Thursday, July 18, 2013

Don't believe everything you read

You remember the classic business book, Good to Great by Jim Collins. Turns out that several years later many of the companies weren't so great after all. The same has been said of another classic, In Search of Excellence.

If you read books like these, or, as in my case, write them, it might be a good time to pause as you grab some reading matter for the beach. I think I paused awhile ago: I've got plenty of unread business books  here in my office on various "must read" piles. (I also have a thousand self-help books in the basement, and I'm still the schlep I was when I bought them.)

Why are we forever disappointed?

The simple answer is that it's not so easy to explain what's going on in a successful company. Or to duplicate it. As proof: the average life expectancy of companies in the S&P 500 has fallen from 75 in 1957 to 15 today.

So in reading and writing about business success a little humility and caution are in order.

Writer Sam McNerney offers several explanations for our belief that we can understand business success.
[One] phenomenon is what Yale Professor of Psychology Paul Bloom terms essentialism: “The notion that things have an underlying reality or true nature that one cannot observe directly and it is this hidden nature that really matters.” Essentialism explains why when kids lose a precious toy, they refuse an identical replacement; it explains why famous home run balls sell for hundreds of thousands of dollars; and it explains why a tape measure owned by JFK sold for over $48,000 dollars at an auction. In terms of objects or people, we have the intuition that each is constituted by an invisible essence. 
The same thing occurs when we think about a company. Business books including Jim Collins’ Built to Last and Good to Great are predicated on the idea that every company has a core identity – its essence - and the job of the business writer is to uncover that identity and excavate those so-called timeless universals. The byproduct is a heavy dose of halos that spawn the illusion of understanding; readers think they’ve captured the intricacies of the company when the opposite is true. To understand the nature of a business, we must discard the fact that such a thing exists.
About halos:
In The Halo Effect, Phil Rosenzweig discusses our tendency to assume universals out of particulars. That is, instead of considering behaviors separately, we incorporate them into a larger whole. It’s a time saver. A new acquaintance who makes a good joke is smart, the barista who compliments your outfit is nice, and the man who speaks loudly on his phone is rude. (The halo effect explains why it might sound strange to learn that Hitler was a vegetarian who never drank.) Research even demonstrates that we tend to perceive attractive people as kind and intelligent, even though a correlation does not exist.
Rosenzweig observes that business authors focus on halos and ignore details. For example, if a CEO is patient and open-minded, those traits (halos) are praised when the company does well (“his ability to listen and carefully weigh the pros and cons led to an increase in sales”) and criticized when the company does poorly (“his tendency to decide slowly led to the company missing out on many opportunities”).
There. How many business writers will tell you not to read their stuff?

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