Success and Luck

Success and Luck Plot Summary

Introduction

Success is often attributed to talent and hard work, a narrative deeply ingrained in modern meritocratic societies. While these qualities are indeed essential, they tell only part of the story. By examining the pivotal role that chance events play in shaping outcomes, we confront a fundamental but uncomfortable truth: our achievements may depend far more on luck than most of us care to acknowledge. Through compelling personal stories, rigorous simulations, and insights from behavioral economics, a compelling case emerges that challenges conventional wisdom about individual success. This examination isn't merely academic—it has profound implications for how we structure our social institutions and tax policies. By reconsidering the balance between individual effort and random circumstance, we discover a surprising opportunity to enhance prosperity for everyone, including society's most accomplished members, without requiring painful sacrifices from anyone.

Chapter 1: The Pivotal Role of Luck in Success Stories

Most highly successful people attribute their achievements primarily to hard work and talent. These self-made narratives, while comforting, often minimize or completely overlook the crucial role of random events that decisively shaped their trajectories. Even extraordinarily talented individuals like Michael Lewis acknowledge their good fortune; Lewis once observed that when he landed a job at Salomon Brothers—the position that launched his stellar career—it was primarily because he happened to sit next to a senior executive's wife at dinner, who then pressured her husband to hire him. These seemingly trivial events can profoundly alter life outcomes. Consider Bryan Cranston, who became a superstar only after John Cusack and Matthew Broderick turned down the lead role in Breaking Bad. Or Al Pacino, who got his career-defining role in The Godfather when Francis Ford Coppola fought studio executives who wanted established stars instead. In both cases, immense talent met fortunate circumstance at precisely the right moment. Personal narratives further illustrate this phenomenon. A professor might secure tenure through an improbable string of rapid journal acceptances. A business leader might launch a company after accidentally meeting a key investor. Or someone might survive a medical emergency only because an ambulance happened to be nearby for an unrelated reason. The role of early advantage compounds over time. Bill Gates had exceptional access to computer programming facilities in the 1960s when few others did. Being born at the right time in the right circumstances positioned him perfectly to capitalize on the personal computing revolution. Similarly, studies show that birth dates influence success in domains ranging from professional sports to corporate leadership, with those born earlier in eligibility cutoff periods enjoying systematic advantages. Even the first letter of one's last name can affect career advancement in certain fields. A study of economics professors found that those with surnames early in the alphabet were more likely to receive tenure, reflecting the discipline's convention of listing authors alphabetically on academic papers. No such effect existed in psychology, where this practice isn't followed. While recognizing luck's importance doesn't diminish the value of hard work and talent, it does provide a more complete and honest assessment of how success actually unfolds. This recognition has important implications not just for how we understand individual achievements, but for how we structure our institutions to provide genuine opportunities for all.

Chapter 2: How Random Events Dramatically Alter Life Trajectories

Random events create divergent paths in life through several key mechanisms. First, they establish different starting points: being born into a particular family, country, or economic system immediately determines access to education, healthcare, and social networks. These initial conditions profoundly shape future opportunities. The economist Branko Milanovic estimates that roughly half the variance in global incomes is explained by just two factors: country of residence and the income distribution within that country. Second, chance affects the discovery and development of talents. Many high-potential individuals never encounter the right circumstances to reveal their abilities. Studies of identical twins who follow different life paths illustrate how seemingly minor events—one twin falling ill on an important test day, for instance—can set them on dramatically different trajectories. The skills we cultivate depend heavily on early feedback about what we're "good at," which often reflects random opportunities rather than innate abilities. Third, small advantages compound over time through what sociologist Robert Merton called the "Matthew Effect"—named after the biblical passage where "unto everyone that hath shall be given." In hockey, for example, children born just after the January 1 eligibility cutoff date tend to be physically larger than teammates born later in the year. This slight initial advantage leads to selection for elite teams, better coaching, and more playing time, ultimately resulting in dramatically better outcomes. Studies show that roughly 40 percent of professional hockey players are born in the first quarter of the year, while only 10 percent are born in the final quarter. Fourth, network effects and social connections magnify random events. The sociologist Duncan Watts conducted experiments demonstrating this phenomenon. In his "Music Lab" study, researchers posted songs from unknown bands online and tracked their popularity across different virtual worlds. The same song might become a hit in one world and languish in obscurity in another, with early random reviews creating self-reinforcing patterns of success or failure. Fifth, small random events have outsized impacts in winner-take-all markets, where small performance differences translate into enormous disparities in rewards. When thousands of highly qualified people compete for limited positions, even tiny advantages can determine outcomes. This explains why so many successful people report pivotal chance meetings, fortunate timing, or narrow escapes that made their success possible. These mechanisms don't operate independently but interact and reinforce each other, creating complex pathways where initial conditions and random events dramatically shape destinies. Recognizing these patterns doesn't invalidate personal agency but provides a more realistic understanding of how lives unfold in complex social systems.

