Bryan Caplan  

Pyramid Power

Big Banks... Boone Pickens Illustrates Beck...
In the latest Cato Unbound, Rod Long attacks Ayn Rand's view that actually-existing capitalism is highly meritocratic:

Rand describes a "pyramid of ability" operating within capitalism, wherein the dull masses are carried along by the intelligent and enterprising few. "The man at the top," Rand assures us, "contributes the most to all those below him," while the "man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains." Rand doesn't say that the top and the bottom always correspond to employers and employees respectively, but she clearly takes that to be the usual situation. And that simply does not correspond with the reality of most people's everyday experience.

If you've spent any time at all in the business world, you've almost certainly discovered that the reality on the ground resembles the comic-strip Dilbert a lot more than it resembles Rand's pyramid of ability. In Kevin Carson's words: as in government, so likewise in business, the "people who regulate what you do, in most cases, know less about what you're doing than you do," and businesses generally get things done only to the extent that "rules imposed by people not directly involved in the situation" are treated as "an obstacle to be routed around by the people actually doing the work." To a considerable extent, then, in the real world we see the people at the "bottom" carrying the people at the "top" rather than vice versa.

I have two conflicting reactions to Rod's observations.  I agree that the workplace often seems Dilbertian to people on the ground.  "The boss is an idiot" is one of the world's most whispered sentences.   When Arnold tells us about the great "Suit-Geek" conflict, I believe him.

Neverthless, it is very hard to reconcile Rod's story with basic economics, and there is tons of empirical evidence that Rand's right about the pyramid. 

The basic economics: If managers don't add value, why do CEOs hire them?  It's not enough to say, "Because of government regulation."  You've got to show that regulations somehow make it profitable for firms to pay large salaries to lots of workers with negative productivity.  (For my earlier criticism of Rod on this point, see here and here).  Such regulations might exist somewhere in human history, but I challenge anyone to provide big contemporary examples.

But what about the "tons of empirical evidence" that Rand's pyramid of ability is real?  The Bell Curve is a good place to start.  Intelligence is one of the strongest - if not the strongest - predictors of income, occupation, and social status.  More to the point, simple pencil-and-paper tests of intelligence are the single best predictor of independently measured job performance and trainability.  If you want to dig deeper, check out the large literature on why income runs in families.

How then can we reconcile first-hand observation with economic theory and statistical fact?  It's easier than it seems.  Lots of people think their bosses are stupid because:

1. The market doesn't measure merit perfectly, so success is partly luck.  As a result, some bosses are unimpressive.  (Though almost all of them are smarter than the average rank-and-file worker).

2. There's a big contrast effect: If you expect bosses to be in the 99th percentile of ability, but they're only in the 90th, it's natural to misperceive them as "stupid."  (Similarly, if someone scores in the 99th percentile on the SAT in math, and the 80th in English, many people will perceive him as "terrible in English.")

3. Bosses are much more visible than regular workers, so their flaws and mistakes - even if minor - are quickly noticed.  When normal people screw up, there's usually no one paying attention.

4. Perhaps most importantly, people over-rate themselves.  We like to imagine that we're so great that we intellectually tower over our so-called "superiors."  Only a small percentage of us are right.

If Rod Long's point is merely that markets would be even more meritocratic under laissez-faire, I agree.  But to deny that actually-existing capitalism is highly meriocratic is misguided.  To suggest that the pyramid of ability is actually inverted is just silly.

Comments and Sharing

COMMENTS (41 to date)
David R. Henderson writes:

Excellent post, Bryan.

Tom West writes:

5. What the boss is good at (and cares about) is *not* what the employee is good at (and cares about).

The things I value involve getting my particular job done quickly and elegantly. The boss, on the other hand, has a completely different set of factors to worry about, of which my getting the job done quickly is only one (and may be a small one).

So, it's little wonder that the employee and boss don't always see eye to eye.

Paul Zrimsek writes:

More to the point, it's idiotic to complain that you know more than your boss about a job you're doing and he's not. The job your boss is doing is... managing you. While it's not impossible that you know more than he does about that job too, it's not the way to bet.

