False Positives and False Negatives
Or: Why do startups started by college dropouts insist on an MBA degree and 5+ years of experience?
Every once in a while, the LinkedIn-verse is enraged at seeing a job ad that says IIT/IIM only*. In comments section, someone will rightly point out: performance in previous job is better predictor of performance in next job, rather than one’s score in some examination a decade ago; if all companies had similarly myopic policies, for example, Microsoft would have missed out on a talent like Satya Nadella; and so on.
Company that posted that job ad, would then ride out the storm (to not say anything is the best PR strategy, and to counter it logically is the worst PR strategy, in most cases), and then do it again anyway. So, what’s happening? What’s the thing too taboo to be said out loud?
In Statistics, we learn about false positives and false negatives. The hypothesis that the company has is this: people from top colleges are better at any job.
When they hire someone from a top college and she turns out to be bad at her job, they have got a Type-I error or a false positive. If they do hire someone not with the best academic pedigree and she turns out to be great at the job, they have got a Type-II error or a false negative.
What the company is effectively saying with its ‘IIT/IIM only’ policy is that while they can’t rule out that there are likely to be false negatives, there is lower probability of false negatives (given large sample size of non-IIT/IIM population) than the probability of false positives. So, ruling out false negatives along with true negatives saves a them a lot of time.
[Try replying with the above logic on the next rage-storm to see why keeping quiet is the better PR strategy.]
But is time the only thing to optimize for? What if they are missing out on a truly great talent with this rule i.e. the opportunity cost of missing out on a false negative in long-term is much higher than the opportunity cost of the company’s time in short-term? Which brings me to the next point.
The unintentional bad signal that such a job posting is sending is also hidden in the underlying hypothesis: people from top colleges are better at any job. That is to say: it’s just another job.
A job very broadly falls on two sides on this spectrum: a job involving vision/judgement/creativity versus a job involving execution. The former role is so specific, and so highly leveraged, that false negatives should not be ruled out. For example, investors will meet a college dropout with a vision to disrupt the hotel industry. Or, a CEO will meet the marketing director who can make a 10x better campaign irrespective of their academic credentials.
The execution role is more about tenacity: this person ignored all distractions during school days to secure a place in good college, and then ignored all distractions during college days to end top of her class degree; so she can be trusted to execute this project without getting bogged down.
So, even if you are falling on the good side of a ‘IIT/IIM and 5+ years of experience only’ job posting, you need to talk to the team and indirectly understand if it’s a creative role and are they just ruling out (true and false) negatives, or are you being hired for your tenacity to execute (an admirable quality, anyway), and then take a decision.
*for those unaware of Indian context: IIT/IIM only means Ivy League only.
