Home > finance > How to understand the career trajectory of Larry Summers

How to understand the career trajectory of Larry Summers

June 28, 2013

I heard from a Wall Street Journal recently that Summers is on the short list for the Fed Chair. I’m wondering, how often and in how many ways does this guy need to fail before people stop thinking this guy is the silver bullet?

Then I remember this article which talks about a study that connects overconfidence with social status. From the article:

“Our studies found that overconfidence helped people attain social status. People who believed they were better than others, even when they weren’t, were given a higher place in the social ladder. And the motive to attain higher social status thus spurred overconfidence,” says Anderson, the Lorraine Tyson Mitchell Chair in Leadership and Communication II at the Haas School.

Social status is the respect, prominence, and influence individuals enjoy in the eyes of others. Within work groups, for example, higher status individuals tend to be more admired, listened to, and have more sway over the group’s discussions and decisions. These “alphas” of the group have more clout and prestige than other members. Anderson says these research findings are important because they help shed light on a longstanding puzzle: why overconfidence is so common, in spite of its risks. His findings suggest that falsely believing one is better than others has profound social benefits for the individual.

Of course, Larry Summers isn’t the only example of this I can think of, but he’s a pretty perfect one.

Categories: finance
  1. Bozhidar Hristov
    June 28, 2013 at 8:09 am | #1

    After being at the center of the most moments of the last two decades, I think that, if he gets the chair he’ll be very conservative in obtaining policy, while what is needed is somebody fresh with ideas and dedication to get things better.

  2. Abe Kohen
    June 28, 2013 at 8:19 am | #2

    Odd, that you think powerful people don’t have friends and acquaintances who stray off the straight and narrow. Clinton pal Marc Rich just died the other day. Obama’s friends make Shleifer look like a saint.

  3. June 28, 2013 at 8:27 am | #3

    People like Summers form a large group of “Intellectual Typhoid Marys”, who, as you aptly note, become the most success full failures in history. I think this is largely a results of several confluent factors:

    First, the criteria for the sorts of jobs like Fed Chairman are far more political than most people realize. Job candidates are selected and confirmed based on their perceived ability to deliver political results, not necessarily technical competence. Here, being well connected and convincing those who will select and vote on your nomination that you will deliver on their agenda(s) is key. I’ve seen this many times in corporations, and history holds many examples as well.

    Second, our so-called “meritocracy”, largely based on academic performance that in turn is largely based on testing, has produced several generations of highly effective psychopaths. In short, we select for the most effective climbers, not the wisest nor the best thinkers. Thus, those who rise to the top are well suite to play political games that suit the agendas of a few rather than the public at large (see above).

    Third, our lopsided emphasis on academic merit has crated a leadership class that is largely amoral and cowardly. No one really cares what you do so much as what you have by way of degrees, job titles, and connections. Whatever you had to do to “collect” those degrees, titles, etc. is ignored. This again provides a selection bias towards those who lack integrity, competence, and courage in favor of those who know how to “play” the system and others. This also discourages those who will point out the emperor (or empress) has no clothes.

    The only way to fix this mess is to return to a culture that values what people do and those sorts of behaviors that are largely expressed as the classical virtues (justice, courage, temperance, and wisdom). This would require an emphasis on building a record of achievement as opposed to collecting job titles, demanding transparency of the selection and review process, and a public willing to demand accountability.

    Until then, we’ll stay in the cesspool.

    • Treetop
      June 29, 2013 at 1:36 pm | #4

      Moosensquirrel: I haven’t particularly seen evidence of a “lopsided emphasis on academic merit” in most politics in the US. As an example, my congressman doesn’t have a college degree, and yet is chair of an important committee in the House. And is at least as bad as the average politician.

  4. June 28, 2013 at 11:11 am | #5

    Brilliant. Thank you. @moosensquirels, your comment too!

  5. June 29, 2013 at 10:56 pm | #6

    “I heard from a Wall Street Journal recently that Summers is on the short list for the Fed Chair. ”

    This is a little oversold by the WSJ. Insiders are saying Jon Corzine is running a close second Gary Gensler’s lawsuits not withstanding.

  6. Filbert Gork
    June 30, 2013 at 2:08 pm | #7

    He may be an unpleasant person, but he is highly intelligent and shown himself to be quite competent at economics-related matters. So based on this one might consider him to be a candidate for Fed Chair. I do think his personality issues would cause clashes with others, lead to dysfunction at the fed, and possibly bad economic decisions… so yeah he’d be a bad choice.

  7. Savanarola
    July 1, 2013 at 5:55 am | #8

    One man wrecking ball. The fact that people still seriously consider him for a post above dog catcher is a symptom of all that is wrong in this country.

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