- Hardcover: 320 pages
- Publisher: Harvard Business School Press India Limited (6 November 2012)
- Language: English
- ISBN-10: 1422184234
- ISBN-13: 978-1422184233
- Product Dimensions: 16.5 x 3.2 x 24.1 cm
- Average Customer Review: 2 customer reviews
- Amazon Bestsellers Rank: #59,194 in Books (See Top 100 in Books)
The Success Equation Hardcover – 6 Nov 2012
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"Really enjoyed reading The Success Equation by @mjmauboussin over the last few days. A smart, insightful book. ow.ly/s3KIE" -- As tweeted by Daniel Pink "... a fascinating book that forced me to reflect on my decision-making processes for investments." -- Tomasz Tunguz, Inc. magazine "Mauboussin's latest, excellent, book attempts to show how to work out what decides the outcome of a given situation. -- James von Simson, portfolio manager at Thurleigh Investment Managers "Mauboussin has always been a must-read. His 2013 book is no exception." -- Tadas Viskanta, founder and editor of Abnormal Returns "The Success Equation makes a valuable contribution to the literature on decision making...thoroughly researched and well written...I highly recommend the book to anyone interested in making better investment choices." -- Financial Analysts Journal "With this book, Mauboussin takes an important step in making a case for the role of statistical analysis in decision-making in various contexts, ranging from CEO compensation to child rearing to college rankings and even picking the next musical superstars. It is almost as if the number crunchers heralded in Michael Lewis' Moneyball have found their second voice." -- Business World magazine "Mauboussin excels at explaining his ideas, many of which are based on complex neuroscience in accessible terms, using case studies and examples from investing decisions, college rankings, and hospital procedures." -- Publishers Weekly "... for investors and business executives wishing to minimise the risk of bad luck, this is a book worth reading." -- Financial Times "there is a lot of thought-provoking stuff in the book, for sports fans as well as investors." -- The Economist "For investors who don't mind wading into some technical weeds, though, Mauboussin suggests some concrete tools." -- U.S. News & World Report "Well written and analytical, this book completely changed how I think about success." -- The Motley Fool (fool.com) "There are tons of statistics and abstractions, yet there is coherence and precision in Michael J. Mauboussin's new book, The Success Equation. Filled with instances from sports and markets, it's an insightful read." -- Mint (livemint.com) "It's always hard to get the balance between detail and readability right when writing a popular book about math. But Mauboussin manages it well." -- MoneyWeek "...the clarity of Mauboussin's writing, and the quality of the examples makes the book a worthy addition to the managerial library." -- strategy+business Magazine "The Success Equation makes a valuable contribution to the literature on decision making when both luck and skill are involved. It is thoroughly researched and well written. I highly recommend the book to anyone interested in making better investment choices." -- CFA Institute "an engaging book." -- Choice Magazine "In The Success Equation, Mauboussin explores the contributions of skill and luck, and discusses how interpreting past results through the 'skill-luck continuum' can help leaders to make better decisions...This can be a useful way to look at business leadership... [He observes that] luck becomes more important and skill less so, as people climb up the hierarchy, which also raises interesting questions about how leaders can continue to grow and enhance their skills... what leaders can do, is to improve their understanding of the impact of fortune on their decisions." --The Sunday Times "...a fine and different approach business readers will find involving." -- The Bookwatch, Midwest Book Review "In dealing with success and luck Mauboussin presents a useful model." -- Eric Falkenstein, Seeking Alpha "I just finished reading the most enjoyable business book I've read in a long time -- although relegating 'The Success Equation,' by Legg Mason Chief Investment Strategist Michael J. Mauboussin to this category would be a grave disservice, significantly understating its sophistication and selling short its achievement." -- David A. Shaywitz on Forbes.com "Fascinating. Michael Mauboussin's insights into the relationship between skill and luck are clearly and simply explained, relentlessly logical and often counter-intuitive. This makes for great reading and provides powerful tools for understanding