The Wealthy People Are Just Luckier. Here’s The Proof.

Paper deep dive “Talent vs Luck: The Role of Randomness in Success and Failure”

Genius is 1% inspiration and 99% perspiration.

— Thomas Alva Edison (1872–1946), and he isn’t the first to say so

The quote above was actually first spoken by a writer, Kate Sanborn. Also, Edison’s attribution to ‘inspiration’ varied: sometimes 2%, sometimes disregarded altogether: ‘Genius doesn’t come from inspiration; inspiration comes from hard work!’, essentially zero percent.

So it is not new that ‘genius’ doesn’t equate to ‘success.’ Especially now we have an experimental proof from the 2022 ‘32nd First Annual’ Ig Nobel Prize in Economics tells us that ‘success is 1% genius and 99% luck’.

The Intriguing Interplay of Talent and Luck in Success: A Deep Dive into Award-Winning Research

This seemingly whimsical paper, titled “Talent vs Luck: The Role of Randomness in Success and Failure”, was awarded the Ig Nobel Prize in Economics. It offered startling conclusions that have far-reaching implications for our understanding of success.

Published by a team of researchers from the University of Catania in Italy with a mix of physics and economic disciplines. The study’s method leans heavily on physics-like simulations to study economic phenomena.

The paper’s central claim contradicts the prevailing wisdom on success. Using an agent-based model to simulate life scenarios, the authors present a complex web of factors influencing one’s career trajectory.

TL; DR

Their groundbreaking research, encapsulated in mathematical models, reached a startling conclusion — success is overwhelmingly influenced by luck, rather than ability or skill. And it is kinda true that people who are born in a wealthy family have greater chances for success.

Here’s a cut to the chase and no BS conclusion. Your luck plays a far more critical role than your IQ.

Of course, there is more to it than just this.

As a nerd, I am going to cover the experiment. But you can jump to the part where I talk about the life story of the rich vs the poor in the sandbox: The rich and the poor, after 40 years. Also, I will discuss how to change your luck at the end of the article.

Got friends who link success to just skill and effort? This might change their perspective!

The Motivation Behind The Luck vs. Talent Research

The research team embarked on this study due to a glaring disconnect they observed in society: the level of one’s abilities or talents often does not correlate with wealth or financial success. This incongruity led them to challenge the notion that talent equates to success.

The researchers wanted to answer:

• Does talent guarantee success?
• How much does luck play a role in success?

1000 Participants In A Soup Of Good And Bad Luck

An example of the initial setup for our simulations.

In the grand theater of the ‘Talent vs Luck’ model, the stage is set with:

• A simple 201x201 grid, a representation of the world
• With 1,000 participants, our pixelated protagonists spend their virtual lives in the world.

It’s a lot like a board game, where each player — each with their unique blend of talent — has a starting position. Though, unlike most games you’ve played, these participants stay put when events happen to them.

From Humble Beginnings

• Starting wealth: All players kick off their simulated life journey uniformly — it’s a level playing field with a starting “wealth” of 10 coins. The original study refers to this as ‘units’ to maintain academic neutrality, but for the sake of engagement and relatability, I will use the term coin.
• Age, the Starting Line at 20: Our avatars begin their virtual career journey at the spirited age of 20, widely considered the starting line for earning money in real life. The simulation spans the course of 40 years — these are the earning years where each player pushes to accumulate wealth before the retirement milestone at 60. They’re in it for the long haul, where each year can turn the tides of their virtual fortune.
• Talent Tally: As for talent, think of it as the players’ IQ/skills — a number between 0 and 1, with nobody hitting either extreme. The average talent hovers around 0.6 (roughly on IQ 105), positioning our crowd around the midrange on the talent spectrum. Like grades on a curve, talent is distributed normally — some closer to the middle, others spread out towards the edges. The distribution shown in the figure below is just like in the real world.

• Normal distribution of talent among the population

A Chaos Of Equal Opportunity For All

The journey traverses 40 simulated years where participants, fixed in their positions, experience life as it comes to them. The board is a dynamic field where green dots signify lucky breaks and red dots, misfortunes, each dot plotting a course of random encounters—wealth shifts with these chance meetings.

The word luck offers no guarantees. While green dots offer the opportunity to increase wealth, the red dots are less forgiving and indiscriminate in their skill or strategy. With 500 events (dots) — split evenly between hopeful hues of green and dire shades of red — the simulation doesn’t just mimic the highs and lows of life; it quantifies the chaos in each colorful collision.

