The Superstar Effect

I've got a new essay in the WSJ about Tiger Woods, the hazards of playing against a superstar, and why we choke in high-pressure situations. The subplot of the piece is the positive feedback loop of success, or why winning in the past makes us more likely to win in the future. Every underdog, it turns out, has to rage against the natural insecurities of the mind (take note, Butler):

Competitors playing a match against Bobby Fischer, perhaps the greatest chess player of all time, often came down with a mysterious affliction known as "Fischer-fear." Even fellow grandmasters were vulnerable to the effect, which could manifest itself as flu-like symptoms, migraines and spiking blood pressure. As Boris Spassky, Mr. Fischer's greatest rival, once said: "When you play Bobby, it is not a question of whether you win or lose. It is a question of whether you survive."

Recent research on what is known as the superstar effect demonstrates that such mental collapses aren't limited to chess. While challenging competitions are supposed to bring out our best, these studies demonstrate that when people are forced to compete against a peer who seems far superior, they often don't rise to the challenge. Instead, they give up.

The negative effect of superstars has been most clearly demonstrated in professional golf, which for the last decade has been dominated by Tiger Woods. Next week, Mr. Woods ends his self-imposed exile from the game and returns to the PGA Tour at the Masters Tournament, in Augusta, Ga. It will be his first competition since November, when he won the JBWere Masters in Australia.

According to a paper by Jennifer Brown, an applied macroeconomist at the Kellogg School of Management at Northwestern University, Mr. Woods is such a dominating golfer that his presence in a tournament can make everyone else play significantly worse. Because his competitors expect him to win, they end up losing; success becomes a self-fulfilling prophecy.

Ms. Brown argues that the superstar effect is not just relevant on the golf course. Instead, she suggests that the presence of superstars can be "de-motivating" in a wide variety of competitions, from the sales office to the law firm. "Most people assume that competing against an elite performer makes everyone else step up their game and perform better," Ms. Brown says. "But the Tiger Woods data demonstrate that the opposite can also occur. It doesn't matter if the superstar is an athlete or a corporate vice president. After all, why should we invest a lot of energy in a tournament that we're probably going to lose?"

Ms. Brown discovered the superstar effect by analyzing data from every player in every PGA Tour event from 1999 to 2006. She chose golf for several reasons, from the lack of "confounding team dynamics" to the immaculate statistics kept by the PGA. Most important, however, was the presence of Mr. Woods, who has dominated his sport in a way few others have.

The numbers back up the legend: When Mr. Woods's break from golf began, in November, he had a World Golf Ranking score of 16.169, which was nearly twice the total of the next two players. He has more career major wins than any other active golfer, and has been awarded PGA Player of the Year a record 10 times.

Such domination appears to be deeply intimidating. Whenever Mr. Woods entered a tournament, every other golfer took, on average, 0.8 more strokes. This effect was even observable in the first round, with the presence of Mr. Woods leading to an additional 0.3 strokes among all golfers over the initial 18 holes. While this might sound like an insignificant difference, the average margin between first and second place in PGA Tour events is frequently just a single stroke. Interestingly, the superstar effect also varied depending on the player's position on the leaderboard, with players closer to the lead showing a greater drop-off in performance. Based on this data, Ms. Brown calculated that the "superstar effect" boosted Mr. Woods's PGA earnings by nearly $5 million.

The analysis is really an investigation into economic tournament theory, which looks at competitive situations in which success is based on relative performance, and not absolute metrics. (It's the difference between a sports game and a standardized test.) Modern management practice assumes that the best way to maximize employee performance is to institute sports-like tournaments, in which people compete directly against each other. Consider, for instance, the competitive structure put in place by former CEO Jack Welch at General Electric. He instituted what became known as the 20-70-10 rule: the top 20% of employees got generous financial bonuses, and the bottom 10% were "managed out."

There is little doubt that, in many situations, such incentive structures lead to motivated employees, working hard for the top spots. But the presence of a superstar can reverse this dynamic, so that instead of trying our best we accept the inevitability of defeat.

According to Ms. Brown, the superstar effect is especially pronounced when the rewards for the competition are "nonlinear," or there is an extra incentive to finish first. (We assume that the superstar will win, so why chase after meaningless scraps?) Just look at golf: Not only does the tournament winner get a disproportionate amount of prize money, but he or she also gets all the glory.

Ms. Brown cites the competition among newly hired associates at a law firm as another example of a nonlinear incentive structure. "The lawyers know that most of them won't be retained," she says. "They either win the competition, or they're let go." The problem with such competitions is that when a superstar is present--when one of the legal associates is perceived as the clear favorite--every other lawyer is less likely to exert maximum effort. Because we assume we're going to lose, we decide to cut our losses, which leads to an overall decrease in employee effort. The cutthroat competition made people less competitive.

Here's the link for more.