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Saturday, November 21, 2015

'Imminent' Terror Threat Shuts Brussels Metro


Belgium's Prime Minister said the terror alert was as a result of "quite precise information about the risk of an attack like the one that happened in Paris".
Heavily armed soldiers and police are patrolling the city amid fears at least one suspect in the Paris attacks could be in Belgium.
The website of the country's crisis centre said it had asked local authorities to cancel large events, urge people to avoid crowds and postpone soccer matches.
Belgian PM Charles Michel said the government would review the security situation towards the end of the weekend.
It comes after a meeting of top ministers, police and security services in the city, which is also home to the European Union and NATO headquarters.
A spokesman for the crisis centre said in a statement: "Following our latest evaluation... the centre has raised its terror alert to level 4, signifying a very serious threat, for the Brussels region.
"The analysis shows a serious and imminent threat requiring specific security measures as well as detailed recommendations to the population."
Sky's Enda Brady, who has arrived at the main Bruxelles Midi train station, said: "Extraordinary security scenes here. Soldiers from the Belgian army carrying assault rifles... in groups of four up and down the main concourse and on platforms.
"It's a totally surreal atmosphere. It's just extremely quiet. It's normally a very very busy station, especially at weekends. Belgian police also heavily armed. Everyone knows what's going on..."  
Belgium, and Brussels in particular, have been at the centre of investigations into the Paris attacks after it emerged that two of the suicide bombers had been living in the country.
Three people detained in Brussels are facing terrorism charges.
The brother of one of the suicide bombers, who was also living in Brussels, is still on the run.
Salah Abdeslam was briefly pulled over by French police near the Belgian border last Saturday morning along with two of those in custody.
The Federal Prosecutors Office in Brussels said on Saturday that police had searched the house of a person who was arrested on Friday and had found "a few weapons".
The last time any part of the country was put on maximum alert was in May 2014 when a gunman shot dead four people at the Jewish Museum in Brussels.

American Killed in Mali Was Mother, Peace Corps Volunteer

The American woman who was killed in the Mali hostage situation was a mother and public health worker who once volunteered for the Peace Corps, her devastated family said.
Anita Datar, 41, was one of the at least 27 killed today -- according to the UN -- when gunmen attacked the Radisson Blu Hotel in Bamako.
It's unbelievable to us that she has been killed in this senseless act of terrorism," the statement said. "She loved her family and her work tremendously."
According to her family, Datar worked as a senior manager at the consulting firm Palladium Group and was a founding board member of Tulalens, a non-profit "connecting underserved communities with quality health services."
Datar, who had a son, originally was from western Massachusetts and grew up in New Jersey. She served in the peace corps in Senegal from 1997-'99 "and has spent much of her career working to advance global health and international development, with a focus on population and reproductive health, family planning, and HIV."
"Everything she did in her life she did to help others— as a mother, public health expert, daughter, sister and friend," the statement said. "And while we are angry and saddened that she has been killed, we know that she would want to promote education and healthcare to prevent violence and poverty at home and abroad, not intolerance."
A family member said that she was in Mali "doing what she loved -- strengthening public health."
It was not clear how Datar died during the siege, during which at least three gunmen stormed the hotel, which was popular with Westerners and the UN.
Also killed was a Belgian Member of Parliament, Geoffrey Dieudonné as well as two attackers, officials said.

