Behavioral New World
August 1, 2022
Luck vs. Skill
To make good decisions, it is important to understand the causes of outcomes. If you falsely believe that Effort X causes Outcome Y, your pursuit of Outcome Y by exerting Effort X will be in vain. Or maybe Effort X is only part of the story.
That’s rather abstract, so let’s consider what leads to (causes) career success. (Career success is relatively easy to measure, at least compared to relationship success or parenting success, for example.) Before jumping into the discussion, I define what I mean by “luck” and “skill” because I use those terms in broader ways than their common meanings. Hang in there.
It is easy to think of luck as something like winning the lottery. But I interpret luck to mean all the influences on you that you had (or have) no control over. Luck factors include being born male in the USA to healthy parents with a decent level of assets. Your own good health is partly genetic and therefore a luck factor.[1]
I think you get the idea—the list could be much longer. And I think you’ll agree that there is lots of serendipity in life. Stories abound about the unlikely ways in which people met their future spouses or found a job. These chance encounters are also part of luck.
Skill also has a broad meaning. Obviously, it refers to what economists refer to your “human capital”—practical skills as well as knowledge and wisdom. But it also refers to your work ethic, the choices you make, and the people with whom you purposely surround yourself.[2] How you react to chance encounters is part of your skill set.
So what causes career success? If you ask people who are successful, they will likely attribute it to their hard work, perseverance, focus on their goals, and so forth. And they are not wrong! But it is possible that they give relatively little weight to luck as an important contributing factor. Why?
Answer: Skill, to the individual, is quite noticeable. “I worked hard and got this outcome.” But this thinking is influenced by something called the “availability bias” (covered in my December 2020 newsletter). One’s late nights at the office or putting in extra time at the gym (for a professional athlete, say) are vividly experienced and remembered.[3]
It requires some humility to step back and ask, “Which other factors led to my success?” An honest answer will include luck, as broadly defined. So resist the urge to claim that you are a completely “self-made” success. (As a bonus, you’ll have more friends.) And it might make you less harsh in your judgment of others who have not had success—bad luck is almost certainly a part of their story.
If you’re reading this newsletter, you’ve had some luck. At a minimum, you are literate, have a computer or phone, and internet access. I’m not saying that those outcomes are fully attributable to luck, but there is certainly luck involved.[4]
You lucky dog, you.
You may recall that I asked readers in March to share biases, real or imagined. Here’s the last one I’ve received; I’m still interested in hearing more. From my colleague A.Y.:
The Taco Bell Sauce Abundance bias. You ask for one hot sauce, they give you a handful.
My comment: Lots of behavior can be explained by incentives. Giving you a handful of packets doesn’t cost the worker anything and then they don’t have to deal with you again 😊.
[1] Family-related luck recalls Warren Buffett’s quip about “members of the lucky sperm club.”
[2] “You are the average of the five people you spend the most time with.” (Jim Rohn). If not literally true, there is certainly some validity to this sentiment.
[3] There may also be a “recency effect” in play as well—it is easier to recall more recent events or information.
[4] I recommend Robert Frank’s book, Success and Luck: Good Fortune and the Myth of Meritocracy. It includes public policy implications for the luck-versus-skill perspective that I’ve (briefly) described here.