Getting a high return on luck

With ‘luck' on the x-axis ranging from bad to good, and ‘return on luck' or ROL on the y-axis rising from poor to great, Jim Collins and Morten T. Hansen present four quadrants in ‘Great by Choice: Uncertainty, chaos, and luck – why some thrive despite them all' ( www.landmarkonthenet.com ). While the bottom left quadrant is about ‘Hitting the death line,' the bottom right one is ‘A sure path to mediocrity.' And the upper quadrants are about 10X, or high-performance; the left box is labelled ‘Defining moments in the 10X journey,' and the right, ‘Essential skill for 10X results.' In the authors' view, the Bill Gates story illustrates the upper-right quadrant, getting a great return on good luck.

The difference between Gates and similarly advantaged people is not luck, the authors reason. “Yes, Gates was lucky to be born at the right time, but many others had this luck. And yes, Gates was lucky to have the chance to learn programming by 1975, but many others had this same luck.” The important difference, they explain, is that Gates did more with his luck, taking a confluence of lucky circumstances and creating a huge return on his luck.

Examining great companies that sustained excellent performance for a minimum of 15 years and the leaders who built them, the authors report that they never found a single instance of sustained performance due simply to pure luck. “Neither extreme – it's all luck or luck plays no role – has the evidence on its side. A far better fit with the data is a synthesising concept, return on luck.”

Getting a high return on luck requires throwing yourself at the luck event with ferocious intensity, disrupting your life, and not letting up, instruct Collins and Hansen. “Bill Gates didn't just get a lucky break and cash in his chips. He kept pushing, driving, working – staying on a 20 Mile March; firing bullets, then big calibrated cannonballs, exercising productive paranoia to avoid the Death Line; developing and amending a SMaC (specific, methodical, and consistent) recipe; hiring great people; building a culture of discipline; never deviating from his monomaniacal focus – and sustained his efforts for more than two decades. That's not luck; that's return on luck.”

The cryptic phrases such as '20 Mile March,' ‘calibrated cannonballs,' and ‘productive paranoia,' are elaborately discussed in the book. For instance, ‘hitting the death line' means the enterprise dies outright or becomes so damaged that it can no longer continue with the quest to become an enduring great company, as the book describes. “The idea is simple: If you ever hit the Death Line, you end the journey – game over!”

Another example in the book is of AMD, as a case of squandering of good luck. “When the time came to execute on their good fortune, they stumbled. They didn't fail for lack of good luck; they failed for lack of superb execution.” A major ‘good-luck event' in the history of AMD, a ‘perennial also-ran' company in the mid-1990s, was the court victory clearing AMD to essentially clone Intel microprocessors. A huge stroke of good luck for AMD, again, was the halting by IBM of shipments of computers that used Intel's Pentium chip due to a highly publicised ‘rounding error.' But then AMD ran into manufacturing problems, leading eventually to its stock falling behind the general stock market by more than 70 per cent from the start of 1995 through the end of 2002.

Valuable insights for managers who are keen to learn.