March 28, 2009

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Paul Krugman on “the magazine cover effect”:

[W]hen you see a corporate chieftain on the cover of a glossy magazine, short the stock. Or as I once put it (I’d actually forgotten I’d said that), “Whom the Gods would destroy, they first put on the cover of Business Week.”

Apparently the numbers back it up when it comes to CEOs. Krugman wryly states, “[p]resumably the same effect applies to, say, economists. You have been warned.”

But Dr Krugman, you presume too much! We need data, not just for CEOs, but academics, journalists, athletes, actors… Maybe being on the cover of Sports Illustrated is good index of future success (IFS) for pitchers, but a negative one for boxers. (This in fact seems likely.) Maybe it’s better for athletes than managers. It might be great for actors — given that increased visibility generally leads to better pay, more awareness, more awards… or else the whole celebrity publicity industry is just terribly misguided.

We need serious, highly-differentiated regressions on this one. Otherwise, this might just be some full-moon positive confirmation thing for everything BUT CEOs.