Tag: luck

Wealth is a product of luck

This seems obvious to me: that luck plays a great part in success. Well, serendipity, perhaps which can always be given a helping hand by elite networks and pushy parents…

Definition of luck

The conventional answer is that we live in a meritocracy in which people are rewarded for their talent, intelligence, effort, and so on. Over time, many people think, this translates into the wealth distribution that we observe, although a healthy dose of luck can play a role.

But there is a problem with this idea: while wealth distribution follows a power law, the distribution of human skills generally follows a normal distribution that is symmetric about an average value. For example, intelligence, as measured by IQ tests, follows this pattern. Average IQ is 100, but nobody has an IQ of 1,000 or 10,000.

The same is true of effort, as measured by hours worked. Some people work more hours than average and some work less, but nobody works a billion times more hours than anybody else.

And yet when it comes to the rewards for this work, some people do have billions of times more wealth than other people. What’s more, numerous studies have shown that the wealthiest people are generally not the most talented by other measures.

What factors, then, determine how individuals become wealthy? Could it be that chance plays a bigger role than anybody expected? And how can these factors, whatever they are, be exploited to make the world a better and fairer place?

Source: If you’re so smart, why aren’t you rich? Turns out it’s just chance. | MIT Technology Review

Image: CC BY-ND fearthekumquat

The role of Lady Luck

This post on Of Dollars and Data is a bit rambling, at least from my perspective, but I did like this paragraph:

Think about the story you tell yourself about yourselfIn all the lives you could be living, in all of the worlds you could simulate, how much did luck play a role in this one? Have you gotten more than your fair share? Have you had to deal with more struggles than most? I ask you this question because accepting luck as a primary determinant in your life is one of the most freeing ways to view the world. Why? Because when you realize the magnitude of happenstance and serendipity in your life, you can stop judging yourself on your outcomes and start focusing on your efforts. It’s the only thing you can control.

I think this chimes well with Stoic philosophy: focus on the things within you control. There are going to be times in all of our lives when bad things happen. Conversely, there are going to be times when good things happen. We can’t control anything apart from our reactions to these things.

Source: Of Dollars and Data