Success and Luck

[jennypenny]

Robert Frank is the guest on today's econtalk podcast. They discuss his new book Success and Luck. It's out next week. I can't wait to read it.

[jennypenny]

Success and Luck

Meh. It’s an easy read (I read it in a couple of hours) but I’d only recommend getting it from the library. It should have been better. It talks about a lot of our favorite subjects. I think the premise is a little forced, however, which put a considerable dent in my enjoyment of the book.

Frank’s position is that luck plays a much bigger role in success than people realize or acknowledge. His view is unabashedly left-of-center as he believes that if you’re lucky for any of the many reasons he lists, you owe it to those who weren’t lucky through birth or otherwise to give back a lot of the spoils. His viewpoint is the basis for the book, but kudos to Frank for skipping the gratuitous political comments and only mentioning politics where appropriate. His ability to argue his point in a thoughtful and palatable way is refreshing ... and gives away his age. It’s a lost art. Anyway, I digress…


Are we all lucky?

Frank says yes, and harps on the fact that we should do more to remember that. It reminded me a little of the current penchant for gratitude journals and the focus on thankfulness in many religions. Obviously, learning to be grateful or thankful usually has a positive effect on a person. He referenced Michael Lewis’s 2012 Princeton commencement speech* as encapsulating his view. Frank goes on to give many examples of luck on a personal and professional level—all good examples and it’s hard to argue with any of his points.

Some of this comes down to whether you define luck in absolute terms or in relation to others. Sure, anyone born in a western first-world country won the geographical lottery. OTOH, being born into true urban or rural poverty in the US might not feel so lucky. There are other factors, too. How much luck comes from living in a stable home (how are we defining that these days?), or having an above-average IQ, or being physically gifted or just being physically healthy? How much do those conditions enhance or detract from a person’s overall luckiness? Is there a way to measure baseline luck like an IQ – LQ? – that measures what kind of head start a person has? It could be almost like handicapping (in the sports sense, not the health sense). If a person is smart and is born into an upper-middle-class home, but suffers from a mental illness, their lack of success seems as much out of their control to me as someone who is very smart but born into abject poverty or an abusive home.

The push for gratitude and gratitude journals seems like a back door to appreciating the luck you’ve received. Some of this is semantics. The randomness of luck seems to be at the heart of all objections. If instead of luck, you used a phrase that simply implied that things outside of your control fell your way or fell into place, then it might not sound so random and eliminate some of the standard objections people have to crediting luck for much of their success. Two distinct groups that object to that line of thinking include the ‘hard work’ camp who insists that everyone can succeed given enough grit, and those with a religious perspective that would chalk up lucky events to providence (although even then, the message is ‘God helps those who help themselves’). The randomness of luck seems to be at the heart of all objections, with a healthy dose of Puritan work ethic sprinkled on top.

Lewis talked about how lucky those graduates were at Princeton. He’s not wrong. A person is also lucky to have supportive parents, a (usually) upper middle class background, and the IQ to be capable of Princeton level work and SAT scores. Those kids were groomed from an early age (usually preschool!) for success. To my mind, that makes them a poor example of how much effect luck has on an individual. If Frank’s argument is that the one-percenters are destined for success from birth and should also be groomed to give more back when they’re adults, I’m not going to argue with him.

Frank then uses that argument to push for a consumption tax to replace the income tax. This is where the premise of the book feels forced. The connection between luck and tax law is a reach. He argues that extremely successful people are also lucky and the extremely successful should pay more in taxes as a way of giving back. Again, I’m not going to argue with him. I don’t think many here would, either. We’d all come out ahead. In theory, it would also slow consumption overall which would be good for the planet. I don’t think I’ll ever see it in my lifetime, but I’ll vote for anyone who promises to try and make it a reality. It's just seems like a really big leap to me.


Hard work as a luck amplifier

I think Frank’s argument doesn’t give enough credence to how luck intersects with the individual. The same lucky break will have very different results depending on the recipient. This goes back to the LQ idea. Being accepted to Princeton is lucky, but the life-changing potential of that luck is different depending on whether the student is from Scarsdale or Southie. But that, too, is luck and out of the individual’s control. What I was most interested in—and I think he glossed over—was how a person’s behavior affected how lucky they were or how well they were able to capitalize on their luck.