17 Books Everyone Should Read, According to Bill Gates

Bill Gates has a schedule that’s planned down to the minute, the entrepreneur-turned-billionaire-humanitarian still gobbles up about a book a week.
Aside from a handful of novels, they’re mostly nonfiction books covering his and his foundation’s broad range of interests. A lot of them are about transforming systems: how nations can intelligently develop, how to lead an organization, and how social change can fruitfully happen.
We went through the past five years of his book criticism to find the ones that he gave glowing reviews and that changed his perspective.
Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012 by Carol Loomis
Warren Buffett and Gates have a famously epic bromance, what with their recommending books to each other and spearheading philanthropic campaigns together.
So it’s no surprise that Gates enjoyed Tap Dancing to Work, a collection of articles and essays about and by Buffett, compiled by Fortune magazine journalist Carol Loomis.
Gates says that anyone who reads the book cover-to-cover will walk away with two main impressions:
First, how Warren’s been incredibly consistent in applying his vision and investment principles over the duration of his career;
[S]econdly, that his analysis and understanding of business and markets remains unparalleled. I wrote in 1996 that I’d never met anyone who thought about business in such a clear way. That is certainly still the case.
Getting into the mind of Buffett is “an extremely worthwhile use of time,” Gates concludes.
Making the Modern World: Materials and Dematerialization by Vaclav Smil
Gates says his favorite author is Vaclav Smil, an environmental-sciences professor who writes big histories of things like energy and innovation.
His latest is Making the Modern World. It got Gates thinking.
“It might seem mundane, but the issue of materials — how much we use and how much we need — is key to helping the world’s poorest people improve their lives,” he writes. “Think of the amazing increase in quality of life that we saw in the United States and other rich countries in the past 100 years. We want most of that miracle to take place for all of humanity over the next 50 years.”
To know where we’re going, Gates says, we need to know where we’ve been — and Smil is one of his favorite sources for learning that.
The Sixth Extinction: An Unnatural History by Elizabeth Kolbert
It can be easy to forget that our present day is a part of world history. Gates says that New Yorker writer Elizabeth Kolbert’s new book The Sixth Extinctionhelps correct that.
“Humans are putting down massive amounts of pavement, moving species around the planet, over-fishing and acidifying the oceans, changing the chemical composition of rivers, and more,” Gates writes, echoing a concern that he voices in many of his reviews.
“Natural scientists posit that there have been five extinction events in the Earth’s history (think of the asteroid that wiped out the dinosaurs),” he continues, “and Kolbert makes a compelling case that human activity is leading to the sixth.”
To get a hint of Kolbert’s reporting, check out the series of stories that preceded the book’s publication.
Stress Test: Reflections on Financial Crises by Tim Geithner
Gates stood at the center of an enormously complex system as CEO of Microsoft. Timothy Geithner did much the same as U.S. Treasury secretary — and saw the structure fall down around him during the financial crisis.
“Geithner paints a compelling human portrait of what it was like to be fighting a global financial meltdown while at the same time fighting critics inside and outside the Administration as well as his own severe guilt over his near-total absence from his family,” Gates says. “The politics of fighting financial crises will always be ugly. But it helps if the public knows a little more about the subject.”
Stress Test provides that knowledge.
The Better Angels of Our Nature: Why Violence Has Declined by Steven Pinker
In Better Angels, Harvard cognitive scientist Steven Pinker branches out into the history of the most contentious of subjects: violence.
Gates says it’s one of the most important books he’s ever read.
“Pinker presents a tremendous amount of evidence that humans have gradually become much less violent and much more humane,” he says, in a trend that started thousands of years ago and continued until this day.
