Tuesday, November 26, 2013

Early Indications November 2013: What makes a great business book?

I recently read Brad Stone's book on Jeff Bezos and Amazon entitled The Everything Store. It's a good job of reporting on a topic of broad interest, given Amazon's unique history and powerful position. I learned a lot of facts about the key people, filled in some gaps in my understanding of the overall timeline, and heard personal impressions from some of the key people involved. I couldn't point to any particular page and say that I could have done it better.

And yet I wanted more. Stone does a fine job on the "what" questions, he has interviewed perhaps more of the principals than anyone else, and the writing is clear throughout. Why then does this not feel like a great business book? That's where my thinking turned next, and what I will discuss this month: after analyzing some commonalities among books that have changed my thinking, I divide my pantheon into two different camps then try to identify some common aspects of "greatness."

OK, professor know-it-all, what are some great business books? Let's start there, because the alphabetical list shows what I have found sticks with me over the years: hard-won narrative lessons, and deep conceptual muscle.

Peter Bernstein, Against the Gods

Frederick Brooks, The Mythical Man-month
Alfred Chandler, The Visible Hand

Yvon Chouinard, Let My People Go Surfing

Clayton Christensen, The Innovator's Dilemma
Annabelle Gawer and Michael Cusumano, Platform Leadership

Tracy Kidder, The Soul of a New Machine

Marc Levinson, The Box

Michael Lewis, Moneyball and Liar's Poker

Carlota Perez, Technological Revolutions and Financial Capital

Honorable mention (the authors probably wouldn't call these business books):

Atul Gawande, Better

Bruce Schneier, Secrets and Lies

Nassim Taleb, The Black Swan

What's missing here? I don't know the Drucker corpus well enough to pick a single volume there. I've never had much Velcro for self-help/personal effectiveness books, so that wipes out a lot of people's favorites, including Stephen Covey. I've admired Ron Chernow (Rockefeller) from a distance, so one day that might go on the list. Isaacson's Steve Jobs biography was rushed to market and thus too long. I never read Andy Grove's Only the Paranoid Survive in the day, but maybe it bears a second look.

There's another category of exclusion, the "we found the pattern of success" books that do no such thing. The exemplars here are Good to Great and In Search of Excellence, the Tom Peters/Robert Waterman sensation from 1985 that helped bring McKinsey to the front page of the business press. Taking the more recent book first, of Jim Collins' 11 "great" companies, only 2 (Nucor and Philip Morris) seriously outperformed the S&P over the following decade. Most of the other nine generally reverted to the mean, or in the case of Gillette, got bought. Most telling, just as Gary Hamel bet his reputation on Enron in his book Leading the Revolution, Collins got stuck with some outright clunkers, most notably Circuit City and Fannie Mae, while Pitney Bowes lost half its market cap. Did they somehow board the wrong people on the bus all of a sudden? I strongly doubt it. As for Peters and Waterman, Business Week published a cover story only TWO YEARS AFTER PUBLICATION showing how many of the 62 "excellent" companies were nothing of the sort. Retrospective pattern discovery at the company level, rife with cherry-picking, has yet to reliably predict future performance (in book form at any rate: I can't speak to what happens inside Berkshire Hathaway).

Ah, but what about the classic strategy tomes? Porter's Competitive Strategy, Hamel and Prahalad's Competing for the Future, and maybe Blue Ocean Strategy have their place, of course, but they all felt like exercises in hindsight bias rather than scientific discovery: the subtitle of Porter's book is, justifiably I think, "Techniques for Analyzing Industries and Competitors" and nothing to do with action. I have yet to see a strategic move in the real world that felt deeply linked to any of these efforts (that doesn't mean there are none, just that I don't see any). There's an old joke that sums up this orientation:

How do you spot the strategy professor at the racetrack?

He's the one who can tell you why the winning horse won.

In contrast, my personal list of the best business books veers away from such methodologies in one of two ways. First, a skilled writer, a self-aware founder/principal, or a combination of the two tells a story rich with personal experience in a highly particular situation. Second, a deep thinker creates a powerful conceptual apparatus that endures over time. (Moore's Crossing the Chasm was a near-miss here.)

Many of these books are striking in the modesty of their origins: Christensen started by knowing the disk drive industry inside and out, while Gawer was able to understand platforms after getting great access at Intel to see the company's handling of the USB standard during her Ph.D. research. Tracy Kidder -- one of our era's great storytellers -- compellingly documents the creation of a computer that never made it to market.

The best first-person tales were not unabated triumphs: Chouinard nearly lost Patagonia after some serious missteps, while Fred Brooks learned about software development the hard way, shipping an IBM operating system late. At the same time, some of the big brains attempted syntheses of stunning breadth: the whole idea of risk, in Bernstein's case, or the modern managerial organization, for Chandler. Both books, I suspect, were decades in the making.

On to the fundamentals: what makes a great business book? I would submit that it have some mix of four qualities:

1) Honesty

It's easy to paper over the messy bits; "authorized biographies" can be so hagiographic that all the sugarcoating makes one's teeth hurt. In contrast, the humility of a Fred Brooks or Yvon Chouinard is refreshing, frankly acknowledging the role of luck in any success that has come their way.

2) Human insight

Business, taken only on its own terms, can be pretty boring. But as part of "life's rich pageant," as Inspector Clouseau put it, business can become part of themes more enduring than inventory turns or new market entry. The best books connect commercial success to aspects of human drama.

3) Continued applicability

The retrospective nature of book publishing can be a curse, in the digital era particularly, but it also means that great research and storytelling stand up over time. A model should continue to help organize reality for years after publication, and the likes of Bernstein, Chandler, Christensen, Levinson, and Perez have earned their stature by delivering not just an investigation but a way of seeing the world.

4) Subtlety of insight

All too often, business books worship at the altar of the obvious. Acknowledging the facts of the situation and then deriving deeper principles, either by astute observation (hello Michael Lewis) or by rigorous scholarship, is a gift.

In the end, we find a collection of great business books illustrate a conundrum: just as with business itself, knowing the principles of business book greatness makes it no less unlikely that a given individual will achieve it. Luck still has something to do with it, and I doubt that most artists wanting to create a masterpiece ("the Great American Novel" for instance) actually did it.

Yet for all the dashed hopes of finding a science of success, and for all the ego trips and bad faith, there are times when stories from the arena of commerce transcend the genre and deliver gifts of insight far more meaningful than simply how to make more money.