Success, however you define it, is parts hard work, parts talent, and 90% luck1. Don’t let anyone else tell you otherwise; it’s even been proven to be harmful to believe otherwise: A belief in meritocracy is not only false: it’s bad for you. If reading is not your thing (not sure what you’d be doing here though), this video explains it very simply.
So what is luck and how do we get luckier?
Below are my thoughts on “compounded luck”, or how luck is something akin to capital: the more and earlier you get it, the more you have in the future. But unlike capital, a massive amount is no guarantee for getting lucky again in the future, it merely raises your chances of. I also discuss some ideas on how to get luckier and maybe find happiness (if you’re lucky).
“Compounding”?
First, let’s talk about the financial term I borrowed for my analogy. What is “compounding interest”? According to Wikipedia “compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest.”
It refers to the results of reinvesting whatever earnings you get from your original investment. In the long-term this grows your capital exponentially. Let’s try with an example:
Juan and Diego both inherit 100 dollars from their grandpa. They’re smart investors, so they both invest their money in a diversified portfolio with roughly the same instruments and weights, and with a 20-year timeframe. The only difference is that Diego will leave the 100 dollars and reinvest whatever he earns (compounding his earnings), whereas Juan will take profits out every year and put it under his mattress (he doesn’t trust the system).
Assuming an annual return rate of 10%, after 1 year Juan will have 100 dollars invested and 10 under his mattress; Diego will have 110 invested. Yes, the same. But, after 20 years of doing the same, Juan will have the original 100 dollars invested and 200 dollars under his mattress. Diego on the other hand will have around 6732 dollars. Starting with the same amount of money, Diego ended up with more than double by simply taking a little more risk by reinvesting his earnings.
If they had invested with a 1 or 2 year timeframe, their strategies would’ve yielded basically the same results. It only really paid off for Diego in the long term. Thus, the benefits of compounding interest are only possible if you take enough risks and for a longer time. The earlier you start compounding, the more you get out of it. The higher risks you take, over a longer time, the bigger the reward.
But, what does this have to do with luck? Now that I know you have a notion of the concept, let me tell you about Compounding Luck. First things first…
Quantifiable Luck
Let’s follow the money or assets analogy and say luck is quantifiable. It’s hard to measure, yes, but you can judge it by orders of magnitude. It’s easy to say someone is unlucky if they were born to a poor family, in contrast to Bill Gate’s kids. But comparing Gate’s kids to Obama’s kids is harder and becomes more subjective. I also assume we can agree that money is not always a synonym of good luck, specially if it comes too suddenly. Ask some lottery winners.
We can say some people are born with a certain amount of luck. If you’re born to an educated family, that’s also rich, that also lives in a developed country, you could say you’re very very lucky compared to the rest of the world. In this sense, luck is also inheritable.
One could be tempted to quantify someone’s luck based on the likeliness of something happening to them, but that leaves out all the context of their lives. Judging luck by the unlikeliness of an event would qualify someone stepping on cow shit very very very lucky, specially if you live in a city.
Investing luck
Regardless of the amount of luck you have at any given moment, you can “invest” it by trying something new. Maybe you start writing a blog, learn how to play an instrument, or volunteer for a new project at work. It doesn’t matter what, but if you never try to use your luck, you’ll never get anything in return!
Sometimes that investment will have a modest return: You’ll learn something new or will have a new anecdote to tell at parties. It doesn’t matter if you fail, just by trying something new you’re generating “something”. If you’re lucky, that something new you tried will be a massive success.
Imagine you were neighbors with Jeff Bezos growing up. You had lost touch with him, but in 1998 you run into his mom at the supermarket and she tells you he’s taking his company public, named Amazon. “Like the river” you think. You’ve never bought stock, but you go and buy a couple of shares because you always liked the guy. Flash forward to September 2020 and your amazon shares are worth 156 times what you paid for them.
You got really really lucky, by paying some dollars and doing just one thing you hadn’t done before.
Now imagine you ARE Jeff Bezos. You worked your ass out, survived the dot com bubble, spent lots of sleepless nights, and got really really really REALLY lucky and became the richest guy by far.
