The Success Equation Quotes

“There's a quick and easy way to test whether an activity involves skill: ask whether you can lose on purpose.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Deliberate practice works when skill dominates, while a focus on process and probability is appropriate when luck is the greater force.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“When luck plays a part in determining the consequences of your actions, you don't want to study success to learn what strategy was used but rather study strategy to see whether it consistently led to success.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Once an innovation reaches a certain level of popularity, its success is virtually assured. By the same token, great innovations can fail because the domino effect doesn't kick in.15”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“There are no good or bad horses, just correctly or incorrectly priced ones. This principle holds across all probabilistic domains: again, the goal is to get more than you pay for.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Further, the size of the sample you take and the length of time over which you measure are essential elements of making a prediction. And of course, you have to be using valid data. So it's important to balance the statistics and the context.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Statistics don't appeal to our need to understand cause and effect, which is why they are so frequently ignored or misinterpreted. Stories, on the other hand, are a rich means to communicate precisely because they emphasize cause and effect.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“When most people come to believe the same thing, large gaps open up between price and value.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Not everything that matters can be measured, and not everything that can be measured matters.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“What gets measured, gets managed.” If we measure the wrong things, we will not achieve our goals.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“We need to work hard to fend off our natural tendency to view what happened as having been inevitable. Our minds simply want to explain what happened and close the case, but the world followed but one path among many possible ones. If we do the Rain Dance and it rains, then to the human brain, it looks like the dance caused the rain. In the more rational part of our brain, we know it's not true. Yet we dance on.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“To maintain an open mind about the future, it is very useful to keep an open mind about the past.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“The location of an activity on the continuum provides guidance on how much reversion to the mean is necessary in making your predictions. High correlations imply limited reversion to the mean; the best estimate for the next outcome is something close to the previous one. Low correlations require substantial reversion to the mean, and the most logical guess for the next outcome is the average. Psychologists have demonstrated that we typically fail to regress to the mean as much as we should.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“When an activity is near the all-skill side of the continuum, you can predict reasonably well. The main issue to consider is the rate at which skill changes. A related point is that a useful statistic is one that is persistent, which means the current outcome is highly correlated with the previous outcome. At the opposite side of the continuum, prediction is very difficult. In cases where there's a drop of skill in a sea of luck, you need a very large sample to detect the influence of skill.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Barlow writes, “Associations discovered must be genuine ones and not due to chance. The mind that seizes on any random coincidence and sees it as a sign of an important permanent association will not guess right and is not conceded to be intelligent, though it may be at times entertaining.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Other psychological tricks we play on ourselves include the recency bias and sample size bias. The recency bias says that we weight recent information more heavily than a body of past evidence. As a result, we tend to overrate players who have done well recently even if they did poorly in the past. Sample size bias is related. The natural tendency is to extract more meaning from small samples than the data warrant. Psychologists who study these biases can teach us a great deal about why we struggle to sort out skill and luck.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Klarman has a wonderful line: “Value investing is at its core the marriage of a contrarian streak and a calculator.”35 He's saying that you have to be different from others and focus on gaps between price and value. This idea extends well beyond the world of investing.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“You have a margin of safety when you buy a stock at a price that is substantially less than its value. As Graham noted, the margin of safety “is available for absorbing the effect of miscalculations or worse than average luck.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“Your only chance of winning is to adhere to the rules that you know work. Your skill can't change the odds, it can only be applied to make sure that you play the cards properly.”
― Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

“While most of us are comfortable acknowledging that luck plays a role in what we do, we have difficulty assessing its role after the fact. Once something has occurred and we can put together a story to explain it, it starts to seem like the outcome was predestined. Statistics don't appeal to our need to understand cause and effect, which is why they are so frequently ignored or misinterpreted. Stories, on the other hand, are a rich means to communicate precisely because they emphasize cause and effect.”
― Michael J. Mauboussin, The Success Equation