When will business books focus more on corporate failures than successes?

However, I rarely come across books which explain why companies fail, given that most companies fail and many large companies falter and eventually even fail. The economist John Kay makes this point in his new book, The Corporation in the 21st Century. He points out that the business magazine Fortune started to rank the largest US companies in 1955 and has done so every year since. 

The only company to be in the top 10 in 1955 and 2020 was ExxonMobil. As Kay writes: “Standard Oil of New Jersey [on the 1955 list] acquired its rival Mobil and is now ExxonMobil, the only business to appear in both 1955 and 2020."

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So, there has been a huge churn in the top 10 US companies over the past seven decades. And this isn’t because industries are stagnating or declining. As Kay writes: “Global demand for automobiles, food, oil, steel, chemical products and particularly electrical goods has continued to grow. Consumers still shop. But none of [the] 1955 companies is today the dominant firm in its industry."

Closer home, many of the family-owned business groups that ran some of India’s biggest companies in the 1980s and even the 1990s are shadows of their former selves. More recently, the much hyped Byju’s and Paytm have struggled.

But management gurus, encouraged by commissioning editors salivating over sales prospects, continue to write on what makes companies and their leaders successful in the hope that these learnings could be used by others.

There is a formula to write such books. Cass Sunstein explains this in How To Become Famous: “Countless successful business books… try to figure out what characteristics are shared by inventors, innovators, leaders, or other successful types. If they find a shared characteristic, they urge that they have discovered a secret or clue of some kind." But in their need to tell a compelling story, some gurus often forget a simple point: facts are not data.

What does that mean? Sunstein offers the example of Jim Collins’ superhit book, Good to Great. One characteristic of successful companies is a “culture of discipline," writes Collins. 

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To this, Sunstein points out that hundreds of companies can fail despite having a culture of discipline. In contrast, you could also find successful companies that lack such a culture.

Indeed, the idea behind almost all such books is to tell a good story with a flowing narrative that engages readers. As Alex Edmans writes in May Contain Lies: “Most books… only ever consider a selected sample that fits the story, so even if all their facts are correct, they’re inconclusive… [They] reverse-engineer an explanation… without ever testing whether other companies with the same traits had similar outcomes."

Of course, this narrative is built on what Phil Rosenzweig calls a delusion of rigorous research in his wonderful book The Halo Effect. The trouble is that what’s claimed to be rigorous research is limited to studying characteristics of companies and individuals who are successful at the point of time the book is written, and does not cover others who might currently share or might have shared similar characteristics. Which is why many companies and individuals who are the subjects of such books eventually fizzle out.

So, this leaves us with an important question: Why do such books keep getting written? An explanation for their popularity lies in the fact that the human mind does not handle complexity well. Explanations for any success are complex but we want simple linear stories. As Rosenzweig puts it: “We prefer explanations that are definitive and offer clear implications."

Also, people who believe they can easily understand the past are likely to assume they can predict the future as well. As Daniel Kahneman writes in Thinking, Fast and Slow: “The illusion that one has understood the past feeds the further illusion that one can predict and control the future. These illusions are comforting. They reduce the anxiety that we would experience if we allowed ourselves to fully acknowledge uncertainties of existence... Many business books are tailor-made to satisfy this need." Indeed, the huge market for self-help books also thrives for this reason.

A huge market for such books is being monetized, but it would be nice if management gurus would also write a few books on why companies fail. Now that would add real value. 

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If not that, they should at least add a disclaimer to their books along the lines of what Kay suggests: “A journalist impressed by the strength of the FAANG corporations today [originally, Facebook, Apple, Amazon, Netflix and Google, with Netflix later replaced by Nvidia] once asked me if there were historic examples of once dominant companies which had lost that dominance. I told her the more interesting question was to find a historically dominant company that had retained that dominance."