Gladwell's Quarterback Problem in Finance

derivstrading's picture
Rank: Neanderthal | 2,526

To me, Gladwell is one of few authors where i can sit down and read his works for hours on end, and I thought i would share one piece with you fellow monkeys. It is about the quarterback problem. More specifically, how any measure we have of determining how well a college qb will fare in the NFL without actually seeing him in NFL conditions.

Most Likely to Succeed

This got me thinking, with finance so focused on narrowly recruiting from a select few schools, is this really the optimal strategy? Do you think finance recruiters face the same problem as NFL scouts do?

This might just be the non target in me talking though :P

Either way, its a really interesting read and I highly recommend all of his work.

Comments (20)

Jan 24, 2011

http://www.econ.berkeley.edu/~webfac/malmendier/e2...
Great paper and quite relevant. Read it when you have time. Trust me.

Tom Brady is a pretty good example of this.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Jan 24, 2011

Very good

Jan 24, 2011

Very good comparison. There are plenty of Roethlisberger/Flacco Bankers waiting out there for an opportunity that never went the Ivy route (I didn't). Having said that, I don't think theres a simple way to do it better without making a different process with different flaws. Good food for thought though.

Jan 24, 2011

Roethlisberger and Flacco were both top-20 draft picks, so they're more like the Ivy kids than they are the non-target kids. Brady and JaMarcus Russell are classic examples of guys who the draft got wrong, though obviously in completely opposite directions.

Your point about finance recruiting only covers half the story. I've never read anything that suggests that firms take a lot of people who flop; all they do is reject a lot of people who could have been very successful. Guys like Brady or Jeff Saturday (Peyton Manning's undrafted -- and future Hall of Fame -- center) might not have gotten a shot on Wall Street. But I don't think there's been a rash of Jamarcus Russells and Akili Smiths.

I'm also skeptical of Gladwell's conclusion, because I'm not convinced he knows anything about football. Anybody who watched college football during Chase Daniel's career knew that he was a great college QB with no chance of becoming a professional QB. In fact, he had so much NFL potential that he went undrafted. Gladwell writes about him like he was a potential top pick, but even at the time of his writing nobody who followed football thought that. His effect also isn't confined to quarterbacks: ESPN did a piece a while back where they calculated the bust rate for each position, and DT/DEs and WRs flopped less more frequently than did QBs.

Jan 24, 2011
2x2Matrix:

Your point about finance recruiting only covers half the story. I've never read anything that suggests that firms take a lot of people who flop; all they do is reject a lot of people who could have been very successful.

Is that potentially because a lot of people could do IB, if given the chance? I'm not trying to be rude because I know this is mainly an IB forum -- I'm just saying, from knowing people who've been in the industry and what I've heard about job responsibilities of analysts, I gotta say that it really doesn't seem that hard, even though I don't think anyone would hire me for the job. Put differently, it seems like an industry where plenty of people who could do the job would never be hired. Again, no offense, just curious if any of you guys agree (and if not, tell me where you think I'm wrong)?

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Jan 24, 2011
econ:
2x2Matrix:

Your point about finance recruiting only covers half the story. I've never read anything that suggests that firms take a lot of people who flop; all they do is reject a lot of people who could have been very successful.

Is that potentially because a lot of people could do IB, if given the chance? I'm not trying to be rude because I know this is mainly an IB forum -- I'm just saying, from knowing people who've been in the industry and what I've heard about job responsibilities of analysts, I gotta say that it really doesn't seem that hard, even though I don't think anyone would hire me for the job. Put differently, it seems like an industry where plenty of people who could do the job would never be hired. Again, no offense, just curious if any of you guys agree (and if not, tell me where you think I'm wrong)?

That was exactly my point. Not that anyone can do it, but that the people who actually get the job are only a subset of the people who could have done the job. But unlike the way that Gladwell conceptualizes evaluating NFL talent -- that is, where there's no way to know who will succeed -- in finance, there are fewer jobs than there are people who would succeed. The recruiting process might not be fair, and it might consistently shaft the same group of people, but they have to draw the line somewhere.

Jan 25, 2011
2x2Matrix:

Your point about finance recruiting only covers half the story. I've never read anything that suggests that firms take a lot of people who flop; all they do is reject a lot of people who could have been very successful. Guys like Brady or Jeff Saturday (Peyton Manning's undrafted -- and future Hall of Fame -- center) might not have gotten a shot on Wall Street. But I don't think there's been a rash of Jamarcus Russells and Akili Smiths.

Thats the point I was getting at, is that finance recruiting basically cuts out tons of people who could be successful. And of course you aren't going to hear of a rash of Russel's because finance isn't that public.

Jan 24, 2011

You have to look from both sides here, like said above. There are definitely kids from non-AQ banking schools (see what I did there) that would do just as well if not better than your ivy's. I attend a top 30 undergrad b-school, I consider myself level with any of the ivy's, really. The way I see it, the non-target kids can actually turn out to be better bankers because they have to work harder and put in more time trying to get in the door, merely trying to get their faces seen, often flying up on their own pockets just see if they can get 30 minutes with someone.

