The Success Stories Of Others Are A Waste Of Your Time: What Really Drives Outcomes

Accounts of successful companies (Google, Netflix) and their management, frequently show up in business magazines. The stories teach us that the founders had some special skill set that resulted in success. If we learn those lessons, we too can find success.

But what if these narratives are mostly made up to fit only some of reality? Created by human minds that intuitively look back at past events through a filter of causality. Paying attention to imaginary reasons while ignoring likelier ones.

Studies from behavioral sciences and probabilistic outcomes now show that we should be highly skeptical of these articles. Written in hindsight, they look for causation and exaggerate the talents of the founders and senior management. They omit a critical contributor to their success – luck.

The authors, like us, have cognitive biases (survivorship, hindsight, outcome bias, and the halo effect, to name a few) which focus them on more appealing, but incorrect, reasons for causation among past events like these. High talent and skills are usually assigned as the causes of success. Probability and luck, which can contribute more, are rarely considered. A story just about luck is not so compelling to people.

Our world is more random than we can imagine. And random outcomes are mostly determined by luck.

“Because luck plays a large role, the quality of leadership and management practices cannot be inferred reliably from observations of success. And even if you had perfect foreknowledge that a CEO has brilliant vision and extraordinary competence, you still would be unable to predict how the company will perform with much better accuracy than the flip of a coin.”

Daniel Kahneman, in Thinking, Fast and Slow [1]

Real analysis of companies that are more successful than others will essentially reveal to us those that were a little luckier. In fact, given what’s recently been discovered about randomness, any significant pattern among successful firms, is very likely an illusion.

Here is the correct way to explain any past performance, including your own:

Only believe explanations that make the event predictable in advance. Good explanations will reduce the randomness and make the event more likely.

Some examples

If they had to start fresh at a different point in time, the founders of Facebook and Google would likely not find success again. Luck mostly explains the first success. The sheer number of others with talent who tried and failed at creating similar companies, points to high randomness and luck for these outcomes.

Warren Buffet, on the other hand, has a higher probability of success. His investing approach is done over a longer period. This reduces the randomness of his most probable outcomes.

Any Forbes or CNBC article on “The Ten Secrets of Great Leaders,” that does not have luck near the top, is a waste of your time.

Also, don’t try and copy the competencies of your colleagues who get three promotions in four years. It was luck.

Talent and skills do yield small successes. But for great success, you need luck.

Nassim Nicholas Taleb discusses more of this and the role of luck in his book, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets.

References

1. Thinking, Fast and Slow By Daniel Kahneman, Published by Farrar, Straus, and Giroux, New York, NY 2011.

If you want to improve your influencing skills (and your luck), a list of books to help you do that can be found here:

Best books to improve your influencing and persuasion skills

KEYWORDS

Career Advice, Randomness, Behavioral Sciences, Nassim Taleb

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