Colin K writes:


1. Promotions are based primarily on the relative value added by each employee

2. Employees are primarily creating organizational capital rather than goods for sale

3. Measurement of organizational capital is difficult and highly subjective

THEREFORE: Promotions will flow to the employees who can most successfully inflate the value of their organizational capital

Thomas DeMeo writes:

Two points-

1. . Managing is as difficult as those above and below you make it. Many management jobs are made incredibly difficult by other people.

2. Success is getting the most out of your people, which gives everyone confidence they are carrying a lot of weight, and failure breeds disrespect. Either way, the employees often feel superior.

Greg Ransom writes:

Bryan writes:

"it is very hard to reconcile Rod's story with basic economics"

Nonsense. Not if your using sound basic economics.

Basic economics:

There is a division of knowledge, local knowledge is crucial, individuals have their own end and plans not fully knowable to anyone else, tastes differ, motivations and choices are personal and are not possessed by collective entities.

So when it comes to knowing my customers and supply the needs of my customers, and getting the most return out of my customers, the boss often has no idea what is happening on the ground, part of Rod's point. Often the ego of a boss leads him to think he understands things he doesn't get.

And CEO's and executives all the way down the line often hire in part on the basis of who they like, who they want to work with, and who is politically good for them. This compromises all sort of other evaluations of "being a good manager or executive".

And on and on. I'm just scratching the surface.

The issue here isn't really IQ.

kebko writes:

I think there is a Hansonian answer to this: Meritocracies are not so wonderful.

It's universally an accepted point to say that one favors state policies that achieve equality of opportunity. Americans share a deep-seated mythology that "All men are created equal". So, when we say that we want equality of opportunity, we all buy the lie that this means we're all equal.

But, the cold hard truth is that a meritocracy would be a highly unequal society. I will speculate that the society we have is already much more egalitarian than a pure meritocracy would be.

It's a real bummer to see others with more successful lives and to admit to yourself that much of the difference arises from your own lack of talent or discipline. I have lived with some terrible decisions & personal faults & it kills me to think of how much worse my life is as a result of them. Admitting this does not make me happy, although I like to think that it will end the end lead to a more successful life. And I'm not talking about some simple social Darwinism or IQ meter - life is more complicated than that.

People who argue that our system needs to be more merit based are arguing from a delusion which will prevent us from getting to the heart of the matter.

This reminds me of a comment I saw on another blog where a member of a minority complained that their city was full of racists because nobody would ever sit next to them on the bus. I thought, "Huh, if nobody sat next to me on the bus, I'd start to wonder if I stank." That bus rider is probably happier than I am & probably gets along with people better at cocktail parties. I don't intend to make light of discrimination here. I'm just saying that a meritocracy may or may not be 100% positive for that fella. He may be a victim. Or he may just stink.

Greg Ransom writes:

What's truly false about Rand's account is the notion that there is a single metric of "merit", a truly absurd idea.

Rod's story is of the boss being an "idiot" is compatible with all sorts of different kinds of "merit" on the part of the boss, even in terms of helping the company achieved greater profit.

Matt writes:

When talking about the top being smarter, how high up in the corporate ladder are we talking. Is it in the vast majority of cases management is better then their employees, or are we talking CEO's?

And the whole point Rod is trying to make is that Rand’s answer is that historical capitalism has been at least an approximation to ideal capitalism, and that Rod is claiming this is not true. The question neither really answer is HOW MUCH? How close does it need to be, to be a good considered a good approximation. So how close would management be in this society to that of a an ideal capitalistic society? If in only half of the cases management with at least ten subordinates has a shift in who manages whom, then the average management personal would be smarter than 95% of their subordinates, but considering only half the people would still be in management, it would be hard to say that current structure is a good approximation for an ideal capitalistic society.

Doc Merlin writes:

Management is usually better at /managing/ they aren't better at doing any specific employee's job. However, because they have power over the employees, any mistake they make is magnified, and they are harder to replace. This risk is why management is paid more than lower level employees.

Douglass Holmes writes:

Excellent post, Bryan.
I remember the old bumper-sticker that said, "If you're so smart, why ain't you rich?" I'm tempted to ask, "If managing is so easy, why aren't you a manager?" And if the answer is that the company you work for isn't smart enough to promote you, then my next question is, "If you're so smart, why don't you start your own business?"

