[HN Gopher] Toxic Origins, Toxic Decisions: Biases in CEO Selection
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Toxic Origins, Toxic Decisions: Biases in CEO Selection
Author : marojejian
Score : 87 points
Date : 2025-05-30 16:01 UTC (6 hours ago)
(HTM) web link (papers.ssrn.com)
(TXT) w3m dump (papers.ssrn.com)
| marojejian wrote:
| archive:
| https://archive.is/https://www.ft.com/content/5ffe19c3-20ec-...
|
| Paper:
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5270031
|
| OK, I'm very skeptical of the correlational results, and feel a
| bit guilty posting this. But... on the other hand:
|
| 1) This is pretty entertaining! 2) Pollution aside, I do buy into
| the narrative that selection bias for lucky risk-takers explains
| a lot of bad leaders:
|
| >Superfund CEOs, by contrast, are more likely to take high-
| variance internal risks -- such as aggressive restructuring --
| that sometimes generate standout outcomes. When these gambles pay
| off, they are difficult to distinguish from skill. Firms,
| observing only results, may systematically promote risk-takers...
| bberenberg wrote:
| Just keep in mind that lucky risk-takers who can do this on a
| risk adjusted basis are a good thing. The problem is when they
| can't risk adjust and burn everything down.
| bluefirebrand wrote:
| Another problem is when they are extreme narcissists and burn
| everything down themselves to fuel their own egos
| paulddraper wrote:
| > In short, Superfund CEOs display performance with essentially
| lower mean but higher variance.
|
| Outcomes however are not evenly distributed, large success
| typically has outsized rewards.
|
| This is why VCs have the investment strategies they do: invest
| in 10, 7 fail, 2 don't matter, and 1 is everything.
| glalonde wrote:
| which makes sense in a portfolio, but a company only has one
| CEO in their basket. But I suppose if CEO elections represent
| stock holders with many companies, then perhaps it may still
| be optimized like a portfolio with multiple CEOs.
| ebiester wrote:
| Only one at a time, but a CEO is still chasing that
| monumental success that their reputation can ride on later.
| darth_avocado wrote:
| > I do buy into the narrative that selection bias for lucky
| risk-takers explains a lot of bad leaders
|
| It's not even actual lucky high risk gambles that are
| successful that are rewarded. A lot of times, it's just
| perceived success. Plenty of leaders fail upwards. Reward for
| incompetence and failure is a promotion that is mostly dictated
| by who you know in the organization. And perceived success is a
| huge factor in "who you know".
| bonoboTP wrote:
| Much more likely that what you see as failure by certain
| criteria was an overall success by the criteria of the people
| who make decisions about hiring them "upwards".
| darth_avocado wrote:
| If running massive vanity projects for years, that get
| completely scrapped, while you get so far behind your
| competitors that you have to layoff half the org and then
| spend hundreds of millions to acquire those competitors is
| called success by some metrics, then I would say you're
| prioritizing the wrong metrics.
| gopher_space wrote:
| If there aren't really any failure states for you on a
| personal level why even spend time planning?
| nosianu wrote:
| You are not contradiction the parent commenter, you
| actually say the same. A key point was/is that they use the
| wrong criteria.
|
| The parent commenter wrote
|
| > _it's just perceived success_
|
| and the abstract from the paper says
|
| > _suggesting firms reward observed success without
| recognizing underlying risk tolerance_
| CGMthrowaway wrote:
| >It's not even actual lucky high risk gambles that are
| successful that are rewarded. A lot of times, it's just
| perceived success.
|
| Or, perhaps relatedly, short-term success which sets up long-
| term failure - but by then the leader has moved on from the
| role.
| ashoeafoot wrote:
| Reminds me of the military where being present when a
| disaster caused by upper echelons strikes can lead to
| "careers due to silence".
| serjester wrote:
| This is just the Peter principle - individuals will keep
| getting promoted until they're no longer competent.
| 0cf8612b2e1e wrote:
| GP is arguing that known incompetence is promoted for
| political reasons. Peter principle is far more
| idealistically meritocratic.
