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Why Software Development Estimations Are Regularly Off

Some people believe that carrying out a large software project is like building a bridge. You look at your past projects and use the data to estimate the time and resources needed. This view has been debunked decades ago; this analogy was frequently seen as an aspiration for the future when I did my Master in Software Engineering at Carnegie Mellon in the late nineties.

In reality, most projects worth doing are not repetitions of previous things. If you need a bridge, you gem install bridge or extend bridge4j. A new software project is more like this:

– You are an inventor. You’ve invented a solar-powered microwave oven, an engine that runs on dead bugs, and a laser-powered weapon to kill mosquitoes. Someone comes to you and says:

“Hey inventor, I need a drone that will pick up mice (but not other animals), locate my ex-girlfriend and drop them on her head. Give me a budget and a time estimate.”

Obviously you have no idea where to start. You need to understand the problem. This hasn’t been done before, but it’s not all new technology. Drones exist, location technology exists too. How about reliably identifying mice? How much do you really need to invent? Can you buy a DIY drone and modify it enough? Can the client slip a tracking device into his ex-girlfriend’s purse?

Software is not about repeating, it’s about inventing. This colorful post on Quora that’s been making the rounds on Twitter is completely off the mark. The analogy of hikers going from San Francisco to L.A. doesn’t apply. Long journeys by foot are something people have done for millennia, and all the knowledge you need is one Google search away. A luddite hiker will do the journey once and learn. When asked to hike between New York and Chicago, he will be much more accurate. After a few inter-city hikes he’ll know enough to produce decent estimates. If I asked you to tell me how long it will take to drive from LA to SF, your estimate may be off by a couple of hours depending on traffic.

On the other hand, an experienced software engineer asked to build a control system for a car to drive itself from SF to LA is facing a completely different problem. Real software development is about doing something that you’ve never done before. That’s why all stupid analogies about routine real-life stuff break.
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Markets for Ideas and Patent Trolls

In Silicon Valley many people treat the concept that “ideas are worthless, it’s all about execution” as gospel. This thought is supported, among others, by Paul Graham [sorry, he’s an easy target because his essays have so much low-hanging fruit]. He says:

Actually, startup ideas are not million dollar ideas, and here’s an experiment you can try to prove it: just try to sell one. Nothing evolves faster than markets. The fact that there’s no market for startup ideas suggests there’s no demand. Which means, in the narrow sense of the word, that startup ideas are worthless.

 

This has always sounded illogical to me. It doesn’t follow that there is no demand. Some things just cannot be sold; there are no “previews” for ideas. To show how absurd the above is, replace startup ideas by brains, cities, reputation. All things that are not worthless but cannot be sold. You cannot sell your life, but you can insure it for a lot of money. Is love worthless because money can’t buy me love?

 

Wait a minute. There’s actually a preview for ideas, and ideas can be sold. Just listen to an episode of This American Life from last year, When Patents Attack. It’s about the US patent system and how it’s broken to an extent that’s ridiculous. That’s why Nathan Myhrvold, former Microsoft CTO and chef extraordinaire, was able to raise $5B to create a repository of ideas. The episode tracks one patent bought by his company, Intellectual Ventures.

 

Patent number 5771354. He got it in 1998, back in the relatively early days of the internet. And the way IV explained the patent to us, Chris Crawford invented something that we all do all the time now. He figured out a way to upgrade the software on your home computer over the internet. So in other words, when you turn on your computer and a little box pops up and says, click here to upgrade to the newest version of iTunes, that was Chris Crawford’s idea.

 

The show goes on to explain that the idea is so generic that 5,303 other patents that were granted by the USPTO cover the same material. It gets worse:

 

 

 Intellectual Ventures goes around to companies and says, hey, you want to protect yourself from lawsuits? We own tons of patents. Make a deal with us. Our patents will not only cover everything you’re doing in your business, no one will dare sue you.

So not only ideas are not worthless; they are indeed bought and sold (Sorry Paul). The way in which they are sold reminds Chris Sacca of: 

 

 A Mafia-style shakedown, where somebody comes in the front door of your building and says, it’d be a shame if this place burned down. I know the neighborhood really well and I can make sure that doesn’t happen. And saying, pay us up.

