His latest piece, “Why Are Harvard Graduates in the Mailroom?” is more accurately titled "In Praise of Exploitation." When you strip his argument down, it amounts to: “A lot of people choose to be exploited, and voluntarily take jobs where they are paid less than they deserve because they hope to be big winners.” As in really big winners. Davidson repeatedly compares the payoffs to various activities (working the the mail room at William Morris, being a low level drug dealers, acting, working in a law firm or investment bank) to a lottery.
The lottery analogy, which Davidson uses through the entire piece, is wonderfully, nails-on-the-chalkboard screechingly at odds with his claim: “That’s the spirit of meritocratic capitalism!” Lotteries involve random, blind draws of “lots”. Modern lotteries, the kind that plug holes in government deficits, are such astonishingly low odds affairs that they are described as “a tax on people who are bad at math.” So Davidson appears to be telling us that success in modern capitalism is painfully unlikely and pretty much random.
And there are ample proofs that meritocracy is a fantasy. A devastating 1992 paper by Patrick D. Larkey and Jonathan P. Caulkin, “All Above Average and Other Unintended Consequences of Performance Appraisal Systems,” declared that 100 years of dealing with performance review systems proved they were inherently unable to produce objective results. Among the reasons: the complexities of the boss-subordinate relationship, the fact that virtually all performance appraisals are subjective (even ones of salesmen should allow for who has better or worse territories), and that it is pretty much impossible to devise sensible ways to compare staff caliber across departments. When I was a young person on Wall Street, getting comp right was management’s most important job, and at Goldman, they spent the better part of six weeks of the year on it.
Or consider the example portrayed in Michael Lewis’ book Moneyball. The baseball industry has always measured players’ skill and achievements by a handful of well-known statistics. To make the most of a limited budget, Oakland A’s general manager Billy Beane relied on statistical analysis to sign low-salaried players that appeared to be dramatically undervalued. The result: The team, with one of baseball’s lowest payrolls, has placed first or second in its division for eight seasons running.
Remember: baseball is a business where the recruiting is unusually transparent, the basic rules have remained unchanged for decades, competitive encounters are in full view, and the incentives for success are high. This would seem to be the perfect environment for developing good rules for hiring and promotion, yet the entire industry was largely wrong.‘
And that’s before we get to the role of good old fashioned bias. A 1997 Nature paper by Christine Wenneras and Agnes Wold, “Nepotism and Gender Bias in Peer-Review,” determined that women seeking research grants need to be 2.5 times more productive than men to receive the same competence score. Similarly, Tom Ferguson has combed though the data sets underlying a recent study claiming that the executive ranks of large firmswere meritocratic, and the underrepresentation of “out groups was due to their lack of skills. Ferguson found that the distribution suggested otherwise: ethnic groups are in fact over-concentrated in a few pockets, when they should be scattered evenly if merit selection dominated.
And another part of the fantasy that Davidson and other status quo apologists exploit successfully is the desperate need to believe the system is fair. As Stanford neuroscience professor Ben Barres (who knows more than a bit about discrimination, having formerly been Barbara) noted, citing research:
When it comes to bias, it seems that the desire to believe in a meritocracy is so powerful that until a person has experienced sufficient career-harming bias themselves they simply do not believe it exists.
Another intelligence-insulting aspect of this article is how Davidson force fits all sorts of different jobs into the same simple-minded generalization. One of the reasons some career paths have extreme power law payoffs is lots of people are willing to do the work for no or little pay because it is creative and intrinsically enjoyable (at least for some people). Writing and the visual and performing arts fall into this category. By contrast, as Frank Partnoy’s book FIASCO made clear, highly paid derivative salesmen hated the work and all said they’d do anything else, including haul garbage, if they could make anything resembling the money they were earning.
Not that we should fell sorry for the aspiring partners or equivalents in accounting, consulting, investment banking, or the law that Davidson weirdly equates with drug dealers or mail room boys looking to leap into a professional role. Those jobs are all well paid to very well paid. The hours are typically exploitative, but the young’uns are also learning a trade, as well as how to manage clients, not just doing scut work. And unlike the mail runners who never get their break, the downside for people in banks or professional firms who don’t make it to the very top are usually very handsome. Indeed, a not trivial number opt out into better careers than if they had stayed with their firm and had made it to the top.
So Davidson misleads in suggesting that a normal organizational pyramid, or the more Darwinian “up or out” version of law, accounting, and consulting firms, is a “lottery” when the upside and downside payoffs of those career paths are very attractive, as contrasted with the typical payoffs of trying to be a professional performing artist (for instance, a woman I know who majored in dance and had gotten hired as a ballerina had to turn to stripping to pay off her school debts).
But there is one way in which Davidson’s lottery metaphor is apt. A 2008 study found that poor people spent a whopping 9% of their incomes on the lottery. I’ve read various theories as to why, most of them of the moralizing “aren’t they dumb/irresponsible” subtext. But as someone who once in a great while buys a lottery ticket (only when it is a rational bet after taxes, and even then, with the predictable lack of success), the explanation that seems most plausible is that the wager allows them to engage in some pleasant fantasizing, just as shelter and vacation magazines do for the more affluent (you can argue that this fantasizing comes at a high cost, but people who are poor need their pleasures too, and there are worse choices than lottery tickets).
So unintentionally, Davidson’s lottery metaphor is apt for those who aren’t on the fast track: exploiting people’s tendency to dream to get them to accept economic propositions that are hopelessly stacked against them. And his insistently cheerful tone tells us we should recognize that this is all for the best in this best of all possible worlds.
I must report that Davidson did e-mail me after one of my salvos at him, but I chose not read his message. If he would like to take issue with one of my posts, he is free to do so in my comments section. I do correct posts pronto if I have made a mistake or misconstrued an argument or data. Felix Salmon argues, and I concur, that one of the values of the blogosphere is that participants can engage in conversations in public, and it forces everyone to sharpen their discourse.