If it were not for a trash can, The Success Equation would not exist. Michael Mauboussin, the author, owes his career in investment banking to spotting the logo of the Washington Redskins football team on an interviewer’s rubbish bin when applying for his first job. The subsequent 15-minute conversation swung the interview and landed him the job. His career was launched by pure luck.
Luck is clearly important to Mauboussin, the chief investment strategist at Legg Mason Capital Management. This book, subtitled Untangling Skill and Luck in Business, Sports and Investing, is an exploration of its contribution to achievements, successes and failures. We are, he writes, good at fooling ourselves about success. We like to attribute success to our own skill while we “readily attribute failure to external causes, including bad luck”.
Published by Harvard Business Review, the book’s ambition is to determine “how to deal with luck in making decisions”. For businesses, the lesson is that “while there is no way to change luck, the main goal is to increase the importance of skill in a toe-to-toe conflict, depending on whether you’re the stronger or weaker opponent”.
To do so, he offers analytical tools, drawing on statistics, philosophy, psychology, finance and economics – to name but a few disciplines. The problem with his varied approach is that it can read like a hotchpotch of the latest thinking from a range of writers, from Malcolm Gladwell’s Outliers and Michael Lewis’s Moneyball to Daniel Kahneman’s work on behavioural economics. For example, Mauboussin spends a great deal of time on checklists – their use in eliminating risk and enhancing skill. In doing so, he cites extensive research from Atul Gawande, the physician and New Yorker writer.
Citing such writers works best when Mauboussin finds holes in their work, rather than merely parroting it. Pitting himself against Jim Collins, he picks apart the guru’s bestseller Good to Great, asserting that the method of identifying the common practices of successful business is flawed.
The trouble with such a methodology, he says, is that “the performance of a company always depends on both skill and luck, which means that a given strategy will succeed only part of the time”.
The more important question, he writes, is “how many of the companies that tried that strategy actually succeeded?”
The problem with quoting writers such as Gawande is that it can serve to remind us how arid Mauboussin’s own writing can be at times.
The anecdotes are fun – for example, the experiment that proved Playboy Playmates had better investment returns than money managers and the S&P500. Or the story of Sony’s spectacular mistiming in launching the MiniDisc. When it comes to the analytical tools, however, the writing can be dense.
Nonetheless, for the main part the author’s style is economical and no-nonsense – a tone reflected even in the acknowledgments, where he thanks his five children and states his confidence that “with hard work and grit, each will successfully solve the success equation in his or her own way” – no shilly-shallying with effusive pledges of love here. (His wife is thanked for encouraging him to “pursue [his] intellectual and athletic passions, which keep [him] going mentally and physically”.)
And for investors and business executives wishing to minimise the risk of bad luck, this is a book worth reading.