This month's Business Book Club selection is The Halo Effect, but Phil Rozenzweig. I came across this book through recommendation surfing (if that becomes a buzzword, you read it here first) on Amazon.com, that is, I was following the system's "if you like that, you might also like this" links from books I liked to books I didn't know I liked yet. I suspect this is a common practice, and it's ginormously smart of Amazon to facilitate it. They got another $25 out of me, didn't they?
I found The Halo Effect by way of Nassim Nicholas Taleb, whose book, Fooled by Randomness (and it's re-tread follow-up, The Black Swan) contained some great brain-twisting premises. I'm sure it's no coincidence that Amazon sent me from Taleb to Rosenzweig and that Taleb has an above-the-title blurb on the cover, "One of the most important management books of all time." Entertainingly enough, this "advance praise" really flies in the face of what Taleb and Rozenzweig are writing about - the rampant misuse of available information to draw improper conclusions.
To be specific, Taleb's work is all about the oversize footprint that big events leave in our minds, far bigger than the actual import of those events. This leads people to make irrational decisions based disproportionately on those rare events, hence the title "The Black Swan."
Rozenzweig takes this as a starting point, elaborating a series of "Business Delusions That Deceive Managers," such as "The Delusion of Absolute Performance" and "The Delusion of Rigorous Research" which amount to saying that things are more complex than they seem and that much of the research out there is flawed. It definitely makes you stop and think about why and how you make business decisions.
As with many business books, you'll get a lot of the value from the introduction and first chapter, and diminishing returns thereafter. In fact, that's all that most businesspeople have time to read anyway. I don't want to give away too much, since I think this book is worth more than a cursory read, but let me explain a bit about the meaning of the title, "The Halo Effect."
We like to study winners, so we can learn from them and be winners ourselves. Or so goes the popular wisdom. Rosenzweig points out that we don't often study the losers as well. And when we do, we discover that they were also doing some of the things the winners were also doing. That tends to render those things somewhat less predictive of winning. It's a bit like studying Olympic medal winners and noticing that most of them drank electrolyte-rich sports drinks. Well, most of the losing athletes might to that too, but you'd have to check. There's a culture of hero worship in business that makes it generally unpopular to study the losers, or at least unprofitable in publishing.
The Halo Effect means that if a company wins, we view everything they did as contributing to that win. We often devalue the effect of external factors or competition and assume that top leaders and their vision and organization were the biggest determiners of the company's success.
As the song goes, it ain't necessarily so.
Posted by David Karp | Permalink
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