Hundreds of pieces will soon be written on what business “leaders” can learn from Leicester City’s triumph. I suspect, though, that the biggest lesson will be ignored – that it vindicates William Goldman’s famous remark that “nobody knows anything.”
City’s players are, mostly, a ragbag of rejects from modest clubs managed by a man whose appointment was greeted with consternation. Very few people took up those 5000-1 odds against them winning the league.
Although such improbable victory is unheard of in football, it is not so unusual in other spheres. Elvis Presley was told to go back to truck driving; George Lucas’s proposal for Star Wars was turned down by Universal and United Artists; and J.K. Rowling, Dr Seuss and C.S. Lewis all got rejected by publishers before going onto to sell gazillions. There’s a long history in business of predictions being horribly wrong.
In fact, in business more than in football, success is unpredictable. As Alex Coad has shown, corporate growth is largely random. For this reason, the performance of venture capitalists varies enormously.
In this sense, Alex Bellos might be right: all that City’s victory tells us is that we under-rate the importance of randomness. City won the title despite having less possession and fewer shots on goal than their opponents. They also had fewer injuries than most teams, and a narrow average winning margin. In these senses, they might just have been lucky.
However, there might be another reason why nobody knows anything. It is a cliché that the City team is more than the sum of its parts. This directs us to an important possibility - that even in quite small groups such as football squads, emergence matters. Some complex systems can display properties which their component parts do not. For example, Alan Kirman shows that demand curves can slope downwards in an aggregate market even if individuals’ behaviour shows no link between price and demand. And Shyam Sunder shows that asset markets can be informationally efficient even if many participants are stupid.
This tells us that what matters is not (just) individuals’ qualities, but interactions between them. City’s players might have been unheralded before this season, but they seem to bring out the best in each other by playing to each others’ strengths.
What matters in hiring, then, is the match between the individual and the organization. City seem to have got this spectacularly right. But many organizations aren’t so lucky. As Boris Groysberg says, “building capability by hiring stars does not work well.” This can be because there’s a lack of fit between the star and his colleagues, or because what looked like star performance was in fact due more to organizational capital than individual brilliance.
Herein, though, lies a problem: it might not always be possible to tell in advance whether you have the right match or not. The fact that there is usually a strong correlation between teams’ wage bills and performance suggests not*: it tells us that it is very rare for teams to succeed by hiring cheap players who are in fact good fits with each other.
This warns us that City might have simply gotten lucky in finding players who are good matches for each other, and perhaps it is only the hindsight bias that gives us the impression that they knew what they were doing.
This, though, only reinforces my point – that maybe the lessons of City’s victory are that even experts know less than they think; that success is unpredictable; and that organizations are complex and so less controllable than bosses think.
But then, maybe in saying all this I am following that old habit, of interpreting all events as corroboration of my prior beliefs.
* subject to the caveat that the correlation might reflect causality from performance to pay.