A study that claims that luck prevails over talent in the distribution of wealth has been mathematically confirmed. Photo by Thegoodly and Getty Images
If you've studied business for as long as I have (40+ years), the headline above probably won't surprise you. In fact, I've long believed that luck, rather than smarts (or hard work), determines success. That's why, early in my career as a journalist, I adopted a motto that attempted to capture this perception: “There are no big shots.” In other words, it's amazing how many of the people at the top are, well, unremarkable. So I assumed luck must play a major role in their rise. I never had a chance to change my mind.
Of course, this was a subjective judgment, but now there is support for this cynicism: the mathematical confirmation of research that claims that luck prevails over talent in the distribution of wealth. Two Italian physicists (Alessandro Pulcino and Andrea Rapisarda) and an economist (AE Biondo) have made this claim, and they have computer models to back it up.
Let’s take a step back. The data on economic inequality are now so familiar that they no longer seem surprising: the top 1 percent of the world’s wealthiest people control almost half of the world’s wealth, and the wealth of the richest eight people is equal to the wealth of more than 3 billion of the world’s poorest people.
But why? The most common explanation is that wealthy people got rich through IQ, intelligence, talent, noble hard work (Horatio Alger), or pure greed (The Wolf of Wall Street). Or maybe it's all of the above, but it's hard to be both noble and greedy.
But what about good old-fashioned luck? After completing my first year in the Harvard MBA program (and journalism fellowship) reporting, thinking and writing about business, I had come to the conclusion that luck is one, if not all, of the determinants of success. So at the end of our 1983 book, Life and Death on the Corporate Battlefield: How Companies Win, Lose and Survive, my co-author Tom Friedman and I summarized it this way:[a] While a great strategy may win in some cases and a great new product in others, there is a lot more luck hidden behind the bottom line than traditional business thinking would have us believe.'' More recently, the great economic thinker Bob Frank wrote a book that explores the importance of success and luck (albeit briefly), “Success and Luck: The Myth of Luck and Meritocracy.''
The academic paper is one with which we all agree: “The meritocratic paradigm, so prevalent in competitive Western cultures, is based on the belief that success is due primarily, or even exclusively, to personal qualities such as talent, intelligence, skill, cleverness, effort, will, hard work, and risk-taking,” the authors write.
Who could disagree? And meritocracy, rule by those with the most power, sounds very fair and very just.
“We must admit that sometimes a certain amount of luck may play a role in achieving great material success,” the authors acknowledge, but they conclude: “In fact, it is rather common to underestimate the importance of external factors in individual success stories.”
How do they know? They write that we take it for granted that intelligence, talent, and personal qualities are all “normally distributed” – that is, there are about as many super-smart people and super-dumb people (most of us are somewhere in between), there are about as many great athletes as stone-clumsy people (most of us are somewhere in between), there are about as many Mother Teresas as Jack the Rippers (most of us are somewhere in between), there are about as many midgets as giants, etc.
Yes, this is the good old “bell curve” or “normal distribution.” Most human characteristics fall along this curve. But wealth follows a power law, also known as the “80/20 rule,” with a majority of poor people and a very small number of billionaires. An extreme but thought-provoking example is that the wealth of the eight richest people is equal to the wealth of over 3 billion of the world's poorest people.
But think again, the authors suggest: if intelligence, talent, and even effort are so normally distributed, yet wealth is so abnormally distributed, what is missing to explain the disparities?
“We argue that such factors are merely chance,” the authors write. “In particular, if it is true that a certain amount of talent is necessary to succeed in life, we show that the most talented rarely reach the pinnacle of success, being overtaken by mediocre but fairly lucky people.” The practical implications are quite clear: “After all, it highlights the risks of distributing excessive honor and resources to people who may simply have been luckier than others.”
For more details and the math used to “prove” this argument, see this paper and its clarifying write-up by MIT Technology Review. Note that the paper has not been peer-reviewed and the model relies on computer simulations rather than humans. Make sure you buy it before you buy it.
Editor's note: This post has been updated to add details about the methods and nature of the study.
