In the Boston Globe Ideas section, Drake Bennett has a typically excellent article on the logical fallacies underlying best-selling business books, such as In Search of Excellence or Good to Great :
While the particulars vary, the basic idea underlying the literature is the same: that the secrets of success can be divined by careful study of the institutional habits of the world’s business all-stars – companies that set the standard for their industries, that thrive in tough times, companies that win the war for talent, companies that are built to last. In the imperturbable focus on core values of Hewlett-Packard or the restless innovativeness of Google or the ruthless accountability of GE, there are lessons for us all.
At their most ambitious, these books purport to elevate the study of excellence to a science, its nuggets culled from exhaustive research and refined by painstaking analysis. Jim Collins, coauthor of “Built to Last” and author of “Good to Great,” likens what he does to physics. Readers of his books, he writes, have their eyes opened to the “immutable laws of organized human performance.”
But a few consultants and business school professors have begun to argue that much of this literature is, in fact, useless. Far from a science, they argue, the success literature is made up of little more than just-so stories in which authors use dramatic anecdotes – often drawn from previously published magazine profiles or interviews with the very executives whose performance is being examined – as evidence for “secrets” that amount to little more than warmed-over homilies. The critics accuse the success gurus of cherry-picking their evidence, of doing little to double-check their results, of circular reasoning, and of making elementary statistical errors.
This is the corporate version of a very well studied psychological mistake known as the Fundamental Attribution Error (FAE). (This is sometimes referred to as the “correspondence bias”.) Simply put, the FAE occurs when people overestimate the importance of supposedly “fundamental” personality traits and underestimate the importance of variables like context. For instance, when subjects were given a series of pro-Fidel Castro and anti-Castro essays to read, they naturally assumed that the pro-Fidel authors were more sympathetic to the Communist cause. So far, so obvious: people write what they believe. However, this assumption persisted even when subjects were told that the position of the writers was determined by a random coin toss. Why? Because we naturally overlook the “situational constraints” placed on people.
The same thing happens when you meet someone in a bar and assume they are always talkative and outgoing. What you’ve failed to consider is the four beers and two shots that preceded your conversation. The drunk extrovert might be shy in a different and more sober situation.
What does this have to do with business books? These influential authors assume that their “successful” companies (many of which are now out of business) are fundamentally better than less successful companies. Thus, they spend lots of ink trying to reverse-engineer the ingredients of corporate success, the traits that lead to high profit margins and stock prices. But what if those ingredients are contextual? What if success is a matter of luck and good timing? What if the temporary rise of a stock doesn’t mean anything?
The larger point, of course, is that humans are terrible at acknowledging the (omni)presence of contingency and chance. We like explanations that cut across situations and aren’t subject to randomness, and so we psychoanalyze personalities and come up with elaborate theories of personality. Alas, these explanations often get the causality of behavior exactly backwards – who we are and what we’re like often depends on where we are and what we are doing. I’ve always loved this short quote from Richard Rorty: “Freedom is the recognition of contingency.”