How can success breed failure? It turns out there are a number of dynamics at work.
Success, we’re constantly told, breeds success. And success breeds stability. The way to avoid failure is to copy successful people and strategies. The way to continue succeeding is to do more of what has been successful.
This line of thinking is so intuitively compelling that we wonder what other basis for success can there be other than ‘success’?
As counter-intuitive as it may sound, success rather reliably leads to failure and destabilization. Instead, it’s the close study of failure and the role of luck that leads to success.
In the macro-economic arena, I think it highly likely that the monetary and fiscal policies of the past six years that are conventionally viewed as successful will lead to spectacular political and financial failures in 2015 and 2016.
How can success breed failure? It turns out there are a number of dynamics at work.
Survivorship Bias
Survivorship Bias is the natural tendency to look at the survivors for the keys to success rather than to examine those who didn’t survive, many of which disappear without a trace. If 100 restaurants are founded and five of the new eateries achieve rip-roaring success, business schools usually study the decisions and strategies of the five survivors, not the 95 failures which closed their doors and left no trail of decisions and strategies to study.
As David McRaney observes in his excellent account of survivorship bias,survivorship biasby focusing solely on survivors rather than those who failed, the causes of failure become invisible. And if the causes of failure are invisible, the critical factors that determine success also become invisible.
Even worse, we draw faulty conclusions from the decisions of the survivors, as we naturally assume their decisions led to success, when the success might have been the result of luck or a confluence of factors that cannot be reasonably duplicated.
We are often reassured by the financially successful that perseverance and the willingness to accept risk are the key factors in success. But as McRaney explains, this is the equivalent of asking the one actor from a rural state who achieved Hollywood stardom for the key factors of his success, on the assumption that anyone else following the same path will reach stardom.
But magazines never track down the 100 other aspiring actors from the same region who went to Hollywood and persevered and took risks but who failed to become stars. Examining the few hundred miners who succeeded in finding enough gold in the Klondike in 1898 and returning with enough of their newfound wealth to make a difference in their life prospects while ignoring the experiences and decisions of the 100,000 who set off for the gold fields and the 30,000 who reached the Klondike but who returned home penniless (if they survived the harsh conditions) will yield a variety of false conclusions, for luck is never introduced as the deciding factor.