| pton_xd wrote:
| Yep, always entertaining to watch these Marissa Mayer / Ron
| Johnson types take a step outside their perception bubble.
| quantified wrote:
| If the companies crash and burn, but the CEOs succeed more
| personally (money, sex, fame, whatever floats their boats),
| then it's a selfishly useful adaptation.
| pkasting wrote:
| > selection bias for lucky risk-takers explains a lot of bad
| leaders
|
| For example, it explains Elon Musk entirely.
| nickff wrote:
| No, Musk has not just been lucky. He founded three companies
| which came to be valued over a billion dollars, each in a
| different industry; this is more than luck.
| wtdo wrote:
| Which three? Cause Tesla wasn't founded by him, neither was
| Twitter.
| nickff wrote:
| I'd argue that he did found the Tesla as it exists now,
| but if you want to discount that, you could choose XAI,
| SolarCity, or OpenAI.
| pkasting wrote:
| Musk did not found SolarCity; that was Peter and Lyndon
| Rive.
|
| I don't know what "found the Tesla as it exists now"
| means. Founding and leading are distinct. Musk has been a
| key leader at Tesla; he was not a founder of it or any
| merged or acquired company.
| nickff wrote:
| Founding is not the same as incorporating or being the
| first to work on. For example, the founding fathers of
| the USA were not the first people to live in the thirteen
| colonies, and many of them were only involved with some
| part of the origination of the country.
| kttjoppl wrote:
| I have to imagine you know that isn't what anyone else
| means by "founding a startup" and that the original 13
| colonies weren't the United States (that's why they had
| to "join or die," they viewed themselves as separate and
| independent states, even in competition with one
| another). You've invented a new definition to suit your
| rhetorical purpose. I think you can make your argument
| without this frankly dishonest tactic. I've seen people
| make the same point here on HN many times.
| kttjoppl wrote:
| I think Musk is a grifter but even I think those picks
| are unfair to him. Respectively that's a company with no
| significant accomplishments yet (it's only two years old
| so I don't think that's even a knock against it), a
| company he didn't found but purchased under shady
| circumstances and has had a lot of scandals, and a
| company he "founded" a lot like he "founded" Tesla.
|
| If you want to showcase a company he unambiguously
| founded which is unambiguously successful, why wouldn't
| you pick SpaceX?
| wagwang wrote:
| Pedantry, this counterfactual idea that tesla or EVs
| would be as big as it is in America without Musk is just
| absurd. The company was bought when it had like 3 people
| and a 250k concept car which was completely redesigned
| and rebuilt under Musk. The real reason why tesla is
| important is because it was the first one to execute big
| on charging networks, no other manufacturer had the balls
| to even conceive of a nation wide network.
| pessimizer wrote:
| > Pedantry
|
| You took a lot of words to agree that Musk didn't found
| Tesla. That other stuff would better be argued with
| someone else who is disputing it, because the person you
| replied to was talking about founding companies.
| madmountaingoat wrote:
| I believe the pedantry label was sufficient
| acknowledgment of fact, while also pointing out that in
| the context of the larger conversation we are really
| talking about whether his leadership decisions led to
| success.
| pkasting wrote:
| I disagree with both the premise and the conclusion.
|
| As far as I can determine, Musk is the sole founder of only
| two companies -- SpaceX and The Boring Company. The former
| is clearly valued at >$1B; the latter is not.
|
| He is also the cofounder, with many other cofounders, of a
| variety of other companies: Zip2, X.com, OpenAI, Neuralink.
| OpenAI is clearly valued at >$1B; Musk was one of eleven
| cofounders. My assumption is that your third company is
| X.com; Musk was one of four cofounders, and the company
| then merged with Confinity (also multiple cofounders), then
| took the name PayPal (which had been a Confinity product).
| PayPal is clearly worth >$1B today. I would find it
| misleading to say Musk "founded OpenAI and PayPal" given
| the above, but up to the reader.
|
| Whether this is "more than luck" -- in particular, whether
| it's actually due to Musk's good leadership -- is far from
| proven. OpenAI, for example, had $1B in capital pledged at
| founding, suggesting it was already valued at over $1B at
| creation time. And the skill sets required to found a
| later-successful company versus to lead one are distinct.