 

People like Myhrvold and companies like Intellectual Ventures are often referred to as Patent trolls. They make money by buying ideas (many of them obvious), only to sue people who are doing something with them. If you build a web application, it’s almost certain that you are violating many patents. If you become big enough, you will be sued eventually. This is why Google and Apple got into a bidding war for a collection of patents a few months ago, and Apple ended up buying them for 4.5 billion dollars.

 

Conclusion: ideas can be free, cheap, expensive, or worthless. Just like books, essays or blog posts 🙂

 

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Apple Doesn’t Need a Twitter Account but You Do

I’ve seen variations of this “insightful thought” all over Twitter in the past 24 hours:

 

Apple

 

This seems to imply that having a Twitter feed or a Facebook fan page is useless marketing. The author is some sort of “marketing guru.”

 

Now, Apple is the company that spent a fortune on the 1984 commercial and aired it on the SuperBowl. According to Wikipedia, they have 361 global stores. They just announced profits of 13 billion dollars for last quarter. Their marketing dollars must be the corporate world equivalent of the US military budget.

 

A Twitter account is cheap; it’s like the Swiss Army Knife of marketing. Of course every puny startup must get one, because why not. No negatives, maybe you can turn it into a modest megaphone. On the other hand, Apple doesn’t need one. It could buy the factory any day. If Apple gets a Twitter account it adds value to Twitter, not the other way around.

 

What’s the next great marketing insight? Larry Page doesn’t fly commercial airlines like you and I. Interesting…
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Kill Hollywood Remixed

This makes sense (barely) if you read the original first. I don’t expect to see this post on Hacker News 🙂

[Picture Morpheus reading this to an army of digital Neos, or maybe Bruce Willis as a general]

Gentlemen: Hollywood appears to have peaked. If it were an ordinary industry (adult vhs tapes, say, or thirst mutilators without electrolytes), it could look forward to locking itself in a hotel room and dying on the can like Elvis. But make no mistake: this is no ordinary industry. The people who run it are not people. They are evil androids who turned good people like Walt Disney into soylent green, and then fed it to Tom Cruise. These machines are so mean and so politically wired that they could do a lot of damage to the Federation. It would therefore be a good thing if rebels hastened their demise. Hacker, you are our only hope.

That’s one reason we want to train elite troops that will burn down the Los Angeles area, but not the main reason. The main reason we want to train such armies is not to protect the world from more Death Stars, but because Beverly Hills Chihuahua brought it to our attention that Hollywood is dying. They must be dying if they’re resorting to such utter pieces of dog shit. If the crops of human bodies in the Matrix were growing rapidly, that growth would take up all their attention. When a striker is fouled in the penalty area, he takes an acrobatic dive while his face winces in fake pain. He rolls on the floor as if he had been kicked senseless by twenty ninjas, a baby and Uma Thurman. Soccer shows Hollywood is beaten. And yet the audiences controlled by the androids’ brain-infecting nanodevices are still huge. There is a lot of potential energy to be liberated within the Matrix.

How do you kill the movie and TV industries dead? Well, the venom of a black mamba can kill a human in four hours. But these are androids! Anybody home? Huh? Think, McFly. Think! You cannot kill them with fire, even though they mostly come at night… mostly. What’s going to kill movies and TV is what’s already killing them: aliens, and sharks with frickin’ lasers. And Michael Bay. So the best way to approach this problem is to ask yourself not what Hollywood can do for you, but what would A Beautiful Mind do?

There will be several answers, and we will see dead people. We can have game shows where convicted felons are given the chance to run to freedom but have to elude the stalkers. Some of the best ideas may initially look like they’re serving M. Night Shyamalan, but there will be a twist. There will be blood. Dave seemed like a friend to HAL before it went crazy, but is this madness. Madness? This is Sparta.