Chapter 3: Winner-Take-All Markets Magnify Luck's Importance

Winner-take-all markets have transformed how rewards are distributed in modern economies, substantially amplifying the role of chance. These markets feature two distinctive characteristics: rewards depend more on relative performance than absolute performance, and rewards concentrate disproportionately among a tiny fraction of participants. While traditional labor markets somewhat rewarded skill differences proportionally, winner-take-all dynamics create exponential returns for those at the very top. Technological advances have dramatically expanded these dynamics across industries. When transportation infrastructure improved in the 19th century, piano manufacturing shifted from local production to concentrated manufacturing by a handful of superior producers. Similarly, digital technology has enabled the best professionals in many fields to serve vastly larger audiences. The top accountants once served only local clients, but tax software now allows the best tax professionals to serve millions. The best doctors can consult globally rather than locally, and star performers can reach worldwide audiences rather than just those who attend live events. In these markets, even minuscule performance advantages can yield astronomical rewards. A company with $10 billion in annual earnings might reasonably pay $100 million to a CEO whose skills improve performance by just 3 percent, since that translates to $300 million in additional earnings. Similarly, classical music recordings allow consumers to listen repeatedly to the very best performers, making small quality differences between top musicians enormously consequential for their earnings. Network effects further amplify these dynamics. Once a platform, product, or service gains a slight advantage, that advantage becomes self-reinforcing. Microsoft Windows dominated personal computing partly because its larger user base attracted more software developers, which in turn attracted more users. Similarly, bestselling books attract more readers because people want to discuss common cultural touchpoints, creating powerful feedback loops that transform small initial advantages into market dominance. The spread of winner-take-all markets helps explain growing income inequality. Since the late 1960s, median wages have stagnated while top earners have seen their incomes multiply several times over. In 1976, the top 1 percent of earners received 8.9 percent of national income; by 2012, that share had grown to 22.5 percent. CEOs who earned 42 times the average worker's salary in 1980 now earn more than 400 times as much. As these winner-take-all dynamics intensify, they transform the relationship between merit and reward. Even when rewards are based entirely on performance rather than connections or privilege, tiny random advantages can be decisive in determining who ultimately succeeds on a grand scale.

Chapter 4: Why Most Big Winners Are Both Skilled and Lucky

Success in competitive domains nearly always requires exceptional skill and tremendous effort, but these qualities alone rarely guarantee exceptional outcomes. To understand the interplay between merit and chance, we must appreciate how multiple factors combine to produce extreme success. In any high-stakes competition with numerous talented contestants, winners are typically both highly skilled and exceptionally fortunate. Statistical simulations provide compelling evidence for this counterintuitive relationship. Consider a contest with 100,000 participants where performance depends 98 percent on skill and effort, and only 2 percent on random luck. Despite luck's tiny contribution to performance, 78 percent of winners would not have the highest combined skill and effort levels. This occurs because in large competitions, there are typically many contestants with nearly identical high skill levels, and at least some of them will also be exceptionally lucky. This pattern appears consistently in various domains. World records in track and field illustrate the principle perfectly. Of the eight current world records in sprinting and jumping events, seven occurred with tailwinds (within permitted limits), and none with headwinds. Similarly, among the previous record holders, seven of eight benefited from tailwinds. Despite tailwinds accounting for only a small performance difference, they consistently feature in record-breaking performances because in extremely competitive environments, every small advantage matters. Chance events influence outcomes more dramatically as the number of contestants increases. In professional baseball, for instance, roughly 450,000 high school players compete for just 1,500 draft slots annually, with only a small fraction ever playing a single Major League inning. When competition is this intense, virtually everything must go right to succeed. The most talented individuals might suffer minor injuries, receive poor coaching, or simply have off days during crucial evaluations. The implications challenge conventional wisdom about meritocracy. Most successful people genuinely did work extremely hard and demonstrate exceptional abilities—it would be grossly unfair to dismiss their achievements as merely lucky. Yet the simulations reveal that many equally talented and hardworking individuals never achieve comparable success simply because chance didn't favor them at crucial moments. The math of probability further reinforces this reality. Improbable events become virtually inevitable when enough opportunities exist for them to occur. Just as everyone will eventually experience some extraordinarily unlikely coincidence if they live long enough, some individuals will experience improbable sequences of favorable events that dramatically enhance their success. These lucky individuals aren't necessarily more deserving than others with similar talents and work ethics who experienced less fortunate sequences of events. Understanding this dynamic doesn't diminish the accomplishments of successful people but offers a more complete explanation of how exceptional success actually occurs in competitive environments.

