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1 Jul 2013

Luck’s Effect on Experts’ Predictions

Dice (Twelve & Two)  [0691]

It is a natural human bias to misinterpret luck as talent.

One of the outside factors that tend to cause us to make the fundamental attribution error in assessing talent is randomness . . . or “luck” as it’s commonly known. For example, when an expert predicts an event, especially an unusual one, we tend to credit him with foresight.

In Jerker Denrell’s research though, as reported in the article “’Experts’ Who Beat the Odds Are Probably Just Lucky” (Harvard Business Review, April 2013 edition), it’s probably better that we attribute his success to luck. Denrell goes further by saying that “people who successfully foresee an unusual event tend to be wrong about the future over the long run.”

If a hundred people predict the role of two dice, it’s best to pick seven, the most likely number. However, if we wish to standout, two or twelve are better because few will pick these. Consequently, an expert in the backwaters of his field can suddenly move to the front by taking a chance on a wild prediction. It’s the experts’ version of the Hail Mary pass in football.

Randomness affects us all though, not just experts. This means we need to assess its influence on all jobs. For instance, randomness plays more in sales than it does in accounting; that’s why sales performance is less predictive of talent than accounting performance is.

Simply being aware of our tendency to over attribute will guard us from those who oversell theirs or others’ talents. While “the proof is in the pudding” is fine for making pudding, it doesn’t work in the expanded range of variables influencing business. Our control over the pudding-making process is far greater than our control over business factors. In short, assessing talent is more than just assessing past outcomes. It requires assessing conditions surrounding success.

 

Related reading: 12 Most Important Unspoken Truths about Experts

 

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