There was a Dilbert strip in which the pointy-haired boss said, "I assume that if I don't know how to do it, it must be easy." Most employees feel that way about managing.

At the root of our belief that the market usually promotes incompetents to management is the basic anti-market bias.

Ryan Vann writes:

Greg Ransom,

Excellent postings as always. I agree with you in that merit has many forms.

Todd Kuipers writes:

Very cool post.

The idea of a pure meritocracy suffers from assymetric information - and is heavily influenced by signalling. It is difficult to determine merit due to the blurring of work boundaries between bosses and minions. It's quite possible to signal that you're much more effective at your role than you are, and if you're duplicitous, grab merit for yourself at the expense of your colleagues, minions (easier due to status) and boss (harder due to status) - meaning I disagree with Bryan's 3rd point.

I think the Randian idea of meritocracy fails because of two primary things:
- a lack of actual Randian morality (being moral in the Rand sense seems to be almost unhuman (humans being bags of chemicals and misfiring synapses), and signalling that you're virtuous when you are virtuous is difficult to differentiate between faux virtuous, leading to...)
- and like Bryan said, assymetric information - i.e. the market for merit suffers from the same EMH problems as any market.

Bryan is quite right about intelligence and reward general correlations but given that we're not merely a sum of a single intelligence metric, it's not a really defining correlation, especially when you consider the market in merit creates vacuous bubbles (e.g. Perez/Paris Hilton, Biden, Janet Napolitano, etc.).

That all said, I quite agree with Bryan's last paragraph - the usual government intervention in anything does screw up the market for merit, and a free market in merit will provide much clearer signals and information.

Thursday writes:

I think it was Brad DeLong who pointed out that the correlation between IQ and income starts to weaken considerably the higher you go. In other words, higher IQ correlates with not being poor, but doesn't have much to say about who ends up on top. The higher up you go the more of a crapshoot things are and the best man doesn't always or even usually win.

Simon Kinahan writes:

The software world is interesting here, because software engineers are usually about as intelligent as their immediate managers, and the pay differential isn't that big either. And yet "my boss is an idiot" is uttered more often in software companies than in others, I think.

Some possible reasons:

1. Often your boss just has different priorities. Developers care about the overall beauty and elegance of their code, but their managers care about shipping a functioning product. Salespeople care about their particular accounts, but their managers have to care about the cost of supporting those accounts. There are often good reasons why managers don't communicate these priorities to their subordinates - we want people to care about their particular jobs, after all, and telling them they're not that important isn't likely to help.

2. Institutional structures matter. I've seen people stuck in positions of authority where they have to do things that seem really, really stupid because they're faced with perverse incentives. I've seen organisations of very smart people fail to do what they set out to do because they never set up systems to make sure they did it and they got distracted. No-one really acted stupidly - they just collectively failed to act on what was happening.

3. Many ground level employees have trouble telling their boss why what he's doing is stupid. The relevant contextual information may be very hard to express, beyond the fact that the decision being made is wrong!

Sandre writes:

Unemployment in American Samoa and it's link to minimum wage.

Chris writes:

Keep in mind that a manager who has too much technical knowledge can be a negative as they run the risk of becoming too involved in designing the project and therefore unable to change course because they have too much personally invested in the project.

Case in point: NASA

When he was the administrator, Mike Griffin was heavily involved in the design work for the Ares rocket line to the point that it became his baby. Even after it became apparent to most that the design was becoming untenable (if not technically, then financially), Griffin staunchly defended it. The design is now all but dead, this has ended up costing NASA 5 years.

Managing and technical work are really two different skill sets and being good at one does not necessarily mean you will be good at the other.

Thomas writes:

Meritocracy is a myth. 1. Who you know >> What you know
2. What you say you are going to do >> What you actually do.

You put these two things together, and the self-righteousness of the long suffering worker is justified against the constant self promotion & cronyism that typifies workplaces.

Ass kissing and politicking is as much a skill as data entry and working an assembly line. One would be considered a productive skill, whereas the other is simply a shell game of taking and assigning blame.

