Good Strategy Bad Strategy, by Richard Rumelt

My nuanced summary of this must read on business strategy and clear thinking in general.

Good Strategy / Bad Strategy is a great book, if anything because Rumelt has a lot of great stories and anecdotes to weave in. Chapters 3 and 4, which caution against the different types of bad strategy and explain why it’s so pervasive, are the strongest and most unique of the book. His teardown of “New Thought” in particular was fascinating, and I now find myself more skeptical than ever of anyone who offers a “comprehensive template” for setting your company strategy. Of course, it mainly comes down to doing the work, starting with understanding what makes a strategy good in the first place.

Note: Part 2 pairs well with 7 Powers, and Part 3 pairs quite well with Thinking In Bets.

If you enjoy the summary below, I highly encourage you to buy the book either via Amazon or Bookshop.

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Introduction

"The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors." This core consists of "a diagnosis, a guiding policy, and coherent action."

"Strategy cannot be a useful concept if it is a synonym for success. Nor can it be a useful tool if it is confused with ambition, determination, inspirational leadership, and innovation. Ambition is drive and zeal to excel. Determination is commitment and grit. Innovation is the discovery and engineering of new ways to do things. Inspirational leadership motivates people to sacrifice for their own and the common good. And strategy, responsive to innovation and ambition, selects the path, identifying how, why, and where leadership and determination are to be applied."

PART I: GOOD AND BAD STRATEGY

Chapter 1: Good Strategy Is Unexpected

One big natural source of strength (beyond typical sources like network effects, brand power, scale, etc.) is having a coherent strategy where policies and actions are coordinated. This can be a big advantage "because other organizations often don’t have [a coherent strategy and] they don’t expect you to have one, either.” [Example of Apple, where Steve Jobs demonstrated ruthlessness in paring down ALL parts of the Apple business so they could survive until the next big wave. Each action was obvious in a way, but surprising in how fully it was put into action.] 

Tip: Learn to say no to most of the actions and interests vying for consideration. Maintain your focus. Each time you say yes, you risk turning your nascent good strategy into a bad strategy. [Example of Desert Storm, which was a classic envelopment strategy right out of the playbook, but surprised people in how tightly coordinated and coherent it was executed. There were numerous other interests who wanted to be involved in different ways, each of which may have put the overall success of the operation - which depended on surprise - at risk.]

Chapter 2: Discovering Power

The second big natural source of strength comes from subtle shifts in viewpoint that identify new strengths easily left unrecognized. The classic example of this is David vs. Goliath, which reveals the weakness in Goliath's helmet (not covering his face) and unexpected power in David's skill with the sling (which is well suited for Goliath’s weakness and capable of causing disproportionate damage). Were David to wear armor (the typical defensive strategy), it would have only hindered his sling and would not have saved him if Goliath closed the distance.

Tip #1: Look for ways to challenge prevailing assumptions of your industry. [Extended - and fantastic - example of how Walmart reframed a store as part of a dynamic network of other stores, regional distribution hubs, and centralized purchasing (with significant positive feedback loops and real-time information sharing). Kmart and other competitors, operating under the prevailing structure of decentralization, were stuck unable to compete.]

Tip #2: Look for ways to impose out-of-proportion costs on your competition and complicate their problem of competing with you. [Example of Andy Marshall’s Cold War-winning strategy for the US to pursue technological advancements which would force the Soviets into investing heavily into massively expensive countermeasures which would not add to their offensive capabilities. This shifted the conversation away from the old arms-race of matching core military capabilities and onto imposing asymmetric costs on their opponent.]

Chapter 3: Bad Strategy

As mentioned, Good Strategy consists of "a diagnosis, a guiding policy, and coherent action." Bad strategy is more than the lack of each of these elements, but some align well with the four major identifiers of bad strategy:

• Gibberish (Fluff) - Using obvious statements, unnecessary jargon, or inappropriately labeling pedestrian aspects of a business as "strategies." Red flags: if you either ask “what is this trying to say?” or if you respond with “duh, that’s just part of our business.” 

• No Diagnosis (Failure to face the challenge) - It is impossible to improve or evaluate a strategy which doesn’t clearly articulate the true underlying problems or obstacles to be overcome. [Example of International Harvester ignoring their inefficient work organization and pursuing investments in new equipment or incentives to grow market share.] 

