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Tag Archives: success

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For human capital formation, 10,000 hours could be crucial.

I was at Lincoln Center several nights ago. Listening to a wonderful performance of Chopin’s Polonaise, I wondered how much the pianist practiced. That took me to Malcolm Gladwell.

In Outliers, Gladwell says that practice is a crucial component of brilliance. Concluding that you need 10,000 hours of practice to display genius, he says that prodigies and unusually high I.Q. individuals are not automatically great. They have to work at it.

Mozart, he explains, had been composing for 20 years before he produced his greatest work. With the Beatles, he reminds us of the hours, 8 hours a day 7 days a week, during which they performed in small Hamburg, Germany cafes. We could also add YoYo Ma, Bill Gates and Wayne Gretsky to the 10,000 hour list. Maybe Tiger Woods also?

The 10,000 hour theory originated with a psychology professor at Florida State University. Looking at musicians, all with talent, Dr. K. Anders Ericsson realized that practice time determined who would excel. Those who had accumulated 10,000 hours of disciplined solitary practice time by age 20 were the “prodigies.” Meanwhile, 8,000 hours meant less expertise and those with 4,000 became amateurs and music teachers.

Still though, other psychologists point to studies that contradict the rule. They say that practice certainly helps. But, “working memory capacity,” for example, can make a huge difference. A musician with more innate working memory capacity will fare better than one with less, no matter how much practice each one accumulates.

And finally, all of this takes us to “The Dan Plan.” Reading about the 10,000 hour rule, Dan McLaughlin quit his job as a commercial photographer to devote 10,000 hours to golf. Although he had never lifted a club, he was convinced that a disciplined regimen would take him to the PGA. Having started during 2010, he projects hitting 10,000 during 2016.

Our bottom line? Having 10,000 hours of human capital formation requires a fairly affluent society. You need lessons, a supportive family and special programs and teachers.

Sources and Resources: A great book, Outliers  introduced me to the 10,000 rule and here, Gladwell presents an excerpt. From there, I looked at Dr. Ericssen’s work and this NY Times article that describes researchers who disagree. But if you just have a few moments, do read “The Dan Plan.” to see how he defines which hours count toward his 10,000, which are ancillary and the progress of his “human capital formation.”

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Your human capital might be affected by your birth date.

In Outliers, Malcolm Gladwell suggests that children born during the Great Depression had an advantage. Economic contraction meant couples had fewer babies. A cohort with fewer children, 1930s babies enjoyed smaller classes and better teachers. Because they were unable to get hired by colleges, over qualified teachers swamped the high schools. As a result, depression babies were more likely to be professionally successful.

Fast forward to the Great Recession. One group of adults called the boomerang generation moved back with their parents. Facing financial insecurity, others also postponed marriage and put off parenthood.

By 2011, the birth rate per 1,000 had plummeted. While the map below is for 2010, it reflects a decline in birth rates that began with the Great Recession, Dec. 2007-June 2009.

Returning to the Gladwell hypothesis, we can ask if the Great Recession will echo the Great Depression. For those who were born from 2008-2011, will their human capital be better nurtured through smaller classes and better teachers?

Births Per 1,000, 2010

Births Per 1,000 in 2010

Births per 1,000

Sources and Resources: A page turner of ideas and facts, Outliers is the wonderful book that introduces a slew of thought provoking hypotheses about success. It took me to statistical web sites here, here and here for my birth rate stats and map. You might also want to look at this Pew Research report.

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During his 2012 Princeton Baccalaureate Address, financial writer Michael Lewis describes a college psychology experiment in which students were divided into teams, each composed of 3 people with a randomly assigned a leader. Given a social problem like drinking or cheating, the teams were asked to brainstorm a solution. Then, 30 minutes after beginning, 4 cookies were brought to each group.

3 people, 4 cookies.

Who got the extra cookie?

Lewis tells us that in every group, the leader, the person who was arbitrarily selected, “grabbed” the cookie and ate it with gusto.

As Lewis continues:

“This leader had performed no special task. He had no special virtue. He’d been chosen at random, 30 minutes earlier. His status was nothing but luck. But it still left him with the sense of entitlement that the cookie should be his.”

Connecting his life, his books, CEO pay and Wall Street excess to his cookie story, Lewis focuses on how luck relates more closely to success than people admit. As he points out, for Princeton grads, their parents, their affluent country and their prestigious university all reflected some luck in their lives that then increased, “their chances of becoming even luckier.”

So, he asked, when life presents you with that “fourth cookie,” will you grab it?

Here is the 14 minute video of his excellent address and here is the transcript.

Also, you might find economic Nobel laureate Daniel Kahneman’s favorite equations interesting:

  • success = talent + luck
  • great success = a little more talent + a lot of luck

 

In Thinking Fast and Slow, Dr. Kahneman then uses some surprising golfing statistics, pp. 177-179, to illustrate his point and his discussion of our regression to the mean.

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In Las Vegas, the 2010 World Series of Poker was composed of 32,000 players and 57 separate tournaments. For the final event, $9 million was at stake. Freakonomics economist Steve Levitt and U. of Chicago law professor Thomas Miles studied the poker world series to determine whether luck or skill created winners.

Their conclusion? Poker is a game of skill.

The best players have more than a 30% return on their investment (ROI). Average players? The ROI is -15%. Translated into dollars and cents, that means the return to skill, per player, per event averaged over $1,200. For the less skilled, the loss was more than $400. (The ROI compared the tournament fees to amounts won or lost.)

Our bottom line?  Similar to poker, in business, skill matters most. Using Bill Gates and Southwest Airlines as examples, this NY Times essay illustrates that skill, discipline, and knowledge turn good and bad luck into success.

The Economic Lesson

The NY Times piece says yes, Bill Gates was lucky. However, Mr. Gates was successful because his skills, decisions and willingness to persevere optimally converged. As a lesson for all aspiring entrepreneurs, Bill Gates depended on a lot more than luck.

An Economic Question: Which characteristics might be necessary for a successful entrepreneur?

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