The Apprentice, HP-Compaq, and the Lack of Science in Business

For some time now I've been meaning to blog about The Apprentice and a gripe that I have. I'm not sure the tasks they are doing are a good measure of business acumen. There are too many variables that may affect the outcome that the candidates cannot control. For instance, when they have a restaurant challenge or a apartment/motel remodeling competition and the final numbers are close, that doesn't mean one group did a better job. It could mean that one group had a few more random customers or a few more naturally happy customers (who always give positive reviews), or something else random. The Apprentice is part skill, but it is part survivorship bias. Think of the guy who wins a coin flipping contest. Does he have any special skill, or was it luck?

This leads me to one of the things that has always bothered me about business – it's not science. My background is engineering. I like to test and measure, test and measure, test and measure, then decide on a long-term course of action. To me, what separates someone who understands business from someone who is riding the waves of random success is the ability to predict the future with reasonable accuracy. That is the only way to determine if the causality the one believes exists, really does exist. I think a better test for The Apprentice would be to let them observe groups that were planning a new product launch or a new marketing campaign, and have the candidates then discuss what they think will happen with each launch. Those who consistently predict correctly should get to stay, the others will go. Those who correctly predict the outcomes will prove that they understand the contributing factors in each case.

51 Ways to Define Leadership

This same line of thinking can be extended to the recent Fortune article about the HP-Compaq merger. The article frames the merger as a failure, but in all honesty we can never know if it is or not. We know it didn't produce the intended result, but we can't compare it to anything else because we don't know what would have happened if the merger had not gone through. We can look at comparable companies and how they have fared, but that is irrelevant. We still don't know what would have happened with HP under a different scenario. Maybe HP would have shined without Compaq. Maybe HP would have been even worse off, and the Compaq merger has helped. It's like trying to think about how your life would have turned out if you had gone to a different college, married a different person, or taken a different job. You never really know because there is no "control group."

This lack of science in business bothers me – not because of the lack of answers, but because people assume things that may not be true. We assume causality where none may exist. The new CEO who came in when the industry as a whole was taking off is seen as a savior. The brilliant CEO who takes over just before a rash of problems is discovered is seen as a loser. Or, maybe it really was the CEO that saved or ruined a company. We can never really know. And I'm fine with that, but I wish other people would see it for what it is and acknowledge the role that randomness has in the business process.