How to be a genius.

 

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Eric Weiner has written a wonderful book, The Geography of Genius. In it he deconstructs what makes a place, and someone in there, a genius. It’s not simple. It’s more art than science, but that’s not to say there aren’t a few things we can learn.

Constraints are good.

Da Vinci was an illegitimate child, and couldn’t grow up to be a lawyer, “settling’ for artist. Donald Campbell said the greatest things about being Scottish was “having something to push against.”

I’ve podcasted about this (episode #012), and we’ve seen other creative people advocate for constraints. Daymond John calls it the ‘Power of Broke,’ Amanda Palmer noted that “limitations can expand rather than shrink the creative flow.” Seth Godin made his video game shorter – because there wasn’t enough bandwidth – and his video game became more popular.

The most successful production company right now isn’t Disney, it’s Blumhouse productions. Who?

The studio that made Paranormal Activity for $15K which brought in $194M.  Filmmaker Rob Cohen worked with Blumhouse and said this about limited budgets:

“You’re going to have to be clever, and that cleverness stretches you, it makes you think outside the box because the money panacea isn’t in your arsenal anymore. You have to fix the problems another way.”

Flyting is good.

Guess who argued? Everybody. Ancient Greece had the symposia, Florence had their workshops, Edinburgh had flyting (15th century rap battles), Calcutta had the adda. Each day of a place of genius ended the same way, arguments then beer.

Places of genius were places of ideas. Those ideas didn’t live in silos (which can kills companies), they lived between people. Not only that, but the conversations pushed boundaries, changed minds, and made the world a better place.

Today we can create deep connections more easily than ever. Nicholas Megalis did it. Austin Kleon suggests you do it too. Penn Jillette did it at clown college. Dan Coyle calls them “hotbeds.” Judd Apatow works with a long list of people because they make him better.

Arguing is a good way to use Twitter

A major theme from Civilization by Niall Ferguson is that people do better when they connect. Ditto for Steven Johnson’s book, Where Good Ideas Come From.

Bimodal is good.

You don’t get to genius level if you don’t come up with something awesome.

Mozart, Weiner writes, “constructed symphonies like Pixar does movies.” Small children and sophisticated patrons enjoyed them the same. Ditto for Florence, where the Wall Street tycoons of the day (Medici family) were patrons of the arts, but demanding. Here is a commission and money for it, but it had better be good.  Kolkata was “acculturation without assimilation.” Silicon Valley was hippy engineers.

Great ideas are mixtures of oil and water. They are things that we never thought of combining in novel ways. They are bimodal.

Nassim Taleb suggest a bimodal fitness strategy, long walks and heavy weights. Charles Duhigg suggests a bimodal goal system, lofty ambitions and concrete steps. Cal Newport suggests a bimodal work strategy. Employment may become more bimodal.

In #askGaryVee, Gary Vaynerchuk writes, “I spend all my time in the clouds and dirt.”

The advantage to a bimodal model is that it combines things at both spectrums, things that wouldn’t normally overlap. Combining old things in new ways is one path to genius.

Walking is good.

“The ancient Greeks were great walkers,” explains Weiner’s Athens tour guide. What’s amazing is often walking is credited – and for really wonderful things.

The best advocacy for walks may be Mason Currey’s book Daily Rituals:

Beethoven? “After a midday dinner, Beethoven embarked on a long, vigorous walk, which would occupy much of the rest of the afternoon. He always carried a pencil and a couple of sheets of music paper in his pocket, to record chance musical thoughts.”

Soren Kierkegaard? “Typically, he wrote in the morning, set off on a long walk through Copenhagen at noon, and then returned to his writing for the rest of the day and into the evening.  The walks were where he had his best ideas, and sometimes he would be in such a hurry to get them down that, returning home, he would write standing up before his desk, still wearing his hat and gripping his walking stick or umbrella.”

Charles Dickens? “Promptly at 2:00, Dickens left his desk for a vigorous three-hour walk through the countryside or the streets of London, continuing to think of his story and, as he described it, “searching for some pictures I wanted to build upon.” Returning home, his brother-in-law remembered, “he looked the personification of energy, which seemed to ooze from every pore as from some hidden reservoir.”

