#04 | There's no recipe for success

🗻 Correlation doesn't imply causation or and why we overestimate skill and underestimate circumstance

Welcome to the 4th edition of Day One - a newsletter designed to cultivate your curiosity and bring humanity back to entrepreneurship. Thanks for being here! If this email was forwarded to you, get your own here

✨ TL;DR

• 🍲 There's no recipe for success. Attempting to recreate the success of the successful won't necessarily translate into the same results. The fact that we think we can, is attributed to the survivorship bias.

• 💀 The fallacy of silent evidence. When looking at history, we tend to focus on the rosier parts of the process, and ignore the parts that don't fit our preconceptions (or aren't even accessible to us). That is: we know how many successful entrepreneurs dropped out of college - but we don't know how many dropped out of college and failed.

• 📈 Why things make sense when looking back. We don't know about those that dropped out and failed because nobody writes/talk about them. Meanwhile, successful entrepreneurs take the podium and create an after-the-fact narrative to explain how their vision turned into reality, that often omits external circumstances. This is called the narrative fallacy.

• ❗So, what can we do about it? Carefully select your sources and always consider what data might be "invisible". Recognise that what worked for one person doesn't necessarily work for another, draw inspiration from success cases but beware of retrospective recipes for success, and, combine your learnings from successes with learnings from failures, too.

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🍲 There's no recipe for success

"We favour the visible, the embedded, the personal, the narrated, and the tangible: we scorn the abstract"

— Nassim Nicholas Taleb, in his book "The Black Swan"

As an entrepreneur and avid reader, I've spent my fair amount of time over the past month digging deep into content that studies the most successful marketplaces: how they started, how they built their MVP, how growth strategies took them to where they are today. More than once, did I find myself thinking "if this worked for them, we should to the same and we are likely to succeed, too". But what I failed to recognise at those times, is that, for every successful startup a specific "hack" worked for, there are hundreds or even thousands for whom it didn't.

Put simply: attempting to recreate the success of the successful won't necessarily translate into the same results.

Our brains are obsessed with building a cause and effect narrative. The problem raises when this model misfires and finds patterns where there are none. The same thing often happens when doing user research (below a tongue-in-cheek tweet that describes it very well!):

Sebastian Schinzel @seecurity

Our online survey showed that all of the students had the required hardware and internet bandwidth to participate in the online courses.

This effect is known as the survivorship bias - and understanding it, can help you make better decisions and build more coherent products. Survivorship bias is a cognitive bias that affects how we interpret data and information when making decisions and occurs when we concentrate on the people or things that made it past some form of selection process and overlook those that didn't. It's attributed to a fundamental understanding of cause and effect - specially regarding correlation vs causation. Even though correlation and causation can both exist, correlation does not automatically imply causation.

Let's look at an extreme example:

"Want to be the next Steve Jobs and create the next Apple Computer? Drop out of college and start a business with your buddies in the garage of your parents' home"

The fact that Steve Jobs (and Mark Zuckerberg, and Travis Kalanick, and Jack Dorsey!) dropped out of college and became extremely successful entrepreneurs, does not mean that all successful entrepreneurs drop out of school, or that all those who drop out of school become successful entrepreneurs. All of them being drop outs yet extremely successful is a correlation. The survivorship bias has us believe that correlation is causation. To bust that myth: here's some research shows the majority of the United States’ most successful businesspeople actually graduated college - 94%, to be exact.

We love to hear stories about those that have beat all odds and became successful, often holding them up as proof that the impossible is possible. We love the encouragement that survivorship bias provides us, and the subsequent belief that we can one day get there, too. But, can we achieve anything if we try hard enough? The sad truth is: not necessarily, as many other factors can influence our chances (and they're not all in our control).

