Stories we tell ourselves about our successes and our failures.
Good outcomes and bad outcomes – what is the role of luck and are you at risk of ‘resulting?’
A friend suggested I read the book "Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts" by Annie Duke because she thought I might like the great point she makes on a widespread bias we all share. An ex-professional poker player, Annie connects the strategies we take and how we assess their outcomes. She describes what she calls "resulting" when you define the quality of the strategy by the Outcome it produced.
Should your strategy produce a good result, we tend to assume it was a good strategy. Conversely, we can take it as a weak strategy if the outcome is poor or bad. The truth is that there could be other things at play. This fallacy is often known as the Outcome Bias, which Wikipedia defines as "an error made in evaluating the quality of a decision when the outcome of that decision is already known."
So, what are the issues, and what can we do about them.
Luck is not a strategy but …
Luck, like hope, is not a strategy, but it is a reality.
Plans mostly fail because of poor assumptions and lousy execution. Bad decisions cause failure - we see it all the time. But the truth is that the most excellent plan can fail because of bad luck. There are many reasons for lousy luck, including the turn of the dice, the fall of a card, or even the erratic decision of an opponent.
Duke gives good examples of this in the book, and I will not spoil the book by telling her stories. But it is also worth remembering that good planning and preparation can limit lousy luck. Or, to put it like Thomas Jefferson, "I'm a greater believer in luck, and I find the harder I work, the more I have of it."
So, what can you do about bad luck? There is nothing you can do; sometimes, you just have to live with it. But identifying whether it was good luck that you succeeded or bad luck that you failed is a crucial skill to learn.
Postmortem your strategies
I worked for a very successful company during the 'dot com' era. Their business grew fast, and they were very successful. The time was the ‘glory days’ of the business. We needed to accept that they made some excellent decisions at that time to position themselves well for the opportunities ahead. Yet, there was an element of luck in how the market matured and how consumers responded to the availability of the use of the internet. The company never considered the part of luck in its execution as it often behaved like it was all about its strategy and execution. This matters because it gave them an unrealistic view of the planning and execution. So, when the luck ran out, and the market changed, because they didn't understand the role of fate, they maintained their strategy only to watch it fail.
The lesson here is always to review where you succeeded and failed through the lens of strategy, execution, and market conditions or luck. Avoid the influence of outcome bias by evaluating a strategy by ignoring information collected after the strategy was defined. While there is a lot to be learned from that data, it may say more about your execution (and the ability to be nimble) rather than the strategy itself.
Or then again, they could just be stories we are telling ourselves!