Replacing expensive costly signals

I feel like there is a general problem where people signal something using some extremely socially destructive method, and we can conceive of more socially efficient ways to send the same signal, but trying out alternative signals suggests that you might be especially bad at the traditional one. For instance, an employer might reasonably suspect that a job candidate who did a strange online course instead of normal university would have done especially badly at normal university.

Here is a proposed solution. Let X be the traditional signal, Y be the new signal, and Z be the trait(s) being advertised by both. Let people continue doing X, but subsidize Y on top of X for people with very high Z. Soon Y is a signal of higher Z than X is, and understood by the recipients of the signals to be a better indicator. People who can’t afford to do both should then prefer Y to X, since Y is is a stronger signal, and since it is more socially efficient it is likely to be less costly for the signal senders.

If Y is intrinsically no better a signal than X (without your artificially subsidizing great Z-possessors to send it) then in the long run Y might only end up as strong a sign as X, but in the process, many should have moved to using Y instead.

(A possible downside is that people may end up just doing both forever.)

For example, if you developed a psychometric and intellectual test that only took half a day and predicted very well how someone would do in an MIT undergraduate degree, you could run it for a while for people who actually do MIT undergraduate degrees, offering prizes for high performance, or just subsidizing taking it at all. After the best MIT graduates say on their CVs for a while that they also did well on this thing and got a prize, it is hopefully an established metric, and an employer would as happily have someone with the degree as with a great result on your test. At which point an impressive and ambitious high school leaver would take the test, modulo e.g. concerns that the test doesn’t let you hang out with other MIT undergraduates for four years.

I don’t know if this is the kind of problem people actually have with replacing apparently wasteful signaling systems with better things. Or if this doesn’t actually work after thinking about it for more than an hour. But just in case.

9 responses to “Replacing expensive costly signals

  1. There’s a common narrative, in contemporary American culture, of a bunch of misfits banding together to outcompete the legitimate but wasteful incumbents. Think of the protagonist’s scrappy training in Rocky or The Karate Kid (vs the wealthy antagonist’s fancy training regime), or even in Twister, where the bad-guy tornado scientists drive fancy new black SUVs, while the good-guy tornado scientists drive a beat-up old pickup truck and get their tornado-scanners to fly by cutting up old aluminum cans for wings. Or Star Wars, where the Empire is glossy and standardized and uses gigantic powerful ships and the Rebels are diverse and quirky and just sort of doing the thing. Or Moneyball, especially analogous to college admissions, where the bad guys use expensive talent scouts and money, and the good guys use one guy who knows some statistics.

    The trope currently seems to be in the process of being ground into dust by postmodern marketers with no taste, but it was originally a coherent thing, and seems to be talking about the sort of problem you’re discussing. This implies a strategic narrative where the normative response to entrenched rent-extracting meritocracies is not to try to win acceptance by them / change minds, but organize a separate system full of misfits to actually outperform. At least, according to the poets and bards of our age. To some extent we can think of Abraham as having done this, as well as the various founding cultures of the US.

    I think this is also the narrative of Clayton Christensen’s The Innovator’s Dilemma.

  2. There actually is a pretty cheap test for whether or not you would succeed at MIT: Apply to MIT. Most who get in actually succeed. Let the admissions committee apply their secret sauce recipe and figure out whether you’re MIT material. The process sets you back $75. If you get your acceptance letter, you have no obligation to go. Just frame the letter and feature it on your resume, hoping that HR at some plucky startup interprets it correctly.

    I don’t run a plucky startup, but if I did, I suspect that this really would sway me: This kid is MIT material, is willing to come work for me, I can pay him like he’s 17 (because he is), and nobody else is going to hire him out, because he has no real credentials. In many regards, this would be a better hire than an MIT grad, who is in a much better position to negotiate a barely-affordable salary.

    I wonder if recruiters come to MIT making job offers to freshman students, encouraging them to quit after the first semester. Maybe they should. I know that Peter Thiel pays young people to drop out of college, but I don’t think he hires them once they do.

    • “If you get your acceptance letter, you have no obligation to go. ”

      …not officially and not obliged *by MIT*, of course.

      I got into MIT and damn right I was obliged to go to MIT *by my parents* (especially since I was still under 18 at the time)…

      …even though the only thing that kept me alive in middle school and high school was knowing I’d have the chance to start over socially in freshman *year* of college, and I knew MIT’s heavy pressure to rush a sorority/”independent living group”/coed fraternity (in my case; for boys there was pressure for the all-male frats too) meant heavy pressure to find all your friends in the first *week*.

      I got into other good schools that didn’t have that pressure – but no matter how good they were they all were, they were equally the pits according to the MIT-or-Ivys-or-nothing people I depended on.

      I threw away the only thing keeping me wanting to stay alive, largely because I had no close *friends* [see postscript] so it was even harder to resists my *family’s* emotional bulldozing.

      Since then I’ve just been propping up my carcass and waiting to find a way to kill myself without disqualifying my organs for donation. :(

      ” Just frame the letter and feature it on your resume, hoping that HR at some plucky startup interprets it correctly.”

      Before I go I plan to frame my MIT acceptance letter and give it to my parents so that they won’t feel sad about the rest of me being dead and they can pat themselves on the back for a kid they raised getting that letter.

