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Book 6: Deeper into Agency

Chapter 9 Surgeons Should Not Look Like Surgeons

Literature doesn’t look like literature—Donaldo hiring practitioners—The glory of bureaucracy—Teach a professor how to deadlift—Looking the part

LOOKING THE PART

Say you had the choice between two surgeons of similar rank in the same department in some hospital. The first is highly refined in appearance; he wears silver-rimmed glasses, has a thin build, delicate hands, measured speech, and elegant gestures. His hair is silver and well combed. He is the person you would put in a movie if you needed to impersonate a surgeon. His office prominently boasts Ivy League diplomas, both for his undergraduate and medical schools.

The second one looks like a butcher; he is overweight, with large hands, uncouth speech, and an unkempt appearance. His shirt is dangling from the back. No known tailor on the East Coast of the U.S. is capable of making his shirt button at the neck. He speaks unapologetically with a strong New Yawk accent, as if he wasn’t aware of it. He even has a gold tooth showing when he opens his mouth. The absence of diplomas on the wall hints at the lack of pride in his education: he perhaps went to some local college. In a movie, you would expect him to impersonate a retired bodyguard for a junior congressman, or a third-generation cook in a New Jersey cafeteria.

Now if I had to pick, I would overcome my sucker-proneness and take the butcher any minute. Even more: I would seek the butcher as a third option if my choice was between two doctors who looked like doctors. Why? Simply the one who doesn’t look the part, conditional on having made a (sort of) successful career in his profession, had to have much to overcome in terms of perception. And if we are lucky enough to have people who do not look the part, it is thanks to the presence of some skin in the game, the contact with reality that filters out incompetence, as reality is blind to looks.

When results come from dealing directly with reality rather than through the agency of commentators, image matters less, even if it correlates to skills. But image matters quite a bit when there is hierarchy and standardized “job evaluation.” Consider the chief executive officers of corporations: they don’t just look the part, they even look the same. And, worse, when you listen to them talk, they sound the same, down to the same vocabulary and metaphors. But that’s their job: as I will keep reminding the reader, counter to the common belief, executives are different from entrepreneurs and are supposed to look like actors.

Now there may be some correlation between looks and skills (someone who looks athletic is likely to be athletic), but, conditional on having had some success in spite of not looking the part, it is potent, even crucial, information.

So it becomes no wonder that the job of chief executive of the country was once filled by a former actor, Ronald Reagan. Actually, the best actor is the one nobody realizes is an actor: a closer look at Barack Obama shows that he was even more of an actor: a fancy Ivy League education combined with a liberal reputation is compelling as an image builder.

Much has been written about the millionaire next door: the person who is actually rich, on balance, but doesn’t look like the person you would expect to be rich, and vice versa. About every private banker is taught to not be fooled by the looks of the client and avoid chasing Ferrari owners at country clubs. As I am writing these lines, a neighbor in my ancestral village (and like almost everyone there, a remote relative), who led a modest but comfortable life, ate food he grew by himself, drank his own pastis (arak), that sort of thing, left an estate of a hundred million dollars, a hundred times what one would have expected him to leave.

So the next time you randomly pick a novel, avoid the one with the author photo representing a pensive man with an ascot standing in front of wall-to-wall bookshelves.

By the same reasoning, and flipping the arguments, skilled thieves at large should not look like thieves. Those who do are more likely to be in jail.

Next, we will get deeper into the following:

In any type of activity or business divorced from the direct filter of skin in the game, the great majority of people know the jargon, play the part, and are intimate with the cosmetic details, but are clueless about the subject.

THE GREEN LUMBER FALLACY

The idea of this chapter is Lindy-compatible. Don’t think that beautiful apples taste better, goes the Latin saying.*1 This is a subtler version of the common phrase “all that glitters is not gold”—something it has taken consumers half a century to figure out; even then, as they have been continuously fooled by the aesthetics of produce.

An expert rule in my business is to never hire a well-dressed trader. But it goes beyond:

Hire the successful trader, conditional on a solid track record, whose details you can understand the least.

