A Taxonomy of Delusion

I mentioned a book called "The Halo Effect" a few weeks ago.  It is a book that questions the wisdom conveyed in many of the popular business books out there.  Here is a review of it by CFO Magazine:

What leads to high business performance? Consultants and journalists have advanced many answers to this question, both in print and from the lectern. But most of those answers are little more than educated guesses. In fact, most of them are probably bunk.

That, in a nutshell, is the message of a provocative new book, The Halo Effect (Free Press, February 2007). Written by Phil Rosenzweig, the book debunks that staple of the best-seller list, the corporate success story. According to Rosenzweig, popular and even academic studies of successful companies are commonly shaped by one or more of nine "delusions," which trump the basics of research and logic.

A Taxonomy of Delusion

1. The Halo Effect. The tendency to look at a company's overall performance and make attributions about its culture, leadership, values, and more.
2. Correlation and Causality. Two things may be correlated, such as employee satisfaction and company performance, but we may not know which one causes which.
3. Single Explanations. Many studies show that a particular factor leads to improved performance. But since many of these factors are highly correlated, the effect of each one is usually less than suggested.
4. Connecting the Winning Dots. It's not enough to compare successful companies to isolate reasons for their success; you have to compare successful companies with less-successful ones.
5. Rigorous Research. Research is only as good as the quality of the data.
6. Lasting Success. Almost all high-performing companies regress over time.
7. Absolute Performance. Company performance is relative, not absolute. A company can improve and fall further behind its rivals at the same time.
8. The Wrong End of the Stick. Successful companies may often pursue highly focused strategies, for example, but that doesn't mean highly focused strategies often lead to success.
9. Organizational Physics. Company performance doesn't obey immutable laws of nature and can't be predicted with the accuracy of science.

Uh-oh.  Something tells me Seth Roberts wouldn't like point #2. 

My take is these points all are extremely valid and this looks like an important book to read if you are at all inclined to read business books.