![\"Better](\"http:\/\/upload.wikimedia.org\/wikipedia\/commons\/5\/5d\/Christopher_Columbus.PNG\" "\\"Columbus\\"")
"More lucky than good"<\/p><\/div>\n
Consider that you are on the board of a company of adventurers, and one of your captains, Chris Columbus, comes to you with a project.<\/p>\n
\u201cThe learned people all think that the world is flat. <\/span>Our R&D indicates that the world is round. <\/span>If you fund our voyage, we will be able to obtain the wealth of the Indies spice trade via a shorter route from the west instead of from the east.\u201d<\/p>\n One director chimes in, \u201cBut Chris, all the experts say that the world is flat, and that the western route is terra incognito. <\/span>Why don\u2019t you think you won\u2019t simply fall off the edge of the world?\u201d<\/p>\n Chris replies: <\/span>\u201cThe experts are wrong. <\/span>Here is my data. <\/span>Fund me, and glory will be ours.\u201d<\/p>\n According to the story we were taught in school, Columbus was not able to get money from the usual channels that might fund a sea voyage, and it was the bold bet by Queen Isabella that launched him toward America and legend. <\/span>In this story, Isabella was the perspicacious investor behind a brilliant, if misunderstood, CEO. <\/span>Her good bet paid off in the bounty of a New World, and all those investors who wouldn\u2019t back Columbus were fools who lost out.<\/p>\n What really happened looked like this.<\/p>\n Chris Columbus tells the board: <\/span>\u201cThe learned people say that the world is a very large sphere, about 20,000 to 30,000 miles around. <\/span>Our R&D indicates that the world is only about a third of that size around, meaning we can more easily obtain the wealth of the Indies spice trade via a shorter route from the west instead of from the east.\u201d<\/p>\n One director chimes in, \u201cBut Chris, if the experts are just a little more correct than you are, you will simply run out of supplies on your voyage, and die.\u201d<\/p>\n Chris replies: <\/span>\u201cThe experts are wrong. <\/span>Here is my data. <\/span>Fund me, and glory will be ours.\u201d<\/p>\n The real Columbus was not able to convince anyone with any learning that a western route to the Indies was shorter than the eastern route that was already established. <\/span>He was able to convince a Queen with more wealth than knowledge. She enabled him to set out on what, by all rights, would have been a voyage to oblivion. <\/span>Just as his supplies were running out, he stumbled upon the New World.<\/p>\n Boards of directors have basically one job\u2014to make good bets and avoid bad ones with their shareholders\u2019 funds. <\/span>This is a difficult job under the best of circumstances, which necessarily includes incomplete information and a limited range of capabilities, including the normal biases and dynamics of even well functioning groups. <\/span>On top of that, they must deal with the bane of businessmen everywhere\u2014luck.<\/p>\n In the mythical Columbus story, the adventurer and the Queen made a good bet, and won. <\/span>In the real story, they made a bad bet and won. <\/span>The problem for directors is that the world only sees results; it cannot see the quality of the bets that led to them. <\/span>Columbus\u2019s bad bet was redeemed by an accident of incredible fortune. <\/span>The Queen appeared to disprove the adage about a fool and her money, and the investors that wisely turned down Columbus\u2019s bet were ridiculed for a missed opportunity.<\/p>\n Obviously, each of us would prefer a board that makes winning bets rather than losing ones on our behalf. <\/span>But no one can dictate the outcomes of our bets. <\/span>The only thing we control is the quality of our bets. <\/span>By definition, good bets are more likely to pay out than bad ones. <\/span>A board that effectively distinguishes these things should be more effective. <\/span>But they can still lose. <\/span>The world isn\u2019t fair.<\/p>\n I have seen well-meaning boards make reasonable bets and end up lambasted on the front page of the Wall Street Journal for looking foolish. <\/span>I have seen boards that were in over their heads nonetheless feted when the wind found their backs. <\/span>The business world looks very different to those of us who are on the inside versus those reading the stories. <\/span>We know that the world is not fair, and deal accordingly.<\/p>\n My Columbus Day message is this: <\/span>We should always strive to be good, and hope we are also lucky. <\/span>In life, if not always in business, we are generally blessed with many chances to succeed or fail. <\/span>Over time, good luck and bad will tend to even out, and the quality of our decisions should show through. <\/span>Even then, though, luck has a say.<\/p>\n","protected":false},"excerpt":{"rendered":" Consider that you are on the board of a company of adventurers, and one of your captains, Chris Columbus, comes to you with a project. \u201cThe learned people all think that the world is flat. Our R&D indicates that the world is round. If you fund our voyage, we will be able to obtain the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,13],"tags":[],"class_list":["post-3227","post","type-post","status-publish","format-standard","hentry","category-governance","category-history"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/3227","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=3227"}],"version-history":[{"count":5,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/3227\/revisions"}],"predecessor-version":[{"id":3294,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/3227\/revisions\/3294"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=3227"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=3227"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=3227"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}