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Unattractive funds managers outperform funds with attractive managers by over 2% (ssrn.com)
97 points by donsupreme 5 months ago | hide | past | favorite | 97 comments



This is Nassim Taleb's “Surgeon Paradox”: “If you're choosing between two surgeons of equal merit, choose the one who DOESN'T look the part, because they had to overcome more to get to where they are.”


This was true IMO until diversity agendas, like the ones that make it harder for an Asian student to get into med school than an African American one.

So now if you have to choose between an Asian doctor and an African American one, you'd have to be pretty foolish to pick the African American one. In the 80s, I would have totally believed the African American doctor must be amazing to make it through. Now we know he was possibly let into medschool with scores that would have gotten an Asian doctor rejected.


Yeah, and there’s at least anecdotal evidence here:

> The admission to medical school of Patrick Chavis, one of the black doctors admitted under the medical school's affirmative action program instead of Bakke, was widely praised by many notable parties, including Ted Kennedy, the New York Times, and the Nation. As an actual medical doctor, Chavis's many actions of incompetence and negligence were broad and widespread. The large number of patients that he harmed, the amount of pain and suffering that he caused, the video recordings of his many major mistakes, the huge number of malpractice lawsuits against him, and the eventual loss of his medical license, were all reported by the media.

https://en.m.wikipedia.org/wiki/Regents_of_the_University_of...


I have seen this argument against African Americans made several times (mostly by asians). As an outsider , I cant stop thinking how shallow the argument is. Here is a counter argument. First, am not American. Am from Kenya. When kids join highschool in kenya, they need to sit a nationwide exam. Total score out of 500. For kids in Nairobi and other well established cities, they will need to get at least 400 marks out of the 500 to get a spot in a national highschool (which are the top of the top public schools) while kids from “rural” and marginalised areas, the cut off point for them can be as low as 350 marks. These are the kids who have pastoralists families that probably move constantly, or stay in areas where its too hot they only attend classes for 4 hrs a day. They most likely dont have electricity, no water etc. Its therefore only fair for their cutoff point to be different from a child who grew up in the city (like me) with access to all modern day life necessities including luxuries like private tuition. Now back to America, would the same argument not be made for black Americans (or any other ethnic groups or even people from other “rural” regions that are marginalised to have their cut off point be different from people from well established regions? That’s what equality is all about. Being able to identify such disparities and create solutions as permanent solutions are sort after.


It is the opposite case here, black students in medical school are more likely from higher income families than the Asian students. So they are accepting people with more resources and lower scores. This is the problem with racial affirmative action, it takes resources from worse off kids and give them to well off kids, if it was based on family resources like in Kenya people wouldn't object as much.

First % is from upper income families, second is from lower, Asian has better representation from lower income families than any other racial group among med students.

> Asian: RI, 2.3 [21.7% vs 9.5%];

> Black: RI, 5.3 [9.1% vs 1.7%];

https://jamanetwork.com/journals/jamanetworkopen/fullarticle...


I don't really care about being "fair" to the applicant, I care about getting the most competent doctor I can. Being a doctor is position of grave responsibility, it shouldn't be a reward that we give to people who deserve it because they tried really hard and had a tough life.


Those kids who had a tough life might be super smart and fully capable of higher scores but didn't achieve them because they didn't have the time to study or were exhausted from just trying to survive. But once in the school setting and then in medical practice can thrive.

It's like trying to find the fastest sprinter using a race but some of kids are wearing heavy backpacks and some aren't. How do you find the actual fastest sprinters?


If you want to possibly argue that people from poverty need assistance, I could almost get behind that. But to make it just race based is insane because you're getting middle class African Americans taking the spots of poor Asians.


A diversity agenda is only flawed if it mindlessly picks applicants without academic and other considerations.

A 95th percentile scoring black student raised in the projects with no societal or peer pressure to succeed, could be just as successful as a 99th percentile Asian student raised in a distraction-free, parental-pressured and peer-pressured environment.

In fact, maybe the black student could be better suited to handle the stressful study and work period that medical interns go through.

And that's just the medical field. There's plenty of stories of tech companies and technologies being built by people that weren't high academic overachievers.


