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The Success Equation by Michael Mauboussin

Key Takeaways:

  1. When thinking of making a “luck” decision (not based on skill) we should base our decision on the base rate and not a single case

  2. Untangling skill and luck help to make better predictions

  3. People base predictions on how well they fit a story. Fail to see how reliable story is or how that story actually played out

  4. Luck is what is left when you remove all sources of skill

  5. 3 steps of skill building

  6. Cognitive

  7. Associative

  8. Autonomous

  9. Understanding difference between experience and expertise is crucial

  10. Dubois equation – Be very aware of sample size. Some patterns of luck/skill will not become apparent until you have an appropriate sample size. May win one hand against a pro poker player, but as you play more hands his advantage will appear

  11. More luck in activity leads to a quicker reversion to the mean. If above average results and it’s a lucky activity, quickly revert to average results

  12. Possible to over-test and the findings or relationship between two things is truly just luck. So many inputs that one of them is bound to show some relation to the other

  13. The closer people’s skill at a certain task is, the more luck effects the outcome

  14. Less skilled players want to introduce more luck into an activity

  15. Fluid intelligence – ability to solve problems never seen before

  16. Crystallized intelligence – ability to use knowledge gained through learning

  17. Checklists and deliberate practice can help in pretty much every situation

  18. Disruptors often start at the low end of their market and slowly improve their product and steal market share from the dominant players. (Toyota, mini steel mills)

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