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Last Updated: Monday, 21 May 2007, 23:07 GMT 00:07 UK
Does luck trump skill in success?
By Evan Davis
BBC economics editor and presenter, Dragons' Den

Levi Roots with his sauce
Levi Roots' Reggae Reggae sauce is based on an old family recipe
Reality shows on television don't always like being given that label. It's kind of demeaning to be pigeon-holed into a rather conventional genre, with some dubious company.

But there is one important way in which Dragons' Den seems to deserve the "reality" tag perfectly.

It is that the programme, like real business, is unpredictable.

The most obvious example on Dragons Den has been the success of Levi Roots, with his Reggae Reggae Sauce.

Despite building his pitch on the mistaken premise that he already had an order for two million litres of his sauce, which the Dragons noticed was in fact an order for only two thousand kilos, Levi still managed to secure an investment and even better, to get his sauce into Sainsbury's.

Surprise factor

But if the programme can be delightfully surprising, it is simply reflecting the fact that surprises are one of the most important features of real business life.

Dragons Den chairs
The Dragons' Den, like real life, is unpredictable

Perhaps the best historical example of this is the classic business school case study of the origins of the Post-It note.

It emerged rather haphazardly from the invention of a glue which didn't appear to work very well and had been put on the shelf six years earlier by US manufacturer 3M.

A potential application for the adhesive was concocted by an employee who found it could solve a problem he'd been having with flapping hymn book pages.

Only when Post-Its were distributed to secretaries at the company was it realised that it was sitting on an office phenomenon.

To those trying to make a go of it, it is often frustrating that there can be such a fine line between success and failure in business.

For broadcasters, of course, unpredictability is a great advantage. It enhances the drama.

But unpredictability is what makes entrepreneurship an interesting challenge - it is not an exact science to create a successful company, and life would be duller if it was.

Entrepreneurs need to live with unpredictability, understand it and not let it get them down.

The role of luck

In his excellent book, Fooled by Randomness, Nassim Nicholas Taleb argues that throughout life we are always understating the role that luck plays in our fortunes, and overstating the degree that humans determine sequences of events.

He thinks it is a fatal error.

Top business leaders come to believe in their own power, failing to realise they have been substantially helped on the way by good fortune.

Indeed, Taleb thinks that we are almost genetically programmed to think that it is we who determine what happens in the world, rather than the world determining what happens to us.

"Just as one day some primitive tribesman scratched his nose, saw rain falling and developed an elaborate method of scratching his nose to bring on the much-needed rain, we link the success of a company with the appointment of a new president at the helm," he says.

We can't help ourselves in thinking that way.

Hindsight

Freddie Laker
Freddie Laker pioneered cheap flights across the Atlantic

But it's far too easy to adopt hindsight, and to assume that everything that has happened in the world was somehow inevitable - from the success of the iPod to the success of no-frills airlines and Harry Potter.

In fact, with a bit of imagination, in each of these cases you can easily visualise an alternative world where the successful product "inevitably" failed.

  • Where the iPod was too expensive to compete. (No-one wanted to pay that much for fancy design. Surely Apple should have known that?)
  • Where Harry Potter novels bombed. (Children don't want silly fantasy, it's more realistic stories they like now)
  • Where those no-frills airlines all went out of business. (Didn't they learn the lessons from Freddie Laker and People's Express, the early low-cost pioneers who went bust?)

One of the most helpful business skills is to be able to think in advance about the alternative worlds that might come to pass, and for each of those possible futures, to foresee the discussions people will have with hindsight about them.

Planning for the unpredictable

In other words, even if you can't predict the future, it's great to stretch your mental agility by thinking through several possible future scenarios and to work out why - after the event - each will have seemed inevitable.

Meanwhile, don't let my argument that business - or Dragons' Den - is unpredictable fool you into thinking it is all random.

The Post-It note had some lucky breaks, but it only succeeded because it really did offer something useful.

And Levi Roots' investment was not attributable to the throw of a dice, but to his personality, which translated into an easily-marketable brand.

Face it: business has that curious combination of chance and obvious skill.

And this comes down to there being tipping points in business.

For a company, overcoming a small threshold can sometimes make a huge difference to the prospects.

And it also emerges from the fact that firms can succeed or fail in a lot of different dimensions (marketing, finance, logistics, human resources), but we never know which dimension will happen to be the one that really matters.

Business is not exactly chaotic in the way scientists might talk of fluid dynamics as chaotic.

But it shares the characteristics of chaos with those systems like the weather, that combine apparent randomness with the order of the physical world.

Unpredictability is not something you can wish away - particularly in a young business. It is simply something for which you do your best to prepare.

And you know what? You can say much the same about unpredictability in the Dragons' Den.

No wonder it's called reality television.

Have you got what it takes to convince the Dragons that your idea is simply the best?

BBC2 are looking for entrepreneurs to take part in the next series of Dragons' Den.

All you have to do is apply...

email: dragonsden@bbc.co.uk
call: 09011 110 825 (calls cost 25p from a BT landline, other mobiles and operators may vary)
website: www.bbc.co.uk/dragonsden



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