Survivorship Lessons

In yesterday’s newsletter I suggested that hiring based on the pedigree of a candidate’s last company relies on a cognitive bias. Survivorship bias is the mistaken belief that the survivor —in other words, the winner— has innate ability that the losers don’t share.

That may be true in a boxing match or a track and field race. But, when there are lots of other variables, it may not be. We tend to assume that the actors who win the academy awards are the best thespians anywhere—but we have no access to seeing performances by the out of work actors, or those performing in small regional theatres who haven’t had the wherewithal to make it to Hollywood and its auditions.?

So, the award goes to those who got lucky enough to make it into the competition.?

That’s one side of survivorship bias, the idea that we venerate those who seem to win—assuming that skill is the reason they won.?

There’s another, adjacent way way we apply bias —but it is in our assessments of actions not people.?

Let’s say you buy 100 lottery tickets and one of them turns out to be a winner. You and another winner are each awarded $50m, half of the jackpot. One possible lesson from this scenario is that buying?lottery tickets is smart; and that buying 100 of them is 100 times smarter. Therefore, everyone should buy 100 lottery tickets.

But, apart from the fact that you must buy at least ticket to win—nothing in this story actually implies that buying even two tickets is smarter than buying only one. In fact, the other winner —who also received $50m—didn’t buy a ticket at all, but was given one as a bonus when she got takeaway Chinese food a month ago.?

We could equally infer that buying Chinese food is the best way to get rich. It isn’t.

Another way to look at this is through a broader lens. If we compare the winners of the lottery to the losers, what separates their outcomes? Ultimately, nothing. And, considering that proportion of losers to winners (millions to 2) it would seem that buying lottery tickets is a poor strategy for becoming rich.?

Here’s another example:?

During World War Two, as the allies worked to reinforce their war planes, they studied planes that returned from missions, and added structural reinforcement to the parts of the planes that had been hit.

Abraham Wald, a statistician working with a team at Columbia University, suggested that they ought instead to harden those areas that had NOT been hit. The reasoning was that those planes that did not come home must have been hit in areas other than those of the surviving planes. Therefore, reinforcing those inverse areas would protect more planes.

Like so many insights, once you understand it, it seems so obvious.

The focus on the surviving planes –or the successful founders — or the Oscar winners – all assume that those who succeeded were successful because of the decisions they made, the path they took or the things they did. But without understanding the counterfactual – the decisions, experiences, and circumstances of those who failed at the same endeavor — we can easily be duped.

One perspective is to look at actions after the fact. The successful exit, the closed deal, the final balance sheet. But another way to look at all of these to imagine them from the front end—and the counter-factual.

When we develop strategic plans, we often start with a set of possible future scenarios that we intend to play out. But it’s easy to get swept away in the upside. We rarely develop losing scenarios. Yet, if we really want to craft strategy with a higher likelihood of succeeding, we need to think about future failure. It’s unappealing.

I was working with a client on their scenario planning for a specific partnership strategy. They are an analytic platform that assesses the data gathered by municipal internet of things (IoT) devices (like red light cameras, on-street CCTV, environmental sensors, etc.). They intended to partner with several of the IoT manufacturing companies to create white label versions of their products.

If it played out as intended, this would be a huge win both for my client, but also for the 3 manufacturers. They would be able to offer a turnkey service that provided not just equipment, installation and service—but also the analytics of the data their systems collect.

It would also benefit the cities by reducing the amount of procurement, number of RFPs and variety of technologies they would have to operate.

But as good as it seemed, I suspected there were pitfalls we couldn’t see. Some were known, like competitors trying to do the same thing, and various objections by privacy advocates to any kind of surveillance equipment. But those were ongoing issues.

The only way to bring other potential problems to the fore was to ask the question. Let’s imagine this becomes a disaster. How?

I suggested we pose a pre-mortem to the team. Imagine it’s two years from now and this partnership strategy failed and become a massive boondoggle for the company. What went wrong? They did not disappoint.

Some of what they came up with included cities refusing to combine procurement of their equipment with software, manufacturers failing to fulfill their contracts and taking the client down with them, cities blaming equipment problems on my client rather than on the manufacturer, and many more.

What mattered in this case was uncovering the real weaknesses in the scenario. Once we had done that we had a way to calibrate the quality of the scenario. Was it the best way to approach the partnership market? Should we embrace that scenario as a guide to craft our strategy?

In fact, we did. But the advantage of pre-vetting the possible obstacles gave us insights that we could use to build a stronger strategy. Our eventual strategy included initiatives and heuristics to prevent those problems and to offer options that would controvert them.

Even with all of that, the strategy could be an abject failure. Why? Because it could have been in the midst of the pandemic, or the company could fail to raise the next round of funding, or the manufacturers could fold for malfeasance and sully my client’s reputation. Or any of an innumerable number of other unknowable possibilities.

Anticipating future possibilities is part of decision-making—and understanding that unknown events can shape outcomes should also inform our after-the-fact assessments. The key here is always to take into account what could have causes those who failed to fail. It’s not always incompetence.

The better question is about the quality of the strategy they employed and why it failed—rather than if it failed.

This makes a big difference to how we assess others and ourselves. Ultimately, our results can be better than our strategy —and worse than our strategy. Just as our health can be better than our lifestyle would have predicted —or worse than our lifestyle would have predicted. Marathon runners with perfect diets get cancer while young and healthy. Jim Fixx, the early guru of running, died of a sudden heart failure.

The outcome isn’t always a just or logical result of the action or quality of work.

Your team can develop extraordinary decision-making skills with the help of executive coaching. Schedule a call with me to learn about how Beyond Better’s Coaching-as-a-Service could accelerate your company’s growth.