nonProfits work: Predicting Success and Failure - The Stories We Tell Ourselves

13 June 2007

Predicting Success and Failure - The Stories We Tell Ourselves

..everybody get random!
Lady Sovereign - 2006

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Predicting Success and Failure - The Stories We Tell Ourselves

via Businesspundit on Jun 13, 2007

Dave Munger writes about the futility of predicting unlikely events. Runaway successes are rare, and difficult to predict in advance. Luckily for us, catastrophic failures are rare as well. I laugh when people tell me they have "the next Google" - as if anyone could have predicted the dramatic success of the first Google. If your goal is to have that level of success, all you can do is build something that has the potential, and hope a little randomness fall your way. VC's don't predict winners, they just screen out the most likely losers and hope with enough investments, the black swan is friendly to them.

Munger's post references this interview with Nassim Nicholas Taleb, author of The Black Swan which I highly recommend. (Be forewarned though. If you struggle with counterintuitive ideas, you may not enjoy this book.)

In the interview, Taleb makes the following statement.

Taleb argues that history books make up reasons for events that are by their very nature improbable. If someone had sat in a coffee house in Vienna in 1913 and related the history-book explanation of the situation in at that time, explaining that Europe was on the brink of an unprecedented continent-wide war, Taleb claims, he would have been carted off as a lunatic.

I think we do the same thing in business. Why do some businesses go from good to great? We make up stories and see patterns where they don't exist, because we are looking for that magic bullet that will make our company do the same. Why did the latest project fail? When we piece it together after the fact, we often get it wrong. That's why I like to use the decision tickler.

So if randomness matters so much, why try? Because you can still take advantage of it. Experiment. Expose yourself to random ideas, random people, random chance, and sooner or later, you might catch a ride on a black swan.

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