The shit happens principle

Even if the odds are very much in our favour, we can still lose. But businesses should still take the risk...

by Alastair Dryburgh
Last Updated: 09 Oct 2013

Pick a card, any card... Bet £1 on red or black and I'll pay you £5 if you're correct. I tell you I've taken six of the black cards out of the deck, so naturally you bet on red. Too bad: you drew a black card.

Did you make a bad decision? Of course not. You made the best one you could have in the situation.

Social scientists who study risk perception describe this principle as 'If you did the right thing then, you have done the right thing now.' Or, more colloquially, as the 'shit happens principle'.

It's obvious in simple examples, but in more complex business situations, it's easy to lose sight of.

Even if the odds are very much in our favour, we can still lose. How many times have you heard someone say at a post-project review: 'It looked like a good bet. It still looks like a good bet, but luck was against us.'

If you are a cold-blooded venture capitalist or private equity investor or trader you get this, but most of the rest of us don't. It would be really good if we could.

Consider HP's recent purchase of Autonomy - a £7.1bn investment followed promptly by a £5.4bn writeoff. Sounds like a lousy deal, but was it? No, it was the best one available to HP at the time.

As a hardware company, it was on the fast track to oblivion. Its last best hope was to convert itself into a software and services company a la IBM. It needed a big acquisition and Autonomy was probably the best prospect out there.

If you spent your life making bets like the one at the start of this piece, you'd get rich. If HP could stop bad-mouthing its newly acquired colleagues and start working with them to make the deal a success, it'd be more likely that the combined firm will still be around in five years' time.

In both cases the problem is the fear of recriminations if a good bet doesn't work out. All it takes to liberate yourself from this is the simple recognition that sometimes 'shit happens'.

Alastair Dryburgh is chief contrarian at Akenhurst Consultants and author of Everything You Know About Business is Wrong (Headline, £13.99). More at www.alastairdryburgh.com

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