Saturated Markets

There was an interesting and provocative editorial the other day in the LA Times by Barry Schwartz, a psychology professor, concerning college admissions. He argued that given that there are far more highly qualified applicants at Harvard, Swarthmore, et al. than there are slots available, all qualified applicants should simply be put in a lottery.

It makes sense to me. I used to argue the same point when it came to applicants for academic jobs. We’d get 80-150 applicants for one professorial position. At least twenty of them would have sterling records with glowing recommendations that said the applicant could walk on water. We’d pore over every line in those applicant files, trying to discern which of those 20 or so was better. It was a silly exercise. There was no way on the basis of paper you could make that distinction. I used to argue that we should simply throw the 20 files down the staircase and see which three landed the furthest downhill. Those three would be our interview candidates. Needless to say, my recommendation was never implemented. But I was perfectly serious.

Similarly, admission deans try to select their “best” candidates on the basis of paper files that can only tell you so much. It’s a silly exercise. They should simply figure out which candidates are “good enough” and randomize after that. But they don’t. They are just like academic search committees. Chalk it up to "human nature." It makes us feel important and essential if we fool ourselves into thinking we can truly select the best of the best. It’s an ego thing.

Academic job searches and elite college admissions are examples of saturated markets. And saturated markets are inherently twisted affairs. The decision makers have too many good choices. And typically they go nuts trying to discern differences when there are none. It’s like a basic science problem where you measure two items that both weigh 3.98 grams to three significant digits. They are the same. Perhaps if you had another significant digit, you would be able to tell the difference. In a science problem, you don’t and you leave it at that. But in making comparative choices in the real world you beat your head against the wall until you convince yourself that one of those items is indeed heavier. It’s silly, but perhaps emotionally necessary to delude yourself.

On the other end of a saturated market is, as Professor Schwartz notes, the person trying to “get in.” They are beating themselves against the wall doing silly things to stuff their resumes and college files so that they look better on paper than the other person. So there is madness on both ends. Both the decision makers and applicants are doing ridiculous things to make distinctions that just aren’t possible.

As far as I can tell, this situation is happening with grades in colleges as well. I’ve noticed that college students are more neurotic about grades than they ever have been. Yet high grades are easier to get than ever before. As the market for high grades gets saturated at the top, students go nuts about trying to distinguish themselves. They worry about whether they have a 3.54 or 3.52 GPA. Making grades higher has had the counterintuitive effect that students obsess more over grades. I couldn’t have predicted that at all.

In my business, I see the effect of saturated markets all of the time. There are so many great songs out there, but there is only room on a CD for a handful. And out of that handful, only one will be the first “radio single.” Radio singles are amazingly important in music publishing. It isn’t CD sales that make a songwriter or publisher real money. It’s radio play.

Picking a radio single for a new or relatively new artist makes or breaks a career. You need a hit, an absolute smash. The stakes are huge. The amount of money it takes to launch a new artist with a new CD is on the order of low seven figures. It’s a million dollar plus investment. Without a radio smash, that money goes poof in a matter of a month.

Record companies go through thousands of songs to find that one radio smash. They twist themselves into pretzels trying to find “the one.” It’s a silly exercise. As Ray Charles once said, “Ain’t a man born can pick a hit for sure.” And it’s funny to watch. Because about three weeks before a CD is about to be pressed, records companies tend to go into an absolute panic about whether they have a radio hit. They start to call around like crazy trying to find a new song that might be “the one.”

Record companies could save themselves a lot of trouble. They should simply pick a couple hundred out of the thousands of songs that they listen to that are “good enough.” Then they should randomize to figure out which go on the CD and which one will be the first radio single. They would do no worse than they are doing right now. And they’d save themselves the emotional wear and tear.