Mark Creasey

Outliers, Ten Thousand Hours, and Seven Critical Human Errors by Adam Howard


Economic Update

Last week’s Update finished with a couple of tables from a recent Dun & Bradsteet survey of small to medium size business owners about their thoughts and feelings regarding the prospects for the 2014/2015 financial year.

The entire report actually concluded that the future looked bright, largely based on the concerns/results included last week, which I thought a little strange.

Why, you ask?

Well, in order to explain I have applied a median, or middle.

The areas of concern were fairly understandable; the respondents were primarily concerned about cash flow (32%) and the value of the Aussie dollar (16%), with some concern about wage costs (2%).

So, a concern about cash flow, at least from a banker’s perspective, is a concern about revenue; its volume and velocity.  Volume, the amount, and velocity, how fast and often it flows.

Where is the demand coming from and is it growing or falling?  If and when are my debtors going to pay me?

Fairly raw and visceral concerns.

Followed by the value of the Aussie dollar, which at mid 90s against the US dollar is about 30% above its long term value of mid 70s.  Anyone wanting to buy Australian goods or invest in Australia at the moment has to be pretty keen to do so as its going to cost them 30% more than it would normally.

What is a concern about the value of the Aussie dollar really about? Demand!  How is the high cost of buying my goods going to impact demand?

My summary would be nearly 50% of business owners surveyed were concerned about demand levels and whether they were going to get paid.  Those don’t sound like the concerns of people who are overly positive.

Next, the results regarding barriers to growth. 32% responded they saw no barriers to growth, with the remaining 18% to our median saying they felt slow demand growth was the largest barrier.  That sounds pretty positive, right?

Well, a further 9% responded they were undecided about barriers to growth.  I would be inclined to say a large proportion of those saying they saw no barriers to growth were actually saying “I dunno…”

Once again, my opinion would be maybe 40% of respondents were actually undecided on any barriers to growth, with the next highest response being slow demand growth.

Bottom line, primary concerns are about demand, with demand growth also a primary barrier to growth.

But the overall report was quite positive.  What the….?

I am not a pessimist, just a realist, and I talk to a lot of people, and the sentiment seems to be that things are difficult and they are likely to stay that way for a while.

PLEASE correct me if I am wrong.

Unless of course you get struck by lightning, like 24 year old Kelsey Zachow who this week won a $66m lottery in the US.  Single mum with two jobs as an admin assistant and bartender and BANG!  It all changes.  That’s luck, baby.

Which brings me back to a topic raised in last week’s Update; our Silver Bullet Culture.

There seems to be a common misconception that innate talent and luck leads to spectacular success with limited need in the purists’ view for much hard work.  As Australians we laud those who succeed with this seeming lack of effort, with this particularly noticeable in the sporting arena.

Think Shane Warne.  Tubby, mullet wearing, smoking Warney who becomes the greatest bowler in history just because he had the gift.

Or what about Pat Cash?  Could have been an AFL footballer, but chose tennis and with little training and just his innate athleticism went on to win Wimbledon.

Those are the myths.

In business circles, what about our own Michael Malone, the founder of Iinet?  Started the business in his parent’s garage and 20 years later he was miraculously a multimillionaire.

And the mining industry has them by the bucket load, but the one who always springs to my mind is the prospector Mark Creasey, who got lucky and found gold, and then nickel. 

This misconception fits very well with Australian egalitarianism where we believe, culturally, that we are all equal.  If anyone rises up we have a tendency to lash out, and cut down the tall poppy. 

The exceptions are those who are born with innate talent and/or whom experience amazing luck, and this belief system means that social and financial mobility are still very much possible in the Lucky Country.  Where you can start with nothing, living in the back of beyond, until you catch your lucky break and end up a gazillionaire.

Sound familiar?

We share this cultural belief with the US (the land of opportunity), and I think it is born of both nations being newly colonized by the white man, with less established class lines and more perceived opportunity.

And that’s where my point lies.  Opportunity.  We have confused opportunity with blind, dumb luck, whereas most real opportunities come disguised as hard work, which also feeds into my comment that money is a poor reason for doing anything.  If it’s only for the money, it’s unlikely you will enjoy it much, and the work required to succeed will be painful and hence overwhelming.

Opportunity and capitalising on that opportunity are two different things.  Gary Player, the dour South African golfer, once quipped that he found it funny that the more he practiced, the luckier he got.