If you don’t come from a family that will guarantee your success in some way no matter how many times you fail—which is most of us—then how does Frank’s theory apply? Are we all still mostly lucky? I dunno. It seems like hard work helps people get the most mileage out of any luck that comes there way. I also think the people who are hustlers (in the good sense) end up being the most lucky because they are constantly putting themselves ‘out there’ and creating opportunities for luck. [This is similar to dating. Yes, a person is lucky to find *that one* person that’s perfect for them. OTOH, if they sit home and watch TV, they’ll never meet anyone, let alone THAT one. By putting themselves out there and taking risks, they are setting themselves up to be lucky.] I freely acknowledge that some people never get a break. They are dealt a lousy hand at the beginning, and no matter how hard they work they never get the lucky break they need to overcome it. Is that a reason not to try though? Or to attribute it all to luck?

Immingrants have reputation for being hustlers and hard workers. Their kids usually surpass them economically and socially. It’s the ones born into the same economic level in the US that seem to be stuck in perpetual poverty. Why is that? There must be a difference, but I can’t quite see it. Is it being just comfortable enough? Is the base level of poverty in the US just high enough to sate people and keep them from trying harder to make their own luck? Are those who come from third world level poverty hungry enough to push through? I’m not sure, and I think the answer is important. I understand telling Princeton grads how lucky they are, but is that the same message you want to give to children from impoverished families? It’s all about luck? Would that somehow push those born with a low LQ to just settle for welfare benefits? Would it encourage them to frame every disappointment in their life as bad luck, even if it wasn’t? I think it’s also wrong to set the bar for success at the level of one-percenters, but that’s probably veering OT.

I think Frank’s argument works for a certain segment of the population. Lewis was spot on in his address to Princeton grads, but how would that same speech play at Ole Miss? Or an inner-city community college? I’m not sure. If Frank's only goal is to raise taxes on the rich in some way, that's fine with me. I was hoping for more, though. I wanted to see him explore how luck--and specifically what kind of luck--made the most difference for normal folks so we could try to do a better job of setting people up for it. I want to know what kind of luck we should be trying to make happen for people, if that makes sense. Is it jobs? Better education? Better health? What kind of early luck raises the LQ the most--early schooling, better health, stable communities? That's what I wanted to see him address.


*Michael Lewis’s 2012 Princeton Commencement Speech http://www.princeton.edu/main/news/arch ... /87/54K53/

[IlliniDave]

I'm on record here as being a bit prickly about the tendency in certain circles to dismiss individual accomplishment with a hand-wave and an appeal to luck. I guess a guy gets tired of every small success, especially the financial ones, he ekes out of life being accompanied by an accusation of white privilege, male privilege, middle class privilege, and educational privilege. In my case there's additional level of humor to that because it is a black man who decides where I rank in the organization and what I get paid (i.e., my "matrix" boss), and a white woman who decides what work I am assigned which directly serves as the opportunity to influence my rating/compensation (i.e, my "program" boss). (Full disclosure, as of last week that changed so that now there is a black woman and the same white woman in those roles, but the change has not been in place long enough to have material influence). By the conventional wisdom I should say the world is unfair and those individuals are just luckier or more privileged than me to have more "powerful" and better paying jobs than mine. But that is silly. They all out-performed me in someone's eyes when it comes to leadership/managerial abilities.

I don't remember where the kernel of the idea came from, but I believe much of what passes for "luck" is simply what a person does when preparation and opportunity intersect during their lives.

That said, there are certainly random elements, and things beyond a person's control. There are initial conditions to the system (circumstances of birth and upbringing) that can be overwhelming (for every Ben Carson there are probably a hundred or a thousand drug/gang war casualties in the poorest sections of large US cities). On the other side, there are people born into so much privilege that even criminal behavior does not affect their success (at least in terms of wealth).

My own opinion is that we err on the side of over-exuberance when extrapolating those extremes throughout the portion of the distribution between them where the vast majority of people are born, live, and die. I guess I should have noted before, but my thinking here is largely US-centric. The playing field is never truly level--real life will never allow that. But the preponderance of people are given the tools for preparation (education and/or entry-level jobs). Opportunities for more tend to be both widespread and somewhat random in nature. It's up to the individual to knit them together with preparation. Most people who achieve wealth don't do so by the spigot of Lady Luck being turned so wide open on them they wind up standing below a Niagra Falls of 100-dollar bills. It's most often when relatively typical preparation meets relatively typical opportunity and a series of good decisions are made, decisions that are within the intellectual capacity of nearly all people. The decisions are tough, no one wants to say, "No," to themselves. Many people for various reasons won't ever find themselves in a place where becoming truly wealthy will be in the cards, but the same recipe of good decision at the intersection of preparation and opportunity is highly likely to afford them enough for a successful and dignified life.