Not the most: the least. Why so?

I’ve introduced this point in Antifragile, where I called it the green lumber fallacy. A fellow made a fortune in green lumber without knowing what appears to be essential details about the product he traded—he wasn’t aware that green lumber stood for freshly cut wood, not lumber that was painted green. Meanwhile, by contrast, the person who related the story went bankrupt while knowing every intimate detail about the green lumber. The fallacy is that what one may need to know in the real world does not necessarily match what one can perceive through intellect: it doesn’t mean that details are not relevant, only that those we tend (IYI-style) to believe are important can distract us from more central attributes of the price mechanism.

In any activity, hidden details are only revealed via Lindy.

Another aspect:

What can be phrased and expressed in a clear narrative that convinces suckers will be a sucker trap.

My friend Terry B., who taught an investment class, invited two speakers. One looked the part of the investment manager, down to a tee: tailored clothes, expensive watch, shiny shoes, and clarity of exposition. He also talked big, projecting the type of confidence you would desire in an executive. The second looked closer to our butcher-surgeon and was totally incomprehensible; he even gave the impression that he was confused. Now, when Terry asked the students which of the two they believed was more successful, they didn’t even get close. The first, not unexpectedly, was in the equivalent of the soup kitchen of that business; the second was at least a centimillionaire.

The late Jimmy Powers, a die-hard New York Irishman with whom I worked in an investment bank early in my trading career, was successful in spite of being a college dropout, with the background of a minor Brooklyn street gangster. He would discuss our trading activities in meetings with such sentences as: “We did this and then did that, badaboom, badabing, and then it was all groovy,” to an audience of extremely befuddled executives who didn’t mind not understanding what he was talking about, so long as our department was profitable. Remarkably, after a while, I learned to effortlessly understand what Jimmy meant. I also learned, in my early twenties, that the people you understand most easily were necessarily the bull***tters.

BEST-DRESSED BUSINESS PLAN

Literature should not look like literature. The author Georges Simenon worked as a teenager in journalism as an assistant to the famous French writer Colette; she taught him to resist the idea of putting imperfect subjunctives and references to zephyrs, rhododendrons, and firmaments in his text—the kind of stuff one does when waxing literary. Simenon took this advice to the extreme: his style is similar to that of, say, Graham Greene; it is stripped to the core, and as a result, words do not stand in the way of conveying atmosphere—you feel wetness penetrating your shoes just reading his accounts of commissar Maigret spending endless hours in the Parisian rain; it is as if his central character is the background.

Likewise, the illusion prevails that businesses work via business plans and science via funding. This is strictly not true: a business plan is a useful narrative for those who want to convince a sucker. It works because, as I said in Prologue 2, firms in the entrepreneurship business make most of their money packaging companies and selling them; it is not easy to sell without some strong narrative. But for a real business (as opposed to a fund-raising scheme), something that should survive on its own, business plans and funding work backward. At the time of writing, most big recent successes (Microsoft, Apple, Facebook, Google) were started by people with skin and soul in the game and grew organically—if they had recourse to funding, it was to expand or allow the managers to cash out; funding was not the prime source of creation. You don’t create a firm by creating a firm; nor do you do science by doing science.

A BISHOP FOR HALLOWEEN

Which brings me back to social science. I have in many instances quickly jotted down ideas on a piece of paper, along with mathematical proofs, and posted them somewhere, planning to get them published. No fluff or the ideas-free verbose circularity of social science papers. In some fake fields like economics, ritualistic and dominated by citation rings, I discovered that everything is in the presentation. So the criticism I’ve received has never been about the content, but rather the looks. There is a certain language one needs to learn through a long investment, and papers are just iterations around that language.

Never hire an academic unless his function is to partake of the rituals of writing papers or taking exams.

Which brings us to the attributes of scientism. For it is not just some presentation that matters to these idiots. It is unnecessary complication.

But there is a logic behind these academic complications and rituals. Did you ever wonder why a bishop is dressed for Halloween?

