Photo: Maik Schulze
Economist Chengwei Liu is an associate professor of Strategy and Behavioral Sciences and leads the Global Online MBA Program at ESMT Berlin. He has held research and teaching positions in Cambridge, Oxford, Massachusetts Institute of Technology, Wharton, NYU, INSEAD, National University of Singapore, Peking University, Warwick and won more than 20 research and teaching awards. In his book “Happiness: A Key Idea for Business and Society”, he summarized his research on the quantification and strategy formation with happiness in sports, investment and the economy, as well as its impact on the assessment of merit and social inequality.
MIRROR: Professor Liu, you are a distinguished scientist and have a position at a university. Did you win them in a raffle?
Liu: No. But of course, professional advancement has to do not only with one’s own skills, but also with chance. Hard work and good networking are very important prerequisites for my work, as well as for many other jobs. But happiness is an underestimated factor. I was often just in the right place at the right time.
MIRROR: They say: As soon as you have a shortlist of applicants for an important position, you should let the lot decide. Normally, however, there are still many rounds of talks in which people try to find the very best person.
Liu: Sure, if you know exactly who the best person is, you should take them. But what are the right criteria for this? If you get to the bottom of this question, you realize that it is almost impossible to ignore your own biases. Whether we like it or not, we prefer people who are similar to us. This creates many problems, because to be successful you need diversity and different perspectives. Unfortunately, companies also tend to confuse identity diversity with mental diversity: people from different places or backgrounds do not automatically think differently. But this is essential for diversity. And you only get these people if you turn on the random number generator. Incidentally, this is also a very good instrument against nepotism.
“You can relax and take anyone off the list – and you’ve beaten the unconscious bias that paralyzes diversity and creativity.«
MIRROR: At what stage of the hiring process should you turn on the random number generator?
Liu: Relatively late. Let’s say you have a leadership position to fill, then there are requirements that all applicants must meet from the outset: they need a few years of experience, they must have a university degree and have leadership qualities. The narrower the selection, the smaller the differences between the applicants. This generates a problem: what criteria decide now? Here we are again with the biases – and now origin, gender and other criteria, which are actually not important for the job, can turn out to be the tip of the scales. It can be assumed that all persons on this shortlist are suitable for the job, otherwise they would not have come this far. So you can relax and take someone off the list – and you’ve beaten the unconscious bias that paralyzes diversity and creativity.
MIRROR: What kind of jobs are suitable for such a process?
Liu: Not only the top management level, people are very similar to each other anyway. And that’s a problem. Take a challenge like climate change. You need people with political expertise, behavioral scientists, physicists, meteorologists; no one, no matter how smart, can combine all the skills you need to solve this complex problem. With such a topic, it is clear to everyone: you need different ideas and perspectives to tackle it successfully. This also applies to other challenges. Hiring the best people doesn’t help much if the team isn’t diverse enough. However, it is often very difficult to determine who brings additional skills and can initiate the decisive change of perspective. A random selection helps a lot.
MIRROR: You presented your idea with the random number generator a few years ago. But it does not seem that she has prevailed in recruiting.
Liu: Yes, this is indeed difficult. In theory, the benefits are obvious. But for many, it immediately calls into question one’s own model of life if one draws instead of looking for successes and merits – even if in the end neither one nor the other decides, but just biases. But you don’t believe that. In doing so, a selection that is not made at random generates another problem: people feel that they are chosen, that they are the most qualified people. Pride and overconfidence are not far away.
“Those who are there and believe that they have only made a career through their own merit do not want the new ones to get over the quota and put obstacles in their way.«
MIRROR: They say the second best person could often be better than the best.
Liu: Often it is simply happiness that carries a person to the very top. Let’s take the Canadian professional ice hockey league. 40 Percent of players have a birthday between January and March. But this is no coincidence: you have to join a team quite young, and the coaches, of course, select the strongest children from a vintage, but must adhere to the vintage. Since even the greatest talent has little chance when it was born in December. The best candidates are unlikely to bring more diversity to the team because they have benefited from such happiness factors. In this respect, the second best person is often more interesting for the post.
MIRROR: The world is an unjust place, and the random number generator is supposed to fix it?
Liu: The world is never as just as we would like it to be. But the motivation to be successful leads people to believe that successful people deserve success. We actually know that this is not always the case: many students at elite universities such as Harvard or Oxford come from wealthy families. Perhaps you should lower the barriers there too.
MIRROR: Back to the companies. If you use the lottery, it probably happens, similar to the quota for women, that employees say: Hey, you only got your position through lottery luck, so don’t tell me what to do now.
Liu: This can indeed be a real barrier. The random selection can be extremely helpful, but if the company culture doesn’t bear that, then the people selected in this way will quickly become scapegoats for everything that goes wrong in the company. It’s a difficult process. Those who are there and believe that they have only made a career through their own merit do not want the new ones to get over the quota and put obstacles in their way. Then these women may not be able to perform so well because of these toxic structures, and those who have hindered them will also feel vindicated.
MIRROR: It is probably very sickening for the personnel in the company to be told that a cube or a coin can do their job better than they do themselves.
Liu: Of course. But they have to realize: We can’t make the best decision. It just feels like that. An example from the financial world: Bankers always believe that they have to scrutinize borrowers intensively, even in a personal conversation. Unfortunately, this is not very effective. If you form a control group in which you raffle the loans, the defaults there are no higher than in the group of personally selected. There is no connection whatsoever between the performance in such a conversation and the risk of default – making it unsuitable as a tool to predict who will pay on time and who will not. Even worse: In such a process, usually only women and minorities are sorted out.
MIRROR: Let’s say: I would now be head of personnel at a larger company and your arguments would have convinced me. Where do I start? And how do I communicate this in the company?
Liu: Once again: It depends on the company culture. If it is open, you can start immediately and communicate openly that you will let the lot decide within the shortlist in the future. If culture does not yet allow this, one must proceed more subtly. You can always give reasons why a certain person got a certain job.