The Benefits of Luck
Why are certain people wealthier or more effective than others? The default explanation has often been the wealthier seem to have some combination of work ethic, intelligence, or some other combination of talents compared to the less-wealthy. Eventually, the cream rises to the surface.
The problem with this explanation is that the statistical variation in wealth is much greater than can be explained by most of the observed variances in work, intelligence or talent.
What does this mean? Only 8% of people own as much wealth as the planet’s poorest 3.8 billion people. 80% of the planet’s wealth is owned by 20% of those people, and the wealthiest 1% own more than all the men and women below the 50% wealth level.
These are numbers which simply cannot be explained by differences in work habits. For example, no one can work billions of more hours than someone else. Similarly, an average IQ is around 100 – but no one has an IQ of 1,000 let alone a billion. So how can it be possible that a few people have countless times more wealth than others, even though they’re not countless times more hard working or smart?
The solution seems to be luck. A group of researchers at the University of Catania in Italy created a computer model of individual talent and the way that people use it to exploit the opportunities they encounter in life. The simulations introduced random good and bad opportunities — good luck or bad luck — across the spectrum of simulated life careers. In other words, some simulated careers acquired more than their share of good luck, others had terrible fortune.
The results were similar to what we see in real life: after 40 years, 80% of the simulation’s wealth was concentrated in 20% of simulated people. When researchers looked at the levels of talent programmed into these most prosperous people, they discovered they were not the most talented, or most intelligent, or even very meticulous.
Those variables all improved success scores, but they were nearly immaterial compared with the one contributor that explained most of the difference in prosperity — the number of good luck opportunities compared with awful luck setbacks that the simulated people encountered.
The most prosperous individuals were the luckiest ones and the least successful individuals were the unluckiest ones.
The research team is now turning its information set over to venture capitalists and people who fund scientific research, with the hope of overcoming certain biases in making future investments. For the rest of us, especially those who have been relatively successful in life, this is possibly a chance to accept a dose of humility and be grateful for the opportunities we’ve been given within our working lives.
