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Archive for July, 2008

Good to not so great?

Over at Freakonomics, Steven Levitt looks into the book Good to Great – it analyses 11 companies that transformed themselves and became “great” companies. Turns out the companies aren’t all doing that well:

Ironically, I began reading the book on the very same day that one of the eleven “good to great” companies, Fannie Mae, made the headlines of the business pages. It looks like Fannie Mae is going to need to be bailed out by the federal government. If you had bought Fannie Mae stock around the time Good to Great was published, you would have lost over 80 percent of your initial investment.

Another one of the “good to great” companies is Circuit City. You would have lost your shirt investing in Circuit City as well, which is also down 80 percent or more. Best Buy has cleaned Circuit City’s clock for the last seven or eight years.

Hmmm. While it’s true that you can learn from the mistakes and successes of those that came before us, what the salient lesson is (presuming there is one), the role of causality and luck or how to generalize to new situations make it a fool’s errand. Good to Great and other successmanship manuals pick and choose winners to fit the evidence and ignore the losers.

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