Why? I have two guesses; we built a better brain, and we give it a chance to work.

Molecular Biologist John Medina explains the biological angle:

“Exercise also aids in the development of healthy tissue by stimulating one of the brain’s most powerful growth factors, BDNF. That stands for brain-derived neurotrophic factor. “I call it Miracle-Gro, brain fertilizer,” says Harvard psychiatrist John Ratey. “It keeps [existing] neurons young and healthy, and makes them more ready to connect with one another. “

In his book, Where Good Ideas Come From, Steven Johnson explains the second “the history of innovation is replete with stories of good ideas that occurred to people while they were out on a stroll.” Johnson suggests that we think differently, in a way where things that might not normally connect do.

Thanks for reading, I’m @mikedariano on Twitter.

If you liked this summary of a book — you might like my book: 28 Lessons from Start-ups That Failed.

// Update. An early draft of this post was first published. I corrected it on 3/22/16 at 10:55am. 

 

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013 Good Things Take Time

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It’s not something you can microwave. It’s more of a Crock-Pot thing. – Dave Ramsey

Good things take a long time. Episode 013 of Mike’s Notes – Soundcloud, iTunes, Overcast – explains it with three characters, let’s meet them.

Our 3 character:

Gary Vaynerchuk, best selling author and CEO of Vaynermedia.

Steven Pressfield, author of the War of Art, The Legend of Bagger Vance, many good books. 

Felicia Day, actor, author, funny awesome person.

Gary Vaynerchuk is someone I can only handle so much of, which is a problem because he’s everywhere. No matter what social network you’re on, Gary is there too.  If evangelists worshipped business and toured like rock stars, Gary would be their leader. 

What would be the gospel? To persist.

Vaynerchuk told Rich Roll that he’s been working out for two years and still doesn’t see any chest muscle. That’s okay, Vaynerchuk says, because he understands the analogy between this, and his business. It takes years of hustle to achieve anything.

If you want to start a business, Vaynerchuk says, there’s something to remember above all else, be patient.

“The biggest single decision of your life,” Vaynerchuk says, is trying to start a $1M business instead of a $300K one. This leads to “very impatient behavior in the first 24 hours out of the box. They’re looking for fast and cheap dollars…there’s not a single fucking person on earth that made it big in four minutes.”

Jason Fried said that we confuse “being a success,” with “being a superhero.” Don’t fall for the finish line fallacy, which is what happens if your finish line is superhero, a definition for someone, by someone else.

Steven Pressfield’s book The War of Art is a constant reminder, and cheerleader, for people running the long race. The book is an inspiration for perspiration

Pressfield’s framework is to treat “your thing” like a professional, not an ameatuer. A professional “puts their butt where their heart wants to be,” Pressfield says.

“The professional arms himself with patience, not only to give the stars time to align in his career, but to keep himself from flaming out in each individual work. He knows that any job, whether it’s a move or a kitchen remodel, takes twice as long as he thinks and costs twice as much. He accepts that. He recognizes it as reality.”

Good things take time. The professional knows this and doesn’t flame out.

Felicia Day is an unexpected character in my life. I can’t remember why I read her book, but I’m glad I did. You’re Never Weird on the Internet (Almost) made me smile – a lot.

Day’s story is one of persistence as well. After a quick story, she opens her book this way:

“So how did I get this super-awesome career? Well, you’re in luck, because this book is designed to tell you how I got here! Short answer: A) By being raised weird. B) By failing over and over again. C) And by never taking ‘no’ for an answer.”

Day had an open door to quit. Her family hinted it. With a background in advanced mathematics, she could secure a job in any industry that didn’t rhyme with “ollywood.” She never quit though.

One small thing led to another. She started a small project called The Guild, an online web series Day shot in her house and garage. It required begging people for supplies and help. Even when she succeeded (going from making commercials to making The Guild), she faced the next set of challenges. Good things take time.

An equation for good things.

