Everything Is Obvious_ _Once You Know the Answer - Duncan J. Watts [150]
8. See Brill (2009) for the original quote.
9. The distinction is important because it is often argued that for any sufficiently large population of fund managers, someone will be successful for many years in a row, even if success in any given year is determined by a coin toss. But as Mauboussin (2006, 2010) shows, coin tossing is actually a misleading metaphor. Because the performance of managed funds is assessed after fees, and because the overall portfolio of managed funds does not necessarily mirror the S&P 500, there is no reason to think that 50 percent of funds should “beat the market” in any given year. In fact the actual percentage varied from 7.9 percent (in 1997) to 67.1 percent (in 2005) over the fifteen-year interval of Miller’s streak. When these empirical success rates are taken into account, the probability of observing a streak like Miller’s is closer to one in 2.3 million (Mauboussin 2006, p. 50).
10. For DiMaggio’s statistics see http://www.baseball-almanac.com/fur: DiMaggio’s Statistics.
11. Arbesman and Strogatz (2008), using simulations, find that the likelihood of a fifty-six-game streak is somewhere between 20 percent and 50 percent. Interestingly, they also find that DiMaggio was not the most likely player to have attained this distinction; thus his streak was some mixture of skill and luck. See also McCotter (2008), who shows that long streaks happen more frequently than they should if batting average is constant, as Arbesman and Strogatz assume, suggesting that batters in the midst of a streak may be more likely to score a subsequent hit than their season average would suggest. Although they disagree with respect to the likelihood of streaks, however, both models are consistent in the idea that the correct measure of performance is the batting average, not the streak itself.
12. Of course, it’s not always easy to agree on what constitutes a reliable measure of talent in sports either: whereas for a 100-meter sprinter it is very clear, in baseball it is much less so, and fans argue endlessly over which statistics—batting average, strikeout rate, runs batted in, slugging percentage—ought to count for more. Mauboussin (2010), for example, argues that strikeout rate is a more reliable measure of performance than batting average. Whatever the right measure is, however, the main point is that sports afford relatively large numbers of “trials” that are conducted under relatively comparable conditions.
13. See Lewis (2009) for an example of measuring performance in terms of a player’s effect on the team’s win-loss record.
14. Of course, we could artificially increase the number of data points by looking at their daily or weekly performance rather than their annual one; but these measures are also correspondingly noisier than annual measures, so it probably wouldn’t help.
15. See Merton for the original paper. See also Denrell (2004) for a related argument about how random processes can account for persistent differences in profitability among businesses.
16. See Rigney (2010). See also DiPrete and Eirich (2006) for a more technical review of the cumulative advantage and inequality literature. See Kahn (2010) for detail on college graduates’ earnings.
17. See McDonald (2005) for the Miller quote.
18. Mauboussin (2010) makes this point in considerably more detail.
19. Ironically, the further removed a measure of success is from a direct measure of talent, the more powerful the Halo Effect becomes. As long as your claim to talent is based on your personally having performed a particular thing well, someone can always question how well it was actually done, or how worthwhile a thing it was to do in the first place. But as soon as one’s accomplishments become abstracted from their substance—as happens, for example, when a person wins important prizes, achieves great recognition, or makes fabulous amounts of money—concrete, individual metrics for assessing performance are gradually displaced by the Halo. A successful person, like a bestselling book or popular idea, is