Sherry LansingOn the merit of meritocracy from Leonard Mlodinow:

Gary Wendt, for example, was once thought of as one of the smartest businessmen in the country. Wendt parlayed his job at GE Capital under Jack Welch into a $45 million bonus when he was hired away to run the troubled finance company Conseco (nyse: CNOPRB - news - people ). Exuberant investors, betting on his past record, tripled the company's stock. But two years later Wendt abruptly resigned, Conseco went bankrupt and the stock was trading for pennies.

Sherry Lansing, who ran Paramount with great success for many years had a similar story. Under Lansing, Paramount won best picture awards and posted its two highest-grossing years ever. Then Lansing's reputation suddenly plunged–and she was dumped–after Paramount experienced, as Variety put it, "a long stretch of underperformance at the box office."

But Paramount's films for the following year were already in the pipeline when Lansing left the company, and based on her choices Paramount had its best summer in a decade. A Variety headline on the subject read, "Parting Gifts: Old Regime's Pics Fuel Paramount Rebound," but one can't help but think that, had Viacom (nyse: VIA - news - people ) had more patience, the headline might have read, "Banner year puts Paramount and Lansing's career back on track."

A more recent and equally famous example came last year: In Spring 2007, the stock of Merrill Lynch (nyse: MER - news - people ) was trading around $95 a share, its CEO E. Stanley O'Neal was celebrated as the risk-taking genius responsible, but in the fall of 2007 after the credit market collapsed Merrill Lynch stock fell to $59 a share, O'Neal was branded the risk-taking cowboy responsible–and was promptly fired. Were these highly able executives whose ability suddenly evaporated? Or did both their coronations and subsequent disgrace rest on the questionable assumption that past success is a reliable indicator of future performance?


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