Mediterranean societies are traditionally ones in which the highest-ranking person is the one with the most skin in the game. And if anything characterizes today’s America, it is economic risk taking, thanks to a happy transfer of martial values to business and commerce in Anglo-Saxon society—remarkably, traditional Arabic culture also puts the same emphasis on the honor of economic risk-taking. But history shows that there were—and still are—societies in which the intellectual was at the top. The Hindus held the Brahman to be first in the hierarchy, the Celts had the druids (so do their Druze possible-cousins), the Egyptians had their scribes, and the Chinese had for a relatively brief time the scholar. Let me add postwar France. You can notice a remarkable similarity to the way these intellectuals held power and separated themselves from the rest: through complex, extremely elaborate rituals, mysteries that stay within the caste, and an overriding focus on the cosmetic.

Even within the “normal” warrior-run or doer-run societies, the class of intellectuals is all about rituals: without pomp and ceremony, the intellectual is just a talker, that is, pretty much nothing. Consider the bishop in my parts, the Greek-Orthodox church: it’s a show of dignity. A bishop on rollerblades would no longer be a bishop. There is nothing wrong with the decorative if it remains what it is, decorative, as remains true today. However, science and business must not be decorative.

—

Next, we examine the following points:

Just as the slick fellow in a Ferrari looks richer than the rumpled centimillionaire, scientism looks more scientific than real science.

True intellect should not appear to be intellectual.

THE GORDIAN KNOT

Never pay for complexity of presentation when all you need is results.

Alexander the Magnus was once called to solve the following challenge in the Phrygian city of Gordium (as usual with Greek stories, in modern-day Turkey). When he entered Gordium, he found an old wagon, its yoke tied with a multitude of knots, all so tightly entangled that it was impossible to figure out how they were fastened. An oracle had declared that he who would untie the knot would rule all of what was then called “Asia,” that is, Asia Minor, the Levant, and the Middle East.

After wrestling with the knot, the Magnus drew back from the lump of gnarled ropes, then made a proclamation that it didn’t matter for the prophecy how the tangle was to be unraveled. He then drew his sword and, with a single stroke, cut the knot in half.

No “successful” academic could ever afford to follow such a policy. And no Intellectual Yet Idiot. It took medicine a long time to realize that when a patient shows up with a headache, it is much better to give him aspirin or recommend a good night’s sleep than do brain surgery, although the latter appears to be more “scientific.” But most “consultants” and others paid by the hour are not there yet.

OVERINTELLECTUALIZATION OF LIFE

The researchers Gerd Gigerenzer and Henry Brighton contrast the approaches of the “rationalistic” school (in quotation marks, as there is little that is rational in these rationalists) and that of the heuristic one, in the following example on how a baseball player catches the ball by Richard Dawkins: Richard Dawkins (…) argues that “He behaves as if he had solved a set of differential equations in predicting the trajectory of the ball. At some subconscious level, something functionally equivalent to the mathematical calculations is going on.” (…) Instead, experiments have shown that players rely on several heuristics. The gaze heuristic is the simplest one and works if the ball is already high up in the air: Fix your gaze on the ball, start running, and adjust your running speed so that the angle of gaze remains constant.

This error by the science writer Richard Dawkins generalizes to, simply, overintellectualizing humans in their responses to all manner of natural phenomena, rather than accepting the role of a collection of mental heuristics used for specific purposes. The baseball player has no clue about the exact heuristic, but he goes with it—otherwise he would lose the game to another, nonintellectualizing, competitor. Likewise, as we will see in Chapter 18, religious “beliefs” are simply mental heuristics that solve a collection of problems—without the agent really knowing how. Solving equations in order to make a decision isn’t a skill we humans can aspire to have—it is computationally impossible. What we can rationally do is neutralize some harmful aspects of these heuristics, defang them so to speak.

