Since reading The Success Equation, I’ve been thinking about how I can improve my chances of future success. Understanding where the things I’m thinking about fall on the luck-skill continuum has changed both how I think about them and my expectations. A lot of things I want to accomplish as an investor and entrepreneur are materially influenced by luck, so I need to hone my decision-making process to increase the chances of getting the outcomes I want.

I’ve also been thinking about past outcomes—both good and bad—to determine how much luck and skill factored into them. When an outcome was good, I generally assigned too much weight to skill. The truth is that skill played a role, but factors outside my control heavily influenced many outcomes. I couldn’t predict that things would happen the way they did. But they did, and I benefited from them. I’ve had more luck on my side than I’ve previously acknowledged when outcomes were good.

When an outcome was bad, I assigned too much weight to luck. In reality, it’s been a mix of skill and luck. In some instances, I didn’t have sufficient skills to get the outcomes I wanted and thus failed. In others, luck just wasn’t on my side.

It’s interesting to think about outcomes in terms of the influence of skill and luck. I’m glad I read this book and can’t wait to use its analysis to evaluate future decisions.

I first read Expectation Investing by Michael Mauboussin this past summer, and I ended up reading that book twice and starting to read all of Mauboussin’s other books. This post is about the fourth of his books that I’ve read in the last few months, and it didn’t disappoint.

The Success Equation is about understanding the impact that luck and skill have on your successes and failures. The book provides a framework for understanding, in advance, how much skill and luck will impact a decision or activity. Understanding how what you want to do is affected by skill and luck can alter your planning, expectations, learnings, and a host of other things.

This book is full of things I’ve found helpful, two of which I’ve written about already:

• Rationality quotient (RQ) matters more than intelligence quotient (IQ)
• How checklists tame luck

Another concept that stuck with me is what he called the “luck-skill continuum.” Mauboussin explained how to gauge the extent to which an activity is influenced by skill and luck by visualizing it on a continuum. He then explained why the sample size required to draw a reasonable conclusion about future expectations differs for activities heavily influenced by skill vs. luck. He also explained reversion to the mean and why it impacts activities of skill and luck differently. I have lots of notes and highlights in the chapter on the luck-skill continuum that I’ll revisit often.  

This book was a great read. Anyone interested in improving their chances of success by improving their decision-making should consider reading The Success Equation.

I’ve started on my new weekend project: cleaning up the images of all the books that I’ve uploaded to this site. Several issues need to be resolved, including these two:

• Load time – It takes too long for the page listing all the books I’ve read to load. This causes the list of returned books to be incomplete, the count to be wrong, etc. Part of the issue is that some book cover images are too large.
• Social sharing – When a link to a book page is shared via text message or social media, the link should load the book cover image. That isn’t happening consistently. I know of two reasons for this: an improper file type and a too-small file size.

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To fix these and other issues, I’ve been going through all the book cover images and changing the file type, renaming the file, compressing the file, etc.

I should complete this project by the end of November at the latest. I’ll provide more details on what I’m doing and my progress in later posts.

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Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

Cumulative metrics (since 4/1/24):

• Total books read: 88
• Total blog posts published: 581

This week’s metrics:

• Books read: 1
• Blog posts published: 7

What I completed in the week ending 11/9/25 (link to the previous week’s commitments):

• Read The Success Equation, a framework for improving your decision-making by understanding how luck and skill impact outcomes

What I’ll do next week:

• Read a biography, autobiography, or framework book
• Pick my next weekend project and start working on it

Asks:

• No ask this week

Week two hundred ninety-three was another week of learning. Looking forward to next week!

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Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

What I struggled with:

• No material struggles related to this project

What I learned:

• When it comes to learning, the human element can’t be replaced. It may be possible to come somewhat close to replicating the process of learning by talking with others, but you can’t fully replicate it. Therefore, people will always prefer interacting with other humans over other forms of learning.

That’s what I learned and struggled with last week.

