Photo: AP images
In the aftermath of the unfortunate death of Steve Jobs, many have highlighted his brilliant 2005 commencement speech at Stanford. I did too. Jobs framed his speech around three stories from his life.
We’re all familiar with how these things are supposed to go.
Brilliant business executive explains his success by focusing on his success (it’s far too often a “he”) and encouraging us that we can make it too.
But Steve Jobs was anything but typical.
We all tend to be enamoured with success and those that achieve it. We are all prone to what Nassim Taleb calls the “narrative fallacy.”
We want to see agency in the world. We want to understand everything in terms of intent, but sometimes (many times) the “cause” is pure noise and worthless as a teacher.
The three stories Jobs chose to focus on at Stanford were difficult, heart-wrenching and painful: dropping out of college; getting fired from Apple in 1985; and being diagnosed with cancer.
Success came from them, as Jobs explains, but only much later and after considerable struggle and difficulty. His approach was counterintuitive, but correct. Thus, as usual, Steve Jobs was ahead of the curve.
By spending so much time looking at success, we learn the wrong lessons. It is true, as Taleb concedes, that “chance favours the prepared.” However, as Taleb also points out, those successes have as much to do with randomness and noise as with talent, plan and execution.
During World War II, England sent regular bombing raids into Germany. Many planes never returned and those that did were often riddled with damage from German anti-aircraft guns and fighters.
Wanting to improve survivability, the English Air Ministry examined the locations of the bullet holes on the returned aircraft and proposed that reinforcement be added to those areas that showed the most damage.
Wald’s unique insight was that the holes from flak and bullets on the bombers that returned represented the areas where planes were able to absorb damage and survive.
Since the data showed that there were similar areas on each returning B-29 showing no damage from enemy fire, Wald concluded that those areas (around the main cockpit and the fuel tanks) were the real weak spots and that they must be reinforced.
The more useful data was in the planes that were shot down, not the ones that survived, and had to be “gathered” by induction in that instance. This insight lies behind what we now call survivorship bias – our tendency to include only successes in statistical analysis, skewing the results.
In most cases we’d be better served by looking closely at the stories of those who failed and why instead of the success stories, even though such people are unlikely to get great book contracts and six-figure advances.
Similarly, we’d be better served examining our personal investment failures than our successes. That’s where the best data is and where the best insight may be inferred.
By examining failure more closely, we’ll have a better chance of doing precisely that.