7 November 2012

The Failure of Success Stories: Despite Doing Exactly Like in the Success Stories He Failed… It’s not Despite; it’s Because (8)

We’ve all heard “success stories” and felt fascinated about them. In many ways everyone likes to envision themselves as characters of success stories. However, doing as in the success stories is not necessarily a bright idea. In this post I’m going to go through the short comings of “success stories” and explain why it is not good to “do as in the success stories”.

Now, I have to make one thing clear. There are “success recipes” and “success stories”. The “success recipes” are usually invented by charlatans that promise to teach you “how to make one million euros on the stock market in five easy steps” or “how to effectively tie your shoelaces in 10 easy steps”. I’m not referring to these “hear what you want to hear” products. I’m referring to those real stories of people or firms that became successful and that have become part of (western) culture. The idea of this post came when I was writing a project on how to encourage and support entrepreneurship in IT and I could not ignore the “two young men in a garage” stereotype.

Let’s come back to “success stories” and focus first on the “story” part. Stories have been immensely important in human history. Stories and storytelling played a fundamental role in human culture and civilization. Culture, in the broad sense, means information that is transmitted from one generation to the next through non-genetic means. As you might know, language developed earlier than writing in human evolution and stories were the main component of culture. Even after writing appeared, reading and writing were the privileges of the elites for most of human history. Not until the XIX-th century and only in the western world was there a public education system to provide mass learning of reading and writing. Even in our times there are areas in the world where illiteracy is a major issue.

So stories were and still are highly important in transmitting information. What is really interesting is that our brains are adapted to learning through stories. At the same time, stories have a major characteristic, namely they need to be coherent. The coherence of a story is crucial in ensuring its viability as an element of culture. The problem is that coherence is not the same thing as “truth”, validity, reliability etc.  

To better understand the difference between coherence and validity think of “fairy tales”. They are highly coherent, but everyone (at least the ones that passed childhood) knows that they are not true and only fictions. Despite knowing that “fairy tales” are products of imagination with zero validity in the real world they are appealing even for adults. Think only about the huge audiences that movies like Harry Potter, Lord of the Rings and Star Wars have made.

Another example to better understand the difference between coherence and validity is “home shopping”. All the programs that present and invite people to buy the magnificent limited offer unbelievable product are extremely coherent stories but have (close to) zero validity. You don’t believe me? Then think, I repeat THINK about losing weight without any effort … is there any possible physical, chemical, biological way to do that apart from starving?

To make a long story short, humans substitute coherence for truth. A coherent story is perceived as true and valid even if in fact it is not so. Success stories are coherent (and desirable) and people believe them as being true. Moreover, people perceive success stories as reliable models.

Now going to the “success” part of “success stories” there is a bit of a “circle reasoning” in the sense that these stories are “success” stories because the characters in the story became successful. Because the protagonists of success stories have been successful people imply that their story is a story of success. In decision making psychology terms this is called “outcome bias” and it means that people judge the outcome and then infer if the “road” to the outcome was right or not. So people seeing that others have been successful they imply that what those people did is the right way to achieve success. However, this is fundamentally wrong because a huge number of RELEVANT factors are usually discarded.

Let’s start with the first flaw in success stories, namely the “starting low” part of most stories. In your typical “success story” the protagonists start usually at a low level that is quite ordinary and most people can relate to it. In a typical success story the main characters start their business project in a “garage” (e.g. Apple), or in a student dorm room (e.g. Facebook) etc. In other stories the main character starts with a low level job such as “moping the floors” or being a waiter. The appeal of this part of success stories comes from the fact that virtually everyone can relate to this low starting level. Most people had a garage or dorm-room or held low level jobs and this makes it easy to imagine yourself in the shoes of the main character in a success story.

To better understand try to make a comparison between a “success story” of someone who started their business in a “garage” or “dorm room” and a “success story” of someone who started their business in an office building in the city center. Which story is more appealing? With which character can you relate with more? Most likely the first, right?

If we go beyond appeal and identification with a character’s starting situation we will see that this information is perfectly useless in assessing the validity of a success story. What is going on here is what I call “observation bias” or in more scientific terms “availability heuristic”. If you ask anyone if they know a story about someone who started a successful business in a garage, dorm-room, studio etc. for sure people will be able to say about Apple, Google or Facebook. These businesses and the stories behind them are widely known as mass media, books and movies have presented them to the general public. However, this is what we can retrieve from memory about starting a business in a garage, dorm-room etc. It has virtually nothing to do with the overall figures of businesses that started at a low level and their rate of success.

