Last Uncertainty Wednesday considered how imperfect correlation is related to the narrative fallacy which in turn underlies observations such as the extravagant headquarters effect. Today I will examine why hiring is so ridiculously hard and even organizations which are very good at it will make their fair share of mistakes.

The underlying reason for why hiring is hard is the base rate fallacy, which occurs when you update your beliefs too much on the basis of flimsy information. What do I mean by that? The classic example that Kahneman provides in Thinking Fast and Thinking Slow is guessing which job someone has based on a description of their characteristics: “Steven wears glasses and has a meek demeanor. Is Steven more likely to be a librarian or a truck driver?”

Our story telling brain wants to jump to the conclusion that Steven seems to fit our stereotype of a librarian much more than that of a truck driver. But in the US there are 3.5 million truck drivers and only 170 thousand librarians. So the base rate is that Steven is 20x as likely to be a truck driver than a librarian! It is therefore quite unlikely that the information about glasses and his demeanor is enough to suggest that Steven is actually more likely to be a librarian.

How does this relate to hiring? When I first got into business, I used to think that most people are good at their jobs and it was just a question of avoiding people who are outright bad. Now several decades in, I am convinced it is the exact opposite. The base rate heavily tilts towards people *not* being good at their job! This may seem overly dramatic but if you look at the realm of sports for a moment and ask yourself the following: if I randomly pick someone who knows how to play soccer, how likely are they to be a good soccer player? The answer quite obviously is: not likely at all (soccer is the most popular sport globally).

So now consider hiring someone in say marketing. How likely is someone, even someone who has done a lot of marketing, to be good at marketing? The answer is: quite unlikely. Very few people are actually good at marketing. Very few people are really good at anything. So in trying to find these people, the base rate works heavily against you! This means that you need to massively dial up your level of skepticism and the information required to move someone from the base rate to the “this person is good at marketing” needs to be incredibly strong.

There is tons of great advice out today on what kind of interview questions to ask. Unfortunately that is of course a bit like a game of spy versus spy because as the questions become known, people tend to be better prepared for them. At the end of the day there is no substitute for meeting a lot of people to fill any one role, to really dig into what they have actually done and if at all possible to have them do some of what they will be doing as part of the process (and of course talk to people who have worked with them). Throughout it all always consider that the base rate is working against you in hiring.