Last week I shared that I’ve been riding shotgun with a VC-backed founder to help him sell his company. The deal was in the final stages of closing last week. It closed on time late last week, but there was a hiccup. The buyer attempted to send the funds to the seller, but he made an error. The seller had provided bank wire instructions, but the buyer sent an ACH transfer based on the bank wire details. Wire transfers and ACH transfers use different types of routing information, so the funds never reach the seller.

The deal technically closed, but this issue delayed the transfer of assets to the buyer. The seller wanted the funds before he transferred the assets—rightly so.

The ACH transfer was returned to the buyer by the bank when it realized that no recipient matched the information provided. The buyer re-sent the funds, and they arrived in the middle of this past week. The transfer of assets was also completed this past week.

I always tell founders that the deal isn’t done until the wire (or ACH) clears your bank. Until then, keep pushing, because things can and do go wrong.

Congrats to this founder for closing the deal and finally getting his funds . . . even if they were a little late.

This week I had lunch with a group of entrepreneurs. One of them, a CEO, had a pressing issue he wanted input on. He had a few million in revenue and was having trouble finding a firm to handle his company’s marketing. They all pitch the same strategy, which doesn’t resonate with him. He’s frustrated and wanted to know what other founders have done to get their marketing efforts off the ground.

When clarifying questions were answered, we learned that the CEO’s focus has been solely on outsourcing the marketing function to an agency. He wants to achieve a specific output or goal and wants an agency to figure out how to do that.

The feedback from founders centered on two points:

• You can’t outsource marketing entirely. It’s hard for an external company to develop a strategy when they don’t have a great understanding of your customer or the problem(s) you solve for your customers. Some founders have had success hiring a full-time marketing leader, who developed the marketing strategy and outsourced some tactical work to agencies. The function and strategy were owned internally by a full-time company employee.
• Deep understanding of the customer, their problem, and their journey lives with the CEO. It’s the CEO’s job to get others in the company to understand those things too and, in the case of marketing, to create appropriate strategies. The CEO can hand his or her understanding off to marketing, but it’s not realistic to expect marketers to develop that understanding and the messaging around it.

I’m no marketing savant, but I’m actively learning to understand it better. Based on my past mistakes and what I’ve read from marketing thought leaders, I agree with these points.

The feedback was useful to the founder with the problem, who walked away thinking differently about marketing. Instead of outsourcing, he’s now considering finding someone to lead his marketing strategy. He’s also thinking about how to convey his deep understanding of the customer’s journey on day one to his new marketing lead so he can set them up for success.  

I shared earlier this week that I’m reading The Success Equation by Michael J. Mauboussin. It outlines a framework for assessing the influence of skill and luck on your decisions (many life outcomes are a combination of both) so you can increase the chances of getting a successful outcome. It’s a good book about improving your decision-making by understanding the impact of luck and skill on successful (and unsuccessful) outcomes.

As I’ve said many times, books are a great way to find other books. One of the key concepts Mauboussin discusses is that to improve your skill in activities where luck has a greater influence than skill, you must focus on the process used to make decisions. The idea is that good decisions can result in outcomes we don’t want because of the influence of luck. And vice versa: a bad decision can lead to a good outcome because you got lucky. Therefore, a decision can’t be judged by its outcome; it must be judged by the quality of the process and analysis used to make it. He goes into more detail, but that’s the gist. I agree with this.

One of the things he suggested using, because they’re effective tools to improve decision-making processes, is checklists. Charlie Munger said the same thing in Poor Charlie’s Almanack (see here). Mauboussin told the story of a doctor who used checklists to significantly reduce hospital infections and realized how powerful they are. He wrote a book about checklists and how to use them effectively called The Checklist Manifesto.

Munger and Mauboussin can’t both be wrong about checklists. I use them some already, and I want to embrace them for material decisions, especially those that involve luck. I’m going to get a copy of The Checklist Manifesto and give it a read so I can lean into what Munger and Mauboussin have both said.