• No Coherent Action (Mistaking goals for strategy) - statements of desire alone do not identify the concrete path forward. (E.g. "We're going to grow 20% per year with a profit margin at 20% or higher.") It’s not enough to just believe in statements of desire or have buy-in from your team. [Example of how this was at the heart of the bad strategy during WWI trench warfare assaults on fortified machine gun positions.]

• No Guiding Policy (Bad Strategic Objectives) - having objectives which "fail to address critical issues or [...] are impracticable." Examples of this are a) dog's dinner objectives (laundry list of things to do labeled as a strategic plan); or b) blue sky objectives (when the objectives are as difficult to accomplish as the original challenge, and therefore add no guidance or focus). [Example of an absurdly blue-sky objective for a school district to request “transformational leadership” when a) the diagnosis explains the challenges leaders have meeting current daily problems; b) there is no known blueprint to create “transformational” leaders even in the best of conditions; and c) it ignores the existing bureaucracy and union system.] The antidote to this is to focus on "one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes."

Tip: "When a leader characterizes the challenge as underperformance, it sets the stage for bad strategy. Underperformance is a result. The true challenges are the reasons for the underperformance. Unless leadership offers a theory of why things haven’t worked in the past, or why the challenge is difficult, it is hard to generate a good strategy."

Chapter 4: Why So Much Bad Strategy?

Bad strategy has a life and logic of its own, not simply poor execution of good strategic principles. Bad strategy is encouraged by the “hope that one can avoid dealing with these tricky fundamentals and the difficulties of mastering them." This comes from three different perspectives.

Active avoidance of the hard work of creating good strategy. This sometimes happens irrationally (from laziness, blind optimism, or desire to please everyone), and sometimes rationally (look up "Condorcet's paradox"). Instead of choosing all options (or creating an even worse compromise), force a decision anyway. People will bring forth stronger evidence and reasoning because otherwise their preferred option might not be selected. Remember: "When a strategy works, we tend to remember what was accomplished, not the possibilities painfully set aside." 

Using template-style strategy where you fill in the blanks for vision, mission, etc. This approach originates in popular writings about the "transformational leader [who] (1) develops or has a vision, (2) inspires people to sacrifice (change) for the good of the organization, and (3) empowers people to accomplish the vision." This kind of vision and leadership - often with pithy fill-in-the-blank entries for vision, mission, values, and strategies (which are usually aspirations/goals) - must not be confused with strategy. [The author provides a lot of examples of bad mission statements.] Antidote: see through the fluff and dissect these generic statements through the lens of what good strategy should look like.

Falling prey to the belief that a positive mental attitude is all you need to succeed. [Fascinating history of "New Thought," originating with motivational writers in the late 1800s and rehashed again and again, most recently with Rhonda Bryne's The Secret.] All emphasize the power of focusing on what you want to attract into your life, the importance of banishing negative thoughts, that success comes from merely getting everyone to fervently believe in the same vision, etc. Antidote: disbelieve any radical distortion of history that ascribes success to anything other than “pockets of outstanding competence mixed with luck.” Red flag: any admonition that "obviously taps into a deep human capacity to believe that intensely focused desire is magically rewarded." Blind belief never replaces good strategy.

Chapter 5: The Kernel of Good Strategy (Diagnosis, Guiding Policy, Coherent Action) 

Diagnosis: "What's going on here?" This understanding drives why you're doing what you're trying to do, and must come before deciding what to do. Without this understanding you cannot evaluate the rest of the strategy. Some tips:

• Most situations are ill-structured problems, meaning there is no easy way to define the problem or deduce the best real-world strategy from the known facts.

• A good diagnosis "replaces the overwhelming complexity of reality with a simpler story, a story that calls attention to its crucial aspects."

• Make sure your diagnosis defines a domain of action that promises leverage over outcomes. E.g. Research shows that academic success is most strongly tied to social class, but that diagnosis doesn't provide any leverage to someone seeking to improve a school. They are better off focusing on other areas, such as school organization.

• A diagnosis is often framed as a metaphor, analogy, or reference to something else well known. E.g. the US guiding policy of containment in the Cold War came from the diagnosis of the USSR being "infected by the virus of Communism."