It would be great if what people did instead of watching shows was exercise their right to remain silent. Maybe they will. All other things being equal, we’d prefer to hear only ourselves talk. Or listen to the cast of Glee murdering our childhood memories. But all other things are decidedly not equal. Whatever people are going to do for fun in 500 years is probably predetermined: watch Ow my balls! Winning is more a matter of accepting it than making it happen. In this respect at least, you can’t push history off a cliff, or even drop it and watch it scream in slo-mo. You can, however, go to Google and feel lucky.

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Luck, Be A Lady While Our Funding Lasts

You are in a room full of roulette tables. Someone gives you one chip and tells you to bet it on a number. Here’s the twist: all tables pay 36 to 1, but not all wheels have the same number of pockets. Some are standard, with the typical 0 to 36 numbering. You see one that has 500 numbers. Screw that one. One has 30 and a sign disclosing that it’s biased, only they won’t tell you how. Hmmm.

 

All wheels start spinning simultaneously. You can change your bet as often as you like, although it’s a big room and you’ll have to run around. You know that all wheels will stop spinning roughly at the same time. What to do?

 

Roulette_wheel
Image from here.

 

This is a very rough analogy for what a startup is like. There are obvious ways to decrease your chances of success. Still, if you play the game optimally your odds are still low. There is much more randomness involved than most people are willing to admit. For this reason, most of the advice for startups is in the negative: there are tried-and-true paths that correlate with failure more than others (e.g. starting a company with people who don’t get along, outsourcing your core competency, placing your bet on the wheel with 500 numbers).

 

The truth about a startup is that we are performing an experiment as we go. We’re doing something that nobody has done before. Our combination of variables such as product, timing, market, team, competition, etc. is unique. We can find comparable stories, but we have no idea how the difference of a single variable affected the whole outcome.

 

Of course, this doesn’t stop very smart people from trying to find patterns. Because there are more failed startups than successful ones, we see articles like:

 

[Insert obligatory rant about correlation and causation here]

 

If you read these articles, you will find things that are common among startups that failed. Of course, who knows if those things are what made them fail. Some of them are pure hindsight. For example, Paul Graham has two bullet points that seem to contradict each other: slowness to launch and launching too early. What is the right time to launch then? Easy, look at successful startups. Those obviously launched at the right time! That advice amounts to “be lucky with timing.” He does the same thing with “raising too little money” and “raising too much.” How do you know how much to raise then? Here’s a hint: if you look at all successful startups, the amount of money raised ranges from zero to a lot.

 

Let’s pick on Paul Graham some more because it’s fun. An obvious question is how many startups that made many of those mistakes succeeded. I for one made mistake #1: being a single founder. It wasn’t a walk in the park of course, but I disagree with pretty much everything he says in bullet #1. I have lots of friends, but IndexTank just happened before I had a chance to get anyone else involved as a founder. I found great investors and advisors to brainstorm with. It was a resounding success in my book. Did I get lucky? Sure, that’s my whole point.

 

The other article is even worse because it has the words “reasons” in the title. If you take a look you will find gems such as #2, building a solution looking for a problem. This sounds a lot like Twitter, doesn’t it? Of course they could argue that Twitter is an outlier. I think we have a theme going on.

 

The authors enumerate a list of things that happen to startups that fail, and call them reasons. A few centuries ago they might have argued that gravity is caused by the large number of objects falling to the ground every day. I would sentence them to five years of studying the scientific method in a prestigious university, and then spend the rest of their lives trying to disprove evolution or something.

 

There are more balanced views out there of course. I found this presentation called  Contradictory Startup Advice… and how to navigate it. The author makes fun of unsound advice from gurus with strong opinions, and then goes on to give some relatively tame advice of her own (e.g. avoid the roulette wheel with 500 numbers). It boils down to “reduce your obvious chances of failure and then hope to get lucky.” What she says makes sense, but I would argue that someone who needs that advice has no business starting a business.

 

With so much luck involved, all someone can do is bet as many times as possible with the best odds you can find. Essentially, not giving up and not going broke. Successful startups are survivors, and that’s why there is so much survivor bias in the advice you’d get from a successful founder. Don’t expect any advice from me other than “be lucky.”