A book I’ve heard mentioned several times by people I respect is The Wealth of Nations by Adam Smith. It was written in 1776, so almost 250 years ago. I struggle to understand the language in old books. It takes me a lot longer to read them, and I don’t always grasp the main points. So I shy away from really old books. But I’m curious about The Wealth of Nations, especially after learning that Warren Buffett recommended it highly.

I came across a work-around: a book called Warren Buffett’s 3 Favorite Books. It was highly rated and claimed to summarize the main points of Buffett’s three most recommended books, including The Wealth of Nations, The Intelligent Investor, and Security Analysis (the last two both by Benjamin Graham).

The book does more than that. It distills the core ideas from the three books and explains them using simple examples. It then explains how and why those core ideas became the principles that drive Buffett’s value-investing strategy. And all in a way that anyone can easily understand.

One thing I especially enjoyed was how he explained the importance of taking initiative and teaching yourself. I really like his explanation of Thayer’s method of learning, a self-teaching approach he learned while attending the U.S. Military Academy. The gist is that if you embrace this method, you can teach yourself almost anything in life, which makes the method an invaluable asset. I totally agree with this method but didn’t know there was a name for the method.

The other concepts I enjoyed were in the chapters on bond valuation and stock valuation. He demonstrated how and why the two are connected and why comparing their yields (mainly, for bonds, the risk-free treasury yield) is a key concept that underpins much of the investing world.

Overall, this is a good book that’s a quick read. Anyone looking to understand or brush up on the core concepts of investing should consider this book.

I’m reading a book this week about understanding the impact of luck and skill on successful (and unsuccessful) outcomes. It’s called The Success Equation, and it’s by Michael J. Mauboussin. It outlines a framework for assessing the influence of skill and luck on your decisions (many life outcomes are a combination of both) so you can increase the chances of getting a successful outcome. Very interesting book so far.

One section is called “Why Smart People Do Dumb Things.” I’ve been thinking about it a lot today. The key premise of this section is that intelligence tests measure some cognitive abilities but fail to measure others. One area these tests miss is decision-making ability. Smart people sometimes make stupid decisions.

The book goes on to distinguish between intelligence and rationality. Most would think they’re related, but this isn’t necessarily true, the book argues. There are two ways to evaluate someone’s cognitive ability:

• Intelligence quotient (IQ) – This is what traditional intelligence tests measure. It’s a rating of someone’s ability adjusted for their age and compared to the rest of the population. Think mental processing speed, memory, vocabulary, etc.
• Rationality quotient (RQ) – This is the ability to think and behave rationally. RQ attributes include “adaptive behavioral acts, judicious decision making, efficient behavioral regulation, sensible goal prioritization, reflectivity, and the proper calibration of evidence.” This is what interests me most.

The book highlights that many people with high IQs cannot act or think rationally and gives examples.

This section resonated with me for a few reasons. First, if decision-making is what matters most in life, then RQ is most important. IQ can’t be changed (as far as I know), but anyone can learn to act and think rationally through hard work and focus. So, if you didn’t win the ovarian lottery and don’t have a rocket-scientist IQ (I fall into this category), you can still have outsize success if you’re intentional about thinking and acting rationally. It’s not easy and takes work—e.g., I read this book—but I feel it’s definitely something that be learned and improved materially.

Second, this section mirrored something Warren Buffett said (I read it in The Warren Buffett Way last year). I wrote a post on the quote; see here. The gist is that rational behavior is what enabled Warren Buffett to achieve outsize success, not his IQ (which is very high, too). It’s not how smart you are, but how effectively you use the intelligence you have. Buffett says some smart people have a 400-horsepower brain but only get 100-horsepower output from it because of the decisions they make. He argues that by being rational, you can have a 200-horsepower brain and get 200-horsepower of output, which puts you ahead of the 400-horsepower “genius” who can’t act rationally.

When two wise people say the same thing, it catches my attention because they reached the same conclusion independently. The probability that both are wrong is low.

I’m excited to finish reading this book. Understanding IQ and RQ, and recognizing when luck heavily influences what I’m doing, has already changed some of my thinking and decision-making.