Yesterday I offered a theory of (some) management consulting:
Firms often have big obvious misallocations of resources, where … many highest status folks in the firm resist … changes. … If a prestigious outside consulting firm weighs in, that can turn the status tide. Coalitions can often successfully block a CEO initiative, and yet not resist the further support of a prestigious outside consultant. … Good-looking kids from our most prestigious schools … are the cheapest folks you can buy with our most prestigious affiliations.
What is status? One theory is that status is a commonly-seen summary of one’s value as an ally. In places where physical strength is more useful, strength counts more for status. In places where knowing the king is more useful, knowing the king counts more. And so on. But the consulting tale I tell above seems at odds with this theory.
Imagine that status in a firm was a proxy for one’s usefulness as an ally within that firm, summarizing the threats one could credibly make, the people one could fire, the favors one could plausibly call in, etc. And imagine that the current equilibrium was that opponents of change together held more of these useful resources – they successfully blocked change.
Now imagine that the CEO hires an outside consultant who writes a report recommending change. It should be clear to everyone that this outside firm has no direct power within the firm. It cannot fire anyone, go slow on a project, etc. So if status was just a proxy for relevant local abilities, then this consultant should have little status. Thus if a consultant actually does help the CEO by lending status to the CEO’s side, status must be something else.
So I’m led to consider a sticky-feature concept of status. Long ago coalition politics was important, and foragers had to estimate how useful each person would be if they joined a coalition. So our distant ancestors considered a standard set of features, such as strength, intelligence, charisma, etc., that tended then to indicate that someone would be a useful ally. Humans evolved specialized mental modules for making such estimates, and for estimating common perceptions of such estimates.
Today we have inherited such mental modules, and often use them to estimate which side will win a contest of coalitions. And even though relevant abilities have changed somewhat, our inherited expectations about who will win a coalition contest are somewhat self-reinforcing. For example, if we expect that coalitions of taller people tend to win, then we will be reluctant to cross such a coalition, which will tend to make them win. This can be a self-reinforcing focal equilibrium of the coordination game that is coalition politics.
If the features that define status are sticky, being somewhat locked into mental models that estimate which coalitions would win contests, then outside consultants with no formal power inside a firm could still tip the balance of status by siding with a CEO. Celebrities who know little about a product could make us more willing to buy it by endorsing it, and students could gain status via past affiliation with professors who have no power in their future work world.
If students gain status by graduating from prestigious schools, and if employers hire students for the status they add to a work coalition, is school productive? Well in this situation school is privately productive, both for the student and the employer. The employer isn’t inferring a hidden ability, but buying a visible feature. So this isn’t signaling exactly. But on the other hand, it isn’t obviously globally productive. The gain an employer gets from adding status to his coalition may well come at the expense of competing coalitions.