Good Luck: The Green Dots

Encountering green dots can have various beneficial effects on the participants, simulating the serendipitous opportunities that people might experience in real life. Here’s how good luck plays out:

• Windfalls: A green dot might represent a financial bonus, an unexpected inheritance, a lucrative opportunity, or even a beneficial connection that can lead to career advancement. Some participants might stumble upon green dots more frequently, not due to talent but sheer chance, representing the unpredictable distribution of luck in the world.
• Talent Multiplier: The talent of an agent determines how effectively they can capitalize on these lucky events. A green dot is a chance to double a participant’s wealth, their talent point representing their ability to leverage opportunities.

Bad Luck: The Red Dots

Conversely, the red dots represent the misfortunes that can set participants back significantly. Here’s how bad luck affects the participants:

• Losses: Hitting a red dot could mean a financial crisis, a health problem, or any other setback that costs the agent half of their current wealth, regardless of how talented they are.
• Unpredictable Setbacks: Just like in real life, bad luck can strike anyone at any time. The simulation mirrors this randomness, showing that misfortune can impact even the most talented.

The Rich and The Poor, After 40 Years

Imagine a colorful field of simulated fortune, where little digital figures represent folks like you and me, embarking on life's journey, from the bustling energy of their 20s to the mellow sunset of their 60s.

In this virtual world, everyone starts with the same modest pocket — 10 coins. They let either a spot of luck (in verdant green) or misfortune (in ominous red) bump into them. With 250 chances for each as they stride through their simulated years.

The Rich

Please meet our most fortunate avatar, who ended up as the king of this digital hill. Starting at twenty, a regular Joe, with a talent score — a combination of skills and knowledge — of 0.61. Not a genius by any standard but a decently clever fellow, slightly above average — an IQ of around 105. He wasn’t the smartest but had a knack for capitalizing on opportunities that came his way.

Fast forward through the simulation, and you’ll see this character’s wallet fattened impressively. How? By encountering green dots of opportunity, each chance grabs hold of his decently high ability value and doubles his wealth. Life for him was a series of fortuitous events, particularly as he neared 40, where his assets skyrocketed thanks to a trio of lucky breaks, catapulting his wealth exponentially as his initial funds were already significant.

What is equally important is that Joe never ran into unpleasant events during that 40 years running.

The Richest Agent’s life journey:

Time evolution of success/capital for the most successful individual

• Initial Stage: Like everyone else, the richest agent started with the same amount of wealth, ten coins.
• Midlife Luck: The most significant change in their wealth trajectory occurred near the age of 40. The agent encountered three consecutive lucky events (green dots).
• Ability Index: An ability index of 0.61 indicates slightly above-average capability (comparable to an IQ of around 105). They had a decent chance of capitalizing on these opportunities and doubling their wealth.
• Wealth Growth: Even though the agent’s wealth didn’t grow much from 20 to 40 years old, these mid-life lucky strikes led to an exponential increase in their wealth, especially as the base amount of their wealth was larger at this point.
• Continued Fortune: From age 50 to 60, the agent encountered three more lucky events, which were again sequential and capitalized on, leading to further exponential growth in wealth.
• Overall Luck: Remarkably, during the 40-year period, this agent did not encounter any significant unfortunate events (red dots), allowing for uninterrupted wealth accumulation.

The Poor

Contrast this with our unluckiest soul, whose life was starkly different. Even with an ability index of 0.74, it translates to an impressive IQ of around 125. His journey was a testament to how treacherous fate can be.

Despite his commendable intelligence, this unlucky soul’s life underscores a profound lesson: sometimes, no amount of talent or ability can shield one from an unrelenting onslaught of bad luck. His life chart, showing only a single green dot amidst a sea of red, stands as a stark reminder that fortune, or the lack thereof, can overshadow innate capability.

The Poorest Agent’s Life of Suffering:

Time evolution for the less successful individual.

• Unremarkable Beginnings: Until 30, the poorest participant’s life was uneventful, with neither significant gains nor losses.
• A Glimpse of Hope: Between 30 and 35, the agent experienced one good and one destructive event, essentially balancing out and leaving their wealth unchanged.
• Downward Spiral: Starting at age 38, the agent’s fortunes took a severe downturn. They encountered 14 consecutive unlucky events without any lucky breaks in between, leading to a drastic reduction in wealth.
• Ability Index vs. Misfortune: Despite having a relatively high ability index of 0.74, equating to an IQ of around 125, their wealth continued to decline, nearing zero by age 45.
• Post 45 Years Old: Any additional misfortunes had little impact because the agent’s wealth was already so low, but the unfortunate events kept occurring.

