The Billiken's Bluff

I read this article in the New York magazine. I'm not sure why. The picture at the start of the article was this:



Which would make almost no one want to read on.

But I did. I don't care about Columbia's Economics Department. I'm not interested in the narrative of how Columbia worked its way from barely in the top 30 Economics Departments in the country to entrenched in the top 10. But, as I said I kept reading and I found this:

Sunspot Theory.


Which applied to me, to my employer. To the recruiting class that was hired in July. And the subsequent class recruited in September:

Sunspot Theory. The idea is that economies get stuck in a rut because of a breakdown in coordination. It seems that people will be productive only when those around them are also productive. Suppose, for example, that you live in a country of skilled, educated people where no one is doing much more than subsistence farming because the economy had recently tanked. (Think of an extreme version of the United States at the beginning of the Great Depression.) Even if you knew how to manufacture sophisticated products like computers, you wouldn’t do it. Why? Because no one would buy them. What good is a computer to a bunch of dirt farmers? For the same reason, none of your countrymen would manufacture anything either.


According to the theory, the only way out of this dilemma is to change everyone’s state of mind at once. The impetus could be anything, really—a new president, a change in the fortunes of a beloved sports team, even something as arbitrary as a spot on the sun. The key is that everyone has to believe that everyone else will suddenly start producing again. The expectation that the economy will improve becomes self-fulfilling.

This theory applies to Columbia's sub par (by Ivy League standards) Economics Department. This theory also applies to nearly everything corporate, cultural, or otherwise. It doesn't seem like Michael Woddford really needed to articulate this theory. It's common sense. It's momentum. It's the basis of Malcolm Gladwell's book The Tipping Point which I only partially read, and which read like a sociology textbook of what we already knew.

Trends start. People start them. It's nearly impossible to get the first person to believe the Earth is round. But, it's incredibly easy to get the two hundred millionth person to believe. It was probably fairly difficult hard to get the first few people to pay money to buy a Pet Rock. But, soon Pet Rocks became the must have gift during the Holiday Season, 1975. All at once people changed their opinion of exactly what the utility value of a rock was.



There are hundreds of examples along these lines.

These types of trends, this type of change is not



linear, it is



exponential.

And to bring this back home. A company who has no business hiring Ivy Leaguers (a company that I happen to work for), who has no business listing that only Ivy League or equivalent need apply, ends up becoming a destination for just that type of graduate. How?

By hiring in bulk. By convincing one Ivy League Grad to accept an offer by telling that graduate that they are planning on hiring 50 Ivy League Grads this month. And they all (or at least most) accept the offer because they believe the others (their classmates, their peers) will accept.

Now it's easy. Now it's true. This is a company with talent (or at least it's a company with Ivy League grads). It is a destination for graduates from top-tier schools. It was not the case before, but all at once it became true.