“Consider the case of Acme Corp., a property development firm in a small town called Nepotsville. The unwritten rule of doing business in Nepotsville is that companies are expected to hire the city council’s friends and family members. Companies that make these strategic hires end up getting their permits approved and winning contracts from the city. Meanwhile, companies that “refuse to play ball” find themselves getting sued, smeared in the local papers, and shut out of new business.
In this environment, Acme faces two kinds of incentives, one pragmatic and one political. First, like any business, it needs to complete projects on time and under budget. And in order to do that, it needs to act like a meritocracy, i.e., by hiring qualified workers, monitoring their performance, and firing those who don’t pull their weight. But at the same time, Acme also needs to appease the city council. And thus it needs to engage in a little cronyism, i.e., by hiring workers who happen to be well-connected to the city council (even if they’re unqualified) and preventing those crony workers from being fired (even when they do shoddy work).
Suppose Acme has just decided to hire the mayor’s nephew Robert as a business analyst.[3] Robert isn’t even remotely qualified for the role, but it’s nevertheless in Acme’s interests to hire him. He’ll “earn his keep” not by doing good work, but by keeping the mayor off the company’s back.
Now suppose we were to check in on Robert six months later. If we didn’t already know he was a crony, we might easily mistake him for a regular employee. We’d find him making spreadsheets, attending meetings, drawing a salary: all the things employees do. But if we look carefully enough — not at Robert per se, but at the way the company treats him — we’re liable to notice something fishy. He’s terrible at his job, and yet he isn’t fired. Everyone cuts him slack and treats him with kid gloves. The boss tolerates his mistakes and even works overtime to compensate for them. God knows, maybe he’s even promoted.
Clearly, Robert is a different kind of employee, a different breed. The way he moves through the company is strange as if he’s governed by different rules, measured by a different yardstick. He’s in the meritocracy, but not of the meritocracy.
As Steven Pinker says, “People are embraced or condemned according to their beliefs, so one function of the mind may be to hold beliefs that bring the belief-holder the greatest number of allies, protectors, or disciples, rather than beliefs that are most likely to be true.”
In other words, just like Acme, the human brain has to strike an awkward balance between two different reward systems:
To what extent when you hire someone to look after your money, are you focused on meritocracy or are there other factors at work, which over time, compromise your end results?
Food for thought.
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