sports and markets. Anyone who wants to understand sport or business beyond the platitudes and assumptions routinely trotted out as expert analysis should read this book." -- Ivan Gazidis, Chief Executive Officer, Arsenal Football Club "If you liked Michael Lewis's Moneyball, with it's mix of data and great storytelling, you'll very much enjoy Michael Mauboussin's Success Equation." -- Jack Covert, 800 CEO READ "Michael J. Mauboussin is always worth reading. ... almost everyone will find something in this book that either he hadn't thought about before, or that he thought about incorrectly." -- Brenda Jubin, Seeking Alpha ADVANCE PRAISE for The Success Equation: Philip Tetlock, Leonore Annenberg University Professor, Wharton School and School of Arts and Sciences, University of Pennsylvania; author, Expert Political Judgment-- "Mauboussin seems to know everything there is to know about how to skillfully disentangle skill from luck. He also knows how easy it is to botch the job and has great stories--from music studios to baseball dugouts to the New York Stock Exchange--that bring statistical abstractions to life." Howard Marks, Chairman and cofounder, Oaktree Capital Management; author, The Most Important Thing-- "In The Success Equation, Michael Mauboussin helps us understand the difference between skill and luck and, importantly, how to tell how much each contributed to a given outcome. He reminds us that in fields where luck plays a big part, like investing, outcomes are of limited relevance in assessing performance. And, indispensably, he points out how important it is for practitioners 'to develop an attitude of equanimity toward luck.' I love that!" James Montier, GMO; author, The Little Book of Behavioral Investing-- "The Success Equation is a brilliant and insightful book packed with interesting anecdotes and rigorous analysis. Anyone dealing in fields that blend some combination of luck and skill--which is most of us--will find their understanding enhanced by reading it. The central role of process in such environments is often underestimated. This book helps redress the balance." Paul DePodesta, Vice President of Player Development and Scouting, New York Mets-- "Few people acknowledge or care to accept the central role that luck plays in our lives. Michael Mauboussin not only understands the separation between skill and luck, but more importantly, provides a mental framework to deal with the reality. This is an important read."
About the Author
Michael J. Mauboussin is an investment strategist and has been in the financial services industry for more than twenty-five years. He has also taught at the Columbia Graduate School of Business since 1993, and is on the board of trustees at the Santa Fe Institute. He is the author of two previous books, Think Twice: Harnessing the Power of Counterintuition and More Than You Know: Finding Financial Wisdom in Unconventional Places and is coauthor, with Alfred Rappaport, of Expectations Investing: Reading Stock Prices for Better Returns.
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Most helpful customer reviews on Amazon.com
Also, I read along while I listened using whispersync. The text is well-written and formatted nicely for the kindle, but I didn't like the narrator for Audible. He has a sing-song way of reading that was annoying after a while and diminished my experience. Plus he changed the text and skipped over references to the figures in the book. I recommend reading alone and avoiding the audio altogether.
It was well done if somewhat different from my expectations. The first 2/3 of the book are essentially a gentle introduction to statistics using examples from sports (sabermetrics), business strategy and investing, on the apparent assumption that most readers will be familiar with at least some of these contexts. I was not expecting this amount of the book to consist of explaining statistical analysis. I did not object as it was exceptionally lucidly written and he does an exceptional job of weaving the statistical points into the three fields he is using for context. The research he references is recent and there is quite a lot of it cited.
The last third was more of the traditional "business book", making specific recommendations about how to use what you've just learned to become more intelligent about pursuing success. There are, however, no ground-breaking insights in here, the potential buyer should note.
The book was shorter than I thought. About 20% of the pages are appendices, etc. As it is lucidly written, it was easy to plow through the roughly 220 pages of actual text. There were several really memorable anecdotes he inserts to illustrate points.
