Winning and Losing Steaks and What They Mean

Posted: June 1, 2008 in Powerful Ideas

I’ve just finished a book by Leonard Mlodinow, The Drunkard’s Walk: How Randomness Rules Our Lives (Pantheon Books, 2008). The author’s argument is basically that randomness and contingency play a much greater role in determining the outcomes of our lives than we can possibly imagine. The author is most engaging – and effective – when discussing winning and losing streaks and how they are fundamentally the result of random outcomes. This has obvious implications for the world of business and leadership.

Mlodinow gives the example of Sherry Lansing, who ran Paramount Pictures for a number of years when it produced such blockbusters as Forrest Gump, Braveheart, and Titanic. After that run, the studio went through a tough stretch where it produced a number of box office duds, notably the Michael Crichton inspired Timeline and one of the Lara Croft movies. Consequently, in 2005 she was fired, ostensibly for losing her movie picking touch. What movies were in the pipeline then? War of the Worlds and The Longest Yard. Not exactly high art, but they did well for Paramount at the box office. The same holds for Mark Canton, who ran Columbia Pictures. He was also fired for not having the knack to pick winners. Films in the pipeline when he was fired: Men in Black, Jerry Maguire, and Air Force One, all huge box office hits.

Perhaps this only applies in the movie business, but can we really say that all CEOs who are blamed for the demise – or raging success – of their companies are actually as responsible as we like to think? I don’t know the immediate answer to that, but it should give us pause to reflect on the imputed effect of senior executives’ performance on their companies. Are boards really looking to improve things or are they just reacting to media hype and investor feeding frenzies?

Mlodinow shows the fundamental randomness behind winning and losing streaks through the example of Roger Maris, who broke Babe Ruth’s home run record in 1961 by hitting 61 homers. There is no doubt that Ruth was a better overall career hitter than Maris. He had better stats, was more powerful, and also more consistent. However, through simple mathematics, Mlodinow shows that one of the good hitters was bound at some point to break Ruth’s record, simply by chance. You might think that the probability is low, but it actually isn’t. In fact, given the numbers of good hitters and the length of time that Ruth’s original record stood, there was about a 50 % chance that someone was going to set a new home record within the timeframe that Maris did. Looking at Maris’s post 1961 stats, we can see that his production that year probably really was a statistical blip.

Does this mean that talent and skill have nothing to do with outcomes? No. But it does mean that there is considerably more luck and contingency involved in success than most of us are willing to accept. However, the most interesting thing that Mlodinow reports is that highly successful people, whether they be artists, business executives, or entrepreneurs, are characterized more by their perseverance and will to succeed than by any particular talent or skill set. When combined with a willingness to learn and to adapt to circumstances, this is really the only way to progress in the face of random events and circumstances.

So, before you go blaming someone (or even yourself) for bad results or the converse, congratulating them for great results, perhaps you should just wonder a bit what role contingency may have played in the outcome; and also if the person showed perseverance in the face of difficulty and an above average ability to adapt and learn. This may be more important in the long run than some kind of magic touch.

© 2010 Richard Martin. Reproduction and quotes permitted with proper attribution.

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