One could complain, or one could accept this practice as business as usual. The will to power trumps IQ, those at the top are not the most deserving, but the most willing to do what it takes to get there. The older I get, the less I believe that your wage is linked to your marginal productivity of labor.

RL writes:

I am reminded of something I wrote a few months back on a medical blog in response to the large number of physicians who thought healthcare reform would be best managed by "letting the experts--DOCTORS--design the healthcare plan.":

There is no more reason for physicians to know how to handle the economics of healthcare (as a global matter) than there is for hospitalists [doctors that specialize in managing patients in the hospital] to know how to best build a hospital. I remember thinking, as a teenager working my first job at McDonalds, how easy my manager's job was compared to mine. He just sat a desk and shuffled papers; I was ringing up several hundred dollars an hour during the lunch rush. Yet it appears in retrospect the McDonalds' board was perhaps wise to not put me in charge. The idea that because we know how to manage patients' health problems we now how to manage healthcare suffers from similar ignorance and hubris.

At a micro level, running a business may or may not be a skill any given physician has. And even those who know how to run their business don't necessarily have any insights into how an entire industry should be run. The guys who own gas stations are not obviously the people to put in charge of "national energy policy."

Daublin writes:

Yeah, the problem is comparing the pyramid of merit with the organizational chart. Like many other responders said, higher-ups are managing, and in particular are doing something different from the lower-downs.

To compare people doing the same jobs, you have to look across organizations. If you look at it that way, then *roughly* more capable people are making more.

MBH writes:

Really? I kinda feel dirty reading that.

Uh. Where to start.

Nice strawman you created. Roderick is apparently arguing that bosses are idiots? Is that what he said? Huh. I didn't notice that.

Have you ever experienced a non-hierarchical organization? Ever?

Pyramid power. Seriously?

Alan Watson writes:

It might add some perspective to this discussion to recognize that talent and behavior are not necessarily the same. While talent might be mostly genetic and therefore constant for a given individual, behavior reflects not only talent but also the incentives the individual faces. You don't need much real world experience to notice how often an individual's behavior changes dramatically after he/she has been promoted to a new position in an organization. The pointy-haired boss in Dilbert represents the absurdity of extreme self-interest within his organization more than a mere lack of smarts. Distinguishing between talent and incentives allows us to see how Rand's pyramid can coexist with Dilbert's world, and also suggests how important it is in our increasingly bureaucratic world to pay attention to organizational incentives.

Tom Dougherty writes:

Rod Long writes, "To a considerable extent, then, in the real world we see the people at the "bottom" carrying the people at the "top" rather than vice versa."

If this were true then the proper response from those who believe this (and there are many people who do believe this) is to start their own company with a business model where the "bottom" are paid more than the "top". With the reduction in costs, due to not having to pay large salaries to upper and middle management, a company should be just as productive (or even more so without the dead weight of management) as the competition, but be much more profitable. This would allow the company to expand faster than competitors and undercut competing prices. The reason why this has not been done is not because no one has thought of this, but is because it is not true. The notion that managers don't add value is the ridiculous wet dream of closest socialists. If Rod Long were correct then someone could become fabulously wealthy using this business model! So, why are there no fabulously wealthy people using this business model? Is it because no one wants to become rich beyond their wildest dreams?


The problem I'm claiming is primarily structural: regulations, by decreasing competition, make it easier for firms to become larger, more rigid, and more hierarchical. Their becoming so is to considerable degree a consumption good for the decision-makers, one they couldn't afford in a more competitive marketplace.

To the extent that we have larger, more rigid, and more hierarchical firms, the degree to which market incentives and market information penetrate the decision-making process is accordingly reduced -- a less extreme version of what happens under socialist central planning. The ability to determine how much value managers are adding to the company is likewise reduced. So it's not so much that CEOs are deliberately hiring bad managers as that a) they're going to have a lot more trouble determining who's a bad manager, and b) given the "calculational chaos" within the large, rigid, hierarchical firm, even smart, competent people are going to be bad managers.

As a wise man once said: when the price of irrationality is low, people buy more of it. My suggested corollary is that when the price of irrationality is difficult to determine, people likewise buy more of it.

