Path Dependency

Imagine two neighbors living in an upscale neighborhood. They’re both well off, happy, and retired. One neighbor has been an accountant her entire professional life. The other has won the lottery at some point in the past.

Now, let’s do a thought experiment: Imagine we could repeat the lives of both neighbors in a Monte-Carlo simulation, thousands of times in a row. The result is that the accountant would end-up affluent in the majority of these simulations.

The lottery winner, on the other hand, has only one path to achieve her current success: Her achievement is path dependent.

Path dependency is the Achilles heel of many best practices: The drive to adopt processes and systems from other industries to improve. Many best practices are not universal, but specific to an industry, time period, or place.

For example, the open office workspace may have been effective in certain organizations dominated by extraverts, but are disastrous when introverts are brought into the mix.

A hallmark of excellent best practices is that they have a long and proven record, covering multiple industries: A great example is the extensive use of checklists.

Very few new ideas have the power to overcome this high bar.

The distinction between a best practice and a lottery ticket is very thin indeed.

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