KomFi. Academy

medium · GRE Verbal Reasoning

Business writers frequently distill the habits of wildly successful companies into formulas for others to imitate. A persistent methodological problem undermines much of this literature. By studying only firms that succeeded, analysts cannot know whether the traits they identify, such as bold risk-taking or relentless focus, actually caused success, since countless failed firms may have shared the very same traits. The failures, having vanished, never enter the sample. A trait common to winners and losers alike explains nothing about why the winners won. Distinguishing genuine causes from mere correlates would require examining the full population of firms that once pursued a given strategy, not just the survivors whose stories happen to be told. Absent that comparison, the confident lessons drawn from success stories remain, at best, untested hypotheses.

The passage suggests that studying only successful firms is problematic mainly because it does what?

  1. It exaggerates the role of luck relative to skill in producing success.
  2. It depends on stories that successful firms generally refuse to disclose.
  3. It concentrates on risk-taking while neglecting the value of relentless focus.
  4. It cannot show whether traits shared by winners actually caused success.
  5. It proves that successful and failed firms are essentially identical in nature.

Sign up free to see the explanation and track your rank →

More GRE Verbal Reasoning practice

All Verbal Reasoning questions · GRE study guide · GRE glossary · GRE flashcards