To better understand think about lottery winners. In the media there are stories and news about people who have won the lottery. Everyone has heard at least one or two of these stories and in everyone’s memory there is available information on lottery winners. If one is asked to estimate the chances of winning the lottery he or she will retrieve from memory instances of people that have won the lottery and make an estimate that is for sure wrong. The reason for which it is wrong is that people have never heard stories about people losing the lottery. Assuming that for every lottery winner there are at least a few hundred thousand people who lost the lottery, imagine how a news bulletin that presents people who have lost would look like. Even if for every loser there would be only one second of air-time the news bulletin would have to last for at least 10 hours.  Now, 10 hours of seeing 1 second for each lottery loser is not something that people would watch and TV stations restrict themselves to presenting one winner for one minute.

Going back to “success stories” and applying the same REASONING we will understand that for every business that has started in a garage and was eventually successful there are at least a few thousand businesses that have started in a garage and failed. Similarly for dorm rooms, studios, garden sheds etc. The same goes for the successful people that have started as waiters or floor cleaners. For each one that has started so low and later became some top-manager hot-shot, there are tens or hundreds of thousands of people who started as waiter or floor cleaner and never got to be even “chief waiter” or chief floor cleaner.

To sum up, starting at a low level is appealing for the public because people can relate to this “starting low”. At the same time, starting low has absolutely zero relevance for the success of the business or of the person.

The second flaw of success stories is that they lack information that is highly relevant. The typical “success story” goes something like this: “There were two young men that have started a business in a garage and 20 years later they were multi-millionaires.” The problem with this is that it lacks two major chunks of information. First, what has happened in those 20 years and second, when did they start the business.

People, in general, attribute outcomes to individual traits and generally ignore contextual factors. “If someone else does something good or bad it is because of his or her character, personality etc. If I do something good it is because of my skills, qualities, character etc. If I do something wrong it is because the context made me do it.” This is essentially how most people think and unless there is discomfort (me doing something bad) about one’s self, everything is attributed to the individual’s character, skills, traits etc.

In success stories the success is assumed to be (only) due to the personality, skills, qualities etc. of the characters in the story. Most people ignore completely the contextual factors. The reality is that contextual factors are much more powerful that we would like to think. I don’t want to go into a lengthy argumentation on the power of context, but let’s THINK about one contextual factor extremely relevant for success stories that is ignored and this is the “Market trend” or “Economy trend”.

Everyone knows that a business or a job is not isolated from the rest of the world and is subject to influences from the market in which it “plays” and the overall economic environment. Despite knowing this, somehow people ignore these contextual factors when it comes to success stories.  Ignoring these influences and trying to replicate a success story is not exactly smart.

To go a bit more in detail here, you know that in economy there are cycles and even if there is not a pin-point accurate duration of an economic cycle, there is a pattern, namely that there are approximately 7-10 years of growth followed by 1-3 years of recession. I am aware that it is not very accurate, but for the sake of the argument let’s agree on this broad description of economic cycles. 

Now, which business do you think will be more successful: one that “goes to market” in the second year of a growth cycle and benefits of at least 5 years of economic growth or the one that “goes to market” in the last year of growth and then has to go through 1-3 years of recession?

The answer is obvious, but most people ignore the timing and economic context of the occurrence of a successful business that ends up in a “success story”.

Going even further in analyzing the economic context of success stories, there is a belief that many successful companies are started during recession periods and that in fact these new businesses are the engine of the new growth. Now, I’m not in the position to deny the effects of some new firms on the overall economy, but let’s see things from a different perspective. If a firm is set up sometime in the middle of a 2-3 years recession, then there are two major factors here. First, resources are relatively cheap in a recession period (or at least cheaper than in an economic boom period) and second, if it takes about 1-1.5 years to set up a new firm and its products, then it means that by the time that business “goes to market” the recession period is (almost) over and subsequently it will benefit from a relatively long period of economic growth.

To sum up, success stories ignore almost completely the contextual factors and most importantly ignore the broader economic context in which a success story takes place.

