Pattern matching beats narrative reasoning

gist

Spellbook co-founder Scott Stevenson argues that short, compelling stories make poor bets in business and investing, because reality is multi-causal and legible ideas get crowded. He recommends trained intuition and an explicit attribute checklist instead, which raised his team's product hit rate and his investing returns.

ideas

• Stories are contagious. Narratives feel clarifying and make us feel smart to share, which is exactly why they spread and why simple stories often make horrible bets.
• Legibility bias. Borrowing Venkatesh Rao and Seeing Like a State, he says we overvalue orderly explanations; simple stories are management and marketing tools, not decision-making tools.
• Alpha in the illegible. Highly legible bets, like Canadian cannabis stocks, get bandwagoned and overpriced, so undervalued opportunities hide where stories are hard to tell.
• Checklists for teams. Scoring past Spellbook feature bets against about 16 attributes, such as zero configuration and a prototype in two weeks, predicted winners better than customer narratives.
• Independence. Pattern matching is natural; the hard part is trusting conclusions that look alien to others, so a bet that draws no confused looks is probably overdone.

quotes