Thread: Talent vs Luck: the role of randomness in success and failure

This is one if the basic premises of the book "Fooled by Randomness"... As well as Richard Feynman's essay titled "Cargo Cult Science.."

If you think back to the 10 years leading up to The Great Recession - the economy was growing my leaps and bounds.. The rising tide was lifting all boats... And it was very hard for upper management to tell the difference between someone Lucky and someone Good - because the results were mostly the same...

Then came the great recession - and the opposite happened.. It didn't matter if you were unlucky or really talented - the falling tide swept everything away.. And it was similarly very difficult to tell the difference between somebody lucky and good - both were destroyed...

It seems like the only time you can tell is sometime in between when things are challenging - not guaranteed success.. Not guaranteed failure.. But a time when skill and effort makes the difference. And it kinda feels like now is one of those times.

Luck - Everybody is lucky some of the time and nobody is lucky all the time. Some people are on average a lot luckier than others, If you live in the Lucky Country or the Land of the Free, then you are likely to be luckier than if you're living in a war torn country like Syria. However, despite the cards that one is dealt with, it is how one plays his hand to take the opportunity that is on offer that will see the person go far. In other words, you've got to hoist your sail when the wind comes otherwise you will still be where you are.
Anyway, is wealth really the equivalence of success? My view is that once you have achieved a certain standard of wealth, your own judgement of success becomes more dependent of other factors such as happiness, connections to family and so on.
Just my two cents. The distributions used are quite instructive, but I think his framing of the problem and his not mentioning luck vs time relationship make the model rather incomplete.

I am speaking more about probability of "Success" given a set of possible outcomes.... Not walking down the street and finding a winning lottery ticket on the ground...

Let's use the example of flipping a coin... Say you make up a "Leadership Development Program" based on flipping a coin... The criteria is Flip Heads = Pass on to the next level...

You start off with 1024 candidates....
Flip #1 - you loose 512 people.
Flip #2 - you lose 256 people
Flip #3 - you lose 128 people
Flip #4 - you lose 64
Flip #5 - you lose 32
Flip #6 - you lose 16
Flip #7 - you lose 8
Flip #8 - you lose 4
Flip #9 - you lose 2
Flip #10 - the last remaining candidate becomes CEO...

Was your CEO particularly righteous, skillful, or knowledgeable? Did he posess any special skills or abilities? He would say he certainly is exceptional.. A cut above the rest.... But the reality is no - it was just the 50/50 probability of flipping a heads.... "Luck" if you will.... And by design - the last man standing gets the prize... So somebody has to win...

And during The big growth runup - almost everybody was winning... The key was to simply be in the game... You could flip a coin and win 90% of the time....

That's why all these big investment groups are pouring money into China at breakneck paces... Stupid money.. Closing down profitable and productive plants in their home country to bet the farm on an unknown chance in China... They are doing it because the whole economy has been growing at 10-20% a year with segments at 100% per year.. You don't have to be "Good" to make a lot of money - you just have to be in the game....

This is very different than an actual "skill" based outcome.... A house painter's income is determined by the square feet of paint he paints. If he paints twice as much - he makes twice as much money.... And the quality of the paint job is almost 100% dependent on his actual skill... It's a numbers game for our painter friend... The only "uncertainty" is the amount of business available in the local economy...

But if you study the decisions of executives - the very best hit 50% right the first try... Literally flip a coin.... And what actually separates the "best" from the "Worst" is how quickly and aggressively the "correct course" when they figure out the coin lands on tails.... The trouble is that a 50/50 shot is still 50/50... And flipping a coin again still has the same probability of outcome... And so the fellow who flipped 10x on heads can just as easily flip the next 10 on tails and pile drive the whole place straight into the ground... And it doesn't violate any statistical or probability rules... The next flip is still the same..

And he will probably still get his bonus and a golden handshake when it fails!


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