Cheap price Business & Investing
The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing
List Price: $ 27.00
Discount Price: $ 15.87
Â"Much of what we experience in life results from a combination of skill and luck.†— From the Introduction
The trick, of course, is figuring out just how many of our successes (and failures) can be attributed to each—and how we can learn to tell the difference ahead of time.
In most domains of life, skill and luck seem hopelessly entangled. Different levels of skill and varying degrees of good and bad luck are the realities that shape our lives—yet few of us are adept at accurately distinguishing between the two. Imagine what we could accomplish if we were able to tease out these two threads, examine them, and use the resulting knowledge to make better decisions.
In this provocative book, Michael Mauboussin helps to untangle these intricate strands to offer the structure needed to analyze the relative importance of skill and luck. He offers concrete suggestions for making these insights work to your advantage. Once we u nderstand the extent to which skill and luck contribute to our achievements, we can learn to deal with them in making decisions.
The Success Equation helps us move toward this goal by:
• Establishing a foundation so we better understand skill and luck, and can pinpoint where each is most relevant
• Helping us develop the analytical tools necessary to understand skill and luck
• Offering concrete suggestions about how to take these findings and put them to work
Showcasing Mauboussin’s trademark wit, insight, and analytical genius, The Success Equation is a must-read for anyone seeking to make better decisions—in business and in life.
The trick, of course, is figuring out just how many of our successes (and failures) can be attributed to each—and how we can learn to tell the difference ahead of time.
In most domains of life, skill and luck seem hopelessly entangled. Different levels of skill and varying degrees of good and bad luck are the realities that shape our lives—yet few of us are adept at accurately distinguishing between the two. Imagine what we could accomplish if we were able to tease out these two threads, examine them, and use the resulting knowledge to make better decisions.
In this provocative book, Michael Mauboussin helps to untangle these intricate strands to offer the structure needed to analyze the relative importance of skill and luck. He offers concrete suggestions for making these insights work to your advantage. Once we u nderstand the extent to which skill and luck contribute to our achievements, we can learn to deal with them in making decisions.
The Success Equation helps us move toward this goal by:
• Establishing a foundation so we better understand skill and luck, and can pinpoint where each is most relevant
• Helping us develop the analytical tools necessary to understand skill and luck
• Offering concrete suggestions about how to take these findings and put them to work
Showcasing Mauboussin’s trademark wit, insight, and analytical genius, The Success Equation is a must-read for anyone seeking to make better decisions—in business and in life.
Customer Reviews
| 75 of 79 people found the following review helpful  Decent book with some interesting references to follow up, By Jackal (New Hampshire) - See all my reviews This review is from: The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (Hardcover) Be aware of all the five-star reviews that have only read one book, or those that have read three books from the same author and nothing else. 0 This book is neither a masterpiece nor the author's best book, but still an interesting book. I think most of the book is based on the author's blog entries. I personally prefer the blog entries which are more concisely written. I feel that this book has a bit too much filler material. The book is clearly not written for professionals in the investment community (even though they too can profit from reading the book). I would have liked the book to go one step further than just present extended blog entries. Sometimes the author lack a critical eye. Sometimes he presents an interesting academic finding and then moves on to the next thing. One is left with a lot of lose ends. What was the point of including the stuff on disruptive technologies for instance. We don't know because t he author does not tell us. Personally, I still found some chapters interesting and especially the references to more specialised sources in psychology and management. This requires extra work, but the author has a good ability to read widely. If you do not want to do this extra work I don't know if the book will provide you with value. After finishing the book you are not left with a clear way to distinguish luck and skill. You are left with the general notion that luck plays a big role in investing. Not sure that is sufficient for even most lay-persons. One thing the author misses is that luck and skill are not cast in steel. Luck is like a Russian doll. What is luck for an investor is not necessarily luck for the CEO. What