Or… one could just cringe and make the effort not to think any of these thoughts about people IRL. As a patient, or ever really.

There are usually plenty other criteria available to base decisions on with available medical practitioners. I find it’s usually a pretty good idea to not get smart with doctors, and I take the one that shows up.

As for medical admissions, I’ve spent a good few years working collaborating with surgeons. And good grades, like looks, are a distant starting point for such people. Not one particularly relevant to one’s ability to navigate the actual decision making in job or the long-winding process of actually getting to that point.


You do you, but when my life is on the line, I'm going to choose the person that wasn't pushed through by some quota.


Judgements about whether a doctor was pushed through by a quota at the beginning of their education based on the color of their skin - that’s a straight up racist thing to share. You simply don’t know whether someone was an A+ student at 18, or whether this made them somehow more capable at improving your outcome.

Personally, I find it much more useful to simply look up whether a doctor is recently pursuing medical publications or research in their work. That’s usually a hallmark of someone who is actually up to date about their specialty outside of daily practice. Just like a dev with an active GitHub page or side projects is better than someone who scored well on their SAT’s to get into a CS program because dad told them to.


It's not racist of me to react to a racist med school enrollment system.


Well, I only said that this was a racist thing to contribute to the conversation. It’s one thing to be privately making racist decisions (based on flawed racist logic), but it’s another to be describing them openly as the right thing to do for your health IRL.

And sorry but no, flawed institutional policies somewhere out there don’t make a racist reaction any less racist. It is what it is.


> So now if you have to choose between an Asian doctor and an African American one, you'd have to be pretty foolish to pick the African American one. In the 80s, I would have totally believed the African American doctor must be amazing to make it through. Now we know he was possibly let into medschool with scores that would have gotten an Asian doctor rejected.

I don't know if this was necessarily ever true, diversity quotas or not. It's a marketing narrative that "feels" good (which is how they get you) but I've always gotten the impression that minority candidates are more likely to take extreme risks to make a name for themselves. The west has never really valued craftsmanship as much as we value showmanship.

It was Ben Carson's "illustrious" career that put me off the idea of blindly choosing the underdog; he and Josef Mengele must have taken the same ethics class. Nobody can say shit about the black surgeon who fucks up high-risk, experimental surgeries-- after all, he had to work so hard to get to where he is.

Dr. Roxy too. I was disappointed to learn she wasn't actually a cocaine-addicted clown, but she's had her medical license revoked nonetheless.


I'm surprised you'd base a doctor's capacity to do medicine off their MCAT score. It'd be like judging a staff software engineer by their highschool GPA. If a doctor survived the rigors of medical school and the years of near-poverty (if not actual poverty) wages of residency, why would you care at all about what their initial score on a test was over 5 years ago?


If you think the affirming actions end once the admittance decision is made I have a bridge to sell you.

Holding favored minorities to lower standards has permeated every institution, including medical schools, at every level because people are afraid of being called racist.

"Racist medical school fails african americans at higher rate than asians!" would be the headline and there would be no defense the critical race theory mob would accept.


Because medical schools do everything in their power nowadays to keep someone in and get them to graduate.

You have the wrong analogy as well, MCAT is extraordinarily thorough, so instead of evaluating on someone's high school GPA, it would be like evaluating them on an all-day entrance interview on which you evaluate them on their knowledge of software engineering, hardware, various programming languages, and their libraries. And many questions from TAoCP.


There’s probably a high correlation between software engineer seniority and GPA


Heavily doubt that one.


I think the key thing you’re missing is “of equal merit” and practically speaking if you’re picking a surgeon you’re not going to be choosing between two new graduates. Let’s say your choice is between two senior consultants who have the same position, then you’re better off picking the one who least fits the bill visually.


Have there been follow up studies finding this?


https://twitter.com/eyeslasho/status/1706319646176227391

>The magnitude of Systemic Antiracism in medical school admissions: A black applicant with a 3.2–3.39 GPA and a 24–26 MCAT had almost a ten times greater chance of admission than an Asian-American with the same scores.

I don't know about studies on actual patient outcomes, but there are good data WRT admissions, which I think is relevant to OP's point about overcoming obstacles.


