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By Root 1082 0

life is something that is best left to individuals exercising their common sense about what is reasonable and acceptable in a given situation. Most of the time this works fine. Problems get resolved, and people learn from their mistakes, without regulators or courts of law getting involved. But occasionally an infraction is striking or serious enough that the rules have to be invoked, and the offender dealt with officially. Looked at on a case-by-case basis, the invocation of the rules can seem arbitrary and even unfair, for exactly the reasons I have just discussed, and the person who suffers the consequences can legitimately wonder “why me?” Yet the rules nevertheless serve a larger, social purpose of providing a rough global constraint on acceptable behavior. For society to function it isn’t necessary that every case get dealt with consistently, as nice as that would be. It is enough simply to discourage certain kinds of antisocial behavior with the threat of punishment.2

Seen from this sociological perspective, it makes perfect sense that even if some irresponsible people are lucky enough to get away with their actions, society still has to make examples of violators occasionally—if only to keep the rest of us in check—and the threshold for action that has been chosen is that harm is done. But just because sociological sense and common sense happen to converge on the same solution in this particular case does not mean that they are saying the same thing, or that they will always agree. The sociological argument is not claiming that the commonsense emphasis on outcomes over processes is right—just that it’s a tolerable error for the purpose of achieving certain social ends. It’s the same kind of reasoning, in fact, that Oliver Wendell Holmes used to defend freedom of speech—not because he was fighting for the rights of individuals per se, but because he believed that allowing everyone to voice their opinion served the larger interest of creating a vibrant, innovative, and self-regulating society.3 So even if we end up shrugging off the logical conundrum raised by cases like Joseph Gray’s as an acceptable price to pay for a governable society, it doesn’t follow that we should overlook the role of chance in determining outcomes. And yet we do tend to overlook it. Whether we are passing judgment on a crime, weighing up a person’s career, assessing some work of art, analyzing a business strategy, or evaluating some public policy, our evaluation of the process is invariably and often heavily swayed by our knowledge of the outcome, even when that outcome may have been driven largely by chance.

THE HALO EFFECT

This problem is related to what management scientist Phil Rosenzweig calls the Halo Effect. In social psychology, the Halo Effect refers to our tendency to extend our evaluation about one particular feature of another person—say that they’re tall or good-looking—to judgments about other features, like their intelligence or character, that aren’t necessarily related to the first feature at all. Just because someone is good-looking doesn’t mean they’re smart, for example, yet subjects in laboratory experiments consistently evaluate good-looking people as smarter than unattractive people, even when they have no reason to believe anything about either person’s intelligence. Not for no reason, it seems, did John Adams once snipe that George Washington was considered a natural choice of leader by virtue of always being the tallest man in the room.4

Rosenzweig argues that the very same tendency also shows up in the supposedly dispassionate, rational evaluations of corporate strategy, leadership, and execution. Firms that are successful are consistently rated as having visionary strategies, strong leadership, and sound execution, while firms that are performing badly are described as suffering from some combination of misguided strategy, poor leadership, or shoddy execution. But as Rosenzweig shows, firms that exhibit large swings in performance over time attract equally divergent ratings, even when they have pursued exactly