We have a system in place where the wealthiest individuals contribute most of the revenue that goes towards efforts to address the removable outright obstacles on the playing field, and fund the basic educational system (preparation). That's probably as it should be. Whether they should be forced to contribute more is something I'll let others speculate about.

The cookie example in the commencement address is rather odd. It does say something about human nature I suppose, but in the real world it's unusual for "rewards" to show up to an enterprise in spontaneous random fashions. The "leader" did not "deserve" two cookies, but at the same time the others did not "deserve" the one they got either, which makes the whole exercise a little specious (and that's coming from someone who believes that executive compensation in public corporations has gotten scandalously out of hand).

[jennypenny]

I'm on record here as being a bit prickly about the tendency in certain circles to dismiss individual accomplishment with a hand-wave and an appeal to luck.

I agree with you. That's why I qualified my response based on a person's background. There's no question that some are born very, very lucky and they have to work really hard at mucking that up for themselves later in life. It can be done, but their safety net is huge. The majority of people have to work hard to make themselves lucky and work hard at making the luck pay off for them. Most people don't have much of a safety net and probably only get a handful of lucky breaks, so the pressure is on to make the most them.

We have a system in place where the wealthiest individuals contribute most of the revenue that goes towards efforts to address the removable outright obstacles on the playing field, and fund the basic educational system (preparation). That's probably as it should be. Whether they should be forced to contribute more is something I'll let others speculate about.

I don't think I made it clear in my post that Frank wants to increase tax revenue from the 'rich' by switching from an income tax to a consumption tax. I would support switching to a consumption tax.

[JamesR]

I was writing out something convoluted about the multiple aspects of work required to unlock the various luck opportunities or whatever. Gave up and rewrote as this - much simpler.

Success
- leverage/scale is required to be 'wildly successful'
- sometimes proxy for how much value you provide to universe, sometimes just from applying right leverage

Luck
- being in the right place at the right time
- associating with the right people, having the right connections, guanxi
- recognizing the opportunity in front of you
- finding the right leverage
- having the right skills/experience/background

Work:
- smart (a misnomer - "effectively" is the better word choice)
- to completion (most fail to get through the big dip, stop short before results appear)
- with great timing (work hard at the right times, get to finish line first to seize opportunity.)


By the way, in 2007-2009 I saw a couple of marketer friends of mine achieve $10k/day profit within the space of a few months from starting in that industry at the same time as I did. They worked hard, finished campaigns when I often didn't, jumped on new opportunities fast before the opportunities disappeared while I dithered about taking risks, and moved from success to success. Success begets success, they were soon signing agreements with affiliate networks and advertisers directly, working closer with critical people to gain more opportunities and gain greater leverage to build on. They grew into producing $300k-500k/mo profit and built their businesses with employees etc.

In summary what I learned from watching them is that success comes from action & timing. And connections came from growing success.

[IlliniDave]

I don't think I made it clear in my post that Frank wants to increase tax revenue from the 'rich' by switching from an income tax to a consumption tax. I would support switching to a consumption tax.

I think I would too, for a variety of reasons starting with the elimination of the IRS code as a major source of tension headaches every spring. Consumption taxes are pretty simple to implement and they reward the good financial behavior of saving and investing in a much more straightforward manner compared to burying the tax incentive in the bowels of the IRS code. I do have concerns that more revenue to the gov't will result in a bigger government that is equally inept/inefficient and proportionally just as financially reckless. More revenue put towards a pay-as-you-go strategy that address debt/deficits/unadressed future liabilities would be a good thing.

[Tyler9000]

Interesting topic. Here's my gut reaction:

"Luck" reflects a lack of initiative in the face of uncertainty.

You see this a lot in investing. Markets are highly uncertain and you have no power over them. Some people embrace that uncertainty and seek out ways to mitigate or even benefit from it (true fundamental valuation research or Taleb-style antifragile asset allocation, for example). People without such initiative attribute any success to luck and many actually actively discourage education on the subject. Anyone who stands out is cut down.