If we wanted to put a more formulaic spin on this we can turn to Cal Newport, who wrote, “rare and valuable jobs require rare and valuable skills.” If you want a job like Gary Vaynerchuk’s, Steven Pressfield’s, or Felicia Day’s you’ll need the skills those jobs take – which take time.

How to be a treasure hunter.

Carl Fismer wanted to dive for sunken treasures, so he found the grandfather of American treasure hunters, Art McKee.

Pulling up to his house one day, Fismer presented himself to McKee and said, “I want to be a treasure hunter, and I’m willing to work for free to learn the business.”

“Besides diving, what else can you do?” McKee asked.

“Nothing,” Fismer said.

“Everyone’s a diver, got too many of those,” McKee said, turning back to what he had been doing.

Robert Kurson explains what happened next:

“Firmer got into his car and drove back to Sarasota, where he enrolled in an emergency medical technician course, earning his boat captain’s license, learned to work on small engines, and volunteered to cook for fifteen firemen a day at the firehouse.”

Two years later he returned to McKee’s house, and when asked again, this is what he said:

“I’m a boat captain, I fix small engines, I’m a state-certified paramedic, and I cook. Meatloaf is my specialty.”

“Good,” McKee said, “you’re on my next trip.”

Resistance will tell you to quit.

If you’re in the middle, and expecting results, know that good things take time. If you’ve been doing “your thing” for 4 minutes, know that it’s going to take a lot longer. If your career has stagnated, men objectify you, and work is a grind, know that good things take time.

To end on a final quote from Pressfield, “do the work.”

If you don’t have a copy of the book The War of Art, get in touch and I’ll send one. The catch? If you think it’s good, you have to buy one for someone else.  

Thanks for reading, I’m @mikedariano on Twitter.

We’re back

 

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This is a short post. Part I explains why I tried out Medium, and then why I left. Part II are links to things I  published there that you may have missed.

Part I

Well, after two weeks of publishing on Medium.com, I’m back. The short answer for why is that Medium is messy.

The main reason I switched to Medium – this site is hosted on WordPress – was because I wanted to experiment with shorter posts, and thought a new place might help. These posts are longer, and a new environment can shift how someone works. J.K. Rowling moved to a castle to finish Harry Potter.*

While I’m no Rowling, I thought the change would be good – and it was, okay.

I didn’t dislike Medium, but I didn’t like it either.  Writing there delineated parts of my process that I hadn’t noticed. For example, I use Markdown for links to my other posts. This process makes my writing a lot faster. Not until I switched to Medium did I realize how much faster.

I should have expected this. B.J. Novak and Casey Neistat both mentioned that software doesn’t matter as much as what you do with it. That’s obvious. The key part is that I could do a lot more, better, with what I was using. Novak writes in Word because he can do a lot more. 

Medium is also messy, a few people reached out to say they didn’t like wading through the mess to find what I wrote. Besides being flattered, I felt the same way. Sometimes I would get notifications for articles like “How to use Snapchat emojis” or “3 ideas for the future.” Meh.

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This blog is back, (back baby!) and will look like this: long form posts on Mondays and Wednesdays. Friday will be the post that goes along with my podcast. I’m finishing Season 1 of Mike’s Notes, you can see all the episodes at Soundcloud, iTunes, or Overcast.

I’m outlining Season 2 right now and am really excited about it.

Part II

Besides writing a book that debunks the surviror bias in startups, here are the other posts I published.

3 Things I Learned:

3 Things I Learned from Bob Seawright. Don’t be complacent with your decision making.

3 Things I Learned from Gary Vaynerchuk. Good things take time.

3 Things I Learned from DHH. What scripts do you follow? What scripts should you follow?

Podcast posts.

011 Finish Line Fallacy. Don’t run someone else’s race.

012 Constraints. Don’t look at limits as a bad thing.

Thanks for reading, I’m @mikedariano on Twitter.

*technically Rowling wrote at the Balmoral Hotel.

We’ve moved….

Update (3/17/16): That didn’t take long: We’re back

 

streetclosedI’m temporarily (beginning March 2016) experimenting writing at Medium.com. There are a few things there that may interesting to readers of this site, and you can pick and choose.

