🔤 Conditions matter
|Mike Dariano||Nov 15, 2019|
Every person, family, and organization exists within a set of conditions (a system) and these conditions matter. Over a long enough period, we call the reaction to a condition 'evolution'. Different species of Galapagos finches, for example, rise and fall with the amount of rain. Sometimes the conditions lead to bigger birds with stronger beaks and sometimes the conditions lead to smaller birds with thinner beaks. The bigger beak birds burgeon because more rain leads to bigger seeds which the bigger birds gobble up. But size as a strength becomes a weakness during periods of less rain.
The field of Behavioral Economics is built on the idea that conditions matter and various Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (read: economics Nobel prizes) have been awarded to researchers who look at how much conditions matter and in what ways.
The most famous is Daniel Kahneman for his work on prospect theory and how decisions can be framed. People tend to be risk-seeking to avoid losses and risk-avoiding to protect gains.
For example, choose one:
A 99% chance to $5,000,000 or
A 20% chance to win $25,000,000.
Generally, people choose the first, almost sure thing, rather than go for broke. Though the second option has a higher expected value.
That conditions matter so much makes it difficult to tell when a person does (or doesn't) do well. This was the case for Michael Ovitz, who decades after starting, leading, and running the most successful talent agency in Hollywood (CAA), went to work for Michael Eisner at Disney. Former colleague David Geffen said, "As good an agent as Mike was, he was not a good partner. And he was incapable of being a partner, as was demonstrated when he went to Disney with his closest friend in the world, Mike Eisner, who fired him. He can't be a partner. It isn't within his makeup."
This sentiment was echoed by Bob Iger who said Ovitz at Disney was just the wrong person in the wrong place at the wrong time. Conditions matter.
Sports is another domain where it's easy to see how much the conditions matter. A combination of teammates, coaches, and schemes means that different players can be a success in different organizations.
One of the most successful organizations is the New England Patriots and a former scout recalled how his boss, Bill Belichick treated him after a draft. Recalled in the book, Patriot Reign, the scout said:
"If I said a guy was a first-round pick, the Colts picked him, and he turned out to be a bust, they (Bill Belichick and Scott Pioli) wouldn't have looked down on me. They wouldn't' have said I was a bad grader because that player in the Patriots system might have been successful."
Conditions exist all around us and make it all the more difficult to make predictions, evaluate people, and judicial decisions. It's a cause for extra empathy and small bets.