So it's not as though the people at the bottom of the pyramid are inherently more competent than those higher up (which I guess is what you meant by the pyramid of ability being "actually inverted"); they just have better information. (Though it's also true that when it's harder to tell the better from the worse managers, there will be more worse managers.)

As for IQ, I see no reason to think it corrects for separation from information; otherwise enough smart people could make state socialism work. I'm sure it does affect hirability and promotability anyway, though.

Paul Zrimsek,

The problem is that in order to know how to manage someone, you have to understand their job -- not as well as they do, but at least to a considerable degree. When a boss constantly gives an employee orders that show that the boss is radically clueless about what the employee has to do every day, I think that counts as sufficient evidence for the worker to conclude that the boss is doing a bad job.

Colin K,

"If promotions are based primarily on the relative value added by each employee" –

Yes, but that's exactly the sort of information that gets obscured by calculational chaos when firms are insulated from market signals.

Douglass Holmes,

"If you're so smart, why don't you start your own business?"

You know that government regulations make it much harder for less affluent people to start their own businesses than would be true in a freed market, right?

"At the root of our belief that the market usually promotes incompetents to management is the basic anti-market bias."

Maybe so, but what I'm arguing is that it's not the MARKET that promotes incompetents to management.

Tom Dougherty,

Same thing I said to Douglass Holmes.


"The guys who own gas stations are not obviously the people to put in charge of 'national energy policy.'"

No doubt. But as a libertarian I don't want ANYBODY "in charge" of national energy policy.

Kevin Carson writes:

Right on, Roderick.

The point is not that managers are stupid as individuals, but that they're *systematically* stupid. No matter how intelligent they are as individuals, the structure of a large, hierarchical organization makes their intelligence less usable. (Of course there may be some genuine qualitative issue as well; as Robert Shea pointed out in "Empire of the Rising Scum," large organizations tend to be dominated by those whose primary skill is political climbing.)

And the overall structure of the economy, when an industry is dominated by a handful of firms with the same pathological organizational cultures, reduces the competitive incentive to reduce irrationality.

Mupetblast writes:

You know that government regulations make it much harder for less affluent people to start their own businesses than would be true in a freed market, right?

But is it the less affluent who are likely to be intrigued by left libertarian ideas, or rather persons of middle class or higher income levels and some degree of educational credentials? I'd guess the latter. These kinds of people start businesses all the time.

Matt writes:

My guess is that if you could graph managerial ability it would look like a pyramid if you used averages. If you used each individual data point it would probably look like scatter shot.

I used to work as a baggage handler. Our supervisors and managers were rarely better at handling baggage then the rest of us were, even though helping us out was a large part of their job (even the CEO would come help load bags a couple of times a year).

But most of them were just simply more responsible than the rest of us. Some of the managers were childish, liked to bicker and borderline sexually harassed fellow employees. Having said that, if a bag went missing, they would go look for it.

hacs writes:

On bank sector in Sao Paulo, Brazil, I have seen different skills (as different goods) instead of different levels of a general kind of ability. Those different skills are distinctively rewarded and hierarchized by each company according to its organizational structure, and that structure is adapted to company purposes, needs and available technology. So, yes, Ayn Rand is right (and Dilbert too) from any fixed company standpoint (and for any organization from its point of view), but she should say "pyramid of organization-specific abilities". In other words, given an environment (any relevant parameter of an economy, country, society, etc), capitalism promotes organizational adaptation (including hierarchies of different skills), and given a set of structured organizations, capitalism promotes the best allocation of responsibilities/jobs in terms of comparative advantage of applicants. Her point of view is forged to hold capitalism as our best alternative (I agree), but she had an ideological social ordering in mind also, and specific-functional hierarchies are yielded by the interaction between capitalism and structured organizations were her individual/group status assignment functions (sorry, I cannot agree, economy and business are very important, but there are several other important variables are ignored by those specific-functional criteria of merit). So, yes, cheers for capitalism, cheers for its implicit rewarding/incentives system, but boo for a meritocracy based on specific-functional criteria only (I cannot deny that such idea is as American as an apple pie, as Max Weber has studied).

