The Will Rogers phenomenon refers to a curious and often misleading statistical effect that can give the illusion of improvement, even when nothing significant has changed. This phenomenon, named after American comedian Will Rogers, involves shifting items between groups to artificially boost averages without enhancing the overall value. Whether it’s in finance, business, or medicine, understanding this concept is crucial for avoiding misinterpretation of data and spotting manipulation. Let’s dive deeper into some real-world scenarios where the Will Rogers phenomenon might rear its head.
A Simple Banking Strategy for Big Gains
In the world of private banking, particularly when managing the wealth of high-net-worth individuals, increasing the total wealth under management is a primary goal. Banks often set ambitious targets for their managers, expecting them to show growth in assets under management (AUM) to reflect a healthy financial performance. However, rather than sourcing new clients or improving investment returns, one can achieve an apparent boost in AUM by redistributing clients between managers.
In the scenario described, there are two money managers—Manager A, who handles ultra-high-net-worth individuals, and Manager B, who deals with wealthy clients but not to the same extent. As the head of the bank, your goal is to raise the average AUM of both managers within six months. One might think this would involve finding new clients or offering superior investment products, but an easier solution is to reallocate assets between the two managers. You increase both managers’ averages by transferring a client with a sizable but not massive wealth from A to B. Manager A, with fewer but wealthier clients, sees an apparent increase in the average wealth per client. At the same time, Manager B benefits from the newly added assets.
The key to understanding this tactic lies in the Will Rogers phenomenon. The essence of this strategy is shifting individuals between groups, which changes the group averages without any real increase in value. The total wealth under management hasn’t changed, but the illusion of growth is now created. Such statistical manipulation can make it appear that the managers have done more with less, thereby meeting the bank’s goals without any actual increase in value. This scenario is common in high-stakes finance, where external appearances—such as reported averages—are sometimes considered more important than true growth or performance.
While this strategy can effectively achieve short-term goals, it’s important to note that it doesn’t reflect genuine financial growth. This manipulation can be misleading, especially if shareholders, clients, or other stakeholders don’t examine the underlying causes of the reported increase. The overall wealth managed has not grown; only how the numbers are presented has changed. It’s vital to remain aware of such strategies, as they can provide a false sense of success.
Hedge Fund Management and the Illusion of Growth
When managing a hedge fund or a group of funds, the pressure to show significant returns can be overwhelming. Investors demand high performance, and fund managers are often under intense scrutiny. The temptation to manipulate statistics—without incurring additional fees or effort—can lead to practices that create the illusion of growth without actual results.
In this example, you oversee three hedge funds: Fund A performs exceptionally well, Fund B performs decently, and Fund C struggles. The goal is to improve the performance of Fund B and Fund C without incurring new expenses or fees. The obvious course of action might seem like investing in new opportunities or developing fresh strategies, but there’s a shortcut: simply redistribute assets within the funds themselves.
By transferring a portion of the high-performing assets from Fund A to Funds B and C, you can boost the performance of the latter two. While not the most profitable in Fund A, these assets are still solid performers that can prop up the other two funds. Even though Fund A’s performance will slightly drop due to the reduced assets, Funds B and C will now appear much healthier, as their portfolios are more profitable.
This strategy illustrates the Will Rogers phenomenon, where nothing substantial has changed in the total value of assets managed. The funds themselves haven’t seen real growth in increased wealth, but by shifting assets between them, the appearance of improvement is achieved. This type of reallocation doesn’t improve the actual financial returns of any individual fund—it simply changes the composition of the funds in a way that makes their performance look better.
In this context, the Will Rogers phenomenon highlights the danger of relying solely on surface-level data. Investors or stakeholders reviewing the performance of these funds might celebrate the impressive returns from Fund B and Fund C without realizing that these returns are merely a product of asset redistribution, not genuine financial improvement. The risk here is that the apparent success doesn’t align with reality, and in the long term, such strategies can undermine trust and credibility.
The Auto Franchise Example: Moving Salesmen to Boost Averages
One of the most straightforward and common examples of the Will Rogers phenomenon can be observed in sales performance. In any business with multiple salespeople, it’s easy to create an illusion of growth by shifting the focus from individual performance to group averages. This is especially true when the difference in individual performance is substantial.
