Over the holiday break, I finished up Daniel Kahneman’s new and much-praised book Thinking, Fast and Slow. I consider it quite an achievement, and by that I mean both the book itself (a deep, personal, and introspective look back at the career of one of the most important psychologists of our time) and my actually reading it (the book weighs in at almost 500 very dense pages).
Here is me thinking fast, but reading slow.
One of the many interesting things about Dr. Kahneman is that, as a psychologist, he actually won his Nobel prize in economics. If you are interested in learning more about how that happened, go here.
Over the last few months, Kahneman’s book has been sitting near the new Jim Collins book Great by Choice in the rarefied air of Amazon.com’s top 100 books list (I reviewed Great by Choice a few months back here). So I thought it was interesting that Kahneman challenged Jim Collins and his book Built to Last in Chapter 19. It was a pointed attack not just on Collins but the entire genre of success story-inspired business books.
Since I spend quite a bit of time reading these sorts of books, I was really interested in his viewpoint. I mean, have I been wasting time reading that I could just as usefully spent watching reruns of Tosh.O or Arrested Development on TV? Is there real value in studying successful businesses and leaders or is it just an illusion?
Here’s what Kahneman says:
“The basic message of Built to Last and other similar books is that good managerial practices can be identified and that good practices will be rewarded by good results. Both messages are overstated. The comparison of firms that have been more or less successful is to a significant extent a comparison between firms that have been more or less lucky. Knowing the importance of luck, you should be particularly suspicious when highly consistent patterns emerge from the comparison of successful and less successful firms. In the presence of randomness, regular patterns can only be mirages.”
Ouch.
Kahneman cites Philip Rosenzweig’s book The Halo Effect (which is now on my reading list) and quickly jumps to the punchline of that book:
“[Rosenzweig] concludes that stories of success and failure consistently exaggerate the impact of leadership style and management practices on firm outcomes, and thus their message is rarely useful.”
So are we to believe Kahneman and Rosenzweig? Is there really no value in studying the leadership and management practices of great companies?
Even after reading the whole book Thinking, Fast and Slow and understanding the psychological principles that trick my brain into applying great importance to these sorts of success stories, I still find the conclusion a hard one to accept. And then Kahneman throws the knockout punch:
“Stories of how businesses rise and fall strike a chord with readers by offering what the human mind needs: a simple message of triumph and failure that identifies clear causes and ignores the determinative power of luck and the inevitability of regression. These stories induce and maintain an illusion of understanding, imparting lessons of little enduring value to readers who are all too eager to believe them.”
Okay, I get it. Kahneman views me as a sucker. And who am I to argue with a Nobel Prize-winning psychologist?
But I just can’t help it. I think there is plenty that we can learn from the lessons of innovative businesses like those that Collins profiles in Built to Last. Kahneman may be right that these books suffer from an illusion of academic rigor that breaks down under close study. And yes, they probably need a disclaimer (“The author makes no promise or guarantee that if you follow the principles outlined in this book you will become Google overnight. Individual results may vary.”).
But what these books lack in academic rigor they make up for in one simple area: they inspire people. To not settle for what they see today. To try something new. To learn. To grow. To believe.
They create the possibility of hope. “Others have done it. I could too!”
So in that sense, Kahneman’s critique is somewhat akin to an adult telling a three-year old child that there is no Santa Claus. My view? The analysis is technically correct, but emotionally bankrupt.
Where success story business books fail the analytical brain, they often are just what the emotional brain needs.
So I don’t know about you, but I’m going to keep on reading business books. By constantly refueling my head with new ideas, I’ll always have something to learn and try. I’ll continue to be inspired by authors like Jim Collins, by companies and leaders who have seen great success, and I’ll suspend my academic doubts in the hope of learning new lessons that might just work.
I’d love to hear what you think. If you believe Kahneman’s critique of Collins and the genre is on the money, or if you believe instead that there is still value in sharing and learning from business success stories, let me know in the comments section below.
Dark Matter Matters 
Actually, I will have to side with Kahneman here. I have not read the book, and the reason for it is that I got greatly disillusioned by reading a number of business books based on success (or failure) stories, such as Collins’. Each time, after finishing another acclaimed tome, I felt like I have learned nothing actionable, yet spent time being entertained by anecdotes and parables. While the inspirational part is certainly important, without true knowledge and intelligence, inspiration can lead to failure just as easily.
The promise of the success-story-based business book is to tell the reader how to repeat the story, not just to inspire to try. This is where they have so far fallen disappointingly short. And this is why I do not read them anymore.