Both examples show similar levels of luck, by orders of magnitude, but with different levels of impact, given the risks undertook. Buying Amazon stock didn’t require much capital back in 1998, but building Amazon required a lot of capital, energy, effort, and above all people who trusted you.
These are also very nice examples of Survivorship Bias. You could do the same thought experiments, but instead of Amazon using Webvan, pets.com or any of the many companies that failed in the early 2000s, and realize how average your experience would’ve been3. Not unlucky, just average. Unlucky ones are the ones that didn’t even try, because even when those ventures made people lose (a lot of) money and time, their luck increased, even if only a little, by preparing them for the future.
Can you get negative luck? Yes, of course, by doing harm, lying, or cheating your way in the world. You might get lucky and not get caught, but if you do you will lose your luck capital. You can’t get lucky if you’re not trusted (or if you’re in jail). You might also be lucky to be born in a place with a higher “tolerance” for cheating or cheat and avoid getting punished.
Anyhow, investing your luck means trying something new, risking something, trying to learn something, whatever is out of your comfort zone. That investment will always yield something, it could be an insane reward, or just experience for the future.
Getting Luckier
“I have been Homer; soon, like Ulysses, I shall be Nobody; soon, I shall be all men—I shall be dead.", wrote Jorge Luis Borges4. If we had infinite time or tries, we’d get all the luck, even monkeys will write Shakespeare given enough time. But, we are finite and luck is so unlikely that we have to work hard to get lucky, though the more you try, the luckier you will get.
As seen above, you get something from investing your luck. It can be money, experience, disappointment, joy, whatever. The thing is, you get something that changes you a little.
Since any effort will reward you with something, it stands to reason you should try to do as many things as you can. That is only partially true. Even if you could theoretically become rich by investing in one stock, say by buying 10,000 dollars of Amazon shares in 1998 and holding them until now, chances are you will need to invest in a diversified portfolio to not lose all your money in the stock market. There was no way of knowing Amazon would be such a successful company back in 1998.
Getting massively lucky almost always requires a massive effort. Even if you were born the most amazing musician, if you don’t have encouraging parents that provide at least the opportunity for you to discover it, or if you never even try to play an instrument, you won’t get anything out of it but some fancy party tricks. Musical talent is nothing without hours of (the right) practice, just like any other human activity.
So, getting luckier involves effort, sometimes a lot of effort. “Luck favors the prepared” said Louis Pasteur, famous for being lucky, among other great contributions to humanity. If you wanna get lucky, work hard and be prepared.
Compounding Luck
By now, we know what compounding means in the investment world and we know that if you try your luck, if you try something new or put effort into your endeavors, you get something out of it. Now let’s combine both: “Compounding Luck”.
I propose when you get lucky you not only get some kind of reward (money, fame, experience, etc.), you also get luckier. The effort you put into something will make your luck capital go up (as long as you don’t cheat), it will yield luck dividends. Maybe the change is insignificant or maybe you get lucky and it’s a life-changing amount of luck. What matters is we get luckier, and if we reinvest our returns, we get luckier exponentially.
Imagine it’s Friday night, you’re tired from the week, and just wanna go to bed. Your friend insists you must go with him to this bar. You’re reluctant at first, but you end up going. There, you meet an amazing person, you start dating, and you realize you complement each other very well. The sum of you is much better than the 2 of you individually. You get better at work, start taking more risks, and your life improves for the long term. You get lucky, incredibly lucky, and that luck brings in more luck.
This applies to everything and there are countless examples of lucky people getting even luckier. Of course, it comes with hard work, but once you get lucky enough, chances are you will keep getting lucky.
There’s anecdotes of people like Seth Godin or Malcolm Gladwell getting hundreds of emails every month with good stories to appear on their books. They wrote books, got lucky, and they’re now in a position where writing and citing good stories became easier, just like the chance to get lucky again. Or people like Justin Bieber, discovered on YouTube by millions of teenagers and becoming massively famous. Even if he doesn’t try, opportunities are gonna come by eventually. People like lucky individuals, they hold power, they seem chosen.
Very few people have gotten lucky without hard work or relentless efforts, but once you get lucky enough, it becomes easier to get luckier, even if you face unbelievable circumstances.