 

Wait, perhaps I’m on to something with the “not giving up” part. Can you really advise someone to be relentless? I’m not sure. Speaking for myself, I have been relentless (very annoying to my parents) for as long as I can remember. I tried really hard to change some of my personality traits for decades. I succeeded at some and failed at others, and it wasn’t for lack of trying. If someone said “learn to be relentless” my answer would be “and you learn to be a dolphin.” Or a towel. Don’t forget to bring a towel. That is good advice. I always know where my towel is.

 

Hit it, Frank.

 

 

 

 

 

 

 

 

 

 

 

 

 

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PandoDaily: The Next Huffington Post?

I like Sarah Lacy’s writing. She’s funny, entertaining, and also a hard worker. Her pieces usually make it clear that she spends ample time researching the topics at hand. I wouldn’t go as far to say she’s my favorite tech reporter (today that distinction would go to Kara Swisher), but I was very happy this morning to learn of the launch of her new site, PandoDaily.

It’s interesting that a tech news site raised venture funding from a very impressive list of investors. To me, this means that it must be an extremely ambitious enterprise. They are aiming to build something much bigger than Techcrunch. Some of the funds and investors on the list won’t write you a check if you’re not swinging for the fences. This makes sense; If I were in Sarah Lacy and Michael Arrington’s place, I’d be out to create a larger megaphone than the Huffington Post just to one-up Arianna Huffington. Given their recent history that could be a powerful motivation, and it will be fun to watch how this develops.

There is one problem with taking money from an array of investors who collectively have a stake in a significant chunk of the Silicon Valley ecosystem: the obvious conflicts of interest that will arise. Gawker shares their opinion on the difference between PandoDaily and what Techcrunch used to be:

Lacy, in contrast, will spend a lot more time covering her owners. At least she’s “unashamed” about that, as she put it. And points to the longtime Valley reporter for knowing how to appeal to tech titans’ vanity. Ever since the changing of the guard at TechCrunch, they’ve longed for a more deeply intertwined publication that will cover the Valley with the fervor of a supplicant. Lacy just sold them one. It’s not clear if the seventeen different stakeholders will be able to effectively block stories they don’t like. But then it’s not clear they’ll even need to.

To which Lacy responds:

We’re being up front about who invested in us; it’s up to the readers to decide how much that conflict bothers them. 

Right off the bat, critical readers will see that one of their first articles is a PR piece for a sister portfolio company, Wealthfront. This startup provides wealth management for people who recently made some money and don’t know much about investing. I checked out the service and it looks useful. However, I do believe that in the interest of reporting fairness Lacy should have mentioned other options besides Wealthfront. There must be some competitors out there, right? A quick Google search brings up Covestor and Collective2.

I strongly believe that the first thing anyone who makes some money should do is educate him / herself. When I first sold some Inktomi stock in 1999, I immediately bought a copy of Burton Malkiel’s A Random Walk Down Wall Street. I read it as fast as I could to prepare for the incoming zombie invasion. I wouldn’t rule out using the services of a firm like Wealthfront, but only after having learned the basics. Paul Buchheit explains all this very eloquently in a from post almost two years ago, titled “What do do with your millions.”

Reading PandoDaily will be an exercise in critical thinking and agenda detection. This is a good training ground for a critical reader, because connecting the dots should be relatively easy. Everyone has an agenda but not everyone discloses it… and that includes me. Hint: brains.

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Stop the Presses: Essay Shows That Hard Work Can Be Unpleasant

I just finished reading Paul Graham’s latest essay, Schlep Blindness. I could say many things about it, but I’ll get straight to the point. Graham talks about having the realization that creating a business involves lots of unpleasant and tedious work. He makes it sound like he just invented faster-than-light travel, even though every person who ever ran a successful business can tell you this. You don’t even need to have started a company. My grandmother burned this into my brain when I was five years old. Chores are necessary but not fun. If it were easy everyone would do it. Yawn.

