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Return on Luck

Return on Luck. Great by choice ch. 7 Kevin Langford Devin Newman Nick Capodagli Victoria Smith Caitlin McPherson. Malcolm Daly and Jim Donini. In May 1999 they climbed an unclimbed face of Thunder Mountain in Alaska.

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Return on Luck

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  1. Return on Luck Great by choice ch. 7 Kevin Langford Devin Newman Nick Capodagli Victoria Smith Caitlin McPherson

  2. Malcolm Daly and Jim Donini In May 1999 they climbed an unclimbed face of Thunder Mountain in Alaska. Before reaching the summit, Daly lost his stance and fell down the side of the mountain.

  3. Luck or Skill? • Bad Luck: • Daly’s stance giving way • Good Luck: • Slice rope wasn’t cut all the way • Daly didn’t die in the fall • Daly didn’t kill Donini on the way down • Donini reached the base camp just as the airplane happened to fly by • Had everything taken just five hours longer, Daly wouldn’t have survived

  4. Luck or Skill? • Most significant element: he had developed relationships with people who loved him and who would risk their lives for him • Rescue leader Billy Shot should’ve aborted but he didn’t • Luck clearly played a role in Daly’s survival

  5. What Role Luck? • Just what is the role of luck? And how, if at all, should luck factor into developing our strategies for survival and success? • Defined a luck event as one that meets 3 tests: • Some significant aspect of the event occurs largely or entirely independent of the actions of the key actors • The event has a potentially significant consequence (good or bad) • The event has some element of unpredictability

  6. Luck-Coding Example • 14 luck events of Amgen VS Genentech (pg 156-158) • They found that: • 10x companies did not generally get more good luck than the comparisons • 10x companies did not generally get less bad luck than the comparisons • 10x companies did not get their good luck earlier than the comparisons • 10x companies cannot be explained by a single giant luck spike • The question is not “Are you lucky?” but “Do you get a high return on luck?”

  7. High ROL: Return on Luck It is not how much luck you have, BUT what you do with it that sets you apart

  8. Squandering Luck: Poor Return on Good Luck • AMD experiences good luck • federal jury cleared AMD to clone Intel’s microprocessors • IBM halted shipments of computers that used Intel’s Pentium chips • Bought NexGen, a company with a clone of Intel’s microprocessor and industry favored AMD, as personal computers became on of the fastest growing markets • AMD poor return on luck • K5 microprocessor months brought to market months behind schedule • AMD failed to execute. Could not manufacture enough microprocessors to meet demand

  9. 10Xers Shine: Great Return on Bad Luck • Hockey • Players born in second half of the year had fewer successes than those born in the first half of the year • NHL • birth rate distribution • NHL “Hall of Fame” • Ray Bourque • “Goals live on the other side of obstacles and challenges.”

  10. Bad Luck Poor Return “The one place you really don’t want to be”

  11. Morale of the Story “There’s an interesting asymmetry between good luck and bad luck. A single stroke of good luck, no matter how big the break, cannot by itself make a great company. But a single stroke of extremely bad luck that slams you on the Death Line, r an extended sequence of bad-luck events that creates a catastrophic outcome can terminate the quest.”

  12. PSA and Southwest 1970s-1980s Smacked by an oil shock that spiked fuel prices Air-traffic control strikes Severe recession and spiraling inflation Sky rocketing interest rates increased cost of jet leasing Unexpected change in CEOs

  13. PSA Screws Up Opt to raise prices rather than lower costs Destroyed its culture with layoffs and labor battles Downgraded its balance sheet with increasing debt Poor returns on the bad luck led to falling behind Southwest permanently.

  14. Book Quote “10Xers exercise productive paranoia, combined with empirical creativity and fanatic discipline, to create huge margins of safety. If you stay in the game long enough, good luck tends to return, but if you get knocked out, you’ll never have the chance to be lucky again. Luck favors the persistent, but you can persist only if you survive.”

  15. Dane Miller and Biomet

  16. Luck Is Not a Strategy • Managing luck involves four things: • Cultivating the ability to "zoom out" to recognize luck when it happens. • Developing the wisdom to see when, and when not, to let luck disrupt your plans. • Being sufficiently well-prepared to endure an inevitable spate of bad luck. • Creating a positive return on luck-both good and bad-when it comes

  17. Questions?

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