We pride ourselves on living in a meritocracy, where the best ideas and the most talented people rise to the top. But what if the systems we use to judge talent are fundamentally broken? A series of stunning new papers suggests that in high-stakes environments—from corporate promotions to venture capital—our decisions are driven by deeply flawed and often irrational heuristics. These cognitive shortcuts don't just lead to bad decisions; they impose a hidden tax on true innovation and talent.

Research Roundup

Rewarding the Past, Mortgaging the Future

Is the Peter Principle real? New research “using microdata on the performance of sales workers at 214 firms” offers a rather resounding, “Hell, Yes!” And it is costly.

The data reveals that employers consistently “prioritize current job performance in promotion decisions”, even when other observable traits (like validated measures of  collaboration or leadership potential) are better predictors of managerial success.

Firms promote their best salespeople or best developers to be managers, not the people who would actually be the best managers.

And the data shows that this biased promotion is enormous. While I would require very little convincing to chalk this up to systematic cognitive laziness, the authors offer an intriguing alternative explanation: the direct “benefits of promotion-based incentives” might outweigh the diffuse effects of “managerial mismatch”.

Alternatively, the same shitty managers getting promoted by this shitty system go on to promote more shitty managers... that could explain it too.

The Paradoxical Penalty for High-Achievers

Let’s talk about fund managers, that bastion of rational, high-stakes decision-making. Today, we'll be peering into the giant, logical brains of its gatekeepers to see what makes them tick. The prognosis is... fascinating.

In a clever experiment, actual asset allocators were asked to evaluate VC funds where the leader’s race (White or Black) and credentials (stronger or weaker) were systematically varied. When credentials were stronger, the allocators overwhelmingly favored the homogeneous, White-led teams. No surprise there; just your baseline bias warming up.

But when credentials were weaker? Asset allocators suddenly preferred the Black-led, diverse team. It almost sounds like a compliment, until you realize it’s a trap, perhaps for everyone. Black VCs are penalized for being successful.

The allocator's brain runs on crude archetypes, driven by correlations. Its schemas are filled with labels like "Socially Responsible Bet", and a Black-led fund with weaker credentials fits right in. But a Black-led fund with elite, top-decile credentials? That correlation doesn't exist because there’s so little data. It breaks the schema. The system defaults to the only other legible pattern it knows: the "elite" White-led fund.

(The bias, by the way, is for the archetype, not just race. A White-led but diverse team with weaker credentials also violated the "elite homogeneous" pattern and was similarly disfavored.)

Hidden in the experiment's own design is a glimmer of hope for anyone that doesn’t “match the pattern”. By making the fund leaders anonymous, the study forced a reliance on generic, pattern-matching bets..out brains laziest system.

When you're just a data point, you're at the mercy of the broken pattern-matcher. The only way out is to become so undeniably distinct that you transcend the stereotype.

All you need to do is break the machine.

VCs’ Reverse Beer Goggles

Want to look into the face of your next bad investment? Look in the mirror.

An analysis of a decade of venture deals found that the “facial similarity between investors and entrepreneurs” significantly increases the probability of getting funded—by over 3 percentage points, “even after controlling for same race, gender, and age”.

The problem is that “funded companies with similar-looking investor-founder pairs have 7% lower exit rates”. The very heuristic that helps close the deal is a reliable signal of a worse investment outcome.

It’s reverse-beer goggles for investors: faces similar to theirs pass “an initial screening heuristic”. The authors found that “when deal sourcing is externally curated, facial similarity effects disappear while demographic homophily persists”.

Media Mentions

Will AI make us smarter about money, or just faster fools? That was the core question I tackled a couple weeks ago on a panel for the @Financial Times in #NYC. We dissected the future of wealth planning and inheritance.

I'm betting heavily on the "faster fools" outcome unless we get very, very smart about designing these systems to counteract our worst instincts, not just cater to them.

You can watch the full debate and judge for yourself by grabbing an on-demand pass here.

A huge thanks to the @Financial Times for hosting an essential, if undeniably privileged, conversation.

SciFi, Fantasy, & Me

I watched the first episode of Pluribus this week. Go watch and wonder, as I am, whether this is meant to be gift or weapon? I am reminder of Babel-17 vs “The Story of Your Life” (language is a weapon vs gift) and Blindsight* vs Children of Time (culture as cognitive weapon vs gift).

*Ignore the vampires.

Stage & Screen

• December 3, Nassau: All our fingers are crossed for Bermuda to come through the hurricane. If all is well, its time for AI and Insurance: Is AI the World's Greatest Actuarial Table?
• December 8, San Francisco: Fortune Brainstorm AI SF talking about build a foundation model for human development
• February 2, NYC: My latest research on neurotechnologies for cognitive health and more.
• February 10, Nashville: Shockingly, I haven't visited Nashville since I was a little kid. On this trip I'll be looking at why Tennessee and North Carolina appear to have more entrepreneurship than all over their neighboring states combined.
• March 14, Online: The book launch! Robot-Proof: When Machines Have All The Answers, Build Better People is will finally be inflicted on the world.
• Late March/Early April, UK & EU: Book Tour!
  • March 30, Amsterdam: What else: AI and human I--together is better!
  • plus London, Zurich, Basel, Copenhagen, and many other cities in development.

Vivienne L'Ecuyer Ming