Doing What They Did Won't Get You What They Got

February 12, 2014

An infographic called “Habits of the Wealthiest People” is making its rounds through the social media space these days.  The chart shows the results of a study comparing the habits and attitudes of a few hundred wealthy people versus those of a few hundred poor people, showing statistical differences between their behaviors.  At the bottom of the chart, there is a quasi-disclaimer, “Following these traits won’t necessarily make you rich…but they are worth a shot.”

The implication -- which is frequently an explicit assertion of the blogger, sharer, tweeter, or pinner that posts this infographic – is that doing these behaviors are a part of what separates the successes from the failures (at least as measured by financial metrics – which may or may not be how one ought to measure success).

 

Now, kudos go to Thomas C. Corley, who is cited as having conducted the study, for having studied both the wealthy and the poor, and finding differences between them.  That is a refreshing difference from the only-look-at-the-winners fallacy. 

 

What’s Wrong with Identifying Differences?

 

Unfortunately, the infographic commits another error that is just as wrong, and is perhaps even more dangerous.  More dangerous because it is harder to spot and much easier to believe.  That is the error of assuming that correlation equals causation.

 

Correlation means that things tend to happen together.  Causation means that one thing makes another thing happen.  They are not the same.  Yet people will often argue as if they were.  Their reasoning will say something to the effect of “when X happens, so does Y, therefore X causes Y.” After all, where there is smoke, there must be fire, right?

 

Such arguments can seem reasonable…until you look at an absurd example.  Let’s do so!

The average number of letters in warm-weather months (March, April, May, June, July, August) is 4.5.  The average number of letters in cold-weather months (September, October, November, December, January, February) is 7.8.  Wow!  When the names of the months get longer, the temperature of the weather gets colder.  Therefore, longer names cause colder weather.  Quod erat demonstrandum (the fancy Latin phrase intellectuals put at the end of a proof).

 

Thankfully, such absurdity is easy to spot.  Sure, there’s a correlation, but it’s purely coincidence.  We know better.  But what happens when we don’t know better?  What happens when the correlation fits our beliefs in cause and effect?  Then we can easily be led astray.

 

Preconceived Notions

 

In the “Wealthy habits” infographic, for example, it shows that the wealthy get fewer calories from junk food than do the poor.  Because they eat healthier, they are better able to succeed and become wealthy, right?  Or this one:  63% of the wealthy listen to audio books during their commute to work, while only 5% of the poor do.  Of course!  The wealthy are diligently learning more about the world and improving their minds, while the poor are wasting their brains on worthless music, or just staring off into space.

 

Those conclusions may fit our preconceived notions, but they are not remotely supported by the data.  The cause and effect could easily go the other way.  The wealthy could be getting fewer calories from junk food because they can afford higher quality food.  Anyone familiar with inner city “food deserts” could certainly vouch for such a conclusion.  Or the wealthy could listen to more audio books because they can afford to purchase more audiobooks and the players that play them.  Their wealth could just as easily be the cause of the audiobook listening effect, as the audiobook listening is the cause of the wealth effect.  Correlation alone cannot tell us the difference.

 

So what does this have to do with innovation?

 

Healthy Skepticism

 

As we create new goods and services, we need feedback about our creations.  Sometimes, that comes in the form of statistically rigorous product testing.  Sometimes it comes in the form of focus groups.  Sometimes it comes in the form of sharing with a life partner and asking “what do you think?”

 

Regardless of how it is tested, you need to be able to receive the feedback in a way that will be of value to you.  This is where your healthy skepticism will come in handy.  Challenge yourself.  Identify your biases in advance.  Force yourself to listen empathically, truly understanding the feedback from the perspective of the provider.  Challenge the data you receive.  Is it simply confirming the bias you had, or does it really give you information that is valuable to delivering a product that your customers want uniquely from you?  Does it help separate the necessary differentiators, or does it reflect mere coincidence?  Always search for what really drives the value of the product in the minds of your customers, in a way that you can uniquely deliver.

 

This principle also applies to how you run your business.  Differentiated success in one business does not prove that success will follow in another business.  As Warren Buffet has so eloquently said, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”  Not that your chosen industry necessarily has bad economics, but your industry is unique.  Your business is unique.  It needs to be treated uniquely.

 

Several years ago, the big management fad was to make every business operate like Apple.  Clearly, Apple had a winning formula, going from near-bankruptcy to the single largest market cap company in the known universe.  Differentiators could easily be identified – human-centered design, retail outlets with genius bars, simple pricing structures, etc. 

 

Fast-forward to April 2013, with a very public, very humiliating ouster of former Apple guy turned JC Penny CEO, Ron Johnson, after the debacle that was trying to make the discount retailer operate like Apple.  The results were so bad, that in May, JC Penny ran a television ad apologizing for the attempted changes. 

 

Simply trying to imitate “winners,” even when differences between them and the not-so-muches are evident, will not automatically lead to success.

 

 

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