Posted by Alex Maier | January 11, 2012, 6:02 pmActually, I just stumbled over this TED talk, which warns us to beware of stories, specifically inspiring and engaging ones. http://www.ted.com/talks/tyler_cowen_be_suspicious_of_stories.html
Posted by Alex Maier | January 11, 2012, 6:45 pmWow. I just watched it. That was strangely disturbing. I’m not sure whether he is a genius or whether I am just really sad for him:) Interesting that he is an economist…
Posted by Chris Grams | January 11, 2012, 8:38 pmI think there is no need to be sad :) Understanding how our brains work, including how sometimes they lead us to see patterns and stories where there are none, and mislead us, can make us smarter about ourselves. What I am trying to say here, Richard Feynman has said better in this video: http://www.youtube.com/watch?v=zSZNsIFID28
Posted by Alex Maier | January 26, 2012, 2:17 amHi Alex!
Yeah, I don’t disagree with you here… these books do often fall short of giving you the things you need in order to repeat the story– if that is in fact possible at all (Kahneman would say it is mostly luck anyway). But I still feel that there is something there along the lines of “Those who cannot remember the past are condemned to repeat it,” i.e. learning from history. Perhaps we learn more from the specific stories than from the broad generalizations though?
Would you find reading something like the Steve Jobs bio valuable? Or would that fall into the same boat as these other success story business books for you?
Posted by Chris Grams | January 11, 2012, 6:45 pmI am a sceptic by nature, and when I hear “inspiration” my mind says “reality distortion.” In most anyone else but Steve Jobs, singular focus, inflexibility, and authoritarian approach to leading a company would be criticized and pointed to as reasons for failure. His leadership style goes against nearly ALL of the leadership books I have read or heard of. Yet somehow the same people to say that collaboration is key to all innovation can also believe in the lone genius of Jobs. What I am trying to say here is, that each story is selected to illustrate whatever idea the author wants to. Stories (and inspiration) thrive on simplification and idealization, not on knowledge and rational thought. Which is fine, but not a good basis for making business decisions.
Posted by Alex Maier | January 11, 2012, 6:58 pmLeaving business success (if that is what you seek) to “luck” is, to me, like buying a lottery ticket, quitting your job, and sitting on the deck while you wait to hear you have won. Luck fhas always favored the prepared. Do I think there is an element of luck or “divine providence” in the success stories of most people or businesses? Sure. However, as a business person, I enjoy reading business books, including ones on the success of others. I have never read one I actually thought was a “how to” for my personal or business success (even though the cover may have said that – or promised it). I’ve also rarely, if ever, read one from which I didn’t gain some piece of useful information. Read enough, put enough information together from all that you’ve read – you probably develop your own game plan for success (again, if that is what you seek), because what resonates with you/moves you is what you will remember and use. I am skeptical by nature of anything that claims to be “the answer” or “the plan” – it just isn’t that easy. Success is not a formula, but there are elements of what others have done/wish they hadn’t done that are helpful to know more about. So, I’ll continue to read business books, novels, biographies, children’s books, and more . . . enjoy the reading and gain what I can. And if some luck comes my way, a bit of divine intervention, a bit of “in the right place at the right time,” I hope my knowledge and hard work have put me in the place to appreciate it.
Posted by Susan | January 11, 2012, 7:01 pmHi Chris
I am reading Kahneman’s book at the moment as well. I think his key contention is that we are hard wired to look for patterns in a way that worked for us in our older evolutionary challenges but our world is now very different and therefore we must be cautious in interpreting our conclusions. In our work we are always trying to work with people to understand where their assumptions and blind spots are and non causal pattern mistakes are one of the most common
I would certainly read the Halo Effect before coming to a conclusion. My view is that it should be required reading for all people thinking about business strategy. As an example of the analysis done the author followed up on “Built to Last” and showed that in 5 years after the study finished 9 out the 17 companies picked trailed the market average on a total shareholder return basis and 10 out of 16 trailed over 10 years (P98 in my hardback version). The author makes the point that Built to Last was supposed to be identifying timeless principles but they did not apply to these companies in the next 10 years. You can argue that might be the wrong time frame but then the same can then be applied to the original argument. I think that the key points are:
1/ That we analyse success retrospectively through rose coloured glasses. The comments on Steve Jobs above resonate on that basis. Plenty of businesses that have gone badly have been blamed on autocratic micro- managers.
2/That a lot of the writing around this area is dressed up as research and reinforced by describing the masses of data analysed which is irrelevant if the method is not scientific and rigorous.
3/That telling inspiring and emotional stories that illustrates a point that is actually not true is at best disingenuous and at its worst the method of charlatans and con men.
4/ That even if the analysis is good (and I think a lot of it is not) then it is historical and we need to think differently about the future.
Phi Rozenzweig does make the point that Jim Collins gets paid a lot more to talk to companies and conferences than he does!!
In the end you cannot study these sorts of things in quite the same way as true scientific method (which is my background and training). That means that we should recognise the weakness and be extremely cautious about any conclusions we adopt or spend time and energy on.
Paul
Posted by Paul Higgins | January 12, 2012, 5:11 pm