As always, @mikedariano on Twitter.

Low Overhead

Thesis: If you keep your overhead low, you get more opportunities to win big.
Low overhead is a chance for optionality. We saw this before, but if you missed it optionality is:
  • When William Teschhumeh Sherman marched on Savannah he never committed to any one route, keeping his enemy off balance and his options open.
  • When Nassim Taleb bought contracts to buy or not buy a stock in the future he had options for what do do (the things he bought literally are called options).
  • Daymond John doesn’t focus his Shark Tank deals on any industry, instead keeping his options open.
“If you ‘have optionality,’ you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells.” – Nassim Taleb
It’s like a slot machine that only takes time, focus, and energy:
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One way to get optionality is to keep your overhead low.
“We don’t have an isolated group [managers] surrounded by servants. Berkshire’s headquarters is a tiny little suite.”  – Charlie Munger
Characters
  1. Failed Startups, from https://medium.com/survivorship-bias project.
  2. Sophia Amoruso, founder of Nasty Gal clothing, author of #Girlboss.
  3. Comedians.
Failed startups. In my research on failed startups there are four financial mistake that startups make; buying inventory — hiring too quickly — paying for marketing — susceptibility to the sunk cost bias.  Each of these increases overhead and decreases optionality.
One founder advised readers, “continue bootstrapping even after getting funding.”
Another wrote that things got bad when they, “stopped working on the app and devoted all of our resources to repacking our backend technology.”
Spending more on X (inventory, employees, hosting, etc) seems like it solves a problem. It doesn’t. It only bends the map.
Sophia Amoruso kept her overhead low by slowly graduating to new locations. First it was a pool house, then something larger, but always in small steps.
Eventually it was time for a move into a warehouse and she decided her team could handle the move as she took a vacation (her first in years).
Everything went smoothly, except when Amoruso got back she saw that someone ordered Herman Miller Aeron chairs. She writes: “There was no way that I was going to have interns rolling around on these things! It sent the wrong message to the company to preach frugality while balling out on twelve grand worth of chairs.”
They couldn’t return the chairs, so they sold them all on Craigslist.
Comedians. In Judd Apatow’s book Sick in the Head there are many comedians who tell him that they succeeded – in part – because they kept their overhead low.
Jay Leno worked on cars during the week and that covered his low cost of living (“I didn’t have a lifestyle to maintain.”). It also let him work on the weekends and do gigs that barely paid for his transportation and food.
When Apatow interviewed Jerry Seinfeld it led to this exchange:
Judd: The other thing that I remember about our interview is that your apartment had nothing in it. Like, it was not decorated.
Jerry: Oh, I was a minimalist from the beginning. I think that’s why I’ve done well as a comedian.
Judd: No distractions.
Jerry: If you always want less, in words
Sarah Silverman told Apatow, “I’ve always kept my overhead low so I could do whatever I want.”
Leno, Seinfeld, and Silverman all knew that keeping their overhead low led to more options in the future.
Getting it right early is easier than fixing it later.
We get used to things really quickly (hedonic adaptation) and find it hard to change from our established path (status quo bias).
Because it’s hard to scale back,  make scaling up a slower process. Whether that’s in terms of the place you live, your business, or vacation plans. Move slowly, and think of financial costs like quicksand – you might get stuck as a great opportunity passes you by. People in quicksand don’t have options.

6 things I learned from Greg Ip’s Foolproof

Greg Ip’s book Foolproof is about how the choices we make to danger and the choices we (should) make when things appear safe. It’s a great book. This book fits nicely among Taleb’s Antifragile, Gall’s Systemantics, and Tetlock’s Superforecating.

What I most appreciated about Ip’s work was the novelty of it. The research he dug up was new and interesting. The anecdotes were funny and tight. This was a good book. Here are six things I learned from it.

1- Seeing is believing but NOT seeing is also believing.

On the personal level seeing is believing has changed lives.  Michael Lombardi, Penn Jillette, and Ezra Klein (among others) all said that when they saw someone do something – they thought they could do it too. This is not what Ip is addressing.

