About Luck

Growing up, luck was always this mystical, intangible thing that could never be explained.

When I’d ask “what is luck?”

I’d typically get one of these three answers:

• “You make your own luck”

• “Luck is what happens when preparation meets opportunity”

• “They harder you work, the luckier you get”

That wasn’t good enough.

Because, how do you ‘make’ your own luck?

I know a lot of people that work hard, but don’t get lucky.

I’ve been well prepared, but didn’t meet opportunity.

The answers were never clear.

The key to understanding luck is understanding the difference between skill and luck.

Where skill is the biggest determiner of outcome, luck plays a minimal role.

Where luck is the biggest determiner of outcome, skill plays a minimal role.

Here’s an example:

If I raced Michael Phelps 100 times in a 50m swimming race. Michael Phelps would win 100 out of the 100 races. Because he has a higher level of skill. I would need to be extremely lucky just to win just one of the races.

Michael would need to slip on the starting blocks, fall in the water and tangle himself on the rope, long enough for me to get an uncatchable lead.

I this scenario: skill plays the major role. Not luck.

Let’s flip the coin…

Literally. Let’s say Michael and I flip a coin 100 times and call heads or tails. An outcome where skill has no effect and winning a heads or tails toss is completely up to luck. If I win 70 our of 100 coin flips, I’ve won 70% of the time.

However, because the toss of the coin is a 50/50 chance, the longer we play the more the percentage will deviate to the norm - If we played 1000 flips, eventually it will work its way back to 50%. No amount of skill can help me increase my probability of winning more.

In this scenario: luck plays the major role. Not skill.

Where luck becomes really interesting is in other areas of life where it’s not so black and white.

Things like business and investing.

If you ask a smart and successful entrepreneur who exited their company for 100’s of millions: how did you do it?

You’d be met with answers like: I worked really hard, stayed persistence, focused, discipline and made sacrifices.

However, there is a graveyard full of smarter entrepreneurs who worked harder; was more persistence, focused, disciplined and made more sacrifices but failed.

Why does this happen?

We’ll explore this more in the newsletter…

A few ideas to whet your appetite. More of these are featured in my newsletter:

Self-serving Biases

If you win at something, a majority of the time you will put it down to your skills. If you lose, you’ll say you got unlucky.

If someone you don’t like does better than you, you’ll say he only did well because he got lucky. If that person fails, you’ll say they didn’t have the skill to be successful.

If you don’t believe this to be true, this newsletter is absolutely for you.

Most of the narrative we tell around luck is self serving. We don’t want to ruin the image we have of ourselves, let alone the image others have of us.

Survivorship Bias

Because we are obsessed with winners. We forget about the losers. The failures.

As Nassim Taleb writes, “We favor the visible, the embedded, the personal, the narrated, and the tangible; we scorn the abstract… the highest performing realisation will be the most visible.”

The story of WWII planes coming back from battle highlights survivorship bias best. When planes returned from battle, Abraham Wald, a statistician studying World War II airplanes, started researching where to reinforce the plans, based on where all the bullet holes were.

Throughout the process he had the realisation that the planes that were shot down - the failures - would tell a better story about what areas of the plane require reinforcement.

We want to learn from success more than we do from failure. And obviously so, the successful are the one’s that ‘survived.’

Again, you could ask the successful pilot: how did you avoid all those devastating blows?

The pilot may answer: well I did the barrel rolls and feints - the enemy had a hard time hitting me.

If you could ask the fallen pilots the same question, they would have said: I barrel rolled, feinted and everything, but they still got me.

The randomness of high-speed, aerial combat needs to be considered.

We attribute too much skill to the survivors and the successful and disregard the impact of luck.

Our Proclivity to Tell Stories

We need answers. We want to know cause and effect. We want to be able to connect the dots looking back.

When luck plays the major role, we want to explain it. We want to say X happened because of Y and Y happened because of Z.

This is very easy to do, and in most cases the story is a self serving bias.

Marc Andreessen said:

I’ll leave you with this:

All billionaire entrepreneurs are wildly smart and incredibly skilful. But not all wildly smart and incredibly skilful entrepreneurs are billionaires.

Explore with me how to get lucky.