Hard Facts and Half Truths

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Buy this book now. You need it. We all do.

I wrote two conflicting posts. One claimed that concentration is the new competitive advantage and the other stated that focus is foolish. You probably preferred one to the other, but I think both make decent arguments. The problem is that they are both half-truths. They are both ideas that are true under some but not all conditions. Is focus important? Sometimes. Maybe. It depends. You will never get anywhere if don't focus at some point, but if focus causes you to have tunnel vision then it will be your downfall. The posts are an illustration of why today's book review is important.

If you have read this blog for a while, you have probably heard me mention that I read business books primarily for the small kernel of truth you find inside. I have about 15-20 books that I think are excellent, and another 20 that are pretty good overall. The rest are like "One Minute Manager" or "Good to Great," they have a few things worth pulling out of them but people treat them as business gospel when at best they are mediocre half truths.

I bought Hard Facts, Dangerous Half Truths and Total Nonsense on a whim because I liked the title. It didn't disappoint. Unfortunately, the book doesn't provide any clear simple aphorism you can use to run your business. I know that is the style with business books these days, but in this one you don't learn management by walking around, the five traits of great leaders or who moved your cheese. You learn to be skeptical. You learn that most business *facts* are half-truths. You learn that business is ultimately situational and that leaders should be more analytical and less dependent on management-by-witty-sayings.

The book takes on lots of business myths and throws them back in your face. For instance, does leadership matter? It is one of the most popular search topics as far as business literature goes, one of the most researched, and one of the most written about. Most of it is garbage. The answer to the question does leadership matter is… it depends. In most cases it matters very little. In a few cases, it matters a lot. Overall, it typically accounts for less than 10% of a company's success. (I know a handful of you are going to send emails to me arguing that leadership is sooo important. Please read this book first.)

The book lists some rules like:

1. Treat Old Ideas As If They Are Old Ideas. The authors write "After all, isn't bland old excellence a better fate than an exciting new failure?" Exactly. That is why I haven't read things like "Blue Ocean Strategy." It's just an old idea in a new package.

2. Be Suspicious of "Breakthrough" Ideas and Studies. The authors quote James March who says that "most claims of originality are testimony to ignorance and most claims of magic are testimony to hubris." We see a lot of this with Web2.0. Everything is new and different, old media is dying, business models can be figured out later, web advertising is king, yada yada… yawn. If you followed this blog for awhile you may remember The Business Experiment. That was my own foray into a new idea after I got caught up in the "wisdom of crowds" and eventually realized that James Suroweicki really didn't do much other than explain why markets work. Yes new ideas are sexy, but sexy doesn't always get you a good ROI.

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3. Celebrate and Develop Collective Brilliance, Not Lone Geniuses or Gurus. No, they aren't talking about the wisdom of crowds. The authors point out that knowledge and success typically build on what was previously done. Darwin, for example, was not some revolutionary genius that pulled evolution of the air. He built upon ideas by others (Lamarck, Matlhus, and Lyell, for example) and nearly got beaten to the punch line by Alfred Russell Wallace. Lone geniuses are rare in business. Don't put so much stock in Jack Welch and ignore his vast empire of well executing executives.

4. Emphasis Virtues and Drawbacks. It is so easy to ignore the negative consequences of the things we want to do. Yet, business is ultimately about tradeoffs. If someone tells you there are no drawbacks to a certain theory or idea, be very very skeptical.

5. Use Success (and Failure) Stories to Illustrate Sound Practices, Not as a Valid Research Model. What if I told you that a study looked at the 50 firms in the S&P500 with the highest stock returns over the last 10 years and 70% of them promoted their CEOs from inside. What does that mean? Almost nothing. The best thing you can take away from that statement is that someone should research insiders vs. outsiders as CEOs. This was my problem with "Good to Great." Who cares what the winners did? Maybe the losers did the same thing. Did anyone check? Does anyone care as long as it sells books?


6. Take a Neutral, Dispassionate Approach to Ideologies and Theories. Ideology kills evidence based management. Have you ever tried arguing with someone about politics or religion? Did they change their mind? Probably not. I used to do that a lot, until I realized that most of us believe what we want to. We think everyone else is biased, but our own views are based on evidence. Here is the test. Ask yourself what evidence would be required to make you change your mind about something you hold dear. Most people will say "nothing, because I know it's true." And that applies as much to business as it does religion or politics.

Before I go too long here, I'll list the key chapters (half truths) that the book tackles.

  • Is Work Fundamentally Different from the Rest of Life and Should it Be?
  • Do the Best Organizations Have the Best People?
  • Do Financial Incentives Drive Company Performance?
  • Strategy is Destiny?
  • Change or Die?
  • Are Great Leaders in Control of Their Companies?

The biggest slap in the face to me was the research on financial incentives. I have always believed strongly that people are motivated by many things, but that money was one of the top things. The research would suggest another half truth. (Which isn't surprising given that Peter Drucker was never a big fan of stock options.)

I always like to end reviews by pointing out who should read a book. Everyone should read this book. It is an important topic, and it is sure to take some of your cherished business beliefs and use them to smack you around. But be wary about buying copies for other people. They won't like you if you rain on their ideology parade.