I recently read Outliers by Malcolm Gladwell, which is poorly marketed as a book about success; it’s actually about seeking to uncover why extraordinary events occur.  Below is a standard distribution curve used to show IQ distributions, which is often used to display probability.  The distribution is meant to be as follows:

  • 65% of a population falls within the main body of the bell.
  • 12.5% each fall within the bell’s shoulders; and
  • 5% each fall in the tails.

An outlier is a group or individual that falls well outside the standard bell curve’s range.


Basically, the following are present if spectacular results are to occur:

  1. A strong work ethic;
  2. A love of the task or subject matter;
  3. The opportunity to build a base of 10,000 hours of practice; 
  4. A series of extraordinary opportunities; and
  5. A demographic or technological event or epoch that coincides with the individual's entry into a market.

Another point made is that in instances of catastrophic failure (an airplane crash or similar) there are on average 7 critical human errors made that create or feed the failure.  

I think it's reasonable to assume that on the flip side, for spectacular success there needs to be a similar number of critical moments which feed the success; which lead to an exponential or scalable leap forward.

Now, it's unreasonable to hope we will all fall into the category of outlier in the global sense, but I think it's completely reasonable to use the above points to help become an outlier in your given sector or industry.  

Before I go on, what about that 10,000 hours of practice? If you break it down its 20 hours of practice every week for 10 years, or 3 hours of practice a day, 7 days a week for 10 years. 

It's easy to understand if I use sports as an analogy. The Audiophiles daughter, who is 7 years old, was identified as naturally talented at gymnastics and was selected for an AIS training squad.  She enjoyed it and had good natural balance and strength. 

The ageing curve, which identifies peak performance ages for different athletes, shows the peak performance age for Olympic gymnasts is mid to late teenage years, so The Audiophile's daughter was promptly told her training program would start immediately with up to 10 hours of training per week. 

10 hours per week, building to 20 if she enjoys it and continues to improve, builds to 10,000 hours by the time she is 16 and you have an Olympic athlete.  That's the theory. 

Additionally, this anecdote includes three of those extraordinary opportunities noted above;

  1. Having the natural ability at a discipline;
  2. Having it identified by someone connected to that discipline; and
  3. Being offered the opportunity to train in that discipline.

And The Audiophile's daughter almost immediately decided gymnastics wasn't fun anymore and moved onto something else, which isn't surprising as very few people would enjoy gymnastics sufficiently to forsake nearly everything else in their life. 

I've got to say, I saw this happen many times when I was a tennis coach, and it’s just another example of how many things have to go right for someone to achieve phenomenal success.

Now I'll go back to The Proprietor as an example. He has worked in and around restaurants since he was 16 years old, and is now in his late 30s. A normal working week would be 50 hours, so over the past 20 years he has built up his 10,000 hours.  He also loves his business and is constantly thinking about how to improve and innovate.

He had some extraordinary opportunities such as:

  • his family was successful in this industry and had some very good contacts;
  • he immediately loved the subject matter;
  • he enjoys alcohol but doesn't have a problem with it (a very common problem in the industry);
  • secured a wonderful leasehold in an area that was just about to soar in popularity; and
  • met an individual who provided enormous operational assistance who also had access to other individuals with capital.

So he is successful.  An outlier in his industry. Certainly on the shoulder of the bell curve, in the top and maybe into the tail and in the top 5% of his market.

But what about global scalability?  How does he become the next Jamie Oliver?

There needs to be at least one but probably many more opportunities presented that come disguised as hard work which he grasps and smashes. 

Sounds like a slippery proposition....and it is otherwise the world would be full of outliers.  

So, the question for readers is, what have you spent a lot of time doing? Have you got 10,000 hours in the bank in any area?

Finally, I have spoken about risk and probabilities a bit over the past few Updates as it’s something I am becoming more and more interested in.  Risk and uncertainty are a part of every area of our lives, where I had previously thought about them almost exclusively in a financial sense.

Over the weekend I had a long chat with a bloke who used to be Managing Director with a large betting agency and we spoke about risk management.  Pretty interesting stuff and next week that’s what I will focus on.

As some homework for next week I will pose a question. How would you interpret it if I told you there was an 80% chance of an event occurring? 

Is that event now a sure thing?  Or is it still risky?  And does your answer change depending on the event?

Food for thought...