is luck for the CEO is not necessarily luck for the R&D department. Etc. Failure to realise this point makes some of the discussion feel very superficial. The book contains a lot of sports analogies. The author is talking about US sports, so these sections will not be fun readings for non-Americans. I am not a sports fan in general, so I think that these sections are a bit too lengthy (~30% of the book). In fact, the book contains more sports discussion than investment discussion (~10%). And even more psychology (~60%). Another weakness with the book is that the author is not pushing the investment parallels strongly enough. Some advice if you have read Taleb. Mauboussin's book is more in the informal style of Taleb's Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. Personally, I would prefer Taleb's The Black Swan: Second Edition: The Impact of th e Highly Improbable: With a new section: "On Robustness and Fragility". If you have not read any of the author's books, pick up More More Than You Know: Finding Financial Wisdom in Unconventional Places (Updated and Expanded) (Columbia Business School Publishing) instead. That book is richer in providing various ideas. I would also advice you to check out the author's blog (on Legg Mason site) to get a feel for his writing. The blog is written for a professional audience, so it is more to the point and largely lacks the filler material. This book is worth between three stars a bit depending on your own writing style preferences (more academic vs more informal). 32 of 39 people found the following review helpful  How and why to "untangle" skill and luck to improve at "the art of good guesswork" when making decisions, By This review is from: The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (Hardcover) I have read all of Michael Mauboussin's HBR Blog posts and thus have eagerly anticipated the publication of this volume in which he examines - in much greater depth than the articles permit -- a common mistake when making predictions: failing to recognize the existence or miscalculating its influence, "and as a consequence we dwell too much on the specific evidence, especially recent evidence. This makes it tougher to judge performance...The problem is that we commonly twist, distort, or ignore the role that luck plays in our successes and failures. Thinking explicitly about how luck influences our lives can help offset that cognitive bias." 0 Obviously, luck can be an important factor. The challenge that Mauboussin embraces is to explore and thereby understand "the extent to which luck contributes to our achievements, successes, and failures." He shares what he has learned so that those who read this book will be much better prepared to take luck into full account when making decisions, especially those that serious implications and could have major consequences. These are among the dozens of passages that are of special interest and value to me: o Skill, Luck, and Prediction (Pages 5-10) o The Luck-Skill Continuum and Three Lessons (23-29) o Stories, Causality, and the Post Hoc Fallacy (34-38) o The Paradox of Skill -- More Skill Means Luck Is More Important (53-58) o Simulation: Blending Distributions to Match the Results (70-73) o Gauging Luck: Independent and Dependent Outcomes (110-116) o Power Laws and the Mechanisms That Generate Them (116-123) o Deliberate Practice: Structure, Hard Work, and All About Feedback (157-163) o When Success Is Probabilistic, Focus on Process (167-174) o How to Live in a World That We Do Not Understand (190-195) o Mean Reversion Mistakes (200-206) Some of the most valuable material in the book focuses on the difficulties that result from attempting to "untangle" skill and luck. (Many people are unaware of that "tangle.") Mauboussin suggests that there is "a basic desire to find cause and effect in every situation, whether or not that view represents reality." He identifies several reasons that help to explain misjudgments. They include the aforementioned desire to see causality where none exists, the regency bias, mean reversion, nd the sample bias. He also has much of value to say about what I characterize as "reverse causality," indicated by the assertion that wet highways cause rain. How to improve the odds when making an important decision? Be sure to check out "Ten Suggestions to Improve the Art of Good Guesswork in a World That Combines Skill and Luck" (Pages 215-233). No brief commentary such as mine can possibly do full justice to the scope and depth of material that Michael Mauboussin provides in this volume but I hope that I have at l east suggested why I think so highly of him and his work. Also, I hope that those who read this commentary will be better prepared to determine whether or not they wish to read it and, in that event, will have at least some idea of how the information, insights, and wisdom could perhaps be of substantial benefit to them and to their own organization. 