The same pattern repeats in all sorts of areas. Politics these days is all about actively attacking initiative.

There certainly is luck involved with any uncertain situation, and there will always be some people on the two distribution tails who either can't win no matter how hard they try or can't lose no matter how lazy they are. Focusing solely on those extremes, however, very intentionally removes personal decisions from the discussion. Maybe it's a defense mechanism. Sometimes it's a political tool. Never does it actually help people improve their own lives.

[jacob]

https://en.wikipedia.org/wiki/Self-serving_bias explains a lot of particular narratives/politics when it comes to randomness.

[fiby41]

Luck is you encashing previously accumulated karma.

@IlliniDave @jp:

We also have removing the income tax debate started by a Harvard doctorate here.
Reasons are that the the Income Tax Department is used to harass the small players and professionals, while those with enough income, dodge taxes or even hide by bribing their way out. So removing Income tax will dismantle the ITD here and losses to the govt exchequer will be partly recouped by service charges which is similar to consumption tax you mentioned.

This is important to consider because agricultural income, no matter how large, is exempt from taxation and you need you, your parent or grandparent to have owned agricultural land to buy agricultural land.

For the nation, boosting savings is the outcome he foresees, which is at ~30% currently.

The man shortly missed the Finance Minister post in 2014.

[GandK]

Luck has always struck me as slightly demeaning term for good results, used when the actions that produced those results are not believed to be due to the agency of the individual who is socially rewarded for them. IOW, it's a denial of respect by those who believe rewards were disproportionate to any effort expended.

I think the debate about luck really comes up when there was individual agency, but agency alone would not have produced the result, or the same result cannot be replicated using the same amount of work by others. Example: Mark Zuckerberg and Facebook. Did he have agency and work hard in his situation? Yes. But did the place and time of his efforts help his success? Yes. And can everyone else, with the same amount of work, achieve the same amount of success if they do what he did? No, because the world does not need billions of Facebooks. So was there luck? Of course. But without his work, there would still have been no Facebook. His success wasn't only luck.

If luck is an ingredient, does it negate the effects of (or perhaps simply the respect of) agency and work? No way. The social purpose of the word "luck" is not so much to point out differences as to complain about them. Which means it's used by people who feel left out. And people who have achieved - by both agency and circumstance - enough success to feel socially, financially and/or spiritually prosperous, object to the minimization of their efforts by the envious.

My opinion: there will always be circumstances that favor people in certain situations, whether that's geography, fortune, talent, IQ, EQ, connections, etc. Everyone has some advantages. This is how our species stays antifragile... we all have different strengths. But it takes work to capitalize on those. In the end it's always effort that moves people forward from where they are, no matter where they happen to begin. Assuming we do want to move forward, that's where our focus has to be: on effort. Not on the advantages others have that we do not have, or on the ephemeral elements that may or may not align around us and give us an unearned push.

Tangent: it disturbs me that there's a growing bias in our culture against any difference that cannot be replicated by anyone who chooses to do it. Young people in particular are all about celebrating differences these days, except when those differences seem to grant someone benefits that others don't get. When that happens, the difference should be vilified and/or stamped out rather than leveraged, which is the net-positive option socially. Fairness seems to be more important than forward progress. Or perhaps it's the only forward progress that ought to be important now... ? Either way, we are shooting ourselves in the foot by demonizing excellence.

[Ego]

https://en.wikipedia.org/wiki/Self-serving_bias explains a lot of particular narratives/politics when it comes to randomness.

Yes! By my own measure I've been moderately successful in life and I rather like the idea that that success is the result of the actions I took and the self-control I exercised. But everywhere I look I see luck.

Even when peering into the depths of my mind I wonder if the "me" who made all those decisions was actually the me I talk about when referring to myself. Neuroscience has shown that it is my unconscious mind that makes the decisions, the same part of the brain that regulates the number of my white blood cells and the precise dilation of my iris, allowing me to read this sentence.

In other words, the portion of "me" in control is the portion of me that I don't control.

The conscious mind, it seems, is told a story by the unconscious mind about why a particular decision was made. If my unconscious mind made the decision and I don't control my unconscious mind then.... luck.