This isn’t just ivory-tower theory. Gates says the book has affected his humanitarian work.
“As I’m someone who’s fairly optimistic in general,” he says, “the book struck a chord with me and got me to thinking about some of our foundation’s strategies.”
The Man Who Fed the Worldby Leon Hesser
Even though Gates can get a meeting with almost anyone, he can’t land a sit-down with Norman Borlaug, the late biologist and humanitarian who led the “Green Revolution” — a series of innovations that kept a huge chunk of humanity from starving.
“Although a lot of people have never heard of Borlaug, he probably saved more lives than anyone else in history,” Gates says. “It’s estimated that his new seed varieties saved a billion people from starvation,” many of whom were in India and Pakistan.
Borlaug was awarded the Nobel Peace Prize, the Presidential Medal of Freedom, and the Congressional Gold Medal for his efforts — and is one of only seven people to receive that honor.
For Gates, Borlaug is a model in getting important work done in the world.
“Borlaug was one-of-a-kind,” he says, “equally skilled in the laboratory, mentoring young scientists, and cajoling reluctant bureaucrats and government officials.”
Hesser’s The Man Who Fed the World lets you peer into the personality that saved a billion lives.
Business Adventures: Twelve Classic Tales from the World of Wall Street by John Brooks
To reply, Buffett sent the Microsoft founder his personal copy of Business Adventures, a collection of New Yorker stories by John Brooks.
Though the anecdotes are from half a century ago, the book remains Gates’ favorite.
Gates says that the book serves as a reminder that the principles for building a winning business stay constant. He writes:
For one thing, there’s an essential human factor in every business endeavor. It doesn’t matter if you have a perfect product, production plan and marketing pitch; you’ll still need the right people to lead and implement those plans.
Learning of the affections that Gates and Buffett have for this title, the business press has fallen similarly in love with the book. Slate quipped that Business Adventures is “catnip for billionaires.”
The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism by Doris Kearns Goodwin
Like us, Gates is fascinated by the way Theodore Roosevelt was able to affect his society: busting trusts, setting up a park system, and the like.
For this reason, Gates appreciates how Goodwin’s biography uses the presidency as a lens for understanding the shift of society.
“How does social change happen?” Gates asks in his review. “Can it be driven by a single inspirational leader, or do other factors have to lay the groundwork first?”
He says that TR shows how many stakeholders need to be involved.
“Although he tried to push through a number of political reforms earlier in his career,” Gates says, “[Roosevelt] wasn’t really successful until journalists at ‘McClure’s’ and other publications had rallied public support for change.”
The Rosie Project: A Novel by Graeme Simsion
Gates doesn’t review a lot of fiction, but The Rosie Project, which came on the recommendation of his wife, Melinda, is an oddly perfect fit.
“Anyone who occasionally gets overly logical will identify with the hero, a genetics professor with Asperger’s Syndrome who goes looking for a wife,” he writes. “(Melinda thought I would appreciate the parts where he’s a little too obsessed with optimizing his schedule. She was right.)”
The book is funny, clever, and moving, Gates says, to the point that he read it in one sitting.
On Immunity by Eula Biss
Even though the science all says that vaccines are among the most important inventions in human history, there’s still a debate about whether they’re a good idea.
In “On Immunity,” essayist Eula Biss pulls apart that argument.
She “uses the tools of literary analysis, philosophy, and science to examine the speedy, inaccurate rumors about childhood vaccines that have proliferated among well-meaning American parents,” Gates writes. “Biss took up this topic not for academic reasons but because of her new role as a mom.”
How Asia Works by Joe Studwell
Joe Studwell is a business journalist whose central mission is understanding “development.”
The Financial Times said that How Asia Works is “the first book to offer an Asia-wide deconstruction of success and failure in economic development.”
