Humans love stories. They're how we make sense of the world.
Yet storytelling can be a dangerous thing when we allow the simple narratives to seduce us into false conclusions.
As we seek meaning in the events we observe, we often fool ourselves into taking correlation for causation, and causation for character.
Let's take a simple example.
Right now, I'm reading Judith Harris' "The Nuture Assumption," a groundbreaking book that persuasively argues that the stories we tell ourselves about parents and children are dead wrong.
Specifically, researchers have found that healthy, happy children tend to come from families that allow freedom, yet set limits (gee, isn't that an easy prescription to follow!). Harris shows her humor by dubbing this the "just right" approach, as opposed to "too strict" and "too loose."
Based on this research, we generally conclude that this enlightened parenting style is the cause of the children's success (correlation to causation), and that this means that the people who practice the style are "good" parents (causation to character).
And we'd be wrong.
As Harris points out, "environment" is critical to child development, but "environment is not synonymous with "nuture." In fact, there are two equal factors that account for child development: genetics, and their peer group, and the data bears this out.
Yet despite the evidence, parents (and I am no exception) have continued to obsess about our role in our kids' development. Why? Because it just sounds right. Because it's something we can do something about. And because we'd like to believe that we have more influence on our beloved son or daughter than that annoying twerp from across the street, even if it means taking the rap for any problems they might develop. (Side note: This is why we should be really really worried that Britney Spears is now hanging out with Paris Hilton. But I digress....)
The same danger applies to business as well. How many times have we seen how wealth and success lead people astray?
Let's say you read about entrepreneurs who hit it big, and you see that lots of them are Stanford dropouts. You might therefore conclude that the entrepreneurs succeeded because of their intelligence (correlation to causality), and that Stanford dropouts have the "right stuff" to be entrepreneurs (causality to character).
Never mind the fact that Stanford's proximity to the world's single largest source of venture capital and the world's leading technology cluster might have something to do with it.
Or perhaps more pointedly, think of the many ballyhooed entrepreneurs who were feted as geniuses after a freshman success, but never delivered a sophomore hit. Did Mark Andreesen and Sabeer Bhatia suddenly lose 50 IQ points because LoudCloud and Arzoo were duds?
The true answer is that neither is a genius or a bum (Note: I do not personally know either of them, so this is largely supposition). When Netscape and Hotmail made them millions, it simply made them rich, not smart. And when later companies failed to generate the same results, it simply made the less rich, not stupid.
Stories continue to be powerful. You should employ them in your business (claiming you started a company to sell Pez dispensers? Brilliant PR!), but recognize that our very human nature is to give too much credit to causes and character, and too little to chance. Never believe that a fat wallet makes you smart, or that a lack of funds makes you dumb. Chances are, the wheel will turn again before too long.
P.S. This post is a sidebar to a future essay I plan to write on the evil of righteousness, the morality of doubt, and why religions are so tragically easy to turn into tools of evil. Watch for it in the next few weeks.