The “Search for Talent” is the “Search for Alpha”
| Oct 15th, 2006 | Filed under: CAPM / Alpha Theory | By: Alpha Male |
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Twenty years ago, the cover story of last week’s Economist (The Search for Talent Oct. 7-13) may not have attracted a lot of attention from the financial community. HR was a corporate backwater and human capital was given only occasional lip service.
But a careful review of 14-page survey entitled The Battle for Brainpower reveals that the search for talent is analogous to the search for alpha. In fact, we all may be searching for the same thing – an ethereal force that defies standardization.
In attempting to define talent, The Economist says:
Some use it to mean people like Aldous Huxley’s alphas in Brave New World – those at the top [right tail] of the bell curve.
Any market inefficiency that has been identified, documented and exploited disappears. The only way find new inefficiencies is to rely on talent. In other words, it takes talent to identify market inefficiencies.
The Commoditization of Talent
The Economist goes on to describes how McKinsey & Co. has divided American jobs into three categories:
- Transformational: extracting raw materials or converting them into finished goods,
- Transactional: interactions that can easily be scripted or automated, and,
- Tacit: complex interactions requiring a high level of judgment.
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[...] All About Alpha on the similarities between the “search for talent” and the “search for alpha.” [...]
[...] The “Search for Talent” is the “Search for Alpha” [...]
AlphaMale
Just a quick note that I’ve made contact with Pranay Gupta. Both he and Straatman left ABP earlier this year for the Pearl Group in the UK. I hope to continue communicating with them to see how their research progresses.
Richard Kang
[...] In “The Search for Talent is the Search for Alpha“, we argued that employee “talent” was analogous to alpha in many ways. In doing so, we also argued that emerging markets represented both new supplies of alpha and, as the Economist had pointed out, new supplies of talent. [...]