Gates says that the book’s thesis goes like this:
All the countries that become development success stories (1) create conditions for small farmers to thrive, (2) use the proceeds from agricultural surpluses to build a manufacturing base that is tooled from the start to produce exports, and (3) nurture both these sectors with financial institutions closely controlled by the government.
How to Lie with Statistics by Darrell Huff
Published in 1954, How to Lie with Statistics is an introduction to statistics — and a primer on how they can be manipulated.
It’s “more relevant than ever,” Gates says.
“One chapter shows you how visuals can be used to exaggerate trends and give distorted comparisons,” he says. “It’s a timely reminder, given how often infographics show up in your Facebook and Twitter feeds these days.”
Epic Measures by Jeremy Smith
Reading this biography was especially meaningful for Gates because he’s known its subject, a doctor named Chris Murray, for more than a decade.
According to Gates, the book is a “highly readable account for anyone who wants to know more about Chris’s work and why it matters.”
That work involves creating the Global Burden of Disease, a public website that gathers data on the causes of human illness and death from researchers around the world. The idea is that we can’t begin finding cures for health issues if we don’t even know what those issues are.
Writes Gates: “As Epic Measuresshows, the more we make sure reliable information gets out there, the better decisions we all can make, and the more impact we all can have.”
Stuff Matters by Mark Miodownik
If you’re like most people, you use steel razors, glass cups, and paper notepads every day without thinking much about the materials they’re made of.
In “Stuff Matters,” Miodownik, a materials scientist, aims to show you why the science behind those materials is so fascinating.
That premise might sound similar to “Making the Modern World,” a book by Gates’ favorite author Smil, which Gates has also recommended. But Gates says the two works are “completely different.” While Smil is a “facts-and-numbers guy,” Miodownik is “heavy on romance and very light on numbers,” potentially making “Stuff Matters” an easier read.
Gates claims his favorite chapter is the one on carbon, “which offers insights into one atom’s massive past, present, and future role in human life.”
Hyperbole and a Half by Allie Brosh
It might be hard to imagine Gates curled up with a book of comic drawings. But Hyperbole and a Half, based on the blog by the same name, is more moving and profound than it is silly.
The stories and drawings in the book are based on scenes from Brosh’s life, as well as her imagined misadventures.
“It’s funny and smart as hell,” Gates writes, adding that “Brosh’s stories feel incredibly — and sometimes brutally — real.”
Gates was especially moved by the parts of the book that touch on Brosh’s struggles with severe depression, including a series of images about her attempts to leave an appropriate suicide note.
It’s a rare book that can simultaneously make you laugh, cry, and think existential thoughts — but this one seems to do it.
What If? by Randall Munroe
Another book based on a blogWhat If? is a collection of cartoon-illustrated answers to hypothetical scientific questions.
Those questions range from the dystopian (“What if I took a swim in a typical spent nuclear fuel pool?”) to the philosophical (“What if everyone actually had only one soul mate, a random person somewhere in the world?”) Each question was posed by a different reader, and Munroe, a former roboticist for NASA, goes to the greatest lengths to answer it accurately through research and interviews.
The reason Munroe’s approach is a great way to learn about science is that he takes ideas that everybody understands in a general way and then explores what happens when you take those ideas to their limits. For example, we all know pretty much what gravity is. But what if Earth’s gravity were twice as strong as it is? What if it were three times as strong, or a hundred? Looking at the question in that way makes you start to think about gravity a little differently.
Bill Gates at the backtage of the musical 'Hamilton' on Broadway in New York City on Oct. 11, 2015.
Bruce Glikas—FilmMagic/Getty Images
Bill Gates at the backtage of the musical 'Hamilton' on Broadway in New York City on Oct. 11, 2015.


