Lucky or Smart?
I recently read author Michael Lewis’ (Liars Poker, Moneyball, and many, many others) 2012 Princeton graduation speech entitled,
“Don’t Eat Fortune’s Cookie” and I have been thinking about it ever since. It’s a great read chronicling the fundamental role luck played in his life and argues it does the same for all of us. A sample…
Thirty years ago I sat where you sat. I must have listened to some older person share his life experience. But I don’t remember a word of it. I can’t even tell you who spoke. What I do remember, vividly, is graduation. I’m told you’re meant to be excited, perhaps even relieved, and maybe all of you are. I wasn’t. I was totally outraged. Here I’d gone and given them four of the best years of my life and this is how they thanked me for it. By kicking me out.
At that moment I was sure of only one thing: I was of no possible economic value to the outside world. I’d majored in art history, for a start. Even then this was regarded as an act of insanity. I was almost certainly less prepared for the marketplace than most of you. Yet somehow I have wound up rich and famous. Well, sort of. I’m going to explain, briefly, how that happened. I want you to understand just how mysterious careers can be, before you go out and have one yourself.
…This isn’t just false humility. It’s false humility with a point. My case illustrates how success is always rationalized. People really don’t like to hear success explained away as luck — especially successful people. As they age, and succeed, people feel their success was somehow inevitable. They don’t want to acknowledge the role played by accident in their lives.
–read more (it’s incredible! Do it.)
Lewis goes on to describe each and every fortuitous event in his life that lead him to where he is today. And he credits it all to luck. In fact, he makes the argument that the secret behind the Oakland A’s success as he depicted in Moneyball was the quantification of luck’s role in identifying skill.
But the Oakland team had figured something out: the rich teams didn’t really understand who the best baseball players were. The players were misvalued. And the biggest single reason they were misvalued was that the experts did not pay sufficient attention to the role of luck in baseball success. Players got given credit for things they did that depended on the performance of others: pitchers got paid for winning games, hitters got paid for knocking in runners on base. Players got blamed and credited for events beyond their control. Where balls that got hit happened to land on the field, for example.
This has had me thinking about the role of luck for New Market Entrepreneurs. We plan. We execute. And the more astute among us make continuous adjustments in real time as new data comes in– never afraid to discard the plan if necessary. Call it a Pivot. Call it Steve Blank’s definition of a startup: A startup is an organization formed to search for a repeatable and scalable business model. Call it agile development. It’s many things. But what is the role of luck in this process?
Then I recalled a NYTimes article, “What’s luck got to do with it?” and went back an re-read it. Penned by accomplished serial business authors last Fall, they make the quantitative argument for the role that luck played in the world’s most successful companies.
Recently, we completed a nine-year research study of some of the most extreme business successes of modern times. We examined entrepreneurs who built small enterprises into companies that outperformed their industries by a factor of 10 in highly turbulent environments. We call them 10Xers, for “10 times success.”
The very nature of this study — how some people thrive in uncertainty, lead in chaos, deal with a world full of big, disruptive forces that we cannot predict or control — led us to smack into the question, “Just what is the role of luck?”
Could it be that leaders’ skills account for the difference between just meeting their industry’s average performance (1X success) and doubling it (2X)? But that luck accounts for all the difference between 2X and 10X?
We systematically found 230 significant luck events across the history of our study’s subjects. We considered good luck, bad luck, the timing of luck and the size of “luck spikes.” Adding up the evidence, we found that the 10X cases weren’t generally “luckier” than the comparison cases.
The 10X cases and the control group both had luck, good and bad, in comparable amounts, so the evidence leads us to conclude that luck doesn’t cause 10X success. The crucial question is not, “Are you lucky?” but “Do you get a high return on luck?”
Return on luck: We call it ROL.
Luck, good and bad, happens to everyone, whether we like it or not. But when we look at the 10Xers, we see people like Mr. Gates who recognize luck and seize it, leaders who grab luck events and make much more of them.
This ability to achieve a high ROL at pivotal moments has a huge multiplicative effect for 10Xers. They zoom out to recognize when a luck event has happened and to consider whether they should let it disrupt their plans.
So it comes back to the old adage, “it’s not luck’, but what you do with it. Or what my close friend, Jeffrey, said the night we (Reebok) bought his company about 20 years ago: “luck is where opportunity meets preparedness”. I was a late twenty-something at the time… the first time I had heard the expression. DEAD ON. I’ve used it at least once a week, every week, ever since then. … The only thing I recall from that night!
The entrepreneurial luck thing comes down to this: In their search to find a sustainable and repeatable business model, successful entrepreneurs will seize on unexpected events and understand things about them that few do. They will see invisible dots and connect them. And if you have this unusual skill, the more ‘unexpected events’ you encounter, the higher your odds to working your magic.
You see, it’s not about lucky events. It’s about seeing opportunities that arise from unexpected occurrences, both good and bad. If you have not already read Michael Lewis’ grad speech… please do it now. It’s clear from the story he tells that he is one of these unique people. He’s too humble to admit it and his message to grads about giving back has no room. Also, the NYT article above tells the story of Progressive Insurance’s turnaround as a result of a series of epiphanies the CEO experienced as a byproduct of devastating, unexpected regulations that could have shuddered the company.
And for me there’s more. Successful entrepreneurship also embodies these traits– tools in the harvest from unplanned events… good and bad.
- Persistence – you believe in your cause
- Passion – you love your cause and you evangelize it
- Smarts – you know everything there is to know about your cause
- Courage – you will fight for your cause
- Connectedness – you never stop building relationships with people who share your passion for your cause and you ask for their help
- Reality distortion – As infamously described in Steve Job’s biography, you wont let the facts kill the buzz of a great vision
To me, the traits above are the elements defining ‘preparedness’ allowing “lucky” entrepreneurs to create luck from unexpected opportunity.
What are yours?