14 of 17 people found the following review helpful Entertaining Read, Valuable Guide for Coping with Luck in Work and in Life, This review is from: The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (Hardcover) I would highly recommend "The Success Equation" for anyone looking to better understand how luck affects our lives. Thankfully, Mauboussin's new book also provides a host of mental tools that can be used to cope with the fact that luck - not just our ability or skill - determines a large portion of our fate. In fact, it is for that reason that "The Success Equation" goes well beyond one of my other favorite books on the topic, "Fooled by Randomness" by Nassim Taleb. Taleb's excellent book rightly highlighted the human tendency to overestimate causality in certain environments, such as the business world. I credit "Fooled by Randomness" for making me more cautious in my assessment of the perceived skill (or lack of skill) of many individuals or groups (companies, teams, etc.), but I regret that it did not provide many tools (aside from Monte Carlo) or mental models for figuring out the relative contributions of luck and skill to a particular outcome. Mauboussin's book does jus t this, and for that reason alone it should be a mainstay on the bookshelf of anyone who works in a field where luck plays a central role ("which is most of us," as one of the blurbs says).Now, Mauboussin doesn't argue that one can make an exact science out of this attempt to disentangle the relative contributions of luck and skill, but he does provide some tools for properly framing the discussion and for at least making the attempt to do so. The author says his goal is to help readers make better decisions than those completely in the dark. I agree with him that this is an important exercise. At least in the business world, it seems like on a daily basis one encounters muddled thinking when it comes to discussing the success or failure of businesses and individuals. And that's despite excellent work from researchers such as Jerker Denrell and Phil Rosenzweig, who dismantled much of the pseudoscience endemic to popular explanations of business success. Now, I'll just share a few of my favorite takeaways: * Which information to focus on when making statistical predictions: Mauboussin applies Kahneman and Tversky's ideas of base rates (prior information) and specific evidence to skill and luck. In realms where skill is dominant, use specific information (you know Usain Bolt is the fastest guy so you predict he wins the race). In realms where luck dominates, use base rates (just because a mutual fund manager beat the market on a one-year basis doesn't necessarily tell you she will outperform next year). * Let's relax with the aphorisms: many people react to the notion of luck with comments like "you make your own luck," etc. These are really just word games. If you work hard and put yourself in a greater position to succeed, that's arguably not luck but rather skill (e.g., "skill" by improving your odds). * Process versus outcome: when luck exerts a large influence, it is better to focus on the individu al's process, not the short-term results. If skill exerts a large influence, you're likely to see a strong link between cause and effect, process and outcome. Similarly, the greater the influence of luck, the larger the sample size you need to make any sensible conclusions. Can we please make knowledge of that fact a requirement for high school graduation?! * Paradox of skill: Defensive readers take note (at first I was a little offended by all the luck talk!). As skill improves, the variance of skill gets smaller, which paradoxically increases the influence of luck on outcomes. Mauboussin offers examples of this from business, investing, and sports, but I particularly liked the example he borrowed from Gould regarding Ted Williams' .406 season. * Methods for parsing the relative contribution of skill and luck: there's definitely some art involved here but I think the tools here should be more widely used in various fields. The methods presented include a subjectiv e analysis (using a few key questions), simulations, and true score theory. * Social influence: the success of many songs, movies, and books is contingent to some extent on social interactions, which means that one person's propensity to purchase an item is dependent on external factors (e.g., his social group or the popular media). This positive feedback amplifies success for the luckiest and vice-versa. Here, the author nicely ties in Watts' fascinating work on social influence (Everything Is Obvious) to the skill/luck discussion. * Identifying and applying useful statistics: use a statistic that is both persistent - you can expect something to recur -- and predictive - it leads to the objective you seek. The test for persistence relates to the skill/luck discussion - skill is the driving force for statistics that are more persistent, or reliable, and vice-versa. In terms of prediction, we can simplistically think of field goal percentage in basketball, whereby a better percentage translates into your goal of... Read more |
Share your thoughts with other customers: 
› See all 33 customer reviews... 
No comments:
Post a Comment