Tuesday, July 31, 2007


When we live our daily lives, we often talk about 'luck' - you get a lucky break; come into some money by sheer chance; tell the story of meeting your wife as 'pure luck' and how different your life would have been if that day your car hadn't blown a tire.

In our daily lives, we embrace 'luck' - we embrace randomness.

In the business world it's different. When have you ever heard a CEO talk about the great year their company is having and explaining it as 'we're some lucky SOBs!'. Or the budget that didn't get met as just 'unlucky'. Or the viral Marketing campaign that just happened to be 'in the right place at the right time' (ok, so some people do acknowledge the luck in this one).

Of course we don't explain business success or failure like this as there is always either credit to take, or blame to assign. Politics takes over. Everything needs an explanation. Everything needs to fit into a narrative that describes what happened - in precise terms, so we can either repeat it or avoid it. Test, retest, learn, advance (plan). This is what we do in business.

Starting your own company exposes the fallacy of this process. With no politics to navigate, no explanations to give to management, no preconceived notions to restrict you, you are exposed to luck in its rawest form. You see randomness in everything - the people you meet, contacts you make, decisions that get altered, then altered again, competitive moves, the list goes on. In all of this there is a large element of luck, of randomness.

As businesses scale up, you don't remove this uncertainty, it just gets aggregated together. In the aggregate, it looks smooth, looks like it's a result of good 'planning'. We give post-hoc explanations for our success or failure, and say we've learned from the experience. Most of the time we've just learned how to weave better stories that we know will be palatable to whomever they need to be palatable to.

This is not to say that your own hard work, thoughtfulness or effort has nothing to do with what you achieve, it's just that not everything is achieved this way. Accepting that luck and randomness play a role in business is important. It releases you from the shackles of strict 'cause and effect' planning.

Good business people, whether they know it or not, maximize their exposure to positive random events and minimize their exposure to negative ones.

Bad CEO's constantly ask them to explain these events when they happen so they can figure out how to make sure they keep happening (at least the positive ones).

Good business people simply chuckle under their breath and weave a good story.

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