This says nothing at all.

The story is exactly the opposite of the one that you're telling!

We first found out that GPA and GRE scores mean nothing. Neither GPA nor GRE scores are predictive of grad school performance!

Same with LSAT. It has no predictive validity for your quality as a lawyer. Just about 0.5% of your abilities as a lawyer are related to your LAST score. (not 50%, less than 1%) https://www.alanet.org/legal-management/2023/february/column...

MCAT scores are a bit more predictive, but only in the stupidest way. Very low MCAT scores are very predictive that you will be terrible and fail out. MCAT is only predictive at the bottom, above the lowest 25% of scores, all MCAT scores are the same.

We don't have a good way of scoring people to get them into these positions. So instead of blindly following a score that we know is meaningless, we try to have some equity of opportunity in society. And, we try to make sure that people have doctors, scientists, etc. that they feel comfortable with and that represent their communities too.


Personally, I would rather have a doctor who helps me get better rather than one who represents my community. I'm not really caring about how well my "community" is represented when I'm sick or injured.

And anyway, since when does someone have to be the same race as you to be part of the same community?


> MCAT is only predictive at the bottom, above the lowest 25% of scores, all MCAT scores are the same.

And how many Asians do you think are in that quartile? So they were right, given that choice go with the Asian, thanks to affirmative action we know they are less likely to be in the bottom and therefore less likely to be terrible.


>Same with LSAT. It has no predictive validity for your quality as a lawyer. Just about 0.5% of your abilities as a lawyer are related to your LAST score. (not 50%, less than 1%)

This is a very poor source - an article from a company with no explanation of their method of determining "success" for lawyers.


> We first found out that GPA and GRE scores mean nothing. Neither GPA nor GRE scores are predictive of grad school performance!

I’m skeptical of these claims because I’ve heard similar things about the SATs, but: https://news.mit.edu/2022/stuart-schmill-sat-act-requirement...


Eh. That position is mathematically flawed in a way that is likely making you more pessimistic about tests than is deserved.

When you select a population by a criteria the selection itself eliminates the correlation.

So for example if you only accept high LSAT scores to be lawyers you should expect to find LSAT scores to be largely uncorrelated-- the correlation has already been removed. In fact, you may find it be be _inversely_ correlated because the parties with weaker scores that still made it through had other things going for them that made them successful. And this is true even if the test performance is HIGHLY predictive considering the whole population.

And this is clearly true: if nothing else LSAT tests the ability to understand written English and the kinds of basic logical reasoning that are absolutely required in the law. There are some people who do poorly at those tasks and would score very poorly at the LSAT, and would be huge liabilities if they became lawyers.

Now, perhaps those low performers would be filtered out by other criteria ultimately (say the bar exam) and so the LSAT may be redundant in that sense (except for saving huge costs and time for people who would ultimately flunk out...).

All that said, it's common for tests to get overweighed because they're the number we have. Would you prefer the lawyer that has the 5pt higher LSAT score but never worked a case like your vs one who successfully handles them all the time? Obviously the latter! but many other predictors are often not available and ones that are available are often not reducible to numbers or are situation specific.

In any case reasoning from post selected statistics has produced some disastrous decisions in business. Sadly, most people are not in the position to conduct a controlled study most of the time and so the stats you get are always tainted by post-selection effects.

I know someone whose work conducted basic coding tests on applicants. They found that scores on the test didn't predict performance (or were even somewhat anti-predictive: the people who nailed the tests were sometimes fakers who had managed to study for the test). So they eliminated it and then suffered disaster after disaster. The newer hires were generally not as good at their jobs, entirely contrary to the expectations from their prior results.


I think disputing the predictive power of things like GPA is pretty common. I'm not sure many people dispute this effect where I think downstream impacts are harder to quantify


I’ve noticed a similar effect with women in IT. I’ve worked with only a few female software engineers but all of them were above average developers. It’s such a male dominated profession that it acts as a sort of filter.


Maybe you only worked at sexist places. If you work in a place that prioritizes hiring women you get the opposite effect. I've seen both.


Both can be true.