In Foolproof, Ip’s point is that things are happening, whether we see them or not. Just because someplace doesn’t flood this year, doesn’t mean it won’t flood in the future.

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Or, as  John Gall writes in Systemantics:

“Our point, repeatedly stressed in this text, is that Systems operate according to Laws of Nature, and that Laws of Nature are not suspended to accommodate our human shortcomings.”

Just because we can’t see it, doesn’t mean it’s not there.

 

2- When everything looks like a nail.

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If we understand where someone is coming from, we can better understand their point of view. The best framework I know is spectrums.

An easy spectrum in 2016 is the political one; left or right, republican or democrat, outsider or insider. Knowing any of these starting points can help us pinpoint a candidate’s arguments. But there are many other good examples of spectrums:

Brian Koppelman and David Levien faced a spectrum of choices – maybe one episode to a guaranteed season –  with their new show Billions. They had to decided where to land on that spectrum because that would dictate their actions.

Charlie Munger (via Tren Griffin ) pointed us to the spectrum of things that can be counted and things that can’t be counted. Munger wrote, “practically everybody overweighs the stuff that can be numbered, because it yields to the statistical techniques they’re taught in academia, and doesn’t mix in hard-to-measure stuff that may be more important.” 

– In the post on black box problems we saw the mini-spectrum of complicated to complex problems. There, we noted that you had to know where you were to solve the type of problem. For example, you can’t use the same heuristics to calculate the tides as you would to predict snowfall.

Complicatd and complex

– In the Chris Dixon post we looked at the spectrum of skill and luck. Dixon uses this spectrum to figure out why someone failed. Was it bad luck, or not enough skill?

Skill/Luck spectrum

Ip introduces another spectrum, engineers to ecologist. He writes:

  •  “Engineers use the maximum of our knowledge to solve problems.”
  • “Ecologists think complex systems may produce unintended consequences whiare are worse.”

If you can identify a condition as created by engineers or ecologists you’ll understand it better. Engineered systems typically solve for small, regular problems but miss suffer from large irregular ones (black swans). Ecological systems typically suffer from small, regular events, but not from black swans. 

Ip does a wonderful job in the book to point out why neither system is always the answer. Instead he nudges us to think about second order effects.

3- Solutions have second order effects, you better be sure about what they are.

sandbags.pngA big point of the book is for people to understand that systems have ripple effects. If one person puts out sandbags in a flood, that stops their flooding problem but it doesn’t stop the water. The next person needs put out sandbags and so on, but eventually the water will flow somewhere.

That’s a clear demonstration of the second (and third and so on) effects, but many engineered solutions aren’t so clear.

– Ip quotes Brad Delong who wrote, “new ways to borrow and spread risk seemed to have little downside….it seemed worth trying. It wasn’t.” Delong – a very smart academic – didn’t foresee the second order effects of new borrowing techniques.

– In our post on CEO pay, we saw the unintended consequences (second order effects) of shifting from salary to stock options.

– Another example from Foolproof is the Mark to Market regulation that changed how banks reported their asset prices. The first order effect was that banks couldn’t hide bad loans. The second order effect  was that Mark to Market added fuel to the financial panic associated with mortgage backed securities. 

Figuring out second order effects is really hard, let’s move to a simpler problem, “risk homeostasis.”

4- What’s riskier, climbing Mt. Hood or driving a car?

Another nice distinction Ip makes in the book is why we engage in risky behavior. He looks at our “risk thermostat” and writes “reducing the risk increases our appetite for the activity.” But only directly. Ip found that taxis that had anti-lock brakes drove harder and faster than ones that didn’t. Drivers of cars that were safer – a better airbag system for example – didn’t have as strong an effect on risky behavior.

This idea is in Laurence Gonzalez’s book, Deep Survival too. Gonzales calls it “risk homeostasis” but the idea is the same. If we feel safer, we engage in riskier behavior to return to some  internal risk level. Gonzalez writes about how four men planned a decent where, “paradoxically, the very discussion that was intended to reduce risk encouraged faith in a faulty system.” The climbers thought they shifted the descent into a less risky system and so they engaged in a more risky type of descent.