| Musk might well be a great founder but bad leader.
|
| (Of course, the obvious intent of my original post was to
| be a snarky dig at someone I view to be an atrociously
| terrible leader whose success has been due to a combination
| of others succeeding despite his influence and simply going
| all-in with huge amounts of capital every time. If you're
| not already inclined to view Musk that way, and you believe
| he's actually a successful businessman who is brilliant if
| eccentric, then a joke post on HackerNews won't change your
| mind.)
| nickff wrote:
| Your 'snarky' intent was not obvious to me, and would be
| in clear violation of the HN Guidelines:
|
| > _" Be kind. Don't be snarky. Converse curiously; don't
| cross-examine. Edit out swipes."_
| DebtDeflation wrote:
| > I do buy into the narrative that selection bias for lucky
| risk-takers explains a lot of bad leaders
|
| It explains a lot more than bad leaders, it explains almost
| everything in society. The winners write history and you can't
| really win unless you take big risks.
| selimthegrim wrote:
| Alphaville is usually free to read.
| shermantanktop wrote:
| At work I'm watching a skilled, proven VP take a huge gamble
| that is out of his control even though he doesn't seem to
| realize it - his confidence clearly blinds him and causes him
| to acknowledge the risk but claim everything is 100% according
| to plan. Even while many senior people are quitting due to this
| gamble, some of whom were less effective, but some are
| virtually irreplaceable.
|
| I've worked with this guy for a long time and he's a risk taker
| but nothing like this.
|
| What seems to have triggered this is his fascination with LLMs.
| I have a feeling this is happening to a lot of execs in tech
| right now.
| bgnn wrote:
| LLMs brought an environment of speculation/gambling about its
| impact in thr future. Pretty much every exec and investor is
| blinded by it.
| dcre wrote:
| "By matching the locations of Superfund sites and their pollutant
| accumulation periods with the birthplaces and birth years of
| these American-born CEOs, we identify 734 unique Superfund CEOs
| and 2,267 non-Superfund CEOs"
|
| Certainly a bigger sample than I was expecting.
| jdonaldson wrote:
| 1 in 4 people live within 3 miles of a superfund site, so it's
| actually spot on.
| Loughla wrote:
| We really have tried to destroy ourselves over the years.
|
| There's a Superfund site about 10 miles from my house.
| Luckily it's close to the headwaters for a major source of
| our drinking water.
|
| Cancer rates here are really high.
|
| Surely they're not connected.
| ada1981 wrote:
| I initially misread this to say that CEOs born in super fund
| sites had some sort of genetic change that caused them to be
| riskier due to environmental toxins.
| Noumenon72 wrote:
| I totally did too, thanks for noticing that mistake and warning
| us!
| engineer_22 wrote:
| I had a hard time understanding. At first I thought it meant
| babies born near Superfund sites were riskier CEOs.
|
| Then I thought it meant managers who were in charge of
| divisions that created Superfund sites before being promoted to
| CEO made riskier decisions as CEO.
|
| And now I'm back to "pollution babies take greater risks".
| Which to my surprise was a surprisingly reasonable hypothesis.
| DebtDeflation wrote:
| We don't talk about our mutant superpowers outside of the group
| chat.
| pcrh wrote:
| You're not wrong.
|
| It is about where the CEO was conceived and born. From the
| article's introduction:
|
| > _Our approach addresses these issues by exploiting prenatal
| exposure to pollution from Superfund sites as an exogenous
| source of variation in executive risk-taking behavior. [...] we
| control for a wide range of fixed effects, including firm,
| year, industry-year, CEO birth year, birth county, and
| headquarters state, ensuring that comparisons are made among
| otherwise similar CEOs. [...] we show that selection mechanisms
| in promotion can amplify behavioral traits shaped by early-life
| conditions, even when firms are unaware of those traits._
|
| Personally, I think it sounds like hogwash -- "statistically
| significant" findings that have little bearing on reality.
|
| More likely, those born in heavily industrial areas are more
| likely to have careers in industry.