      MIT’s pressuring people to find all their friends in the first week of school is OK for social butterflies and for people who don’t need friendship to tolerate being alive, and it’s *terrible* for people who do need friendship and want to make friends but need more than a week to do so…

      …and so many people take kids who do want to make friends and, in the name of getting them into MIT, *turn them into* people who do want to make friends but [thanks to having their growth restricted in all areas, including people skills learning, that aren’t on the SATs] need more than a week to do so.

      postscript: I got the triple-whammy of a shy personality *and* an ugly body (not a fat one, this like-mother-like-daughter ugliness can’t be dieted away) *and* lots of pressure to be even less social (ranging from “sure no one will notice your beard and mustache if I bleach it!” from the woman who gave me the hair to “people will think you’re crazy if you ever ask for help outside the family” [so much for having a close friend to call for a reality check before going to school with blonde facial hair] to “don’t give non-geeks a chance because being less popular makes you a less superficial person and it’s the geeks who will accept you just the way you are!”).

      • Sadgirl, it sounds like you’re stuck in a genuinely awful control system. I’m sorry to hear that! Also, you’re overestimating how insoluble your *other* problems are, because you haven’t found a way out of the big one that would free up energy to work on them. I can’t blame you for that, that’s just how humans work.

        What I can do is ask for a bit of your time before you make an irreversible choice to exit. Here’s my contact info.

        Even if you choose not to reach out to me or anyone else, thanks for sharing your perspective. It’s important to understand these control systems.

  3. Offering prizes for doing well on the psychometric test is a good way of incentivizing MIT students to take it at all, but it’s still expensive. You also might expect people who *already* have MIT degrees (esp. recent graduates who don’t have many other credentials and would do poorly on the test) to try to stop you if they realize what you’re doing.

    Another possibility is that the data for the cheaper signal is already there, and isn’t being exploited yet, as in David H’s MIT admission letter example. As a counterargument, something something efficient markets (but I have no idea how markets work, and would be pleased if someone could flesh out a better counterargument).

    Also, I think Triplebyte is more or less doing what you describe in this post. It’s a cheap process for applying for coding jobs, which, as far as I can tell, focuses exclusively on aptitude and, to some degree, experience, and doesn’t look at credentials at all.

  4. daveatnerdfevercom

    Read Bryan Caplan’s recent “The Case Against Education” (esp the 2nd half – the 1st half you’ll find obvious).

    The main problem here is those who have the most incentive to use the new signal Y are those few who do well on Y, but poorly on X.

    Suppose the plan is to show your MIT acceptance letter instead of your MIT degree – despite the fact that 80% (let’s say) of MIT freshmen graduate.

    Those who think they’re more likely than average to be in the remaining 20% have a lot more incentive to try the acceptance letter scheme. So from an employer’s viewpoint, the letter and the degree are NOT the same thing.

    This is the why IQ tests aren’t a good signaling substitute for college graduation, despite a very strong correlation. (Caplan discusses this.)

    • How about the Z?

      Let’s say Y is the acceptance letter, X is the formal degree, and Z is the networking done at MIT and continuing into post-MIT relationships.

      Does Z count as an expensive signal?

      Does the expense of Z not get counted since it’s already covered in the cost of X? MIT’s such a big Greek school that its financial aid department treats – and pays! – the cost of living in a fraternity or sorority the same way it treats the cost of living in a dorm. At some Ivies going Greek does cost extra but networking without going Greek is much easier than at MIT, etc.

      Does Z count as some other level of signaling that can’t be used in place of X or Y (X or Y impressing the employer once s/he knows you exist, Z improving the odds of some employers knowing you exist, etc.)?

      Does Z count as X½? That is, there’s having X alone vs. having Z + X (or just maybe most of X – say, made it 7 semesters through MIT then had to leave for some reason and didn’t get the degree, but stayed close and stayed in touch with the rest of the frat/sor chapter) but no having Z alone without any X so it’s not exactly X vs. Y vs. Z.

  5. There’s a classic problem with signals. Sometimes what is being signaled is more important than just the signal. The classic example is that having a reputation for being just is just as good as actually being just, but having a reputation for being healthy is not just as good as actually being healthy. Getting an acceptance letter from MIT is only as good as having a degree from MIT if the latter signal doesn’t provide valuable information. Otherwise, why not just use a birth certificate as a general purpose signal for just about everything? Why waste time and energy working on that novel when one’s birth certificate is just as good as the Booker Prize? [1]

    It is possible to change signals, but if the new signal is significantly easier to get, then it will be less valuable. Replacing four years of study with a single psychometric test sounds attractive, but the hard part would be getting the outside world to accept the latter. I have a school ring from MIT, what they call a “brass rat” because it features a mangy beaver on it. My girlfriend, who also has an undergraduate degree from MIT would borrow it for her own job interviews as a means of signalling. Being a woman, she found it made certain old timers feel a lot more confident in her. [2] You can buy a brass rat on eBay, but it will never be as valuable a signal as an MIT diploma. Anyone can buy a brass rat on eBay.

    In a sense, this post is advocating the Wizard of Oz approach. The tin man feels that he lacks the ability to love, so the wizard supplies him with a ticking heart. The lion feels he lacks courage, so the wizard supplies him with a medal for bravery. The scarecrow feels that he lacks brains, so the wizard supplies him with a diploma. Everyone is satisfied. [3] Of course, the reader or watcher is especially satisfied since these characters demonstrated their capacity to love, be brave and think on their journey to Oz. The Wizard of Oz, in the book even more than the movie, is depicted as a bit of a charlatan.

    [1] I could expand this argument into a general argument about any achievement. Why visit Machu Pichu when you can get the tee shirt on Canal Street? Sometimes the journey is worth something.
    [2] You can imagine the thought process: She’s a woman. She’s wearing a really ugly ring. She’s got to be really smart!
    [3] Even Dorothy was satisfied since she had recognized those virtues in her new friends, and she was going to go home. I guess the wicked witches were a little put out being crushed by a house and dissolved in water, but think of the flying monkeys finally getting their freedom.


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