When I was younger, I was really incensed about favoritism. I noticed that many people got jobs or positions because of the people they knew rather than the people they were.

Lately though, I’ve thought about the prevalence of buddy buddy deals in filling positions, and there is another explanation other than nepotism: information costs.

Filling a position, especially the more important the position, takes time and energy. You have to set up interviews, you have to go without someone at the position for a period of times, and you run the risk of getting someone who will perform the job poorly. When picking from one’s pool of friends however, these problems are reduced. First, you know more or less who will be competent. I have some friends right now that I would put in any position that I had a chance to fill, regardless of their background, just because I know they are hardworking and competent. I can fill the position quickly and effectively.

Also, part of one’s effectiveness at a job involves taking into account how well one can work with others. So, if I pick a friend or an acquaintance, we are much more likely to get along. People think that social ties are “irrelevant” to a given job and only the “skills for that particular job” should matter, but in reality, social ties are often one asset in an employee.

In short, finding talent is hard and time consuming, and finding talent that will be compatible with a certain organization is even harder. Given these constraints, using one’s social network is a natural response.


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