Prompted by the example of Britain’s recent Cabinet reshuffle one of my favourite bloggers presents eight mechanisms through which, sometimes, organizations and markets can actually favour incompetence.
1. The wet bed. If a man has pissed the bed, you don’t ask someone else to sleep in it. …
2. A disposition effect. … Just as stock market investors tend to hold onto bad stocks, because of their refusal to admit error, so employers hang onto bad staff.
3. Noise vs signal. In many contexts, feedback about performance is noisy. …
4. The devil you know. In many jobs, a worker’s ability can only be assessed after he has done it. … mechanisms 2 and 3 above suggest that the bar for mediocrity might be set so low as to allow idiots to thrive.
5. Survival of the unfittest. Bjorn-Christopher Witte describes how, sometimes, competition between fund managers can encourage reckless risk-taking with the result that lucky chancers rather than the genuinely skilled will thrive. …
6. Desperation. If people are desperate for a very high pay-off, they’ll be attracted to incompetents and fraudsters, as only these are stupid or criminal enough to offer such rewards. As Laurie has said, “sometimes when you’re dying of thirst, you have to drink the Kool-Aid.” This is why con-artists often prey upon the terminally ill or bereaved. But it also lies behind what I’ve called the Bonnie Tyler syndrome – the urge (often on the left) for a great hero.
7. Product differentiation. In a wonderful paper (pdf) on the persistence of the market for quack medicines in the 19th century, Werner Troesken points out that the manufacturers of such remedies spent fortunes on advertising and product differentiation. In this way, the failure of one medicine did not discredit the industry, but merely shifted demand to other quacks. ,,,
8. Like hires like. … The upshot of this … is that organizations can eventually be run by second-rate MBAs whilst technical skills are completely weeded out. Joao Ricardo Faria shows (pdf) that this sort of mechanism can generate the Dilbert principle.
From Wikipedia: The Dilbert principle refers to a 1990s theory by Dilbert cartoonist Scott Adams stating that companies tend to systematically promote their least-competent employees to management (generally middle management), in order to limit the amount of damage they are capable of doing. In the Dilbert strip of February 5, 1995, Dogbert says that “leadership is nature’s way of removing morons from the productive flow”. Adams himself explained, I wrote The Dilbert Principle around the concept that in many cases the least competent, least smart people are promoted, simply because they’re the ones you don’t want doing actual work. You want them ordering the doughnuts and yelling at people for not doing their assignments—you know, the easy work. Your heart surgeons and your computer programmers—your smart people—aren’t in management. That principle was literally happening everywhere.