Everybody Cheats

One of my favorite movies of all time is Breaking Away. Dave Stoller, the protagonist in that little tale gets his chance to race against the Team Cinzano, his idols. Unfortunately it doesn't work out the way he thought it would, the pro riders recognize him as a threat and toss a pump into his wheel, sending him in a ditch.

After the race he comes home crying, puts his arms around his mother and says, "everybody cheats, I just didn't know".

I keep thinking of that scene as I read yet another SEC scandal, this time backdating options. It's interesting to read the following two articles one after the other.

Dispatches From The Frozen North

There are two explanations for this. One is that the CEOs of these companies have the incredible ability to pick the exact bottom of their company's stock price every single time without fail. If this is true, then these men (and they are all men) are probably actually underpaid for their remarkable ability to predict the future, since the odds of choosing the right date every time for all the different companies is something like a quadrillion to one against.

Malcolm Gladwell, Game of Shadows:

FloJo had a fantastic year in 1988, which is why she raised so many eyebrows. She wasn’t Beamon. She was Bonds. I think if we’re smart about it, we can learn to distinguish the fluke performances from the phony performances.

Essentially the same argument. It follows that any performance which is so statistically improbable, is very probably the result of cheating. But in the case of CEOs, we tend to not give the benefit of the doubt, but in the case of athletes we do.

Malcolm Gladwell, Forensic Analysis:

I take it, from  many of the comments on my last post, that virtually no one bought my idea for loosing the forensic economists on sports records.

Found via rentzsch.com. One of the many differences between Wolf Rentzsch, and myself: I'm an admitted criminal when it comes to public transportation.