Any organization that does zero virtue signalling but still nonetheless have women working in substantial positions strongly suggests they're genuinely an enlightened organization and/or found lots of way above average candidates somehow.

For any organization that does some amount of signalling, no strong inferences can be made on either direction.

For any organization that signals 24/7, a pretty strong inference can be made in the opposite direction.


I’ve never worked at a place that had to prioritize at all. Every company I’ve worked for was growing fast enough that hiring more people was a bottleneck and we would hire anyone who was qualified, at least for developer positions.

We do have quite a few women working for us in significant positions but female applicants for developer positions specifically are still extremely rare.


Actually, I would choose the female because she punched her way through a mess of obstacles to get where she is.

In addition, she is likely to pay fucking attention. It's well documented that female doctors tend to do things like follow checklists and prodcedure instead of just half-assing it.

Every single specialist female surgeon I have dealt with has been way above average. The male surgeons have been a mixed bag. Some good--some not so much.


I believe there are studies that show that if you are a woman patient, you do much better with a woman doctor. Iirc, the outcome doesn't matter if you are a man.


[flagged]


Sometimes, every number should come with error margin bars...


A tall person would likely have to lean over more, and on average, will tend to have bigger hands. A small, geeky-looking person, on the other hand, is likely to have smaller hands.

Why we wouldn't be using a robot for such a delicate surgery, I have no clue. Personally speaking, though, if I get brain cancer, I will not optimize for a tall surgeon.


> Good-looking managers also have greater chance of promotion and tend to move to small firms. The potential explanations for their underperformance include inadequate ability, insufficient effort, overconfidence and inefficient site visits.

This makes sense as a consequence of people's tendency to prefer attractive people, and seems related but not identical to the Peter principle. They'd tend to get responsibility unwarranted by their past performance because they're just so damned good looking!

Hmm, if this study has legs, maybe my next resume should highlight how ugly I am. And if I put a bag over my head during the interview, maybe they'll think I'm so hideous that I must truly be a genius.

* 16 years industry experience

* History of delivering blah blah

* Face looks like a mule kicked it


I believe these biases to be the case. Consider an almost opposite signal - the US court system: unattractive, men, and minorities are given longer sentences.

One risk to personal achievement is externally when too little is expected. It is especially tragic there is undiscovered, latent ability or a lack of appropriate confidence. A more ethical course is to refuse some offers and accolades, and never take things that are too easy. After adolescence, excellence must come from within regardless of difficulty level the world presents.


only if they've read and internalized this paper


I have a general philosophy that when outsourcing you should go with the company that has the crappiest web presence and least good branding because obviously, if they're still in business dispute their terrible marketing, they must be good.


Years ago I was hiring a mechanic to look at a used car. Car and him were in a city a few hours a way, so I lined him up to meet me at the dealership.

Website and reviews went back years and had good reviews (which can always be manipulated), but he was so difficult to deal with over the phone. Was polite, but could not give me definitive answers even when it came to payments. i.e. I told him I could pay him cash or credit and it came to this 5-minute back-and-forth where he would not just tell me what he wanted.

Before I hung up on him, I realized if he has been in business this long he's got to be great at what he does because he is a terrible business-man.

I think I was correct. Guy put the car through its paces, checked everything under-the-hood, did the weirdest test drive I've ever experienced, and wrote up a thorough report. Even the sales-guy was like, where the hell did you find this guy (in an impressed way)?!?

7-years later and he was 95% spot on about everything...one thing he thought I would have to replace ended up being an easy fix instead.


This is absolutely true with trades. If you're hiring a roofer or whatever that has a great website, they will be the worst. The good ones have a backlog and no need to waste money on a site or other advertising. Essentially it's sales led vs product led.

True also for e.g. beer. For a given price point, the one that advertised the most (Stella for example) put the money there instead of quality.


That sword cuts both ways. A business that manages all aspects of its business properly, including web presence, outreach and customer service, may signify of a higher quality of work.


its a version of https://en.wikipedia.org/wiki/Goodhart%27s_law

the metric is of a good site or a poor site being a proxy for the quality of the service or product.

As soon as this metric becomes common enough, it gets gamed, and thus fails as a good metric.