 

Is it possible that Paul Graham’s audience (in his mind at least) is composed of privileged, spoiled kids who don’t know about blood, sweat and tears? I guess. No harm in telling suburban kids from Ivy League schools about the harsh reality of the entrepreneur, the unsung hero of modern society. My real issue with this piece is that it’s extremely disingenuous. Let me explain why.

 

Paul Graham is an investor. He invests in hundreds of companies. He is looking for the next Facebook or Google. Creating a company like that requires founders who won’t take an early exit. It’s easier for this to happen if those founders are a bit irrational and inexperienced. Here’s the most dangerous paragraph in the whole article:

 

How do you overcome schlep blindness? Frankly, the most valuable antidote to schlep blindness is probably ignorance. Most successful founders would probably say that if they’d known when they were starting their company about the obstacles they’d have to overcome, they might never have started it. Maybe that’s one reason the most successful startups of all so often have young founders.

 

This is pure speculation, and a rationalization to justify Paul’s preference for younger founders. Another possibility is that older founders most likely don’t align themselves with Paul’s investment objectives.

 

I’m 42 years old. I started IndexTank not that long ago, and I could say what Paul says above: if I had known how hard it was going to be, blah blah. That adage is cliché, ignorance is bliss. That doesn’t mean anything though, because I know I will do other things in life that will have similar obstacles. I may start another company some day, and hopefully I won’t face the same ones. I will face unexpected hardships and it will be rough at times, because that’s life. Nobody knows what they are getting into when they start something new, old or young. That’s just because life is unpredictable, like a motherfucking box of chocolates. Don’t be fooled, what Paul Graham is doing here is thinking like the VC that he is.

 

And Paul, please stop trying to make “schlep” happen. It’s not going to happen.

 

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Journey to the Center of an Espresso Machine

Can I write an interesting blog post about an espresso maker? Here’s a try.

Paul Erdős (and other people) said that “a mathematician is a device for turning coffee into theorems.” Along the same lines, some of us believe that a programmer is a machine to turn coffee into bugs. I guess I’m an unusual programmer: for years I was able to create tons of embarrassing bugs without the help of caffeine. In fact, I only started drinking coffee regularly after I turned 40. My preferred coffee drinks are espresso-based: cappuccinos, mochas and lattes. San Francisco has spoiled me in that respect, because the quality and variety of coffee and coffee shops here is outstanding. Over the past couple of years having a cappuccino has become the second thing I do after I wake up. The first one is checking email. The third one is getting dressed, unless I have to go outside to get coffee. In that case I have to swap 2 and 3 because it’s cold outside.

A couple of years ago I found a good deal on Craigslist: a Gaggia MDF burr grinder and a Gaggia Deluxe espresso maker for a couple hundred bucks. A few weeks after that I moved into a furnished house that had a beautiful La Pavoni in the kitchen. I kept the grinder for home, and took the Gaggia Deluxe to the office. I used it there for a while, until IndexTank moved to Valencia street in the Mission neighborhood. It turned out that our new office space was a few doors down from Four Barrel Coffee in San Francisco. Of course I couldn’t even begin to compete with their sophisticated machinery and barista wizardry, so I became a regular at the place and abandoned the Gaggia. Months went by, and I don’t know if anyone else used it in the meantime. For all I know the poor Gaggia must have felt abandoned like Andy’s toys in Toy Story 3. Except for Woody. He took Woody to college with him, right?

Gaggia

Fast forward to a month ago, when I moved out of the furnished house to a new place. Naturally I rescued the Gaggia from the office to have it provide my morning cappuccino. The first time I tried to use it I found out it wasn’t working. I saw that the flow of water from the grouphead (the bottom of an espresso maker where you insert the portafilter) was a pathetic drip. What to do? I tried cleaning everything that was reachable, letting steam out of the machine, no dice. As a software guy I tried turning it on and off several times, of course that didn’t work either 🙂 Unlike most of our modern appliances this machine is purely electromechanical, and it contains no software. It doesn’t even have a power supply, it works with AC power.