ANOTHER BUSINESS OF INTERVENTION

People who have always operated without skin in the game (or without their skin in the right game) seek the complicated and centralized, and avoid the simple like the plague. Practitioners, on the other hand, have opposite instincts, looking for the simplest heuristics. Some rules: People who are bred, selected, and compensated to find complicated solutions do not have an incentive to implement simplified ones.

And it gets more complicated as the remedy has itself a skin-in-the-game problem.

This is particularly acute in the meta-problem, when the solution is about solving this very problem.

In other words, many problems in society come from the interventions of people who sell complicated solutions because that’s what their position and training invite them to do. There is absolutely no gain for someone in such a position to propose something simple: you are rewarded for perception, not results. Meanwhile, they pay no price for the side effects that grow nonlinearly with such complications.

This also holds true when it comes to solutions that are profitable to technologists.

GOLD AND RICE

Now, indeed, we know by instinct that brain surgery is not more “scientific” than aspirin, any more than flying the forty or so miles between JFK and Newark airports represent “efficiency,” although there is more technology involved. But we don’t easily translate this to other domains and remain victims of scientism, which is to science what a Ponzi scheme is to investment, or what advertisement or propaganda are to genuine scientific communication. You magnify the cosmetic attributes.

Recall the genetic modifications of Book 3 (and the smear campaign of Chapter 4). Let us consider the story of the genetically modified Golden Rice. There has been a problem of malnutrition and nutrient deficiency in many developing countries, which my collaborators Yaneer Bar-Yam and Joe Norman attribute to a simple and very straightforward transportation issue. Simply, we waste more than a third of our food supply, and the gains from simple improvement in distribution would far outweigh those from modification of supply. Simply consider that close to 80 or 85 percent of the cost of a tomato can be attributed to transportation, storage, and waste (unsold inventories), rather than the cost at the farmer level. So visibly our efforts should be on low-tech distribution.

Now the “techies” saw an angle of intervention. First, you show pictures of starving children to elicit sympathy and prevent further discussion—anyone who argues in the presence of dying children is a heartless ahole. Second, you make it look like any critic of your method is arguing against saving the children. Third, you propose some scientific-looking technique that is lucrative to you and, should it cause a catastrophe or blight, insulates you from the long-term effects. Fourth, you enlist journalists and useful idiots, people who hate things that appear “unscientific” in their unscientific eyes. Fifth, you create a smear campaign to harm the reputations of researchers who, not having f* you money, are very vulnerable to the slightest blemish to their reputations.

The technique in question consists in genetically modifying rice to have the grains include vitamins. My colleagues and I made an effort to show the following, which is a criticism of the method in general. First, transgenics, that is the type of genetic modifications thus obtained, was not analytically in the same category as the crossbreeding of plants and animals that have characterized human activities since husbandry—say, potatoes or mandarin oranges. We skipped complexity classes, and the effects on the environment are not foreseeable—nobody studied the interactions. Recall that fragility is in the dosage: falling from the 20th floor is not in the same risk category as falling from your chair. We even showed that there was a patent increase in systemic risk. Second, there was no proper risk study, and the statistical methods in the papers in support of the argument were flawed. Third, we invoked the principle of simplicity, which was called antiscience. Why don’t we give these people rice and vitamins separately? After all, we don’t have genetically modified coffee that has milk with it. Fourth, we were able to show that GMOs brought a bevy of hidden risk to the environment, because of the higher use of pesticide, which kills the microbiome (that is, the bacteria and other life in the soil).

I realized soon after that, owing to the minority rule, there was no point continuing. As I said in Book 3, GMOs lost simply because a minority of intelligent and intransigent people stood against them.

THE COMPENSATION

Simply, the minute one is judged by others rather than by reality, things become warped as follows. Firms that haven’t gone bankrupt yet have something called personnel departments. So there are metrics used and “evaluation forms” to fill.