I just had this experience with dbrand vs sopiguard. The former has great packaging but their product (and even their shipping) has gotten so poor…when you contact them they immediately take a defensive position and ask for more money to fix anything. Sopiguard on the other hand has bare minimum packaging and their product is good enough that I don’t know what their CS is like.

Oh, and for all their pretty prints, dbrand doesn’t put the name of what you actually got on the package, so you have no way to confirm if it’s a poor cut or a shipping error (in case of a MacBook skin).

Their subreddit is littered with these complaints.


Doesn't seem to be mentioned in any other comments or the paper itself, but this is Berkson's paradox.

https://en.wikipedia.org/wiki/Berkson's_paradox


I don’t have access to the paper. I wouldn’t be surprised if they didn’t account for such sampling bias effects. Hope they did though (for science’s sake!).


You're saying that unattractive, unperformant fund managers have nothing to recommend them, and so that makes the correlation negative because they're censored from the sample? Otherwise it would be roughly flat, if they didn't let the unattractive bad managers go?

Could be. But then, it's still a reasonable heuristic, because you might find that unattractive managers are uniformly pretty good or better, and attractive ones are 50-50. The best manager might be one of the really really good looking ones, but overall there is less selection pressure on attractive managers with respect to performance. (Halo effect?)


Yeah exactly. And sorry I wasn't trying to disprove the study or anything, just providing the name of one of the effects they're describing.


"Utilizing the state-of-art deep learning technique to quantify facial attractiveness" we're really there


Forget the research, release this as an app lol


Couldn't this just be statistical noise? 2% isn't a huge difference, and if you partition stock funds into two arbitrary groups it's almost certain that one will on average perform better than the other, but not by a lot. The next question to ask should be how much better are stock managers who have an odd number of hairs on their head, compared to those who have an even number.


> 2% isn't a huge difference

2% per annum is a spectacular difference, compounded. Careers and fortunes are made of that.


If you collect enough data over a long enough time period, it’s absolutely possible to see a 2% uplift and it be statistically significant.


If you look at the abstract it's 2% per annum, which is an absolutely massive difference in terms of ROI.


So what's the actual relative difference? The absolute difference is completely useless in this context.


Absolute or relative? Login wall to get past the abstract.


This is China's mutual fund market, where reliable numbers about business financials are hard to come by.


Hard to come by? What do you mean by that? The financials are readily available. So you must be under the impression that it's an auditing free for all?

Do you actually have first hand experience with this because it doesn't match mine.


There’s edge cases though, I run a fund and we’re one of the top perf… oh… oh no.


Is there somewhere I can opt-in to be worse at investing, in exchange for doing much better on dating apps?


Yeah, get a sex change.


No comment on the other half but why would that make you worse at investing?


Can you expand on this?


OPs name is Neil, so I assume he's a man. The number of men per women on dating sites is very high but even if it wasn't, women are far pickier than men. As a result, almost all women have hundreds of likes and tens of matches for every one a guy has.


Because it’s almost Christmas, a related joke from Warren Buffett:

"I heard they called off the Wall Street Christmas pageant because they couldn’t find three wise men"

The point being that most fund managers do not outperform the index, so 2% more or less isn’t that important.


Umm, fun joke, but 2% over- or under-performance is HUGE, especially compounded over years.

It is the reason behind the common recommendation to buy only low-load or no-load funds; because a 1% or 2% load vs a zero or 0.1% load is almost impossible to overcome — over time, the no-/low-load funds will win.


The comment wasn’t that 2% doesn’t matter. It was that even with the 2% from your ugly fund manager you should still just buy index funds


The average fund manager does not underperform by more than 2%.


The incentive for fund managers is to make as much profit as possible and not care much about losses. If you take into account that fund managers typically blow up every 10 or so years, then they do underperform by more than 2%. Read Taleb's books for more information.


The average includes the over performers


after fees. most managers don’t outperform after fees


Plus a lot funds aren't trying to beat the market but instead reduce variance.



A good maxim is to employ people who are hired and promoted for their ability and not for extraneous reasons.


Red pill: people would rather surround themselves with attractive people and pay the 2% tax than be more successful with a team of Quasimodos.