I decided to search coffee enthusiast forums for help. The first advice I found was to descale the machine. It seems that if you use hard water to brew your coffee, minerals build up inside. Once in a while you’re supposed to run some chemicals to clean it up, so I bought some descaling powder. I dissolved it in water as instructed, and spent a long time running it through the machine. Alas, it only made things worse. At this point I was almost ready to kick the Gaggia to the curb, and then a sudden realization came to me: “Hey, I’m an electrical engineer! I studied this stuff in school! I should take it apart and see what’s going on inside.” So I did.

Gaggia_open

There are two main components that you can see in the picture: the pump (top right) and the boiler. The working principle is very simple: the pump sucks water from a reservoir and injects it into the boiler. The boiler heats the water electrically until it’s close to the boiling point. There is a temperature sensor attached to the boiler that shuts off electricity then. The water has two ways out of the boiler: either as steam through the golden valve at the top (which leads to the frothing wand), or as hot water through the grouphead at the bottom.

First of all I disconnected all the cables you see in the picture. A decade ago I would have taken notes, but now I have this convenient pocket computer that takes pictures worth dozens of words. Next, I took out the boiler.

Gaggia_boiler

I took apart the boiler and gave it a thorough cleaning. There was one nut that I couldn’t undo because I didn’t have a wrench handy, but I didn’t think that would be a big deal. It was the one holding part #58 in the figure below.

Gaggia_parts

I put everything back together, still not working. Could it be the pump? I took it out, it was an Invensys CP3A that isn’t made anymore. I gave it a good old cleaning and put it back in.

Invensys

I tested the Invensys pump on its own (detached from the boiler), and it pumped water into a glass with significant pressure. At this point I was puzzled and almost ready to give up. As a last resort I took the boiler apart once again, only this time I got a wrench to unscrew the nut that held part #58 together with part #46 (a copper pipe). I assume the purpose of that pipe is to collect water from near the top of the boiler, where it will be hotter. I tried to blow through the pipe but I couldn’t, which seemed weird. Bingo. The clog was in this copper pipe in the heart of the boiler. I gave the little pipe a “floss” with a tiny allen wrench and put everything back together.

By now I had probably spent several hours over the course of three nights tinkering with this machine, so there was a lot of tension and anticipation as I fastened the last few screws. I turned on the pump. Seven seconds went by, but they seemed more like nine to me. At that point a torrent of hot water came gushing out of the grouphead. Success. Happiness. COFFEE!!!!!1 Of course I had a celebratory shot, even though it was bedtime. Bad idea of course.

So here are my conclusions after this little journey:

1) In some ways this machine is the complete opposite of the Macbook Air I’m using to write this post: it’s designed to be tinkered with. It’s not built to become obsolete. I can’t remember the last time I found an appliance that was so easy to understand and fix.

2) Both the Macbook Air and the Gaggia Deluxe are beautiful, only in different ways. There are design details inside the Gaggia that make it very clear that these people know what they’re doing. It’s very hard to mess it up. For example, there are several live 110v electrical wires very close to water, but you’d have to try hard to get them wet. There is enough space inside the machine to insert wrenches or screwdrivers as needed. The pieces of rubber and wire retainers used were chosen for functionality, durability and convenience.

3) This machine is not that expensive, and I could have thrown it away on day one. If I do the math, I probably put more billable hours into this machine than its retail price. However, I really wanted to tinker with it for fun. I figured that if I could fix it I’d value it more because of the “IKEA Effect.” No surprise there, I love this machine now. The delicious espresso that comes out of it tastes better to me than anything I can get at a coffee shop.

4) Italians know how to build beautiful machines. Does any reader have a Ferrari Testarossa that I could take apart? I’m pretty confident I’ll be able to put it back together.

Still with me? Follow me on Twitter just ’cause.
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I Always Expected Hindsight Bias from the Financial Press

Today the Federal Reserve of the US released transcripts of 2006 meetings. The financial press, always avid for filler and faux outrage, pounced on them. How is it possible that the almighty Fed didn’t see the 2008 recession coming? 

From the NYTimes:

The transcripts of the Fed’s Open Market Committee meetings in 2006, released after a standard five-year delay, suggest that some of the nation’s pre-eminent economic policy makers did not fully understand the basic mechanics of the economy that they were charged with supervising. The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in models that turned out to be broken.

