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Unattractive funds managers outperform funds with attractive managers by over 2%
- PessimalDecimal 3y agoA good maxim is to employ people who are hired and promoted for their ability and not for extraneous reasons.
- JumpCrisscross 3y ago> 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.
- optimalsolver 3y agoRed pill: people would rather surround themselves with attractive people and pay the 2% tax than be more successful with a team of Quasimodos.
- thot_experiment 3y agoI 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.
- PH95VuimJjqBqy 3y agoit'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.
- ladberg 3y agoIt could definitely be applicable when trying to convince people to invest in your fund!
- deleted 3y ago[deleted]
- thot_experiment 3y agoAre 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?
- PH95VuimJjqBqy 3y agoIt 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.
- thot_experiment 3y ago> 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.
- PH95VuimJjqBqy 3y ago> 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.
- Jensson 3y ago> 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.
- thot_experiment 3y agoSure 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.
- fshbbdssbbgdd 3y agoWhy would that when you’re picking someone to manage your money? You’re hiring a fund manager, not a personal trainer.
- mynameisnoone 3y agoI'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.
- Animats 3y ago2% is huge. Is there a non-paywalled copy of this?
- FuriouslyAdrift 3y agofound this dangling out there https://d1e00ek4ebabms.cloudfront.net/production/uploaded-files/SSRN-id4322134-301bec51-74ff-4c81-9f93-f04d750b901d.pdf https://d1e00ek4ebabms.cloudfront.net/production/uploaded-fi...
- raphaelj 3y agoIs 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%).
- NovemberWhiskey 3y agoGenerally speaking, in finance, if you mean the former you'd say "by 200 basis points" in order to disambiguate.
- dmurray 3y ago"2% per annum", per the abstract, so the ugly manager returns 6%. I agree the effect seems too large to be believable.
- april7 3y ago"Utilizing the state-of-art deep learning technique to quantify facial attractiveness" we're really there
- tayo42 3y agoForget the research, release this as an app lol
- angarg12 3y agoRelevant XKCD https://xkcd.com/882/ https://xkcd.com/882/
- jack_riminton 3y agoThis 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.”
- optimalsolver 3y ago[flagged]
- deleted 3y ago[deleted]
- hef19898 3y agoSometimes, every number should come with error margin bars...
- caslon 3y agoA 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.
- talldatethrow 3y agoThis 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.
- space_fountain 3y agoHave there been follow up studies finding this?
- huijzer 3y agoBecause 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.
- toss1 3y agoUmm, 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.
- hklgny 3y agoThe 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
- mandelbrotwurst 3y agoThe average fund manager does not underperform by more than 2%.
- hklgny 3y agoThe average includes the over performers
- huijzer 3y agoThe 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.
- dustingetz 3y agoafter fees. most managers don’t outperform after fees
- junar 3y agoRelated news coverage: https://www.ft.com/content/6e299bef-a475-4f6b-9430-d4a8c9772d44 https://www.ft.com/content/6e299bef-a475-4f6b-9430-d4a8c9772... Some prior papers linked from the above news article: https://www.sciencedirect.com/science/article/abs/pii/S2214635021000915 https://www.sciencedirect.com/science/article/abs/pii/S22146... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1659189 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1659189 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3341835 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3341835 https://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12428 https://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12428
- Animats 3y agoThis is China's mutual fund market, where reliable numbers about business financials are hard to come by.
- missedthecue 3y agoHard 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.
- karaterobot 3y ago> 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
- purplecats 3y agoonly if they've read and internalized this paper
- mynameisnoone 3y agoI 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.
- neilv 3y agoIs there somewhere I can opt-in to be worse at investing, in exchange for doing much better on dating apps?
- guerrilla 3y agoYeah, get a sex change.
- callalex 3y agoCan you expand on this?
- guerrilla 3y agoOPs 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.
- jowea 3y agoNo comment on the other half but why would that make you worse at investing?
- hgomersall 3y agoI 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.
- andy99 3y agoThis 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.
- insickness 3y agoThat 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.
- chii 3y agoits a version of https://en.wikipedia.org/wiki/Goodhart%27s_law 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.
- voiceblue 3y agoI 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.
- ladberg 3y agoDoesn'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 https://en.wikipedia.org/wiki/Berkson's_paradox
- projektfu 3y agoYou'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?)
- ladberg 3y agoYeah 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.
- apienx 3y agoI 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!).
- deadbeeves 3y agoCouldn'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.
- fallingknife 3y agoIf you look at the abstract it's 2% per annum, which is an absolutely massive difference in terms of ROI.
- deadbeeves 3y agoSo what's the actual relative difference? The absolute difference is completely useless in this context.
- cma 3y agoAbsolute or relative? Login wall to get past the abstract.
- richardw 3y ago> 2% isn't a huge difference 2% per annum is a spectacular difference, compounded. Careers and fortunes are made of that.
- scott_w 3y agoIf you collect enough data over a long enough time period, it’s absolutely possible to see a 2% uplift and it be statistically significant.
- beepboopboop 3y agoThere’s edge cases though, I run a fund and we’re one of the top perf… oh… oh no.
- lolpanda 3y agolink to non paywalled version of this https://d1e00ek4ebabms.cloudfront.net/production/uploaded-files/SSRN-id4322134-301bec51-74ff-4c81-9f93-f04d750b901d.pdf 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