The minute one has evaluation forms, distortions occur. Recall that in The Black Swan I had to fill my evaluation form asking for the percentage of profitable days, encouraging traders to make steady money at the expense of hidden risks of Black Swans, consequential losses. Russian Roulette allows you to make money five times out of six. This has bankrupted banks, as banks lose less than one in one hundred quarters, but then they lose more than they ever made. My declared approach was to try to make money infrequently. I tore the evaluation form in front of the big boss and they left me alone.

Now the mere fact that an evaluation causes you to be judged not by the end results, but by some intermediary metric that invites you to look sophisticated, brings some distortions.

EDUCATION AS LUXURY GOOD

Ivy League universities are becoming in the eyes of the new Asian upper class the ultimate status luxury good. Harvard is like a Vuitton bag and a Cartier watch. It is a huge drag on the middle class, who have been plowing an increased share of their savings into educational institutions, transferring their money to bureaucrats, real estate developers, tenured professors of some discipline that would not otherwise exist (gender studies, comparative literature, or international economics), and other parasites. In the United States, we have a buildup of student loans that automatically transfer to these rent extractors. In a way it is no different from racketeering: one needs a decent university “name” to get ahead in life. But we have evidence that collectively society doesn’t advance with organized education, rather the reverse: the level of (formal) education in a country is the result of wealth.

The same argument applies to biographies of scientists and mathematicians written by science journalists—or professional biographers. They will find some narrative and, worse, put scientists on pedestals.

A BS DETECTION HEURISTIC

The heuristic here would be to use education in reverse: hire, conditional on an equal set of skills, the person with the least label-oriented education. It means that the person had to succeed in spite of the credentialization of his competitors and overcome more serious hurdles. In addition, people who didn’t go to Harvard are easier to deal with in real life.

You can tell if a discipline is BS if the degree depends severely on the prestige of the school granting it. I remember when I applied to MBA programs being told that anything outside the top ten or twenty would be a waste of time. On the other hand a degree in mathematics is much less dependent on the school (conditional on being above a certain level, so the heuristic would apply to the difference between top ten and top two thousand schools).

The same applies to research papers. In math and physics, a result posted on the repository site arXiv (with a minimum hurdle) is fine. In low-quality fields like academic finance (where papers are usually some form of complicated storytelling), the “prestige” of the journal is the sole criterion.

REAL GYMS DON’T LOOK LIKE GYMS

This education labeling provides a lot of cosmetic things but misses something essential about antifragility and true learning, reminiscent of gyms. People are impressed with expensive equipment—fancy, complicated, multicolored—meant to look as if it belonged on a spaceship. Things appear maximally sophisticated and scientific—but remember that what looks scientific is usually scientism, not science. As with label universities, you pay quite a bit of money to join, largely for the benefit of the real estate developer. Yet people into strength training (those who are actually strong across many facets of real life) know that users of these machines gain no strength beyond an initial phase. By having recourse to complicated equipment that typically targets very few muscles, regular users will eventually be pear-shaping and growing weaker over time, with skills that do not transfer outside of the very machine that they trained on. The equipment may have some use in a hospital or a rehabilitation program, but that’s about it. On the other hand, the simpler barbell (a metal bar with two weights on both ends) is the only standard piece of equipment that gets you to recruit your entire body for exercises—and it is the simplest and cheapest to get. All you need to learn are the safety skills to move off the floor at your maximum while avoiding injury. Lindy again: weight lifters have known the phenomenology for at least two and a half millennia.

All you need are shoes to run outside when you can (and perhaps some pants that don’t make you look ridiculous), and a barbell with weights. As I am writing these lines I am checking the brochure of a fancy hotel where I will be spending the next two days. The brochure was put together by some MBA: it is glossy, shows all the machines and the jars of the color-rich juices to “improve” your health. They even have a swimming pool; but no barbell.

And if gyms should not look like gyms, exercise should not look like exercise. Most gains in physical strength come from working the tails of the distribution, close to your limit.

NEXT

This chapter managed to mix weight lifting and fundamental research under the single argument that, while the presence of skin in the game does away with the cosmetic, its absence causes multiplicative nonsense. Next, let us consider the divergence of interest between you and yourself when you become rich.