For anyone who’s ever wished there were someone to indulge and investigate their secret scientific fantasies, this book comes in handy.
Should We Eat Meat? by Vaclav Smil
Gates isn’t shy about proclaiming Smil, a professor emeritus at the University of Manitoba, his favorite author. In fact, he’s recommended several of Smil’s books before.
As usual, Gates writes, Smil attacks the issue of whether humans should consume meat from every possible angle. First he tries to define meat, then he looks at its role in human evolution, as well as how much meat each country consumes, the health and environmental risks, and the ethicality of raising animals for slaughter.
Gates, who was a vegetarian for a year during his 20s, is especially impressed by how Smil uses science to debunk common misconceptions, like the idea that raising meat for food involves a tremendous amount of water.
In fact, Gates writes:
Smil shows you how the picture is more complicated. It turns out that not all water is created equal. Nearly 90 percent of the water needed for livestock production is what’s called green water, used to grow grass and such. In most places, all but a tiny fraction of green water comes from rain, and because most green water eventually evaporates back into the atmosphere, it’s not really consumed.
Overall, the book left Gates feeling that eventually, “the world can meet its need for meat.”

What is behind ISIL's attacks?

After ISIL's deadly attacks on Paris, Beirut and a Russian airliner over Egypt's Sinai Peninsula, has the group changed its strategy?
On this episode of UpFront, Mehdi Hasan asks the former head of counterterrorism for British intelligence and one of the founders of the UN's Counter Terrorism Implementation Task Force (CTITF) about ISIL's tactics and game plan.
We also examine the myth of the Sunni-Shia war, and speak to the leading Muslim scholar Sheikh Hamza Yusuf about the roots of radicalisation.
Headliner: Former head of counterterrorism at MI6 Richard Barrett
Over the past month, ISIL has claimed responsibility for bringing down a Russian airliner over Egypt's Sinai Peninsula, suicide blasts in Beirut and attacks in Paris.
Both Russia and France have responded by intensifying air strikes against ISIL targets in Syria. Across the West, heightened concerns have prompted officials to bolster security measures, with ISIL vowing to strike again.
So, what's behind the group's recent string of attacks? Is ISIL changing its strategy to bring about a confrontation with the West or is it trying to deter further military attacks on its so-called caliphate?
In this week's Headliner, Mehdi Hasan asks Richard Barrett, the former head of counterterrorism at MI6, about ISIL's motivation.
Reality Check: The myth of a Sunni-Shia war
What is driving the current violence and chaos in the Middle East? Many say it's the "age-old" sectarian conflict between Sunnis and Shia, but a look at the facts shows something different.
In this week's Reality Check, Mehdi Hasan highlights the myth of the so-called Sunni-Shia war.
Special: Sheikh Hamza Yusuf
Leading US Muslim scholar Sheikh Hamza Yusuf has been at the forefront of efforts to counter the narrative of ISIL.
As the cofounder of the only Muslim liberal arts college in the US, Yusuf has worked to stop young Muslims in the West from going to fight for ISIL.
In an interview recorded before the recent attacks in Paris, Beirut and Baghdad, Mehdi Hasan asks Yusuf what is behind the allure of the group for some people and why they join it.

Brussels is put on high alert as Europe moves to tighten borders

PARIS — The government abruptly shut down the metro system in Brussels, canceled sporting events and warned shoppers to stay away from malls as Belgium placed the capital on maximum alert early Saturday, citing a “serious and imminent” threat of attack.

Just a week after the deadly Paris attacks, armed troops stood guard in front of hotels and bus stops in Brussels. The government warned the population to avoid crowds; there was a scattering of shop closures. At least four of the Islamic State militants who attacked Paris came from the same immigrant neighborhood in the Belgium capital.

The new threat alert in Brussels comes after European countries agreed Friday to new steps aimed at securing Europe’s frontiers, as further evidence emerged that extremists in the terrorist attacks in Paris were using the region’s porous borders to slip between the continent and the battlefields of the Middle East.

French prosecutors said Friday that they had confirmed that another of the suicide bombers who died in the attack on the Stade de France had traveled through Greece, adding more evidence of how militants have been taking advantage of the same routes used by migrants to flee into Western Europe from the war-torn Middle East. The man, officials said, had apparently entered Greece on the same date and location — Leros island on Oct. 3 — as another attacker who had arrived with a fake Syrian passport under the name Ahmad Almohammad.

The name of the second stadium bomber was not provided by prosecutors. But two senior security officials briefed on the investigation in two different countries said the man had traveled on a fake Syrian passport under the name Mohammad al-Mahmod.

Senior European officials meeting in Brussels agreed to implement a higher measure of monitoring at external borders, even as France extended its broad counterterrorism sweeps nationwide.

Currently, citizens of the European Union — unless they display suspicious behavior — face only cursory checks when arriving on flights from outside the 26 nations in Europe that share an open border treaty. The new policy would bring more scrutiny, including thorough passport checks against European watch lists.

Nine people were arrested in sweeps Thursday in Belgium in connection with the Paris attacks. Seven were released Friday without charges, and two remained in detention.

In Paris, French officials said Friday that a third body — that of a male — was found in the rubble of Wednesday’s massive pre-dawn police raid in which Abdelhamid Abaaoud, the suspected ringleader of the Paris attacks, was killed. French officials now say that it was this newly uncovered but still unidentified third person who detonated a suicide vest in the apartment — not, as authorities had earlier reported, the lone woman in the group. She was officially identified Friday as 26-year-old Hasna Aitboulahcen. Prosecutors said a passport in that name was also found in the targeted apartment.

Police believe that Abaaoud fired one of the three Kalashnikovs on cafés in Paris last Friday night. Abaaoud was seen entering the metro system on video surveillance about half an hour after the attack on the Bataclan began at a station east of Paris near where police later found an abandoned Seat used in the attacks.

On Thursday, French officials said that a “non-European country” had provided information Monday that Abaaoud had passed through Greece, the single-largest gateway to Europe for a record flood of migrants. A senior police official said that at least one of the three suspects captured alive Wednesday had also been in Greece.