I did, however, feel that several points were not well made. It is, I think, a common problem when writing about statistics - certainly journalists prove that nearly every time they write about a study in some field. It is really hard to keep the discipline of being precise and correct about what are always estimates and tendencies. The last example of this in the book is fresh in my mind so I will use it as the example - he says that "reversion to the mean" means that if you give a test on each of two consecutive weeks, the highest scorers on the first test will tend to get lower grades on the second, and conversely for the lowest scorers. I think this is clearly not true, except where the class is at a fairly even skill level to begin with, which is rare. In my experience, in any more diversified class, students tend to repeat their performance level fairly often and don't revert to the mean. 4.0 students tend to score highly most of the time!
Also, he gets very sloppy discussing the "Matthew effect", which is a name for the phenomenon that "the rich get richer and the poor get poorer". He says this is all attributable to "luck" but does not use any of the statistical methods he discusses earlier to identify luck separately from skill to demonstrate his claim. His examples were poor as well: he cites the victory of VHS over Betamax and Windows OS over unspecific competition which I assume was Apple. He says the competing products were substantially similar and the resulting market share was "out of all proportion" to the cost of producing the marginal product. Obviously those examples are poor because in both cases the winning product was itself superseded or its market share cut into within a few years. Neither is a case of "the rich get richer" or "winner take all" unless you stopped measuring wins in the 90's. It was "winner wins for a while" - until it didn't. And I would disagree that the only relevant distinction is product quality and everything else is "luck". That is what business strategy is all about. MS had a better strategy initially than Apple. Apple was all about making clear it was the anti-IBM and going it alone. Unfortunately the marketplace was not as anti-IBM as Apple thought, and also MS's decision to stick with software turned out to create opportunities for lots of other businesses to step in and share and bear costs of constructing the marginal product while Apple had to fund and build a whole new computer to sell one additional copy of its software. So I don't see that as just plain "luck" at all.
But, having got that off my chest, I thought it was a pretty well written book, although like most business books, it is far better explaining the past than solving for the future.
A key motivation of The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing is the fact that sports offer a rich vein of skill-versus-luck analysis. Sports data, combined with statistical analysis and behavioral psychology, contribute valuably to the study of business management and investing.
The Success Equation covers several compelling themes, including the luck-versus-skill continuum, the importance of sample size, mean reversion and dynamic processes, and key lessons in improving the art of guesswork.
The luck-versus-skill continuum ranges from all luck (e.g., roulette) to all skill (e.g., running marathons). Between these extremes, hockey has a large luck component whereas basketball primarily involves skill. The analysis of this topic draws heavily on athletics because of the vast and detailed records generated by sports and the many practical lessons that can be extracted from them. Recognizing where an activity lies on the luck-versus-skill continuum can shape strategy, hone skills, help in dealing with uncertainty, and improve performance in numerous ways that are relevant to investing.
Sample size is key to understanding luck versus skill. Investors should
consider the sample size (if an activity is controlled mainly by luck, a small sample will not do),
understand history, which helps in skill-based activities more than in luck-based activities, and
categorize events by simple/complex payoff and narrow/extreme outcome.
The complex/extreme combination resembles the “black swans” highlighted in Nassim Taleb’s work. Mauboussin notes that most financial blowups have resulted from naively applying statistical methods in a world of black swans.
Mean reversion and dynamic processes are related. Understanding the mean-reversion process is critical in investing because one can do all the right things but still underperform until the odds catch up. Just as important, however, is recognizing a dynamic process. A change in the process revises the odds and shifts mean reversion to a new mean.
The book ends with 10 key ways to improve one’s chances at guesswork. In addition to the three ways discussed earlier, they include learning from feedback, looking for ways in which situations may interact, and knowing one’s limitations.
Mauboussin’s writing style makes for a highly enjoyable and comprehensible read. Sports-based examples are used effectively throughout. Most readers will readily recognize the differing natures of the various sports and grasp how an understanding of those differences translates into the analysis of investment and business problems. Also commendable is Mauboussin’s conscientious provision of academic references. Some 60 pages, about 20% of the total, are devoted to notes and citations that amplify points and offer background and further reading.
The Success Equation makes a valuable contribution to the literature on decision making when both luck and skill are involved. It is thoroughly researched and well written. I highly recommend the book to anyone interested in making better investment choices.