In the case of an auto franchise with two branches, you manage six salespeople, three at each branch. The sales figures are starkly different: in Branch A, the salespeople sell an average of two cars per week, while in Branch B, the average is five cars per week. The apparent performance disparity creates the opportunity to manipulate averages without changing sales figures. Moving one salesperson from Branch B to Branch A—specifically, someone who is a mid-tier performer in Branch B—creates a situation where both branches see an improvement in their averages.
When salesperson number 4 is transferred from Branch B to Branch A, Branch A’s average sales increase from two to 2.5 cars per person. At the same time, Branch B, which now has only the top performers (salespeople 5 and 6), sees its average increase to 5.5 cars per person. While both branches now show better sales performance on paper, no additional cars have been sold. This is the essence of the Will Rogers phenomenon: statistical manipulation designed to create the illusion of improvement without any underlying change in productivity.
This type of manipulation may appear harmless at first glance, but it can lead to skewed perceptions of performance. Hence, managers and business leaders need to understand that such average changes do not represent true improvements. The real issue lies in whether the strategy will result in a long-term increase in actual sales or if it’s merely a temporary, artificial boost. In the long run, focusing solely on averages can obscure the need for genuine performance enhancements and might mislead stakeholders into thinking the business is doing better than it is.
Stage Migration in Medicine: A Deceptive Success
One of the most concerning applications of the Will Rogers phenomenon occurs in medicine, particularly when diagnosing diseases such as cancer. In healthcare, diseases are often categorized into stages, with the severity of the disease increasing with each subsequent stage. Stage one typically involves the least severe cases, while stage four represents the most advanced and difficult-to-treat cases. Survival rates, as expected, tend to be highest for stage-one patients and lowest for stage-four patients.
However, advancements in medical technology, especially in screening and diagnostic tools, have led to more accurate and sensitive detection methods. While this is generally a positive development, it can lead to a phenomenon known as stage migration. New screening methods detect even the smallest, most treatable cancers that previously went unnoticed. These smaller, less aggressive tumors are now categorized as stage-one, although they are less harmful than many other stage-one tumors. As a result, more patients are classified as stage-one, and the overall survival rate for stage-one patients improves.
This situation creates the illusion that the survival rate for stage-one cancer patients has improved when, in fact, the improvement is largely due to a larger proportion of relatively healthy individuals being classified as stage-one. While detecting smaller tumors may be beneficial in some ways, it’s misleading to suggest that this represents a true advancement in medical treatment. The real challenge lies in understanding that the improvements in survival rates are not a result of better treatment but rather of more precise diagnostics.
This phenomenon is dangerous because it can create a false sense of success. If survival rates improve, it could lead to complacency in the medical community, as doctors and healthcare administrators might believe that progress has been made when, in reality, the only change has been the reclassification of patients. This is a classic case where statistical manipulation—intentional or not—masks the true state of affairs in healthcare, leading to misguided conclusions about treatments’ effectiveness and the healthcare system’s state.
The Dangers of Misinterpreting Data
The Will Rogers phenomenon is a stark reminder of the potential pitfalls in interpreting data, particularly when averages are used to assess performance. Relying too heavily on averages can be misleading in finance, business, or medicine. In the case of private banking, hedge fund management, auto sales, or healthcare, shifting individuals or assets between groups can create the appearance of improvement without any real growth.
This phenomenon often goes unnoticed because the changes are internal and don’t necessarily require external validation. In the financial world, reallocating assets between funds might improve the performance metrics of underperforming funds, but it doesn’t increase their value. Moving salespeople between branches may make each branch appear more successful, but it doesn’t translate into more products being sold. Similarly, in medicine, advancements in diagnostic technology can lead to higher survival rates due to stage migration, but they don’t necessarily reflect improvements in treatment effectiveness.
Investors, managers, and healthcare professionals must look beyond the surface-level statistics and question whether the reported improvements indicate progress. By understanding the Will Rogers phenomenon, individuals can avoid being misled by superficial data and ensure that decisions are based on genuine growth and improvement, not just statistical manipulation.
Conclusion
The Will Rogers phenomenon exemplifies how manipulating averages distort perceptions of progress and success. From finance to auto franchises and medicine, stage migration can create impressive illusions while failing to change the underlying reality. Individuals in various industries must remain vigilant, question rising averages, and seek a deeper understanding of the underlying factors at plug so they unravel the illusions and foster a more accurate assessment of true progress and genuine achievements.
This article is part of The Art of Thinking Clearly Series based on Rolf Dobelli’s book.