"Selection Bias" in Business: Why Most Business Books Suck

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Don't believe everything you read. Sure, an author may point out that Company ABC, who has grown revenues rapidly by 500% uses empowerment to drive its company's growth. But flip the coin for a sec. What if the author ignores how empowerment erodes confidence in another company: Company XYZ? A certain book I read two years ago regarding "cult marketing" highlighted companies and programs that look good then. Yes, these companies who used cult marketing had initial large jumps in profits. Magazines heralded their executives, and the long wait lines was a good indicator of how much people liked the companies. But did cult marketing also lead to the downfall of most of those companies? Most now have crumbled--most notably including Krispy Kreme and the WWF (aka WWE). Too bad no follow-up book on "cult marketing" exists.

How to Combat Selection Bias in Business

Says Stanford's Jerker Denrell, "Impressive studies show that following best practices, focusing on the core, and building a strong culture are among the secrets of business success. But beware: These and other received ideas may also be the secrets of failure." When you're analyzing data or business books, remember this: correlation is not causation. The best way to combat selection bias, says Denrell, is to "get all the data you can on failure." If authors forget this concept, they'll guide you to absurd theories on why businesses succeed. Just because I traveled to Ethiopia for the week, and Yahoo's price soared during the week -- it doesn't mean me being away caused Yahoo's stock to jump. A gross analogy, yes; but, it shows the ridiculous assumptions of most business books. Too bad most business authors forget the concept of causation. And, folks: that's why most business books suck.

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Posted on April 03

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