Review: Billion Dollar Lessons

Momentarily coming back to the world of business books, I read through Paul Carroll & Chunka Mui’s Billion Dollar Lessons: What you can learn from the most inexcusable business failures of the last 25 years on my recent long flight. The book, as the title would suggest, deals with failures and it’s always interesting to learn more about some juicy stupid mistakes 🙂

At the beginning, the authors point out that typically business books deal with successes and “no one looks at failures“. While I agree there’s way too much emphasis on finding real or, as it mostly is, imaginary reasons for success, “no one” looking at failures is not exactly true either. “In search of Stupidity” is one good example of work specifically looking at (high-tech) failures.

The book then goes on to identify seven “failure patterns”, including things such as “Illusions of synergy” and “Faulty Financial Engineering”. While handling them, the authors provide what turns out to be the most entertaining and enlightening part of the book: numerous case studies how badly things went wrong in many companies. The treatise included many case studies unknown to me, and one has to admit it’s always interesting to read about major blunders. The authors are, rightly so, quick to point out that the people who were in charge of the failed companies or projects were not, in fact, idiots. That’s one of the key lessons of the book – without carefully and coldly analytically trying to avoid some of the pitfalls, it’s easy for anyone, even a very smart person, to end up flying a metaphorical plane straight into a mountain.

Some juicy details and case studies are given from “classic” mistakes such as mistaking marketing for market research and failing to acknowledge that acknowledging a threat is, in fact, not the same as dealing with the threat. Another interesting theme running through many of the cases is the loss of resilience in modern business – many bets are so highly leveraged that even slight movement in the wrong area (such as, in one case, a very slight drop in national death rate) can have catastrophic consequences to the business. Of course, this goes hand in hand with the inability or unwillingness to do some simple sensitivity analysis of those highly leveraged bets.

Throughout the book, Billion Dollar Lessons highlights many things that are very wrong in the world of business, from bowing to analysts and investors expectations to dangers of financial engineering and how many big decisions are made very emotionally with little or no actual supporting evidence. Towards the end of the book, then, many of these psychological shortcomings are identified and methods developed to reduce the risks associated with them. This part, while probably the most valuable to anyone running a business, is not exactly novel – the critical importance of Devil’s Advocates, of fostering and protecting and valuing diverging opinions and all the related issues have been identified years ago, and many have been highlighted by well-known authors such as Bob Sutton.

Given this, I would say that Billion Dollar Lessons is a great book for anyone not yet convinced of the value of diverging opinions and having devil’s advocates and is highly recommended reading. For people already familiar with this key lesson, however, it’s a less critical read – a very entertaining and interesting read, but not that important. This is not to say there are no other lessons in the book, but that’s what the main message boils down to.

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