious validity of the self-fulfilling prophecy perpetuates a reign of error.  For the prophet will cite the actual course of events as proof that he was right from the very beginning.”

For example, for admission to kindergarten, a child has to have completed a certain age so there will be a few months difference between the oldest and youngest child in the class. At that age, a few months of extra brain development is significant. The older children will be able to grasp things better and therefore perform better. The cycle of achievement and underachievement, encouragement and discouragement, adds up to a significant advantage over the years. I am quite sure such a process worked to my advantage.

The self-fulfilling prophecy is related also to what Karl Popper called “The Oedipus effect” - an idea that he had discussed in The Poverty of Historicism - the influence of a prediction upon the event predicted.  He called this the ‘Oedipus effect’, because the oracle played a most important role in the sequence of events which led to the fulfillment of its prophecy.

Path dependent processes are those where initial decisions and conditions almost irreversibly affect subsequent decisions which ultimately produce an outcome. It explains how the set of decisions one faces for any given circumstance is limited by the decisions one has made in the past, even though the situation may have changed. Here the future success is determined by the past success. Thus Microsoft or QWERTY keyboard enjoy disproportionate success even though superior products exist. Economists also call it 'network externalities'. Nassim Taleb writes in Fooled by Randomness:
...Brian Arthur, an economist concerned with non-linearities at the Santa Fe Institute, wrote that chance events coupled with positive feedback rather than technological superiority will determine economic superiority - not some abstrusely defined edge in a given area of expertise. While early economic models excluded randomness, Arthur explained how "unexpected orders, chance meetings with lawyers, managerial whims... would help determine which ones achieved early sales and, over time, which firms dominated."
As this Hindi song shows, some people believe that life is all about luck while some believe that life is all about planning. The truth is that both play a role in deciding one's life chances. The successful vastly underestimate the role that luck has played in their lives. Tom Peters, one of the authors of In Search of Excellence , writes in an article TOM PETERS'S TRUE CONFESSIONS, 'In McKinsey's world, all of life is one of two things: strategy or organization.' If everyone had the same opportunities that I had, I would not have got into IIMA.(No doubt you are muttering what Sherlock Holmes told Doctor Watson, 'Your grasp of the obvious amazes me.' )

Wednesday, April 6, 2016

Luck - II

Although both genes and environment both interact and influence behavior, there are some situations when a powerful influence from one side of the interaction can overwhelm the influence of the other. Take for instance the side of genes. Whatever splendid environment you are born in, it will not compensate for the catastrophic consequences of a genetic disease like Tay-Sacks.Conversely some environmental effect can overcome genetic influence. Even the best possible combination of genes is not going to help if you are subjected to a prolonged period of severe protein malnutrition during childhood.

Psychologists say that birth order has an effect on effort and striving - apparently, the first-born has a stronger work ethic, makes more money and achieves more conventional success than their younger siblings. In Justice, Michael Sandel says that when he asks his Harvard class how many are first born, about 75-80% raise their hands. The results have been the same every time he has held the poll.

I would have liked to conduct such a poll in the classes I studied in if I had known about it at the time. (The study is controversial and there is no scientific consensus about it.) For the record, I am first-born. Nobody can claim that he or she can influence the order in which one is born. If something as arbitrary as one's birth order has an influence on one's tendency to work hard then even the hard work one puts in is a matter of chance.

I heard a BBC podcast which suggests that social conditions a couple of generations ago could affect your health. How? The egg that formed you was formed in your mother's ovary when she was a foetus in your grandmother's womb. The health of this egg depends on your grandmother's diet. So your health depends on how women were treated in your society a couple of generations ago.          

Not only the economic capital but also the social capital of family members - the relationships that they have built over the years - aid in one's education and career.  The social capital of a plumber is less influential than that of a doctor in any part of the world so which social stratum you are born in is by no means immaterial even in the most meritocratic societies. The social and economic conditions that you find yourself in matter big-time.

In his retirement speech, Tendulkar talked of the large number of people who helped him in various ways. In the absence of such a nurturing and supportive environment he would not have achieved as much as he did. Jeb Bush, whose father and brother were US presidents and whose grandfather was a  rich Wall Street banker and a US  senator, once said about having such a family lineage, 'I think overall its a disadvantage.' Most people would give their right arm to have such a disadvantage. As Malcolm Gladwell says in Outliers:
People don't rise from nothing.  We do owe something to parentage and patronage.  The people who stand before kings may look like they did it all by themselves.But in fact they are invariably the beneficiaries of hidden advantages and extraordinary opportunities and cultural legacies that allow them to learn and work hard and make sense of the world in ways others cannot. It makes a difference where and when we grew up.  The culture we belong to and the legacies passed down by our forebears shape the patterns of our achievement in ways we cannot begin to imagine.
A report in the NYT says that a large-scale research study found that social mobility hadn’t changed much over time. When you look across centuries, at social status broadly measured — not just income and wealth, but also occupation, education and longevity — social mobility is much slower than many thought.  This is true whether you consider capitalism, democratization, mass public education, the decline of nepotism, redistributive taxation, the emancipation of women, or even, as in China, socialist revolution.

Then there are the unexpected accidents that keep happening. You may fall sick before an exam or interview. A trivial injury may turn into a life threatening condition as happened to this journalist. You may be standing on the side of the road and a vehicle may hit you. (There are maniacs on Indian roads so this is by no means rare.) There is a long running study of Harvard graduates extending over decades which shows chance events changing lives in unexpected ways.

Happy B'day dear Kesu

Hi Friends,

This is a post from Jaya. Those who are reading Kesu's blog would definitely know me (Kesu's wife). Today is Kesu's birthday  and I take this opportunity to write a few words about Kesu in this post. Firstly, wish you a very happy Birthday dear Suresh. You have always been such a wonderful life partner with whom I would share anything and everything. You are a  genius, matured, patient, loving, caring ... the list is endless... husband.  Love u lots!