Salah Abdeslam, 26, a French national now wanted in connection with the attacks, is also believed to have been stopped in Greece in August. Four other assailants are believed to have traveled through Europe to Syria, but their exact routes remain uncertain.

The confirmed death toll in the attacks rose Friday to 130, from 129. More than 350 people were wounded in the carnage.

With Europe confronting a heightened terrorist threat, the measures announced Friday underscored a trade-off between security and the open borders that the European Union once held dear. Moving to shut down a network of homegrown jihadists who are slipping undetected between the continent and the battlefields of the Middle East, officials agreed to come up with a proposal before the end of the year to enhance the ability to track airline passengers. Currently, passenger list information in Europe is kept for only a month. That could now be extended.

“A month to conserve data?” French Interior Minister Bernard Cazeneuve said Friday. “That’s definitely not enough.”

But Cazeneuve, the French interior minister, on Friday urged his counterparts in Europe to agree to fresh security measures, including more involved passport checks at Europe’s borders. He warned Friday that “we can’t lose any more time.”

The U.N. Security Council unanimously approved a French-sponsored resolution Friday calling on all nations to redouble and coordinate action to prevent further attacks by Islamic State terrorists and other extremist groups, the Associated Press reported.

The resolution says the Islamic State “constitutes a global and unprecedented threat to international peace and security,” and it expresses the council’s determination “to combat by all means this unprecedented threat.”



Are Successful CEOs Just Lucky?

NOV15_16_119316095_2
“Ask chief executives why their companies are performing so well, and they’ll typically credit a brilliant strategy coupled with hard-nosed, diligent execution. When you ask Lars Sørensen of Novo Nordisk what forces propelled him to the top of HBR’s 2015 ranking of the best-performing CEOs in the world, he cites something very different: luck.”
So begins our recent profile of the best performing CEO of 2015. Sørensen’s modesty is refreshing, but is it accurate? 

A series of recent papers help answer that question, by quantifying the roles of luck, ability, and experience in CEOs’ success. Together they suggest two conclusions: first, no single trait or skill seems to explain CEO performance; and second, luck plays a very large role.
There is a long line of research that attempts to measure the impact of CEOs on the companies they run, and it provides background for these newer studies. Estimates of CEOs’ contribution to companies’ success vary, but one study found that it varies between 2% to 22% depending on the industry, and most estimates I’ve seen fit within that range. There is also some evidence that this “CEO effect” has been rising over time.
Impact_US_CEOs