The third flaw of success stories is that they promote behaviors that in general are detrimental. Many of successful entrepreneurs make a big thing about them dropping out of school. Personalities such as Sir Richard Branson, Steve Jobs and even Bill Gates have dropped out of school and they somehow never forget to mention this when telling their stories. Is dropping out of school a general characteristic of successful entrepreneurs? Could be, but is it in any way relevant?

Here, again we have a case of “availability heuristic”. Since high profile personalities say that they have dropped out of school, many people have this available in their memory and subsequently imply that dropping out of school is something good. On a “softer” side, people imply that education is not that important for one to achieve success. Again these are only a few instances and the huge mass of school drop-outs is ignored. In general people who drop out of school are worse off than people who complete their studies and this is a widely accepted truth. Moreover, the more education, the better is the outcome in life quality, income etc. I accept that there are several controversies of the exact impact of an additional year of education in one’s overall well-being  but there is no controversy on the overall positive impact of education.

In a similar line of thought, what is missing from these “success stories” is the fact that even if the “stars” of a business have dropped out of school, the business heavily relies on highly trained professionals. Of course glamorous personalities like Bill Gates and Sir Richard Branson are in the spotlight, but do you actually believe that their businesses have developed to this level without people who were formally trained to do the business? Behind every successful entrepreneur that has dropped out of school, there is an (invisible) army of highly schooled people who are doing the work.

To sum up, following a success story that includes dropping out of school or giving little importance to education is in fact detrimental for the individual.  

The fourth failure of “success stories” is that they ignore the money factor. If you ask a wannabe entrepreneur about her project, sooner or later the topic of money and financing the investment will come up. Even if money is not the most important thing in the success of a business (or person), it is highly important and it is one of those things that if it is lacking then it is a big issue. The typical success story usually ignores this component or it mentions something very briefly about someone mysterious who made an initial (small) investment.

Money issues are somehow taboo in many cultures and people prefer not to talk about them. However, in real life financing an investment or a career is a big thing and in many situations it makes a difference between a success and a failure.   

The fifth failure of “success stories” is that they ignore what has not happened. I’ve left this point at the end because I believe it to be very important and a bit hard to digest. By its very nature a story is a listing of facts – things that have happened. At the same time, for everything that happens there is at least one thing that has not happened.

To better understand this, let’s get back to the lottery example. If you win the lottery this means that, apart from being extremely lucky, many other people that have played the lottery did not win. If you win the lottery then it means that “not playing the lottery” did not happen. If you win the lottery it means that other people that would have picked the same numbers did not play the lottery or changed the numbers.

For everything that happens there are countless things that did not happen. Why they did not happen is a very broad topic of discussion, but overall it’s simply luck.

Not one single “success story” takes this fact into account, but the truth is that in all successes there is a huge amount of luck. For example what would have happened to the great success story of Apple if someone else had invented the technology behind the iPod? What would have happened to Facebook if Mark Z. would have been born a girl (there is a 50:50 chance for a human to be male or female)?

The examples above might be a bit too extreme, but let’s think of some more digestible ones namely the actions of the competition of all these examples of success. All success stories somehow ignore what the competition has done or most importantly what it has not done. One company’s success implies as in the lottery example the lack of success of another company. So in order for some company or person to be successful others (direct competitors) have to not exist or fail somewhere down the road.

In the same line of thought, if the guy that started as a floor cleaner got a promotion that in turn led to another promotion and so on up to top management it means that other people did not get the promotions (or jobs if they were external candidates). He might have got the promotion(s) because he was better than the others, but then there is the question why was he better? If he was better than the other candidates it means that candidates better than him did not apply for the job; it also could mean that the other candidates had a bad day when the interview took place or simply missed the train or got stuck in traffic. Again, for everything that happens there are countless things that do not happen for extremely various reasons.

To sum up the fifth shortcoming of success stories, they focus only on what has happened and somehow infer that the protagonists were the only cause for what has happened. Success stories rule out major factors such as luck and actions of competitors.

In conclusion, it is not despite following the examples of success stories; it is because such examples are followed to the letter that people fail. In the end, success stories are very nice narratives that have the role of inspiring people, but nothing more. Their validity as examples to be followed is virtually zero. There is no “success recipe” (in 10 easy steps).

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