I bet the second order effect of being surrounded by pretty people generally leads to better outcomes. In the surgeon's paradox you actually care about the raw skill of the individual and nothing else. If whatever you're trying to do involves any sort of interpersonal interaction, you're gonna make the 2% up and then some.


> If whatever you're trying to do involves any sort of interpersonal interaction, you're gonna make the 2% up and then some.

No, your attractive colleagues are gonna make up that 2% and then some, not you. All these attractive fund managers got more funding, more promotions, better salaries etc according to the study, but they did a way worse jobs.

Their super power is that they make others pay for their success, they don't create the success themselves. The unattractive people however do help make other successful, that is what the 2% extra return per annum shows.

If you need people to do sales, then yeah hire an attractive person and give them commission, that way it works for you. But for most other jobs their success comes from manipulating you, and then their attractiveness works against you more than it helps.


Sure being attractive helps the attractive person more than anyone else, but I think there's enough surface area + network effects that a company full of attractive people will generally outperform a company of unattractive people of the same skill? For example while I'm sure I'd pretend it wasn't something I'm considering, given two similarly attractive offers and one very attractive interviewer I'd be foolish to consider myself unentangled in making that decision, try as I might.


it's certainly true that attractiveness is part of being a prostitute but outside of vocations where attractiveness is built into the work itself I don't think what you said actually applies.


Are you kidding me? Being attractive is like playing life on easymode! It's a bonus to every interaction you have in life, have you never had to interview for a job?


It gives you an advantage, so does being tall, having a deep voice, being confident, etc.

The entire point is that if you're successful without these advantages you're probably better than someone perceived to be as good but with the advantages.

We've all worked for and with unattractive people.


> being tall, having a deep voice, being confident

these are subcategories of being attractive, or entangled dimensions at the very least

> if you're successful without these advantages you're probably better

marginally better at the specific task at hand, which in most professions can be counterbalanced by being attractive

for example take two engineers, they have equal interpersonal skills but one is more skilled and less attractive than the other. The less skilled engineer may still have higher throughput as a result being better able to manage up, despite having the same interpersonal skills, simply because of their attractiveness bonus. I think you're really underestimating the effect size, I think it's large enough to be significant in most work.


> these are subcategories of being attractive, or entangled dimensions at the very least

absolutely not true, they're often about being dominant or authoritative. phone work is a perfect example where people trust you more if you have a deeper voice because you're seen as more authoritative.

Men with hair are considered more attractive, balding men are considered more authoritative because most men in positions of authority are older and balding.

Here, let me reply to your made-up situation with my own made-up situation.

What if one engineer was good looking and gay and slept his way to the top and another engineer was ugly but good.

who will continue rising faster? The gay slut, duh. therefore everyone should endeavor to be a gay slut despite _THIS CONVERSATION_ being about engineering skill.


It could definitely be applicable when trying to convince people to invest in your fund!


I'd rather be killing it with hard work of the yeoman pirates of the Crimson Permanent Assurance to prove a point that they don't have to be legacy Harvard admits/underwear models to grind up the competition as a seasoning for breakfast, lunch, and dinner. Bring me your reformed ex-cons, fugly seasoned secretaries, and the technically disabled to mop the floor with the Instagram Fiji, duckface and plastic surgery selfie crowd.


Why would that when you’re picking someone to manage your money? You’re hiring a fund manager, not a personal trainer.


> A good maxim is to employ people who are hired and promoted for their ability and not for extraneous reasons

More specifically, identify which attributes your peers select against for no good reason and chase those.


link to non paywalled version of this https://d1e00ek4ebabms.cloudfront.net/production/uploaded-fi...

this paper also defines good looking and how to measure it with machine learning algorithms. given that look is highly subjective, any findings based on that is not very useful


2% is huge.

Is there a non-paywalled copy of this?


Is it 2% or 2 percentage points?

Like, if the attractive fund manager gets a 4% ROI, is the unattractive one getting 6% or 4.08% (0.08 is 2% of 4%).


"2% per annum", per the abstract, so the ugly manager returns 6%. I agree the effect seems too large to be believable.


Generally speaking, in finance, if you mean the former you'd say "by 200 basis points" in order to disambiguate.






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