| zzzeek wrote:
| im not able to read it any other way. can you explain what it
| actually says?
| LarsDu88 wrote:
| I live in Silicon Valley, and one thing I noticed while house
| hunting is that the entire Google Campus, including the entire
| early campus sits atop a superfund site due to groundwater
| contamination from solvent tank leaks from early chip
| manufacturing sites.
|
| There were even reports from the early 2000s of workers getting
| nauseous within the offices, and the former YouTube CEO passed
| away recently prematurely from lung cancer (not saying that's
| related, but if we're looking at correlational studies...)
| candiddevmike wrote:
| That would be a wild RTO-related lawsuit.
|
| Were you a Google employee forced to return to office? You may
| be entitled to compensation.
| dboreham wrote:
| Same for several Netscape buildings on Ellis St back in the
| day. Not sure which companies are in those buildings now but I
| remember the pulme mitigation pipework being installed in the
| parking lots. Former Fairchild site.
| m463 wrote:
| I remember before google the area near rengstorff/shoreline was
| a huge hill over a garbage heap with lots of PVC vent tubes
| sticking out of the ground.
|
| It was a huge waste disposal area.
| marojejian wrote:
| Meta comment - [update: oh, I see they changed the link to the
| paper too. i guess that makes it more defensible. but the
| original FT story covering the paper did add value, and now it is
| more lost ]
|
| It's curious someone changed the title of this, and I'm of two
| minds about it:
|
| Pro change:
|
| - Yes, the original title "Pollution causes CEOs: study"is baity.
|
| - Yes, the new title is the actual title of the underlying study,
| which is less baity.
|
| In general, this is the kind of thing I love about HN.
|
| Con change:
|
| - The original title _is_ the literal title of the FT article,
| whch is what the post is on, and it does provide commentary (some
| snarky) on top of the paper.
|
| - The original title does more elegantly and effectively convey
| the conclusion of the research, whereas the paper title does not
| convey this at all. It's more crappy intellectualized science
| writing.
|
| I think this is one case where the more engaging title is also
| the more effective one.
| pcrh wrote:
| I scanned the article. Oddly enough, it _is_ about the toxins
| in the environment where a CEO was born. From the article 's
| conclusion:
|
| > _Superfund CEOs--those born in counties later designated as
| Superfund sites--excel in internally focused management domains
| where risk-taking remains adjustable and containable, yet
| struggle with externally focused policies where risks are
| immediately exposed to market consequences. [...] Superfund
| sites represent some of the most hazardous contaminated areas
| in the U.S., and our sample primarily includes executives born
| before industrial chemicals were widely recognized as
| developmental toxicants. [...] This historical setting provides
| a unique opportunity to examine how early-life conditions
| interact with career selection mechanisms that systematically
| filter executives based on risk-taking outcomes._
| ashoeafoot wrote:
| A system can do many dice throws and is better off for doing high
| risk ones .For the company its fatal, for the parallel
| exploration of the many possible scenarios of the slime mold
| expanding, its informative. Even the "boring"-no risk taken CEOs
| have their place, they ready the canon for the living canonball
| by driving a company to desperation.
| CommenterPerson wrote:
| I am going to develop real estate on a toxic dump. It will be
| beautiful. Prices will shoot up and I'll get rich. All the
| neighborhood kids will become CEOs.
| m463 wrote:
| I remember reading that people who were hypersensitive would
| avoid overstimulation.
|
| Meanwhile, people with lower sensitivity needed more stimulation
| and became more prone to crime and risk taking.
|
| I wonder if superfund sites decrease nerve efficiency leading to
| less stimulation and therefore risk taking.
|
| EDIT:
|
| _A 2015 longitudinal study based on army medical records of
| Swedish men showed a correlation between low resting heart rate
| and violence and criminality, with the authors theorising that
| lower sensitivity to stimulation resulted in increased likelihood
| of risk-taking and sensation-seeking behaviour - effectively a
| low sensitivity counterpart to SPS. "_
|
| https://en.wikipedia.org/wiki/Sensory_processing_sensitivity
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