Guiding Policy: “What should we do about it?” This is what you're trying to do, your understanding of the "overall approach for overcoming the obstacles highlighted by the diagnosis" without defining exactly what should be done. Some tips:

• Don't set goals or visions or images of desirable end states; rather, "define the method of grappling with the situation and ruling out a vast array of [otherwise] possible actions."

• "A guiding policy creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on the other rather than canceling one another out."

• One way of creating a guiding policy: carefully select and define the customer segment you're addressing. [Example of an owner of a corner grocery store serving business professionals versus college students and the implications it has on business decisions.]

Coherent Action: “How can we get started now?” Don't stop at only defining the guiding policy. Include coordinated actions to bring your strategy down to earth and sharpen the strategic ideas. Some tips:

• Often the main thing getting in the way of immediate action is the “forlorn hope that [...] the whole long list of hoped-for 'priorities' can all be achieved."

• Prompt: "Suppose you absolutely had to accomplish [guiding policy] within the next [aggressive timeline] or everything would collapse. What would you do then?"

• No guiding policy is a silver bullet. Strategy is executed through everyday actions alone.

• Coherence is critical. Beware of lists of nonconflicting but uncoordinated actions that don't complement each other. E.g. any company aiming to be a low-cost producer needs to have all policies across the company aligned with keeping costs low. 

• Encourage coherence through a) the design of your organization for improved coordination (chapter 9); b) by specifying "proximate" objectives (chapter 7); and c) more generally by imposing the strategic direction on the organization to force a level of coordination that would otherwise be unnatural. (Only force this coordination when the gains from doing so are very large; it otherwise erodes gains from decentralization and specialization.)

PART II: SOURCES OF POWER

Chapter 6: Using Leverage

Good strategy comes from generating strategic leverage through “a mixture of anticipation, insight into what is most pivotal or critical in a situation, and making a concentrated application of effort."

Anticipate the future, especially particularly disastrous or advantageous changes with buyer demand or competitive reactions. [Example with oil prices, where the true risk is from prices "going high, suckering you into a major investment, and then diving to low, leaving you with useless assets."] Work on understanding "the habits, preferences, and policies of others, as well as various intertias and constraints on change."

Identify Pivot Points, the ways to "magnify the effects of focused energy and resources.” All situations have natural imbalances where relatively small adjustments can lead to outsized impacts. [Example of 7-Eleven, which learns and focuses on the most pivotal elements for any given market, whether product variety in Japan or store cleanliness in China.]

Concentrate your efforts on the fewer, more limited set of pivot points which generate larger payoffs. Constraints guide the need to prioritize and concentrate resources in the first place (and are a forcing function to identify the critical pivot points). Remember, many investments are subject to threshold effects, where some critical level of investment is required to affect the system. [This is why doing mediocre work across a lot of objectives often doesn't achieve any business result.] [Example of the Getty Trust investing in art education as a way to become a major force in the art world.]

Chapter 7: Proximate Objectives 

Good strategy comes from a well-crafted proximate objective: something that may seem audacious from the outside yet is actually quite possible. [Example of JFK's call to put someone on the moon, which was carefully chosen as a proximate objective where America would have competitive advantage against the Soviet Union.] Some tips:

• Proximate objectives resolve ambiguity and unlock forward progress. [Example of Phyllis Buwalda, director of Future Mission Studies at JPL, whose model of the unknown lunar surface - resembling the American Southwest desert - enabled JPL engineers to get to work.]

• When leading complex and ambiguous human efforts, leaders must “absorb a large part of the complexity and ambiguity [and pass] on to the organization a simpler problem—one that is solvable." Otherwise the work will suffer.

• Within dynamic, uncertain situations, consider setting a proximate objective to simply find a stronger position and create options for future decisions. [Example: this describes early-game behavior between chess masters.]

• Prompt: "What one single feasible objective, when accomplished, would make the biggest difference?" Phrase it more like a task, and less like a goal.

• Analogy of learning to fly a helicopter: where it’s important to master the basics (flying during daytime) before tackling more challenging tasks (landing on a boat in a storm). 

Chapter 8: Chain-Link Systems

Systems which have "chain-link logic" - when the performance of the whole system is limited to the performance of the weakest part - have important implications for strategy. Importantly, high-performing chain-link systems (when all subunits are excellent) usually enjoy enduring advantages which are difficult to replicate (e.g. all parts of IKEA's business model). Some tips:

• Within real-estate, a property's potential is influenced by the limiting factors, some of which are fixable (poor paint job) and some are not (being next to a highway). "If you have a special skill or insight at removing limiting factors, then you can be very successful."

