Why everything you learned at business school is wrong

Not everything – just most of it.

While much of the wisdom taught in business school is undeniably inspirational and useful it’s not actually very reliable. Take advice on how to be successful and you’re most likely not to be successful. Yet this advice is relied upon. Imagine if such unreliable evidence applied to medical science. Suppose a vaccine was developed for a disease that had worked on some patients but was more than likely not to work for most. We wouldn’t even call it a vaccine, we’d call it snake oil.

So how come we spot fake remedies but we swallow business advice that has little or no substance?

We see this all the time. Startups with great claims to be the next big thing who persuade young people to make lifechanging career decisions to be part of the new facebook or the new google. Bright young things fresh out of school mislead into thinking that the anecdotes of their predecessors will stand them on good stead despite embarking on a new journey in a new age with new obstacles, new disruptions and new opportunities. Anecdotes from history are important but they should come with a health warning. Past performance is not a reliable guide to the future performance but despite knowing this, it is to easy to be seduced by the promise of a shortcut to success and the best of us can be fooled.

We all admire winners. When we see somebody who has worked hard for years bow their head to receive an Olympic medal, we share the joy. If we’re older, we wish we’d been there – if we’re younger, we develop an ambition to be there one day. But how do you win a gold medal at the Olympics? What are the ingredients of success?

If you look at a sample of winners you can see the common attributes – hard work; dedication; tenacity; healthy diet. Do these things, the same things, over and over again, every day without fail, for years. Every winner does these things.

So is that the winning formula? Lots of hard work and commitment consistently over a long period of time? If we want to be scientific about it, we could take a sample of people, get them to reproduce these activities and see if we get the same outcome as the gold medal winners. That would provide proof that this hard work and tenacity is the way to win a gold medal.

But we don’t need to perform an experiment because every other competitor in the Olympic games, the ones who didn’t get gold medals, they also worked hard and ate well every day for years. And for every one of those who didn’t win, there’s a few hundred who didn’t even get to the Olympics.  Of course, training for the Olympics will most likely make you a great athlete but you probably won’t win a gold medal. Sorry – I’m just being objective about it.

Of course, the facts are disappointing. It feels like common sense that imitating success should lead to more success. Indeed, it’s what inspires us to aim for it. But retrofitting factors of success after the event and expecting to repeat the result, while it feels intuitively right, is objectively wrong. It’s like trying to work out how to win the lottery by asking the winners how they did it. There’s a lot of luck involved.

This clash between what makes intuitive sense and objective reality is well understood. Using hindsight to learn lessons is fraught with potential of flawed logic. It’s often referred to survivor bias and there are numerous historic examples to illustrate it.

When soldiers were first given helmets to wear in the 1^st world war, hospitals reported a dramatic increase in head injuries. The intuitive conclusion could be that, for some reason, the helmets were dangerous. The actual explanation was that the hospitals were seeing the wounds of soldiers who would previously not have survived. When we see old buildings, it’s natural to think “they knew how to build buildings that would last in the old days.” But that is to ignore the many more buildings that haven’t survived.

And when we look at businesses that are successful, should we look at them and their leaders and learn from their success? Would that be any different to looking at Olympic gold medal winners or Victorian architecture? When we draw conclusions about how businesses have been successful, are we ignoring all of the businesses that did exactly the same things and didn’t succeed? Would we say that the successful businesses, like Olympic Gold medal winners, did all the right things, they just did them better? Or would we say, they had some luck too?

Jim Collins wrote his best seller “Good to Great” about 11 companies that beat the stock market over 40 years and he shared some lessons about how they did it. If, instead of using hindsight to draw conclusions, he’d have picked these 11 as his predicted winners for the next 10 years to prove his insight, he’d have found that most under-performed the market. Fanny Mae would have stood out as his most notable poor prediction. In other words, Collins’ secrets of success are unreliable. You might as well toss a coin to pick stocks.

We’d be foolish not to try to learn lessons from history but history isn’t science. Neither is economics. If it was, economies would always flourish and the 2008 global economic crisis would never have happened.

Sorry to be the bearer of bad news but most things you learn at business school are wrong. I feel bad – like I’m revealing that Father Christmas is actually not real. There is no secret of success. The real secret is that there’s no secret.

Do I have heroes? Successful business people? Great politicians? Sports people? Yes, of course I do. We’d be crazy not to draw inspiration from our heroes who have succeeded but when it comes to trying to imitate them, we need to accept that success, whether we like it or not, requires lots of hard work and luck – but mainly luck. But as Gary Player, the golfer said, “The more I practice, the luckier I get”.