What's Luck Got to Do With it?

So there you are heading off on your holidays again. But as you while away your time at the airport, you are inevitably drawn to the bookshelves in search of some reading for the plane or the beach. And there they are, those faces smiling out at you from the business and self-help sections. The captains of industry, the motivational speakers, the self-help gurus telling you how you too can have anything you want if you learn their ten steps, seven habits, three secrets or whatever. But while some of these writers have had stellar careers, do they really have significantly more ability than you or have they just been very lucky?

The relative importance of the roles played by ability and luck in organisational and individual success is a question that has been around for a long time. And as we have witnessed the collapse of a variety of organisations recently, some would find it reasonable to speculate that their early successes may just have been a matter of being in the right place at the right time rather than any great ability. The protagonists involved might counter that they were highly skilled but just happened to be in the wrong place at the wrong time when it all went pear shaped. So which is it?

A recent study by Denrell & Liu sheds some interesting light on this question. Their primary finding is that exceptional performance is not always a good predictor of ability. It is the context in which the exceptional performance was achieved that matters most. If the performance could have been influenced by luck then it is a poor predictor of ability compared with contexts where luck is unlikely to be significant. So an amateur tennis player is extremely unlikely to beat Roger Federer because luck will have relatively little to do with it. However luck kicks in in a big way when chance events can significantly impact on performance such as when future forecasts influence whether professional investors decide to sell, buy or hold shares. Complex systems where components are tightly coupled (i.e. business) are sensitive to chance events and external shocks. So while the business literature loves its heros, you should think very carefully before you decide to imitate Steve Jobs, Mark Zuckerberg or whoever. What’s luck got to do with it? Quite a bit it would appear.

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Effort Versus Talent

EFFORT VERSUS TALENT

Yesterday, the Irish international soccer team kicked off their European Championship adventure with a match against Croatia. Despite qualifying for the finals, the team has shipped a lot of criticism. Under the guidance of Italian manager Giovanni Trappattoni, they eschew fancy, skilful football for a pragmatic approach that emphasises organisation, discipline and effort.

Today’s fast paced, information-rich world is a demanding and competitive environment as well. Work is increasingly mentally tough, requiring the ability to process large amounts of information quickly and to come up with creative and innovative solutions. So should we recruit talented people or hard workers? And more importantly how should we manage them over time?

To this end it is worth revisiting a classic piece of research on children which was published by Carol Dweck over 10 years ago. She took several hundred New York schoolchildren and gave them a test. Afterwards she praised half for effort (‘you must have worked really hard’) and the other half for intelligence (‘you must be smart at this’). Then she offered the children a choice of two further tests – one at the same level as the first and another more difficult. The results were fascinating. Of those praised for effort, 90 percent chose the harder test and the numbers were reversed in the case of those praised for intelligence. Dweck’s conclusions were that the intelligence group were scared of failure while the effort group were keen to learn from their mistakes. This conclusion was reinforced when the pupils were offered the choice of looking at the test papers of those who had done better or worse than them. Almost all the intelligence group chose to boost their self-esteem by looking at the work of those below them, while most of the effort group examined better test papers to understand their mistakes. In subsequent tests, the effort pupils raised their average scores by 30 per cent, while the intelligence group average dropped by 20 per cent.

The implications are obvious. Whether you are working with children or knowledge workers (and sometimes the differences are not all that clear!!) it is much better to focus on effort than on outcomes. You want your employees to be challenged by complex problems and to be keen to put the effort into coming up with solutions. Moreover, you do not want them to be afraid of failure because discontinuous innovations almost inevitably have high failure rates. These have to be tolerated to ultimately get the results that you want.

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