• "When each link is managed somewhat separately, the system can get stuck in a low-effectiveness state [...] because of quality matching. That is, if you are in charge of one link of the chain, there is no point in investing resources in making your link better if other link managers are not."

• Getting such a system unstuck requires thoughtful management (and patience while waiting for results). [Example: Italian machine company which first improved quality, then improved sales, then reduced costs. A different sequence would have led to a worse outcome.]

• When addressing this challenge, consider "shutting down the normal system of local measurement and reward, refocusing on change itself as the objective."

Chapter 9: Using Design

Good strategy comes from approaching it not as a decision but instead as a novel, designed response to a situation where all interconnected layers are carefully considered. [Example of designing a BMW and all of the interrelated factors that inform the final product.] 

• Example: Hannibal's surprising victory against Rome at Cannae was a result of "premeditation, anticipation of others' behavior, and the purposeful design of coordinated actions."

• "I am describing a strategy as a design rather than as a plan or as a choice because I want to emphasize the issue of mutual adjustment. In design problems, where various elements must be arranged, adjusted, and coordinated, there can be sharply peaked gains to getting combinations right and sharp costs to getting them wrong."

• Clever design is most important when resources are constrained. You need to "hold all of the details in your mind in order to imagine a configuration that might be effective." [Example of designing a satellite under many interwoven constraints.] 

• Companies with a strong lock on a high-quality strategic resource (like a set of patents, such as Kodak) must be careful not to let their strategic abilities decay due to the low challenge of maintaining their profitable business.

• "In time, most [successful companies] will loosen their tight integration and begin to rely more on accumulated resources and less on clever business design." It takes a LOT of discipline to do otherwise.

Chapter 10: Focus

Focus is a hallmark of good strategy. Focus is the “pattern [of] attacking a segment of the market with a business system which supplies more value than the other players.” Focus means two things: a) coordinated policies which produce extra power through their interacting and overlapping effects; and b) the application of that power to the right target. [Example of Crown Cork & Seal, whose profitability as a metal can maker came from a focus on shorter runs for smaller producers. Their plants were situated to serve multiple producers and thereby never lost bargaining power.] Some tips:

• Always analyze a particular company’s strategic focus within the context of the competition. 

• Identify the core policies of the company (especially those different from the industry). And for each policy, identify its target (what it is trying to accomplish). Seek out ways the policies reinforce and strengthen each other. 

• The true focus for any given company may be hard to discern. "If you are serious about strategy work, you must always do your own analysis. A strategy is not necessarily what the CEO intended or what some executive says it is. Sometimes they are hiding the truth, sometimes they are misstating it, and sometimes they have taken a position as leader without really knowing the reasons for their company’s success."

Chapter 11: Growth

Healthy business growth is  "the outcome of growing demand for special capabilities or of expanded or extended capabilities. It is the outcome of a firm having superior products and skills. It is the reward for successful innovation, cleverness, efficiency, and creativity." Growth itself being framed as a strategy is a hallmark of bad strategy. [Example of Crown Cork & Seal's subsequent poor performance following a series of acquisitions during the 90s.] 

• "Unless you can buy companies for less than they are worth, or unless you are specially positioned to add more value to the target than anyone else can, no value is created by [expansion through acquisition]."

• Watch out for acquisitions done for reasons which can be accomplished via business contract.

Chapter 12: Using Advantage

Good strategy comes from identifying the few critical asymmetries between yourself and competitors which can be turned into advantages. For advantages to be sustainable, you must have some kind of "isolating mechanism" which prevents competitors from duplicating the resources underlying it. 

"A competitive advantage is interesting when one has insights into ways to increase its value." These must  be things you can do on your own. [E.g. the owners POM, from humble beginnings and over the course of a decade, created the US market for fresh pomegranate juice.] Value creating changes in competitive advantage occur when progress is made on at least one of four fronts:

• Deepening advantages: Widen the gap between buyer value and cost. Continually examine (and improve) both your internal processes and how the customer experiences your product. Left alone, these will not naturally improve over time.

