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).
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.”
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.
Ever since my friend Paul Salazar first introduced me to the book Built to Last back in 2002, I’ve been a willing member of the cult of Jim Collins. During my time at Red Hat, we took some of the ideas from Built to Last as inspiration for the process we used to uncover the Red Hat values. Then we later employed many of the principles from Collins’ next book Good to Great as we further developed the Red Hat positioning, brand, and culture.
While many of the Big Concepts (TM) expressed in these books may initially seem a bit cheesy and Overly Branded (TM), I’ve come to love and occasionally use some of the terms like BHAGs (Big Hairy Audacious Goals), the Tyranny of the OR, Level 5 Leadership, and my longtime favorite The Hedgehog Concept. Why?
Because they are just so damn useful. They make the incredibly complex mechanics behind successful and not-so-successful organizations and leaders simple and easy for anyone to understand. They are accessible ideas and you don’t have to be a former management consultant with an MBA from Harvard in order to understand how to apply these principles to your own organization.
I’d go so far as to say that over the past fifteen years, no one has done more than Jim Collins to democratize the process of creating a great organization.
So when I found out that Jim Collins had a new book coming out, his first since the rather dark and depressing (but no less useful) How the Mighty Fall in 2009, and that he’d been working on this new book with his co-author Morten Hansen for the last nine years, I was ready for my next fix.
I finished the new book, entitled Great by Choice: Uncertainty, Chaos, and Luck–Why Some Thrive Despite Them All a few nights ago, and here are my thoughts.
This book comes from the same general neighborhood Collins explores in his previous books (I’d describe this neighborhood as “what makes some companies awesome and others… not so much”), but instead of simply rehashing the same principles, this book explores a particularly timely subject. From Chapter 1, here’s how Collins and Hansen set up the premise:
“Why do some companies thrive in uncertainty, even chaos, and others do not? When buffeted by tumultuous events, when hit by big, fast-moving forces that we can neither predict nor control, what distinguishes those who perform exceptionally well from those who underperform or worse?”
In other words, what common characteristics are found in companies that thrive when the going gets wacky? (Times like, for instance… right now.)
In this book Collins and Hansen clearly did an immense amount of research to answer this question. In fact, as with Built to Last and Good to Great, the appendixes at the end “showing the math” for how they reached their conclusions take a third or more of the book.
Their research led to a set of companies that they refer to as the “10x” cases because, during the study period, these companies outperformed the rest of their industry by 10 times or more. After looking at over 20,000 companies, the final organizations that made the cut were Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest Airlines, and Stryker.
Now you may look at this list, as I did, and say to yourself, “Okay, I get Southwest Airlines and Progressive Insurance… but Microsoft????”
Well, as it turns out, the period they were studying wasn’t up until the present day. Because this research began nine years ago, they were studying the companies from 1965 (or their founding date if it was later) until 2002. So in that context, the choice of Microsoft makes a lot more sense. In 2002, Microsoft was still firing on all cylinders (believe me, I remember).
I won’t spoil the whole book for you, but Great by Choice has an entirely new set of Big Concepts (TM) that will help you understand the characteristics that set these companies apart from their peers. This time around, we are introduced to:
–The 20 Mile March: Consistent execution without overreaching in good times or underachieving in bad times.
– Firing Bullets, Then Cannonballs: Testing concepts in small ways and then making adjustments rather than placing big, unproven bets (basically akin to the open source principles of release early, release often and failing fast). But then placing big bets when you have figured out exactly where to aim.
– Leading above the Death Line: Learning how to effectively manage risk so that the risks your organization take never put it in mortal danger.
– Return on Luck: My favorite quote from the book perfectly articulates the concept: “The critical question is not whether you’ll have luck, but what you do with the luck that you get.”
Many of these concepts come with an awesome allegorical story to illustrate them. That’s the great thing about a Jim Collins book: you can’t always tell whether you are reading a business book or an adventure book. In this case Collins (who is also an avid rock climber himself) shares tales from an ill-fated Everest expedition, the race for the South Pole, and a near death climbing experience in Alaska interspersed with specific stories from the businesses he is profiling.