The question puzzling many in the field is two fold:

1) How the brain accomplishes this retroactive storytelling.
2) Why the brain does it.

There is a lot we don't know, but there are many smart people working hard to figure it out. For instance, on Thursday Scientific American wrote about an interesting series of studies.....

http://blogs.scientificamerican.com/min ... free-will/

My gut tells me that the answer to #2 will go a long way to explaining the hard problem of consciousness. But then again, what do I know?

[7Wannabe5]

Ego said: Yes! By my own measure I've been moderately successful in life and I rather like the idea that that success is the result of the actions I took and the self-control I exercised. But everywhere I look I see luck.

I think (but do not necessarily believe) my success is due to cleverness, not self-control. Of course, since in my mind "success" equals " somehow eventually getting or achieving what I want to do or achieve", self-control is only to be applied in the realm of mutually exclusive. If I can figure out a way to eat pastry every morning and still have use of my knees at 85, then I am successful because clever and also very lucky!!!

[Ego]

Yeah, but what if you figured out a trick to enjoy kale for breakfast in a way that makes it even more pleasurable than a pastry? In bed? At the (nice) Marriott?

That might be a really lucky convergence of self-control and cleverness.

[jacob]

2) Why the brain does it. [...] My gut tells me that the answer to #2 will go a long way to explaining the hard problem of consciousness. [...]

Your gut told you that?

The why is the reason I said that the "ego" (the self) was perhaps a memetic virus or at least something most brains pick up very early on life. Do babies have a self? What about apes? Do dogs? Also of note is various religions' attempt to rid the mind of the self as it is seen as a source of unrest, e.g. Buddhism. More interestingly is how the "ego" program is set aside when in "flow". And then there's the state of enlightenment ...

As a side note, the ability to form narratives is highly useful for tracking. Humans use their big brains to find prey rather than their not so sharp eyes, bad hearing, or almost useless noses. The ability to form theories as well makes technology possible.

[Ego]

The why is the reason I said that the "ego" (the self) was perhaps a memetic virus or at least something most brains pick up very early on life. Do babies have a self? What about apes? Do dogs? Also of note is various religions' attempt to rid the mind of the self as it is seen as a source of unrest, e.g. Buddhism. More interestingly is how the "ego" program is set aside when in "flow". And then there's the state of enlightenment ...

I don't understand. What is the purpose of the virus?

[jacob]

The purpose of any virus is to replicate. Not being facetious here but why would/should it need to have a purpose? It simply is what it is and does what does.

In particular, if you (I realize the irony of using pronouns!) see everyone around you referring to themselves as "I" ... why wouldn't you naturally pick up on that. Of course, the one exception here is BRUTE who seems to have been infected by something else

[Ego]

Well, if we sprung from a life form that did not have the virus and then suddenly, poof, evolution spewed out a mutation that created it, and that mutation stuck, then it is reasonable to assume that there is some purpose that allowed it to continue in the pool.

Unless it's a spandrel. Actually that would be kind of cool.

It just so happens that I am writing a story about a spandrel right now. Maybe I'll have to work this in.


Edit to add: Google is magnificent! The ego is a spandrel produced an interesting result....
http://www.religiousforums.com/threads/ ... ory.74389/

[jacob]

I dislike the word "purpose". It implies intent where there might not be any. Does a falling rock have a purpose?

[Ego]

By purpose I mean, why does it (feel like it) exist? Like my fingers, why do they exist in this form rather than in sixes or twelves? Add to that the fact that it feels like it exists but evidence is suggesting that maybe it is an illusion. That makes it even stranger than if it was a six-fingered appendage. Purpose isn't the right word but I think you know what I mean.

What is the reason for the feeling of agency when plenty of things don't have the same feeling?

[jacob]

It exists because it can? That is, certain aspects of the universe and the hardware (limbic system and spinal chord) is compatible with it. For example, most humans think their self stops at the edge of their skin although IIRC there are recorded examples of people who aren't capable of placing a "self" inside the physical extent of their body. Another funny fact is how most humans currently think their self resides with their brain, that is, in their head ... whereas in many [historic] cultures, the self is associated with the heart ... and the brain is, for example, just considered a reservoir for spinal chord marrow.

Similarly, computer viruses exists because they can.---Because computers are connected and the brain/computer lacks an immune system or the selective ability to delete useless programs. At least from the get go.