I digress, but agree that Gladwell indeed did not know football, but does have a great point, in football, banking, and many other areas (college acceptance, social circles, work environments, etc)

Jan 24, 2011
derivstrading:

This got me thinking, with finance so focused on narrowly recruiting from a select few schools, is this really the optimal strategy? Do you think finance recruiters face the same problem as NFL scouts do?

Totally an issue in every area where people try to forecast the success of other people. Nobody knows how well QBs will do in the pros, just like nobody knows how well college basketball players will do in the pros. And, I'd say it's also hard to predict how some kid will do as first-year analyst. With that said though, there are some noisy predictors, such as past successes and achievements.

Jan 24, 2011

2x2Matrix, I don't think you're fully incorporating the details of the article. Chase Daniel is an example of a QB who everyone thought wouldn't be a good NFL QB and didn't end up being a good NFL QB, but what about the QBs who nobody gave a shot and eventually became rockstars such as Tom Brady? That's why Gladwell is advocating for an apprenticeship type process that starts with a large group and systematically weeds out the underperformers. For all we know, Chase Daniel could have succeeded in the NFL due to what the scout touted as a strong arm, ability to hit receivers on the run, and intelligence, so it is necessary for the scout to keep track of him as long as he sees the potential. However, without having seem him or any other QB out on the NFL field before draft time, we will never know who can play and who can't.

Also, what's interesting to note is that Drew Brees compares very closely to Chase Daniel, but they were put in two entirely different situations. Coming out of college, both were great college QBs with nearly identical characteristics. Drew Brees got drafted in the 2nd round while Chase Daniel went undrafted. Ironically, both are on the Saints, and the verdict is still pending for Daniel.

Jan 24, 2011
HarvardOrBust:

2x2Matrix, I don't think you're fully incorporating the details of the article. Chase Daniel is an example of a QB who everyone thought wouldn't be a good NFL QB and didn't end up being a good NFL QB, but what about the QBs who nobody gave a shot and eventually became rockstars such as Tom Brady?

Like Tom Brady and... who? 32nd overall pick Drew Brees? 1st overall pick Peyton Manning? 10th overall pick Ben Roethlisberger or fellow first-rounder Aaron Rodgers? Or maybe you mean 1st overall pick Michael Vick or 3rd overall choice Matt Ryan? Brady is in a class by himself.

I understood the article, I just disagree with it. The reality is that there are far more failed first-rounders than there are late-rounders who became stars. Gladwell overstates the point: even though NFL talent evaluators occasionally let a star slip through, and even though they whiff on a disturbing number of first-round QBs, they do know something about evaluating talent. Most of the whiffs are guys like Russell who got drafted because they had huge upside (or because they were drafted by a team with an undead owner), not because they were sure things. But look at Sam Bradford: scouts knew he was the closest thing possible to a surefire success, and by all indications he's going to be a star.

Jan 24, 2011

I also don't know how much of an authority Gladwell is on a lot of the topics he covers, but I love his writing and am always down to read his stuff. This was a great one

Jan 24, 2011

Agreed, Gladwell's books (particularly Outliers and Blink) have had a profound impact on my overall perspective.

On a side note, I'm unable to open the "Most Likely to Succeed" link. Anyone mind posting a direct link? At hindsight, I'd presume it elaborates on his "date-of-birth" theory.

I win here, I win there...

Jan 24, 2011

Saw someone mentioned Jeff Saturday as undrafted future HOF. Throw in Antonio Gates and Priest Holmes into that category.

Jan 24, 2011
HedgeMonkey:

Saw someone mentioned Jeff Saturday as undrafted future HOF. Throw in Antonio Gates and Priest Holmes into that category.

That was me, but I don't know about Holmes. He was the best player on the planet for three years, but I don't think he had the longevity. But Gates, definitely.

Jan 25, 2011
2x2Matrix:

That was me, but I don't know about Holmes. He was the best player on the planet for three years, but I don't think he had the longevity. .

Fair enough - hes basically Terrell Davis with one more good year - but top 15 all time in Rush TDs is going to warrant consideration.

Jan 25, 2011

Analysts aren't bankers.... we're analysts....

The skill-set to actually succeed at banking long-term is very different.

"The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher." - Oscar Wilde

Jan 25, 2011
Jan 25, 2011

An investment banking analyst is not like an NFL quarterback....its not a good metaphor. Actual investment bankers who bring in deals and produce revenue for the firm are hired based on prior performance. Same thing for traders and buyside portfolio managers...they usually get capital incrementally based on early success with small "aprentice-like" amounts of capital. Analysts are performing manual labor which is why they are evaluated in about 45 minutes and hired rather indiscriminately based on prior, non-industry qualifications. Also, the consequences of hiring a bad analyst are practically nil (less then 100k of the firms money to fire a kid after a few months), whereas the consequences of wasting a high-round draft pick in the NFL or hiring a portfolio manager who blows tens or hundreds of millions of dollars is way higher. That is why the finance industry generally makes those employees show some industry-specific aptitude before hiring them. So there really is no QB problem in this industry for the jobs that matter.

And Priest Holmes has no chance of making the HOF.

Jan 26, 2011
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