• Broadening the extent of advantages: Expand into adjacent markets which build off your complex pool of knowledge and know-how. Be careful of framing strengths too generically and diversifying into products and processes you know nothing about.

• Creating higher demand for advantaged products or services: Position yourself to be the main supplier to serve the increased demand.

• Strengthening the isolating mechanisms that block easy replication and imitation by competitors: Pursue this however you can, especially by reducing employee turnover or simply making your product a moving target through continual updates. Think beyond patents. 

Chapter 13: Using Dynamics

Good strategy comes from understanding how to attain an advantaged position in the first place. (Any easy-to-capture position will be just as easy to lose). Beyond pure innovation (e.g. inventing a new category), this will most likely happen by exploiting a wave of (largely exogenous) change. Details:

• Study how other companies have risen to power or fallen from grace due to waves of change.

• Remember that "most industries, most of the time, are fairly stable." Yet we also see massive change in short periods of time, and not just recently.

• Dig beneath the surface and understand the fundamental forces at work in your relevant industries. Develop enough expertise to question the experts.

• You don't need to be 100% right about the wave of change; you just need to be slightly more right than everyone else (and better at acting on it).

• Example: giving computer components their own microprocessors (and standard ways to communicate with the system) reshaped the industry profoundly (and eliminated the need for systems engineers.) Specifically, the CPU no longer needed to be programmed to interpret individual keystrokes and prioritize that work over other processing needs once the keyboard had its own microprocessor and could simply say "the 'k' key has been pressed.”

• Example: the Cisco router rode four waves: a) shift toward the centrality of software; b) rise of corporate networking (especially between products using different protocols); c) IP (internet protocol) networking displacing corporate-sponsored network protocols; and d) the explosion of public internet use leading companies to want "always-on" internet connections.

Strategic skill is most critical during waves of industry transition. Guideposts which indicate a wave:

• Escalating fixed costs: When supporting further R&D becomes so expensive that it leads to consolidation. [E.g. the shift toward jet engines for aircraft reduced competitors to only 3.]

• Deregulation: Formerly regulated companies - especially monopolies - tend to have poor understanding of a) competition; b) internal costs; and even c) who their most lucrative customers are. (Price regulation almost always subsidizes some buyers at the expense of others).

• Predictable biases in forecasting: which include a) optimistic growth curves ignoring natural saturation points for their markets (after which sales track population growth and replacement demand); b) only considering existing incumbents; or c) looking at whichever company currently looks most successful and expecting success to "look like them."

• Incumbent response to change: Usually they resist transitions which “threaten to undermine the complex skills and valuable positions they have accumulated over time." (See chapter 14.)

• Attractor state: Consider how the "industry 'should' work in light of technological forces and the structure of demand," specifically if needs and demands of buyers are met as efficiently as possible. [E.g. Cisco's vision for all data moving via IP packets was the correct attractor state for the industry compared against less efficient carrier-specific proprietary standards.] 

Chapter 14: Inertia and Entropy

Good strategy accounts for the inertia and entropy which all large companies are subject to. This is both for the large company aiming to stay relevant and for the small company seeking to displace them. First, the three main types of organizational inertia:

• Inertia of Routine: A.k.a. "the way things are done here." [Example of Continental Airlines responding to deregulation with outdated cost-plus financial models and obsolete decision making rules of thumb.] Fix this by introducing new routines through senior management (and replacing long-tenured people who are heavily invested in old routines).

• Cultural Inertia: A.k.a. the elements of social behavior and meaning which are stable and strongly resistant to change. Within successful companies these behaviors have likely contributed to its prior success, even if the behaviors  now impediments to future success. [Example of Bell Labs within AT&T.] Fix this in steps: a) simplify routines and remove excess layers of administration or nonessential operations; b) fragment the operating units so their individual performance can be better scrutinized based on both performance and culture; c) perform triage and replace managers with those who will reflect the desired culture. Only after it’s performing well do you undo the fragmentation and reintroduce the "new overlay of coordinating mechanisms."

• Inertia by Proxy: A.k.a.  when an incumbent chooses not to pursue a viable future because the current situation is too profitable. This is fixed "when the organization decides that adapting to changed circumstances is more important than hanging on to old profit streams." Upstarts who captured customers in the meantime must build "bonds of cost and loyalty with newly acquired customers" otherwise they may be recaptured by incumbents quickly. 