In both these cases – taxi drivers and mountain climbers – we see that when the riskiness of the act is directly reduced, people return to a basic level of risk taking.

5- A celebration for failed restauranteurs, economies, and marriages.

Failure at the micro level is often quite good for the macro level. Nassim Taleb writes that we should have a National Entrepreneur Day, “I am an ingrate toward the man whose overconfidence caused him to open a restaurant and fail, enjoying my nice meal while he is probably eating canned tuna.” Taleb notes that the overall restaurant landscape is stronger thanks to the many small failures.

Ip’s research reflects this too. He looked at the economies of India and Thailand and found, “the benefits of easy credit are sometimes worth the crisis and bailout that followed.”

In her book, The Up Side of Down, Megan McArdle looked at why ‘bad’ things can be ‘good.’ She writes, “if you do a Google search of the phrase “The best thing that ever happened to me,” marriage and childbirth certainly do pop up. But….Here’s a partial list of the unexpected items that make up life’s Greatest Hits: Divorce My husband’s affair Cancer Get fired.” 

6- How to be safe? Have space.

If you want to avoid disaster you need space between you and the disaster.

– Ip writes that airplanes work in the system of “big sky, little airplanes.” In-air crashes rarely happen. It’s when the space is constricted (runways, airports, approach, takeoff) that most crashes occur.

Charlie Munger suggests space too: “No matter how wonderful [a business] is, it’s not worth an infinite price. We have to have a price that makes sense and gives a margin of safety considering the normal vicissitudes of life.”

– Goldman Sachs has a “Global Core Liquid Assets” fund of $179B in case of a liquidity crisis.

– Nassim Taleb writes in Antifragile that redundancy is a form space, but not an easy one to justify. “Redundancy is ambiguous because it seems like a waste if nothing unusual happens. Except that something unusual happens—usually.”

Thanks for reading, I’m @mikedariano on Twitter.

I wrote another post Danger in Safey where I oultined three ways safety makes us feel safe. The thinking with that post was inspired by some of Ip’s writings.

 

Survivor Bias in WW2 Airplanes, NBA players, & Mutual Funds

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My project on Survivor Bias is an attempt to answer the question: “What can we learn from dead startups?

Looking at dead startups is  form of  thinking called inversion that Tren Griffin and Charlie Munger both use. Rather than asking:

– What do successful startups do?

We can ask:

– What did unsuccessful startups do?

Avoiding the latter can be just as helpful as pursuing the former.

Look at Blockbuster and Netflix, two companies that had a lot in common. In many ways Blockbuster was the better company. They had more offerings of each new release movie, and you could get the movie from them more quickly. Depending on how fast you turned around each DVD, the cost savings wasn’t huge. Netflix relied on the notoriously error prone United State Postal Service, Blockbuster on prime retail locations.

Why study Netflix but not Blockbuster? Because Netflix survived, but that dismisses everything Blockbuster did right – or wrong. Much of that information is now lost and we can’t learn from Blockbuster’s mistakes. Luckily the same can’t be said for technology startups.

Thanks to blogging – and especially Medium.com – the number of “my tech startup failed and here’s what happened” articles are plentiful. Even better is that they’re consistent. In combing through the reflections on 60+ defunct startups a few patterns emerged.

Those findings will come soon enough (you can follow the project at Medium). First we’ll explain what Survivorship Bias is with three characters: World War 2 airplanes, basketball players, and mutual funds.

WW2 airplanes.

In World War 2 the allied nations had a problem, they were losing too many aircraft. At the most dangerous times of the war the odds of coming back were a coin flip. 

The Navy decided that the best solution would be to add armor to the planes, but could only add so much, and didn’t know where to put it. They took this question (how much armor to add and where) to Abraham Wald, a mathematician working on the war effort. Wald applied his models to places where the plane hadn’t been shot.

This took everyone aback. Why armor where the planes hadn’t been hit?

Wald reasoned that if some planes were able to return after being shot in certain places, other planes had not been able to return after being shot in the inverse of those places. Wald found the survivorship bias in looking at only the planes that made it back.