Overall assessment: The book is a fitting companion to Built to Last, Good to Great, and How the Mighty Fall. Simple, accessible, easy to digest, and with some very actionable key concepts that you can immediately put to use. And, unless you read all of the research data at the end, you’ll find it to be a quick read that you can likely finish on a plane trip or in an afternoon.
So go on, pick up a copy and let me know if you agree.
Consider taking a look at my new book The Ad-Free Brand (not an advertisement, mind you, just a friendly suggestion:). It has some nice tips for how to build a great organization without the help of… you guessed it… advertising!
One of the first things many new employees notice when they step inside Red Hat is how deeply held our corporate values are within our walls and how much they impact behavior within the company. The values aren’t just words to most Red Hat folks, and they show up in conversations and in actions on a daily basis. Today we probably take for granted that it has always been that way.
But it wasn’t. Back in 2002, I was one member of a team tasked with figuring out Red Hat’s corporate values. At that time, the company was still pretty small– about 500-600 employees.
I must admit at first I was pretty jaded about the whole corporate values business. The concept of corporate values made me think of those Successories motivational posters with a photo of a bear in the middle of a stream with a fish in his mouth and a word like “ACHIEVEMENT” in all caps at the bottom. Or whatever. Most corporate values systems didn’t seem authentic to me or were just plain lame.
The values team was made up of a cross section of folks from across Red Hat: Sean Witty, who did biz dev and M&A; Mark Cox, a security guru who is still at Red Hat; Jeremy Hogan, one of the original Red Hat community managers but who at the time was working in support; Paul Salazar, who I’ve written about before in this blog here; Jonathan Opp, who is still in the Red Hat brand team and did a lot of the original writing of the values descriptions; and myself.
We quickly decided we didn’t want Red Hat to end up with just some lame words to put on posters. We wanted to do this values stuff right.
Paul Salazar knew Jim Collins from Stanford, and encouraged each of us to read Collins’s book Built to Last (which is one of the Top 10 Books behind Dark Matter Matters). In it, Collins talks about the characteristics common to great, enduring corporations. According to him, the most important thing great companies shared was having deeply held values and core purpose. From the book:
A few weeks ago I finished the new Jim Collins book How the Mighty Fall and Why Some Companies Never Give In. If you read this blog much, you’re probably sick of me prattling on about how much I love Jim Collins’ work (here, here, and here). Over the years at Red Hat, we’ve based many projects related to the values, mission, and other corporate-level structural thinking on ideas we got from him.
Well, it’s been almost eight years since Collins wrote his last full-length book, Good to Great (which ranked number one on my list of the top ten books behind Dark Matter Matters). How the Mighty Fall is a short book, and in it, Collins is clearly a bit on the defensive about his previous work. The issue? In the economic meltdown last year, some of his Built to Last companies didn’t last, and some of his Good to Great companies are back to good… or gone.
Collins explains it this way:
…the principles in Good to Great were derived primarily from studying specific periods in history when the good-to-great companies showed a substantial transformation into an era of superior performance that lasted fifteen years. The research did not attempt to predict which companies would remain great after their fifteen-year run. Indeed, as this work shows, even the mightiest of companies can self-destruct.
…I’ve come to see institutional decline like a staged disease: harder to detect but easier to cure in the earlier stages, easier to detect but harder to cure in the later stages. An institution can look strong on the outside but already be sick in the inside, dangerously on the cusp of a precipitous fall.
So this book is Collins’ attempt to discover why exactly some very good companies went oh so very bad. If Good to Great was Star Wars, this book is The Empire Strikes Back— a long, hard look into the dark side (even the cover is black).
Collins did extensive research using an interesting approach. He studied these companies, not as history has judged them, but based on what the company was saying, what the press was saying, what financial analysts were saying during the time period being studied– before we knew the outcome. And all of the research was done in historical order, almost like he was following the companies through time.
The results of the research play out like a Greek tragedy. He identified 5 stages of decline in the companies that had gone from great to… not so great: