Robin Hanson explains what happens when people get serious about showing off:
Before the modern world, most jobs had a big physical component. And so physical ability (strength, speed, stamina, coordination, etc.) was one of the main things people tried to show off. Yes, people did try to show off physical abilities on the job. But when people got serious about showing off, they created special off-the-job contests, such as races and games.
These special contests made it much easier for observers to see small ability differences. For example, you might watch messengers all day on the job running from place to place, and though you’d get a vague idea of which ones were faster, you couldn’t see fine differences very well. But a race controls for other variation by having contestants all start at the same time on a line, and all run straight to a finish line. So even if one runner beats another by only a fraction of a second, observers can still see the difference. Other kinds of special contests also reduce noise, making it easier to see smaller ability differences.
When people can choose between competition forums with more and less noise, signaling incentives will induce them to choose forums with less noise. After all, competitors who choose forums with more noise will be seen as trying to hide their lower abilities among the noise.
So if messengers who wanted to show off their running abilities had a lot of discretion about how messenger jobs were arranged, they’d try to make their jobs look a lot like races. Which would help them show off, but would be less effective at getting messages delivered. Which is why people who hire messengers need to pay attention to how fast messages get delivered, and not just to hiring the fastest runners. Just hiring the fastest runners and letting them decide how messages get delivered is a recipe for waste.
In the rest of society, however, we often both try to hire people who seem to show off the highest related abilities, and we let those most prestigious people have a lot of discretion in how the job is structured. For example, we let the most prestigious doctors tell us how medicine should be run, the most prestigious lawyers tells us how law should be run, the most prestigious finance professionals tell us how the financial system should work, and the most prestigious academics tell us how to run schools and research.
This can go very wrong!
This seems a corollary of Hanson’s law by, oh, the same guy. I learned about that here too. Really useful for understanding customer behavior.