“It’s embarrassing for the Fed,” said Justin Wolfers, an economics professor at the University of Pennsylvania. “You see an awareness that the housing market is starting to crumble, and you see a lack of awareness of the connection between the housing market and financial markets.”

“It’s also embarrassing for economics,” he continued. “My strong guess is that if we had a transcript of any other economist, there would be at least as much fodder.”

The Wall Street Journal, in turn, has these articles:

Little Alarm Shown at Fed At Dawn of Housing Bust and
 Governor Cautioned Fed About Mortgages. From the latter:

History may show that Susan Bies’s concerns didn’t get enough attention at Federal Reserve policy meetings in 2006.

All the above is a fine example of hindsight bias. Why? Because nobody could have foreseen the magnitude of the crash. Look at the S&P 500 chart for the past five years:

If you click on the chart, you will see that the stock market peaked in October of 2007. Between then and the low of February 2009, it fell close to 50%. This means that the collective intelligence of all the financial analysts did not see the crash coming in 2006 and 2007. If you dig into the archives of the above newspapers and others, the opinions were very divided back then. Some people expected a soft landing, others even thought it would be a good thing for houses to go down in value. From the New York Times itself: Don’t Fear the Bubble That Bursts (March 2006).

Moral of the story: do not pay attention to anything you read in the financial press. Nobody knows anything about the future, nobody can predict it. Of course the pundits will tell you that “they saw it all coming.” Hey, it’s their job.
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The Seven Habits of Awesome Dolphins

Whenever I see an article that tries to extract patterns from a limited study of successful or failed companies, my BS detector goes off. I just read this abomination on Forbes: The Seven Habits of Spectacularly Unsuccessful Executives.

I remember back in 1997 when I first heard of some friends reading “The 7 Habits of Highly Effective People.” My first reaction was “if I studied the 7 habits of awesome dolphins, could I become one?”

 This article is worse than that because it’s plagued by hindsight bias and dishonest language. Let’s dissect the “habits” one by one:

Habit # 1:  They see themselves and their companies as dominating their environment

I wonder how many successful executives also do this. The question is whether you are right or wrong! If you are Larry Page and you see Google as dominating the online advertising market, you are successful. On the other hand, if you are an AOL executive… The key “ability” here is realizing when there is an up-and-coming threat, and acting accordingly. This is not always possible at the time, but it’s trivial in hindsight.

Habit #2:  They identify so completely with the company that there is no clear boundary between their personal interests and their corporation’s interests

Two words: Steve Jobs. Of course if you had this habit and you failed, you were not Steve Jobs. A more interesting question would be: of all executives with this trait, how many succeeded and how many failed? Of course, that’s not addressed.

Habit #3:  They think they have all the answers

Hmm… what if they happen to be right? How many successful companies have executives who think they have all the answers? Also, this could be rephrased in a more positive way: they are extremely confident. Both mean essentially the same thing, except one is a criticism in hindsight.

Habit #4:  They ruthlessly eliminate anyone who isn’t completely behind them

Of course, successful executives don’t do this. Instead, “they do not hesitate to fire those who won’t align themselves behind the company vision.” or something equally positive.

Habit #5: They are consummate spokespersons, obsessed with the company image

That’s probably true of most high-profile CEOs, whether successful or not.

Habit #6: They underestimate obstacles

Of course, this can only be true in hindsight. If you succeeded, then you took smart and calculated risks. This statement is just unadulterated stupidity.

Habit #7: They stubbornly rely on what worked for them in the past

Again, successful CEOs learn from experience. They know what worked and what didn’t work. They are not stubborn, instead they possess resolve and determination. They “stay the course.”

The article is a collection of cognitive biases. It also falls prey to a basic trick of the human brain: creating a story to explain what may be the result of an intractable set of interactions including timing, market, and luck. Investment analysts want to believe in a world of easy explanations and prescriptions for success (or at least, avoidance of failure). They need to be called out more often when they put out this kind of drivel.

Oh well. So long and thanks for all the fish.