💀 The fallacy of silent evidence

"Randomness (or luck) plays a huge part in life’s results, and outcomes that hinge on random events should be viewed as different from those that do not… Clearly my way of judging matters is probabilistic in nature; it relies on the notion of what could have probably happened… If we have heard of [history’s great generals and inventors], it is simply because they took considerable risks, along with thousands of others, and happened to win. They were intelligent, courageous, noble, had the highest possible obtainable culture in their day – but so did thousands of others who live in the musty footnotes of history"

— Nassim Nicholas Talent, in his book "Fooled by Randomness"

Let's look back once more at this statement:

"Want to be the next Steve Jobs and create the next Apple Computer? Drop out of college and start a business with your buddies in the garage of your parents' home"

How many people have followed the Jobs model and failed? Not sure about you, but I have no idea. No one writes books about them and their unsuccessful companies. None of them end up on the cover of Forbes. This is the heart of what is called the fallacy of silent evidence: our tendency to see historical evidence with a rosie filter, while ignoring the parts that don't fit our preconceptions - or at least, in this particular case, forgetting that there is a part of the historical process that is inaccessible to us, and therefore, silent.

This is specially dangerous when trying to predict the future from the past. In fact, there are countless business books out there, analysing past successes to give you a guaranteed guide to success - beware of those!

📈 Why things make sense when looking back

“A stupid decision that works out well becomes a brilliant decision in hindsight.” — Daniel Kahneman, in his book "Thinking, Fast and Slow"

Let's be honest here for a minute: most of us (if not all) don't really know what we're doing. We might have a vision, and an overarching strategy of how we think we'll get where we want to go - but we don't have a fool-proof step-by-step plan to follow. Why does it always look like successful people had a clear "recipe" for success?

That's because, in most cases, successful entrepreneurs create an after-the-fact narrative to explain how their vision turned into reality - often omitting to admit the roles that other factors, like luck, background and other circumstances played in their success. This is called narrative fallacy.

“The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship, upon them. Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding”

— Nassim Nicholas Taleb, in his book "The Black Swan"

❗ So, what can we do about this?

Here are a few things that have helped me personally:

1. Carefully select your data sources. This applies to everything, from what you choose to read to what methods you use to conduct your research.

2. Consider what data is missing. Think of the attempt to portray the effect of COVID-19 accurately: patients who die without being tested aren't accounted for, while, in many countries, health care systems can't keep up with the testing. How does this affect the data we're provided with?

3. Recognise that what works for one person may not work for another - and accept the role of timing, luck, connections and socio-economic background.

4. Don't only focus on examining what has worked for successful people, but learn from others' failures, too. To get you started on that: a resource that analyses +100 big companies and why they failed and a compilation of 353 startup failure and post-mortems.

5. Draw inspiration from the companies you admire, but beware of retrospective recipes or prescriptive content claiming to know the exact steps to take towards guaranteed success.

“If you spend your life only learning from survivors, buying books about successful people and poring over the history of companies that shook the planet, your knowledge of the world will be strongly biased and enormously incomplete. As best I can tell, here is the trick: When looking for advice, you should look for what not to do, for what is missing, but don’t expect to find it among the quotes and biographical records of people whose signals rose above the noise. They may have no idea how or if they lucked up”

— David Mcraney, in his blog "You Are Not So Smart"

Link to Sketchplanation

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☕ Curiosity snippets

• 📰 Procrastinate much? Manage your emotions, not your time. According to Adam Grant, procrastination isn't about avoiding work, but avoiding negative emotions. We procrastinate when the task stirs up feelings like anxiety, confusion or boredom. Although it makes us feel better today, we end up feeling worse (and falling behind our deadlines), tomorrow. For a deep dive into it, I highly recommend Adam's WorkLife podcast episode: 🎙️"The real reason you procrastinate"

• 📰 Maker's schedule, Manager's schedule. I admit, I have been struggling with my schedule recently. As someone that has always managed a manager's schedule, packed with meetings, now I am feeling the need for more time to strategise and build, without interruptions. 🖌️ Sketchplanation also has a great sketch (as always!) on this.

• 📰 Second-order thinking: What smart people use to outperform. This week I learned about the concept of second-order thinking, a critical tool to solve problems. When we only think at the first-order level, we often end up unintentionally creating another problem that's worse than the original one. Second order thinking is the process of tracing down and identifying the implications of those first order impacts.

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💫 Thank you

Thank you so much for reading. If you have thoughts/feedback or any interesting content to share, I'd love to hear from you! And if you believe a friend might enjoy this newsletter - I'd very much appreciate you sending it to them by sending them this link or clicking below.

Thanks for being there!

— Kat