How Do You Expect Your Succession to Succeed?

Friday, August 23 2013

Are you a good driver?

Are you better than average?

A survey found that most people answer both of these questions in the affirmative. It’s amusing and mostly harmless that we all think we are better than average at driving, which is, of course, statistically impossible.

Are you a good businessperson?

Are you better than average?

Most businesspeople will answer yes to both these questions. Entrepreneurs are optimists. Although the numbers show that only 35% of businesses started in the U.S. will survive for five years, budding entrepreneurs don’t believe the statistics apply to them. Daniel Kahneman writes that “a survey found that American entrepreneurs tend to believe they are in a promising line of business: their average estimate of the chances of success for ‘any business like yours’ was 60% – almost double the true value. Fully 81% put their personal odds of success at 7 out of 10 or higher and 33% said their chance of failing was zero.”[1]

As optimistic entrepreneurs, we tend to underestimate risks, overestimate our own chances of success and believe we will always beat the odds. This underpins the level of persistence and drive necessary to run a successful business. And having a positive expectancy in our future will encourage us to push our limits, motivate our employees, and convince our banker or investors that we have the secret sauce to know we will succeed where others have failed.

According to Kahneman, a Nobel Prize winner in Economic Sciences, this is where many will get into trouble. Knowing is different from predicting and expecting. We can’t know an event in advance. We can only truly know after the fact. Expecting, and backing up that expectation with the actions and practices required to maximize our chances of success will help, but still offers no iron-clad guarantee.

When asked his favorite equation, Kahneman shared this:

Success = talent + luck

Great success = a little more talent + a lot of luck

He goes on to say, we tend to attribute too much of our success or failure to our own talents and abilities, and not enough to good or bad luck. Sometimes events over which we have no control happen and these events can carry more weight than all of our actions.

This doesn’t mean we stop working and just hope for good luck. It means we may have to work even harder in order to maximize our odds, diminish the chances of bad luck and capitalize on any good luck that comes our way.

My (hard earned) advice is to expect the best, but prepare for the worst. That way you’re covered.


[1]Thinking Fast And Slow Daniel Kahneman, Anchor Canada; 2011 p.256