Do we underestimate the role of luck in our successes and failures?
Definitely, according to the irreverent Nassim Nicolas Taleb, known for his Black Swan theory (I wrote an article about it, here)! This is the central idea of his book "Fooled by Randomness". Rather than providing an extensive account of it, I chose in this article to focus on the importance of luck in our fortune - the core thesis of the Lebanese American essayist - and its corollaries that we could sum up very simply:
(1) Be humble
(2) Retain your judgement on others
Generally, we attribute success to talent. Biographies and self-development books depict how certain traits such as risk taking, or habits, lead to success and failure. But is that really the case? Taleb thinks that we grossly underestimate the role of sheer luck in our fate. Now, let's explore three reasons provided by Taleb as to why chance alone might play a larger role than we think.
First of all, the patterns and traits that we identify in successful people are often disconnected from their performance. Our perception is altered by the survivor bias which, in a given population, makes a certain subset disappear. For example, consider the idea that waking up at 4am is a key to success, as popularised by the "miracle morning" concept born in Silicon Valley. While many successful entrepreneurs follow this routine, they are the only ones observed. There are likely numerous unsuccessful entrepreneurs drinking kale juice and falling asleep on their yoga mats in the early morning, but they remain invisible to the public. No one is interviewing them on podcasts or writing their biographies.
To assert that success stems from the miracle morning or a risk-taking mindset, one should study two populations of entrepreneurs at the beginning of their projects. These two groups should share similar characteristics (location, experience, sex, etc.) except for the specific trait under study. The first group would practice the miracle morning, while the other would enjoy the luxury of not waking up in the middle of the night. After a certain period, such as two years, we could examine the success rate of each group to determine if there is a correlation, which might imply causation (or an unexpected confounder).
Secondly, Taleb emphasises that success often traces back to an initial stroke of luck or advantage that snowballs over time. Economists refer to this as "path dependence." Consider an actor at an audition, let's call him Henry Truck. The examiner fell in love as a teenager with someone who had a similar-sounding last name, and end up selecting Henry. This initial, unforeseen fame, exposes Henry to a large audience - including movie directors - thus creating more opportunities. Henry becomes a movie star. Meanwhile, numerous equally talented actors keep serving macchiatos at their local Starbeurk to pay their rent. This apparently insignificant luck snowballed into determinant success for Henry. We can see the same pattern in trading, where an early streak of fortune - you "beat the market" - can lead to recognition in the field.
“If one puts an infinite number of monkeys in front of (strongly built) typewriters, and lets them clap away, there is a certainty that one of them would come out with an exact version of the Iliad.”
Coming back to our initial example, to determine whether a person truly possesses extraordinary acting talent, a controlled experiment is needed. In this experiment, Henry would go through a series of auditions conducted by a different jury each time, with the jurors having no prior knowledge of him. To establish giftedness, he would need to be selected far more often than other contenders. We observe his performance in independent occurrences.
In a nutshell, factors such as being in the right place at the right time, meeting the right people, or encountering favorable circumstances can greatly influence the outcome, regardless of our efforts, sustaining Taleb's idea.
Lastly, Taleb underscores the role of luck connected to the non-linearity of reality. This can be summarised with the following statement: "Life is unfair, in a random way." We often maintain the illusion that a certain amount of effort will yield proportionate results. However, this is rarely the case.
“(...) Reality rarely gives us the privilege of a satisfying linear positive progression: You may study for a year and understand nothing, then, unless you are disheartened by the empty results and give up, something will come to you in a flash.
Additionally, even a minuscule additional increment can generate a disproportionate outcome. Imagine building a sandcastle on the beach. You add more sand linearly, increasing its height until it collapses unexpectedly. This phenomenon is captured by the saying, "The straw that broke the camel's back."
“What we are witnessing here is a nonlinear effect resulting from a linear force exerted on an object. A very small additional input, here a grain of sand, caused a disproportionate result (...).”
The fact that our success is not proportionate to our efforts supports the idea that luck plays a larger role than expected in success. Taleb sustain his thesis regarding the significant influence of luck in success with numerous arguments and illustrations. However, for the purpose of this article, I will stick to these three reasons. With that in mind, what conclusions can we draw from his analysis?
The first corollary of Taleb's demonstration is that we should approach our successes with humility. Believing that we “deserve" all of our accomplishments is often misguided. While our innate qualities may have played a role, luck also had its influence. Failing to acknowledge the contribution of Lady Fortuna leads to overconfidence in our judgement and arsehole behaviours. This overconfidence is toxic and can result in dramatic errors of judgement as we become less inclined to question our intuitions and listen to others. We become susceptible to being “fooled by randomness”.
“Lucky fools do not bear the slightest suspicion that they may be lucky fools - by definition, they do not know they belong to this category. They will act as they deserve the money.”
The second corollary suggests that we should not judge and assess individuals solely based on their current success, as it may not necessarily be deserved. This is particularly relevant when we cannot observe results over an extended period. A limited number of observations increases the odds that it's just luck.
Instead of focusing solely on outward success, we should appreciate individuals for their inner qualities and behavior. Taleb draws a compelling parallel to Homer's Iliad, where heroes like Achilles and Hector experience both triumphant victories and devastating defeats.
“Heroes are heroes because they are heroic in behaviour, not because they lost or won.”
Glory and fame wax and wane. It reminds me the latin saying “Arx Tarpeia Capitoli Proxima” which means "The Tarpeian Rock is not far from the Capitol" - in ancient Rome, the Tarpeian Rock was where people sentenced to death were thrown off, while the Capitol symbolised power and influence.
In conclusion, Taleb's intention is not to undermine the value of a strong work ethic or intelligence. They are not rendered useless but are neither mandatory nor sufficient for success. Lucky fools exist alongside intelligent, hardworking individuals who may not achieve the same level of success. His book serves as a call to humility, urging us to acknowledge the role of luck in shaping our fortunes, both good and bad, and to approach the judgment of others with gentleness and understanding.