Tom Dougherty writes:

Rod Long writes, "You know that government regulations make it much harder for less affluent people to start their own businesses than would be true in a freed market, right?"

While this may be true, it is irrelevant. It is the business model that is under consideration. The business model being where the managers add less value, and are therefore paid less (or are jettisoned altogether) than the bottom rung employees. I see no reason why less affluent people who manage to start their own business despite the burdens of government regulation would be less likely to institute this business model than some other business model. Nor do I see why the less affluent, who are less capable of creating a new business, would be more attracted to this business model than the affluent, who would be more capable of creating a new business, especially since this business model would potentially offer such humongous profits.

How about a business model with no deadweight management and hiring only (or mostly) women employees, because we all know that women who are equally productive as men only earn 69% of what a man makes. With such a winning business model that is guaranteed to earn such high profits, one should not have any trouble raising sufficient capital to start such an enterprise.

DLJ Dir writes:

Wait...people still take Kevin Carson seriously?

just wandering writes:

If your job is producing Widgets, your boss should not be a superior widget-assembler; that would be a waste, and he should be the Guy at your level... making more money than you.

If he has management skills, then he only needs enough widget know-how to grade the performance of the widget makers beneath him. And those guys complaining about their own skills being "superior" to the boss's are missing the point. That base of the pyramid might be made up of incredibly bright widget craftsmen, but if none of them have any business skills, they will never form a successful organization and move a product to market.

mulp writes:

"Perhaps most importantly, people over-rate themselves."

Yeah, I think the bankers who think they deserve tens and hundreds of millions in bonuses are over-rating themselves.

Can you really argue that they created anything of value and didn't instead merely pump and dump on the way up, and maybe were on the leading edge of shorting the stuff they were pumping up and dumping. Goldman was creating securities and selling them while shorting the same securities. You can argue that the traders who figured that out deserved tens of millions in bonsuses because they figured out how to make a profit by underwriting mortgage they knew would fail and making a profit, and then making even more profits when the securities they created and knew would fail did fail.

By those standards, Bernie Madoff should not be in jail. In fact, Madoff isn't in jail for his ponzi scheme, but for his misrepresentation of what he was doing. The Goldman people put all sorts of obscure disclosures in the offerings so that if you spent a few manyears on them, you would be able to figure out they weren't worth the paper you printed them on.

Only when you argue that profit is all that matters, not what is moral, can you justify the bonuses.

It isn't a reach to say that the people who bought the goods in China that were tainted with poison in order to make it look like there was more protein present were at fault for their customers dying, or the customers who died were at fault. Buyer beware, you should assume that the seller is out to defraud you. And if you are defrauded, it is your fault, not the person committing the fraud. In fact, why not argue that if your house is broken into, it is your fault for no putting a guard on the house.

None of these people are capitalists. They do not do what a real capitalist does. A real capitalist is Warren Buffett who buys and holds for decades. The bankers are just running a gambling operation: lots of money passes through their hands and they skim off the top - they add no value, create no capital.

mulp writes:

Another perspective on the 50th anniversary of the laser.

Who deserves a few million in bonuses more, the people who invented the laser and explained how it worked so others could make new kinds of laser, or the bankers who created the several trillion in securities that are worth far less and earned billions in bonuses?

As you can't do anything today without encountering lasers, lasers are a constant positive in your daily life; are those trillions in securities having a positive impact on your life?

Pick any of hundreds of other real innovations and fruits of creativity, insight, and hard work,... Internet, web browser, email, cell phone, DTV, ....

Tracy W writes:

As someone who has recently gotten a bit more management responsibilities, I feel a lot more sympathy for managers. What they/I do is hard.

For example, you tell a person to write a summary of a complex issue and you agree with them a deadline of three days. You send them the report that they should be summarising. You ask them a day later how progress is going, they say fine. You ask them again two days later, they say fine. They don't deliver the summary on time. You ask them why not? They say they are looking for some information. You remind them that it was in the report you sent them and point out the exact section. They reply "Oh!" You ask them to summarise the section for the report pronto. Next time you check on them you find they are playing around with graph formatting and haven't done the work. This is not dealing with any resource conflicts or personality conflicts (well, not obviously), this is just getting a report summarised, with the intent of developing the employee's skills.