The CEO, then, is not the primary driver of a firm’s success. Industry, for instance, matters far more. But what factors determine which CEOs rise and fall, and who makes it to the top job in the first place?
It shouldn’t take a careful empirical study to convince you that CEOs don’t get where they are on the basis of ability alone. If that were true, the C-suite would not be so dominated by white men. Nonetheless, a new working paper by Renee Adams at the University of New South Wales, Matti Keloharju at Harvard Business School, and Samuli Knupfer at BI Norwegian Business School helps to quantify the role of ability in becoming CEO.
The researchers used data from the Swedish military to compare Swedish men who ended up becoming CEOs to men who didn’t. Military service was mandatory in Sweden between 1970 and 1996, and the government attempted to measure young men’s aptitude using a series of cognitive tests, as well as an interview. The researchers were able to match this data with other sources to determine the professions these men eventually entered, and how well they were paid.
Their results are what you might expect: CEOs are, on average, smarter than most people. But they’re hardly exceptional. The median CEO of a large firm in Sweden scored in the top 17% in “cognitive ability,” a measure based on four tests given by the military to assess inductive reasoning, verbal comprehension, spatial ability, and technical comprehension. (The researchers don’t argue that such ability is necessarily innate, as opposed to shaped by one’s upbringing; they just note that the scores predate any leadership experience.)
CEOs of large firms scored higher on this measure than CEOs of small firms and family firms. But large firm CEOs didn’t score much higher than other professionals, like doctors, lawyers, or engineers.
Success in the military interview was a slightly better predictor of becoming a CEO, compared to cognitive tests. As the researchers explain, “Conscripts obtain a higher score in the interview when they demonstrate that they have the willingness to assume responsibility, are independent, have an outgoing character, demonstrate persistence and emotional stability, and display initiative.” Perhaps this represents a measure of the things CEOs need beyond smarts; perhaps it reflects bias in the interview process.
Overall this evidence suggests that CEOs are a relatively talented bunch, but not much more so than other skilled professionals, or for that matter than the executives who report to them.
“These results suggest that the high pay CEOs enjoy does not arise from scarce supply of the three traits we study,” the researchers conclude, noting that Swedish CEOs receive a 1200% pay premium compared to the average worker. “While a favorable mix of traits may make it easier to climb on the corporate ladder, it by no means assures a position as a chief executive of a major company.”
What else shapes the careers of successful CEOs? It’s hard to avoid Sørensen’s conclusion that luck is the single biggest factor. Consider a 2014 study by Dirk Jenter at Stanford and Fadi Kanaan at MIT: they looked at more than 3,000 CEO turnovers between 1993 and 2009 and found that CEOs were frequently fired for factors well outside their control. Recall that in the CEO effect studies, industry and macroeconomic factors tended to matter more for financial success than who was running the company. Yet, Jenter and Kanaan found that CEOs were significantly more likely to be dismissed during recessions or when their industry is suffering, despite the fact that these trends have little to do with managerial skill. (Lest you start to feel bad for CEOs, if anything they are more likely to be compensated for good luck than fired for bad.)
Perhaps the most sweeping indictment of the idea that CEOs’ careers are shaped by skill comes from a 2014 paper by Markus Fitza at Texas A&M. He argues that even that 2% to 22% of firm performance that studies have attributed to CEOs could be largely the product of luck. To understand why, you have to dive into the methodology of all this research, but I promise it will be worth it.
Studies of the CEO effect usually look at how much CEO turnover correlates with a company’s financial performance, after accounting for other factors like industry performance, overall economic performance, and the like. If a firm does badly for four years under one CEO, then another CEO comes in under the same economic conditions and the firm does well for the next four years, that gets counted as the CEO effect.
But that’s not necessarily proof of CEO skill. Imagine that when CEOs take the top job, they get to pick between two strategies, and once they pick, that strategy is in place for their full tenure. One strategy leads to success, the other to failure, but no one knows which strategy is which. Perhaps the first CEO in the example above just randomly happened to pick the bad strategy, and the next CEO happened to pick the good one. In that case, the CEO effect would just be measuring luck.
That example is purposely oversimplified, but CEOs clearly do face uncertainty when choosing a strategy. If a new CEO coming in and changing course is more like a dice roll than an indication of competence, then measurements of the CEO effect reflect luck rather than skill.
Fitza’s contribution is to estimate just how confident we can be that the CEO effect is due to skill rather than luck. To do so he simulates how big a CEO effect you might see in the data if company performance were entirely random. He shows that, because of how few data points exist about any single CEO, randomness can create the illusion of a CEO effect, even when no skill is involved. Fitza calculates that the portion of the CEO effect that we can be confident is related to skill is between 4% and 5% of total company performance. (The study that found the 2% to 22% range tried a similar approach and came to the conclusion that in some industries the CEO effect was large enough to rule out luck, while in others it was not.)
What should we make of all this?
It’s safe to say that CEOs are, overall, a talented bunch, but that’s not what separates them from other professionals, nor is it the main reason their firms succeed or fail. Certainly it doesn’t come close to explaining why they’re so well paid. Put another way, CEOs matter, just less than many people think. Instead, luck, and yes, bias, play a far larger role in determining who ends up leading companies, and whether they are fired or end up industry leaders.
There’s perhaps no better proof of this point than the third factor the researchers looked at in the study of male CEOs in Sweden. In addition to the interview and the cognitive tests, the researchers considered height. Taller men, they found, were more likely to become CEO, though the effect wasn’t as strong as for the other two factors. Even though CEOs weren’t at the very top of the spectrum in intelligence, when the researchers combined cognitive ability, interview results, and height into one score, they found that CEOs of large Swedish firms were in fact in the top 5%. Becoming CEO doesn’t necessarily hinge on being the best and brightest, though that helps. It’s also important that society thinks you look the part.