How to hire smarter than the market: a toy model

erikbern.com

Another great post from Erik Bernhardsson:

What my model implies, is that there’s an “arbitrage opportunity” here. In fact, it’s a bit of a silver lining to the fact that the market is biased. Are companies systematically putting a premium on something? Then bet against them! Go after the underdogs.

This post introduced me to Berkson's Paradox, a concept so simple that if you hadn't seen it described before you might not have realized that it was so commonly-occurring (or that it needed a name at all!). But thinking clearly about this dynamic in recruiting, home-buying, or in so many other contexts has massive benefits in shaping your strategy.

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