A man wears the costume of the god of good fortune, known as Chai Seng Ye, during Chinese New Year's Year of the Pig celebrations at the Dharma Bhakti Temple in Jakarta, Indonesia, on February 5, 2019.Willy Kurniawan/Reuters
Mark R. Rank is the Herbert S. Hadley Professor of Social Work at Washington University in St. Louis. He is the author of a soon to be published book, Random Elements: How chance and luck profoundly shape our lives and the world around us.
What shapes our economic destiny? Attributes such as education, skills, and labor market experience probably come to mind immediately. Demographics such as age and parents' socio-economic status may also be considered.
But surprisingly, according to various social scientists, these factors only explain about 35 percent of the variance in income. In other words, 65 percent of the difference in personal income exceeds our standard assumptions.
So what's the rest of the story in terms of how well we're doing financially? It turns out that a big part of the answer has to do with luck. Randomness and chance help shape our career choices and income. Chance events such as a chance encounter, a missed call, or being in the right place at the right time can influence why you take a particular job with a particular income at a particular moment .
Consider who will become rich and who will experience poverty. It turns out that random factors are a big factor. In a fascinating research article titled “Talent and Luck: The Role of Randomness in Success and Failure,” mathematical physicist Alessandro Pulchino and his colleagues explain how working for 40 years can earn you great wealth. We were able to empirically quantify the relative importance of talent and luck. -Age lifespan. What they discovered was that the most talented people rarely reach the pinnacle of financial success. Rather, the people most likely to reach the pinnacle of wealth are those with more average talent who also happen to have some luck.
The same goes for people suffering from poverty. Much of poverty can be explained not by a lack of motivation, but by unfortunate events that hit people over time. In fact, my research shows that the majority of Americans will experience poverty for at least a year at some point in their lives, often due to bad luck – sudden health emergencies. , factories closing, working hours being cut short without notice, cars breaking down. When these events occur, often suddenly, households can be thrown into a downward spiral into poverty.
These results throw considerable water on the myth of meritocracy and wealth. Certainly, personal attributes such as talent and determination are important factors for material success, but just as important is luck. We may think of having a basic level of talent and determination as necessary but not sufficient conditions for economic advancement in life. Achieving great success often requires not only talent and determination, but also luck. As Dr. Pulchino and colleagues write, the idea that we live in a rigid meritocracy is clearly false because it “underestimates the role of randomness in the determinants of success.” be.
American economist Robert Frank has also written extensively about the role of luck in relation to income. He says that while it is true that highly skilled people who work extremely hard can become wealthy, “it is much more likely that a talented person who works extremely hard and only earns a modest income.'' “There are many There are hundreds of disparities between skilled and patient people who become millionaires, and the disparities often arise from chance events. ”
Dr. Frank observes that the United States (and Canada) has become a winner-take-all society over the past 40 years. As a result, a very small number of people experienced incredible increases in wealth while the rest of society experienced economic stagnation. What separates the lucky few from other equally talented people is how lucky they are. “The result is that, far more often than ever before, seemingly trivial random events cause surprising differences in economic rewards,” Dr. Frank wrote.
So the next time someone tells you that they are entitled to all the wealth that has ever come their way, you might remind them to count their lucky stars.