Basketball players.

Earl “The Goat” Manigault is one of the most famous basketball players in New York City. Born in 1944, Kareem Abdul-Jabbar once called him “one of the best basketball players in New York City,” Manigault is a small blip on the radar of American basketball, and maybe not even that.

His story is still worth telling. Part of the value of inversion comes from looking at what not to do. For planes the inversion led to the conclusion that damage to certain areas was very bad. For basketball players we can follow the same reasoning.

Manigault failed to become a successful basketball player for two reasons; his game and his addiction.

Besides praising his game, Abdul-Jabbar also noted it had flaws. “Earl couldn’t shoot the ball from beyond eight feet. He could leap out of the gym, but he couldn’t shoot the ball beyond eight feet, and he wasn’t interested in passing it.” Outside shooting and passing are two key basketball skills and Early didn’t have either one.   

The second fatal flaw for Manigault was his additions. He was kicked out of high school for smoking marijuana. The same year Abdul-Jabbar entered the NBA, Manigault entered prison for possession of drugs.

We see in this story of two New York City basketball players that there are things to learn from both. Study Abdul-Jabbar’s path and you’ll see that he took dance lessons and worked hard. You’ll also see external forces, Abdul-Jabbar had the good fortune to be at UCLA and with the Los Angeles Lakers. Those things are good to know, but not that helpful for aspiring basketball players. 

Study Manigault and you’ll see equally instructive things. If you don’t have the core skills for your pursuit, whether that means passing in the NBA or coding a website, you won’t survive there. Ditto if you become addicted or lack a supportive structure around you. The most helpful advice might come from Manigault.

Mutual funds.

When I first looked at a mutual fund statement I wondered how people could be so stupid. “You just pick the one that’s had the higher returns,” I told my father. I was obviously a know it all who knew nothing.

Time passed and I noticed the fine print, past performance may not be indicative of future results. A few years after that I learned that survival bias is present in mutual funds as well.

Mutual funds are collections of investments where investors pool their money to buy securities, usually with a theme. An example might be when all the teachers in a state – through their pension – buy a “long term growth fund.” This fund, along with all other “long term growth funds,” will be lumped in the “long term growth fund category.”   

At the end of each year, one news source or another will report on how well “long term growth funds” did that year. The next year the same thing will happen and so on. Now here’s where our bias enters.

This reporting won’t include all the funds. Some of the funds will go out of business because of poor returns. Those poor performers will be omitted from the next year’s report because they won’t be around anymore. That is, the report will only include the survivors.

We see that CNN or whoever will fail to report about Growth Fund B, which due to poor performance has been closed. This boosts the returns at all levels and happens in a fractal manner with nearly all investments.

Why should founders care?

Founders need to be warned about specific causes of death and survivorship bias because other founders wish they had been. This is not my opinion. A consistent thread in the postmortems was the influence of Survivor Bias.

One founder wrote, “all that you can really glean by examining the crème de la crème is perhaps an understanding that putting in just enough hard work will (probably) generate just enough sheer luck for you to accomplish what you set out to do.”

Another wrote: “The startup press glorify hardship. They glorify the Airbnbs who sold breakfast cereal to survive, and then turned their idea into a multi-billion dollar business. You rarely hear the raw stories of startups that persevered but ultimately failed.”

A third: “For every entrepreneurial story where the success is attributed to the founders being steadfast through hard times, there are probably five failures that were due to founders being stubborn or scared about making a hard decision. This is a prime example of survivorship bias, where we attribute success to traits that survivors exhibit, even if there was no causation by those traits.”

That failed founders made time to share their experiences is a gift. How often does someone account for why their marriage fell apart or their attempt to flip houses ended?

We don’t hear those stories because stories of failure are difficult to tell. Except in the industry of technology. The mantra of failure is not seen as a scarlet letter as much as a badge of honor. It’s more like a “I ran a marathon and all I got was this lousy t-shirt.”

Thanks for reading, I’m @mikedariano on Twitter. If you want to follow along, the bestplace is at Medium; https://medium.com/survivorship-bias.