Now there might be some rational reason why this is happening, I might have communicated badly for example. But figuring out what I could have done better is not easy and it's not obvious. I can see I could really easily turn into a micromanager.

Sheldon Richman writes:

Roderick writes, "regulations, by decreasing competition, make it easier for firms to become larger, more rigid, and more hierarchical."

If this were not true -- if "the market" can overcome the government's obstacles and hum along as though they do not exist -- why do we complain about those obstacles? Is it only because of the moral aspect? Is there no economic critique to be made?

Joe writes:

Tracy W:

"This is not dealing with any resource conflicts or personality conflicts (well, not obviously), this is just getting a report summarised, with the intent of developing the employee's skills."

As an underling, stuff like this coming from a manager reeks of busywork. If it's not readily apparent to the employee that it's relevant in some way to their job, they're not going to have a whole lot of motivation to get it done. And saying that the intent is to "help them develop their skills" is just completely patronizing.

Trevor H writes:

As an academic, Rod's perspective may also be a little skewed. He is working closely every day with people in the 95+% of intelligence. The 95s he perceives at the bottom of intelligence may be the deans and provosts managing the 98s and 99s who are the star professors. We shouldn't be surprised by such localized inversions within a single highly specialized institution. I once managed an R&D center for a large, global company. There were more than 200 employees, the bottom of the pay scale aside from the admins had a few really junior folks under $100k per year salary. As a manager I would never assume I was the smartest person in the room.

Kevin Carson writes:

Tracy W: Now if he'd asked the guy to turn it into a PowerPoint presentation, you'd *know* it was busywork. I once spent most of a day printing out a really crappy PowerPoint slideshow on paper, making several hundred copies and stapling them together as handouts, when the substantive information could have been conveyed as a single page of bullet points.

Trevor H: But you wouldn't expect the intelligence distribution to be that way in, say, a hospital, which is where I work now. And I constantly live under the effects of decisions made by MBA types who are so much a product of their culture that they literally *cannot see* what Crosby called "the costs of low quality." They see how little staffing it's humanly possible to just barely scrape by on, and high-five each other (literally) about how much they've saved on labor costs--while completely ignoring the fact that the resulting costs from MRSA, med errors, complications, employee disgruntlement and turnover, and HORRIBLE customer word of mouth about what a squalid understaffed shithole it's become, exceed the apparent savings several times over. They've made a way of life out of what Robert Jackall called "starving" and "milking": gutting human capital, stripping assets, and hollowing out long-term productive capability in order to massage the quarterly numbers and game their own bonuses.

Also, a lot of it's structural, as Roderick said. William Waddell, a noted lean consultant who's worked with hundreds of businesses, points to the way the GAAP accounting principles developed by Norman Brown at DuPont and GM dovetail with this management culture, so that the management accounting system reinforces the incentives to starving and milking. GAAP rules treat labor hours as virtually the only direct cost, while treating management salaries as fixed or semi-fixed costs that are just part of general overhead, and thus absorbed into the unit costs of product "sold to inventory."

Trying to act intelligently in that structural environment is almost as much of an uphill swiim as being a good manager in the Soviet economy, regardless of individual intelligence.

aretae writes:

I have to end up on the side of Sheldon, Roderick, and Kevin here.

I work in private industry (Software side of Health Insurance) at this point, as a troubleshooter attached to a manager.

Regulatory systems in a corporatist system like ours favor large companies. Large companies have a structure that they need to hold together, and the costs of holding the structure together include managers. The structure wouldn't hold together without them...but the structure exists primarily due to regulatory burden. If the largeness of companies is primarily a defense against legal predation (or indeed an offensive predation), then many layers of management exist NOT to get a job done, but to defend against predation.

Is it any shock then that on-the ground workers think they know more about doing the work than the managers do? Most likely they do, or at least the top 10% do. The managers goals are NOT to get the work done efficiently, an awful lot of the time.

Matt writes:

Also if many jobs that require intelligence don't pay much, so the correlation between IQ and income is useless. The vast majority of people aren't smart enough to be a mathematician, but they almost never become rich.

Grant Gould writes:

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