Entropy sets in with anything that is not carefully managed over time. [Example of GM, which had a tightly coordinated and highly successful product line under Sloan's management, which then decayed in subsequent decades as individual brands expanded into price points that competed with each other.] Effective managers must weed the garden to keep it healthy and growing.

Tip: when cross-subsidies exist between the individual operating units of your business, create a hump chart of the relative contribution of each unit to the whole. Start with the one contributing the most and end with the one taking the most away. [Visual example from 28 retail outlets; the best course of action was to close the 5 worst performers and fix the other 8 through shared best practices.] "A distinct hump, sustained over time, indicates a lack of management." 

Chapter 15: Putting it Together 

[Extended example of Nvidia, which highlights the different parts of this section in detail.] 

PART III: THINKING LIKE A STRATEGIST 

Chapter 16: The Science of Strategy

Good strategy relies on scientific empiricism - forming hypotheses at the edge of what we know, and subjecting them to real-world tests. In business, whether through research or through your operations, you will create valuable privileged information which others don't have. Some tips:

• Remember: "asking for a strategy that is guaranteed to work is like asking a scientist for a hypothesis that is guaranteed to be true -- it is a dumb request." Good strategy will require more than just deduction.

• A good hypothesis must be refutable - proven false by observable fact.

• Anomalies - facts that don't fit received wisdom - are opportunities to learn something new. [Example of Schultz noting Italian espresso bars, which he brought to America as Starbucks.]

• Vertical integration creates valuable proprietary information "when the core of a business strategy requires the mutual adjustment of multiple elements, and especially when there is important learning to be captured about interactions across business elements."

Chapter 17: Using Your Head

Good strategy also requires thinking about your own thinking. We tend to muddle through our day-to-day, working on whatever has captured our current attention. We also tend to latch onto the first insight that comes to mind, not stopping to examine whether it's the best possible insight. Tips:

• "Make a list of the ten most important things you can do. And then, start doing number one." Take time to explore the intersection between what is important and what is actionable.

• Identify the problem driving why you are thinking of taking a certain action.

• Articulate the kernel of your strategy as the simplest possible formulation. This forces you to be “complete” and not anchor too much on one part. 

• Start with your initial set of options and seek to create new higher-quality alternatives that expose the weaknesses and internal contradictions of your initial set.

• Cultivate an internal panel of experts - vibrant personalities with specific perspectives - you can invoke to see your challenges from different points of view. "The panel of experts trick works because we are adept at recognizing and comprehending well-integrated human personalities. Thinking through how a particular well-remembered expert might respond to a problem can be a richer source of criticism and advice than abstract theories or frameworks." 

• Write down your judgements in advance so you can test them against reality. "The same principle [as with diagnoses & insights about problems] applies to any meeting you attend. What issues do you expect to arise in the meeting? Who will take which position? Privately commit yourself in advance to some judgments about these issues, and you will have daily opportunities to learn, improve, and recalibrate your judgment."

"Whether it is insight into industry structures and trends, anticipating the actions and reactions of competitors, insight into your own competencies and resources, or stretching your own thinking to cover more of the bases and resist your own biases, being “strategic” largely means being less myopic than your undeliberative self."

Chapter 18: Keeping Your Head

"Good strategy grows out of an independent and careful assessment of the situation, harnessing individual insight to carefully crafted purpose. Bad strategy follows the crowd, substituting popular slogans for insights." [Example: Global Crossing entering a commodity race with undersea data transmission cables. All details pointed to the collapse of its business.] Develop your own awareness for the five intertwined errors in human judgment and behavior that often underlie man-made disasters:

1. Engineering overreach, "where designers built systems whose failure modes and failure consequences exceeded their ability to comprehend or analyze."

2. Smooth-Sailing Fallacy, "where people assume that a lack of recent tremors and storms means that there is no risk."

3. Risk-seeking incentives, "where an individual profits greatly if things go well and other people take the loss when things go poorly."

4. Social Herding, when we look to the behavior of others to alleviate our own uncertainty, forgetting that everyone may be undertaking the same mutual collaboration and there is no one actually paying attention to fundamentals.

Inside view, when we ignore the lessons of history because we want to see ourselves, our venture, or our group as different.