Rare Talent and Huge Salaries

In an earlier blog I doubted whether the ability to run a large business is rare enough to necessitate the vast salaries many directorships attract, and suggested that people were often mistaking good luck for business acumen.

I’m now having second thoughts.

Even if running a business does not require any single very rare skill, it might still still require a rare combination of common skills.

I’d expect the successful captain of industry to be well above average in each of the following.

Intelligence (1/10)

Power of concentration (1/5)

Stamina and perseverance (1/5)

Co-ordination - ability to avoid muddle and confusion (1/2)

Memory (½)

Ability to assess people (½)

Ability to manage people, to delegate, supervise adequately without overdoing it, to judge when to listen, and when not. (1/3)

After each I’ve put an estimate of the proportion of the population who meet the standard.

Assuming independence, the probability of someone qualifying in all respects would be the product of all those probabilities, namely:

(1/10)*(1/5)*(1/5)*(½)³*(1/3) = 1/(6000)

Senior posts are usually taken by people in the age range 40 to 60, who I guess amount to less than a third of the population, so the proportion of the population qualified by both age and ability is at most 1/18000.

The population of Great Britain is around 60 million, so the number of people is between 3000 and 4000. That number must be further reduced to remove people of the requisite abilities who have not chosen business careers - some will have chosen instead to be doctors, lawyers, academics, journalists, computer programmers, soldiers or civil servants.

How many people are needed to run our large companies? I’m not sure how many companies are involved. 1300 companies are quoted on the main market of the London Stock Exchange, though not all those a British. All companies in the FTSE 350 index have their primary listing in Britain, so I guess that at least 350 companies need directors of high ability and each company will need several. With fewer than people 4000 available, leadership talent may be rare after all.