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Overcoming Bias Commenter's avatar

+10 karma, Robin. This is fascinating, concise, and above all useful.

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Overcoming Bias Commenter's avatar

This theory seems like it's being used overbroadly.

For CEOs, actors, and directors, their salary is really the least relevant cost factor. If you're running a large corporation, or making an expensive movie or television production, given the number of people involved, the risk is the whole project rather than the individual. Hiring an incompetent CEO (might) harm the entire company, causing losses that make his salary look trivial. Same thing goes for hiring a bad director or an actor for a major role. I doubt actors for minor or really minor roles suffer from this effect. For the big shots, their salary is not the determining cost, so "enslaving" them wouldn't change too much.

Authors and musicians carry signifant brand risk. That is, if I publish too many bad books or release too many bad CD's, my brand could suffer, and individuals who have some sense of their abilities (the model requires individual ignorance of talent, which is not wholly realistic) will look for other record labels / publishers. Consumers will be hesitant to purchase my brand. Thus, the main expense is not (necessarily) their salaries. I have some other specific ideas of where this fails, but I am not sufficiently familiar with the industries to voice them with confidence.

Athletes I know relatively little about the structure of. This may have a more significant effect there.

This is still an interesting and useful theory; I'm just not sure that binding contracts are the correct solution.

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