Jason Becker was born in California ~50 years ago. His dad and uncle were guitar players, so he was exposed to guitars starting at a young age. He would play everything that came around and before finishing high school he was already giving concerts. In 1990 he was awarded the Best New Guitarist award from Guitar Magazine. He had a promising future, he had gotten lucky, very lucky, enough to become famous for his music before turning 25. Until 1991, when Jason was diagnosed with ALS and given 3 to 5 years to live. That year he couldn’t even finish touring.
Jason got very lucky, luckier than most, by being born with incredible talent to a family of musicians that nurtured his gift, and able to pursuit a career playing guitar and composing music. He had gotten so lucky that despite having a debilitating disease he’s still lucky enough to be able to continue composing music until today, aided by a computer.
That’s the power of luck, once you get lucky enough, chances of getting lucky again are higher, and when you’re lucky there are very few things that you can’t face. There are some caveats though.
Past luck doesn’t guarantee future luck
Getting lucky, specially if it’s really lucky, can help you get lucky in the future. The luckier you get, the higher chances of getting lucky later. But even with higher chances, getting massively lucky is hard.
Douglas Prasher is a researcher that in the eighties worked in genetics and biochemistry research at the University of Georgia, where he identified the gene sequence for aequorin. Initially very lucky, he was able to clone and sequence genes previously thought to be very hard or impossible. Douglas also proposed a way to trace substances in live cells and organisms using bioluminescence. His luck ran out before he could experimentally prove his hypothesis: he wasn’t able to secure the funding for his research and after a few unlucky research positions he had to quit science altogether. In 2008, while he was working as a private driver, the winners of the Nobel Prize in Chemistry were announced: all 3 of them had collaborated with Douglas and in their acceptance speeches recognized his seminal work as fundamental for their own research. Two of the recipients, Martin Chalfie and Roger Tsien, invited and paid for Douglas and his wife to attend the ceremony in Oslo.
Prasher, thanks to the ultimate combination of hard work, talent, and luck, was able to produce research that would be ground-breaking, so much to earn the ultimate prize in science. His luck though, wasn’t enough to allow him to continue his career in science and earn a well-deserved Nobel Prize.
Luck, as powerful as it is, can’t guarantee future luck. It can make getting lucky easier, but it’s not a guarantee. Even if Malcolm Gladwell gets thousands of emails with good stories, if he’s not lucky enough to find the perfect one for the next book it will be for naught. It might be easier to get lucky now, he just needs to find the right email in his inbox, but not certain. As you get luckier, your luck capital compounds, it grows exponentially, elevating your chances to get lucky again.
That’s why, even if you’re born with the most luck capital, ie. to the richest most educated parents living in the most equal and advanced society, you’re not guaranteed to get lucky by yourself. Chances are you will suffer regression toward the mean and be considered less lucky than your parents, or might even get massively unlucky and be considered generally out of luck. But, with that seed capital there’s little you need to do to get lucky again: just try something new.
Final words | TL;DR
Success is mostly luck, but you can get luckier if you try (hard) enough.
Luck is powerful, very powerful, and you can harvest it by trying new things: learning, starting, or investing something, or just getting out of your comfort zone. You will get lucky, but you might get very unbelievably lucky.
Getting lucky works like capital: the sooner and the more you start investing it, the greater amount you get in the future, specially if you take advantage of the exponential growth of compounding interests in the long-term.
Being lucky raises your chances of getting lucky in the future, but it’s no guarantee for getting lucky again. You can even pay the ultimate price and die (or maybe just end up working on a different field from your dreamed one) before reaping any benefits from your luck.
How to be happy?
Once you realize success is mostly luck (and being prepared to capitalize that luck, which is the easy part), you can begin to hack your mind into being happy. There’s no need to suffer for not being less successful than your peers, you are merely less lucky.
Once you realize how scarce luck is, but that when you do get lucky it brings more luck for the future, you can appreciate the little things more, and happiness, just like the devil, is in the details. As for me, the monkey got lucky and wrote Shakespeare: I can say almost all of my happiness today comes from the luckiest beer I’ve had in my life, a beer I wasn’t gonna drink because I was too tired to go out.