There seems to be a principle in the universe that uniquely drives people to failure based on previous success. I’ve seen it time and time again. Someone is successful, but then in repeating or attempting to repeat that success, ends up at a place of catastrophic failure. Allow me to share some examples.
We’ve all seen someone in the creative realm—be it a film director, musician, writer, painter or other artist—who has some spectacular breakout success. The world applauds loudly, and the artist is showered with recognition and sometimes even money. This is a very heady thing for an artist, especially for anyone who has labored in obscurity and poverty for a long time until they arrive at the breakout that seems to perfectly capture the spirit of the times and deliver a unique piece of art and/or entertainment. Then the artist proceeds to repeat the theme over and over again ad nauseum, losing his audience and the critics until finally becoming a parody of his or her public persona and the punchline of a bad joke. I won’t name names, but I really don’t think you need me to. It’s just sad.
My second example comes from the world of business. Someone comes up with a new business model and creates a new company that gets a lot of attention and investment, possibly has leading to a successful sale to a larger company or even an IPO. Fast forward a couple years until the founder’s non-compete wears out and the person starts up essentially the same business. And it fails miserably because the world has moved on. More commonly the failure comes not in a new business, but as a once successful business fails to adapt and gets quickly passed by a new competitor as the world changes. The examples in the technology and Internet space are many. Think Blackberry, MySpace, AOL, WordPerfect, DEC, Atari, Lotus 1-2-3.
On the personal career side this same principle often results in the Peter Principle—where a person is doing their job well and is promoted into a new job that is entirely different and where they fail miserably. Being promoted to your highest level of incompetence. You end up with an organization of people operating incompetently because they were promoted based on previous success in different roles. Dystopia indeed. One area that seems especially prone to this failure is sales, where the skills needed to be an excellent salesperson are at best adjacent to the skills needed to be an excellent sales manager, and at worst entirely different. We’ve all had the misfortune of working for Peter, haven’t we?
On a macro level the human species exhibits evidence of the same principle of becoming a victim of its own success. Humans have been successful at conquering the environment, getting a leg up on disease, driving huge productivity gains in agriculture, and multiplying. To the point of killing the very planet on which we depend. Think on this: experts estimate that 6.9 billion people are alive today. This should reach 8 billion 2025 – 2040, depending on your assumptions. That’s a whole lot of people. For comparison, here are some commonly used estimates of historical population:
10,000 BCE 1 million
5,000 BCE 15 million
CE 1 200 million
CE 1000 310 million
CE 1800 978 million
CE 1900 1.6 billion
CE 2000 6.1 billion
If this doesn’t scare the beejeezus out of you, I don’t know what will. Now those of you who paid attention to high school history, you may remember the Chicken Little of the 18th century Richard Malthus, who argued (incorrectly) that the world would run out of food in the mid-19th century based on then current increases in population and food production. Along came some enormous gains in productivity thanks to productivity gains stemming from improved farming techniques, hybrid plants and the application of massive amounts of fertilizer (aka the “green revolution”). Lest I be accused of Malthusian scare tactics, let me just say that whether your view on global warming are informed by science or by the the superstitious dribble and pseudo-science of biblical inerrancy you ought to be concerned to the point of action. I have thought out loud that the earth would do well to shrug off about 5-5.5 billion people through a combination of drought and pestilence, but then I’m often left babbling in the corner of a cocktail party. All of this to say that I offer the overpopulation of the earth as perhaps one of the most spectacular examples of success leading to catastrophic failure.
To take it back down to the immediate and personal, let me talk about investing (since Quentin asked me to blog about money and finance, after all). If you’ve read an investment prospectus before, you’re familiar with the words “past performance is no guarantee of future success.” And yet most people look at the 401k options available to them, look at the last 12 months performance and plop a bunch in the highest performing fund. Mistake! While there is money to be made by predicting the madness of crowds (also known as “momentum investing”), it’s far better to have a view of the future that is fully informed by up and down cycles, is nicely allocated across asset classes, with a view to the macroeconomic forces that will drive performance in one asset class differentially against all others. If you believe (as I do) that asset class performance is a pendulum, you will look at classes that have high performance and figure out what will make them return to the mean. Similarly you will look at asset classes that have underperformed, and see what might improve those. This is a slightly more contrarian view of the world generally and markets specifically.
The bottom line is you must understand the past, but then form a view of the future, and let that guide all of your decisions. Do not become a victim of your past success in any area of your life. Be open to new information. Try new things. Understand what has changed in the world. The surest path to failure is to draw inward as time passes. Instead reach out and expose yourself to new ideas, new things, new people. Never repeat yourself or become a victim of your own success.
And stay one step ahead of the next guy (or 6.9 billion guys).