Final distribution of capital/success among the population.

This is a distribution of the final wealth held per individual. You see, a few succeed, while the majority fell to the bottom. The one stood out — not by genius, but by seizing serendipity’s green glow, quintupling his worth by 40, untouched by the red scourge of setback. Meanwhile, the smarter ones mostly encountered bad luck and ended up being penniless.

Luck, The Often-Overlooked Element of Success Under The Myth of Meritocracy

The research we discussed reveals a profound truth: not all struggles stem from a lack of effort or ambition.

We see a lot of interviews with successful individuals, which often spotlight their relentless effort and perseverance. However, these narratives rarely acknowledge the role of luck. Many believe their young age’s hard work and struggles directly led to their success, overlooking the possibility that their favorable circumstances were a product of good fortune. This misconception is why the principles of success are difficult to replicate — Hard work and effort are necessary, but achievements in life also depend on seizing the right opportunities at the right time.

This reality demands a compassionate understanding of those who, despite diligence, don’t achieve success, not because of a lack of effort but due to unfavorable circumstances. As we saw in the study, it suggests that a person’s financial struggles are not entirely their fault. Of course, except for those who have given up on themselves, everyone else is striving in their own way.

The concept of swapping the lives of the wealthy with those living in poverty offers a striking illustration of this point. Wealthy individuals often assert that hard work can turn any situation around. Yet, when their roles are reversed with the impoverished, they find themselves mired in the daily grind of survival, where concerns about basic needs like food and shelter leave no room for thoughts of wealth or business pursuits.

The life trajectories of the most and least successful individuals in the study underscore this. The most successful never encountered significant misfortunes, why would they? They have the safer environments compare to the poor.

Acknowledging Our Luck: A Virtual Toast to the Fortunate Readers

To you, the readers of this piece, take a moment to acknowledge your good fortune. The very device you’re using to read this signals a life unburdened by the immediate, pressing concerns that weigh heavily on many — like where the next meal will come from. This is a toast to you, the fortunate ones, and a wish that our paths be sprinkled with more green dots of opportunity than the red dots of adversity.

Dodging Life’s Curveballs and Transforming Outlook into Opportunity

Of all the intricately intertwined events In life, both encountering more good fortune and sidestepping disasters can change our destiny.

It’s about recognizing that many of life’s setbacks are beyond our control and unrelated to our abilities. So, how do we dodge these curveballs? The answer is surprisingly straightforward: minimize risk. Why tempt fate when you can opt for safer alternatives, like working out at home instead of risking a jog on the main road, or in health aspects like smoking less, drinking in moderation, and choosing healthier foods? All can significantly reduce our chances of falling ill or running into accidents. Remember the study’s lucky individual who never got sick? Reexamine your lifestyle and ask: “Can you get exposed less to the red dots?”

On the other hand, you want to foster good Interactions with others. It doesn’t just provide social benefits; it also opens doors to ‘green dots’ of opportunity and helps us spot ‘red dots’ of danger. Knowledge is power — or at least, being informed about others’ misfortunes can prevent us from falling into similar traps!

Let’s consider how we can boost our luck. The wealthiest person in our study stumbled upon good fortune repeatedly. So, what’s the secret? Well, it turns out that luck is a matter of perspective, just as psychologist Richard Wiseman suggests. People who consider themselves lucky tend to have a wider perspective on life. They focus on the positive, seeing opportunities even in the most unexpected places.

Your outlook can significantly influence your fortune. The Law of Attraction, as explained in Rhonda Byrne’s “The Secret,” and the principles in Stephen R. Covey’s “The 7 Habits of Highly Effective People” underscore this idea. These philosophies emphasize proactivity, clear goal setting, prioritizing, fostering positive relationships, understanding, empathy, and continuous self-improvement. By adopting these habits, we not only boost our effectiveness but also attract success and opportunities.

Just a cute image generated by Dall.E after I fed this article to it.

Until Next Time

Yes, life demands effort, but the direction of our efforts is crucial. Strive for safety and health, and expand your horizons to minimize life’s ‘red dots’ and maximize its ‘green dots’. Wealth might be a roll of the dice, but remember, when success isn’t just about financial riches. It’s about playing your cards right, embracing opportunities, and enjoying the journey on your terms.

Hang ~ On

I’m keen to dive into some critical questions sparked by our discussion: “How should this change our approach to education and career planning?” and “What does this mean for governments or companies in allocating resources based on an individual’s past record?”

Let me know which topic intrigues you the most! I’m excited to explore these questions further and I can’t wait to write it up!