December 11, 2010

Don’t do cargo cult business

Richard Feynman, the physics Nobel Prize laureate, gave a commencement speech at CalTech in 1974. There he talked about cargo cult science:

In the South Seas there is a cargo cult of people. During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now. So they’ve arranged to imitate things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas—he’s the controller—and they wait for the airplanes to land. They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land. So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.

Recently I read a cargo cult business plan. It was put together by a few MBA students from a good school, which is all the more disturbing. It looked everything as a business plan should look like: it had a market analysis, a sales plan, a pricing analysis, and a manufacturing plan. It was 25 pages long with great illustrations. It had an executive summary. It looked exactly like the real thing. Except that it was all based on hypotheses that the team hadn’t tested. After thinking about some these for a few minutes it was clear that they were completely absurd… and the whole thing fell apart.

So whenever you’re conducting an analysis ask yourself if it is truly robust or if it only has the appearance of robustness.

See more: Feynman’s speech and his great book (the next one is great as well).

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