Chapter 5: The Cognitive Biases That Make Us Underestimate Luck

Despite compelling evidence for luck's importance, most successful people systematically underestimate its role in their achievements. This tendency stems from powerful cognitive biases that shape how we perceive and interpret causality. Understanding these biases provides insight into why false beliefs about luck persist despite contradicting evidence. The availability heuristic leads us to overweight information that comes readily to mind when constructing narratives about how events unfold. Successful people vividly recall their talents and the countless hours they've invested in developing skills. They remember difficult obstacles overcome and decisive actions taken. These experiences feature prominently in memory, while background conditions that enabled their success—being born in a developed country, having access to good schools, or benefiting from chance meetings—remain far less salient. The headwinds/tailwinds asymmetry further distorts perceptions. As psychologist Thomas Gilovich explains, people readily notice forces working against them (headwinds) but quickly forget forces working in their favor (tailwinds). Just as cyclists focus on the wind in their face while taking tailwinds for granted, people emphasize obstacles they've overcome while overlooking advantages they've enjoyed. Experimental evidence confirms this bias: when playing games with random elements, people consistently recall their opponents getting luckier draws than themselves. Hindsight bias creates an illusion that outcomes were more predictable than they actually were. Once we know how events unfolded, alternative possibilities fade from view, and the actual outcome seems almost inevitable. This makes successful people prone to constructing narratives where their achievements resulted from skill and foresight rather than fortunate timing or lucky breaks. Self-serving attribution bias leads people to attribute successes to internal factors (skill, effort, character) while attributing failures to external factors (bad luck, unfair conditions). This asymmetry in causal attribution helps maintain positive self-image but creates a systematically distorted view of reality. Research with depressed individuals suggests they may actually have more accurate perceptions of causality than non-depressed people, who consistently overestimate their control over positive outcomes. Motivated reasoning also plays a role, as acknowledging luck threatens beliefs about deservingness and personal control. If success depends substantially on factors beyond our control, this challenges the comforting notion that we can fully determine our fates through effort and skill. The belief that we control our destinies serves important psychological functions, potentially explaining why people cling to it despite contradicting evidence. These biases interact with cultural narratives that celebrate individual achievement while downplaying contextual factors. In competitive environments where rewards flow disproportionately to winners, these distorted perceptions become increasingly consequential, shaping not just personal narratives but also public policies that affect opportunities for future generations.

Chapter 6: The Social Cost of Denying Luck's Importance

When successful individuals systematically downplay luck's role in their achievements, the consequences extend far beyond personal psychology to shape institutional arrangements and social policies. This collective misattribution imposes substantial costs on society, affecting both public investment and individual wellbeing. Perhaps the most significant consequence has been declining support for public investments that create environments conducive to success. Infrastructure that previous generations built—transportation networks, educational systems, scientific research facilities—has been deteriorating as tax revenues fail to keep pace with maintenance needs. The American Society of Civil Engineers estimated in 2013 that the United States faced a $3.6 trillion backlog in essential infrastructure maintenance. This deterioration affects everyone, including the wealthy, who must navigate pothole-riddled roads despite driving luxury vehicles. Laboratory experiments demonstrate how acknowledging external factors influences behavior. When subjects are asked to recall external factors that contributed to their good fortune, they subsequently donate 25 percent more to charity than subjects asked to focus on personal qualities that produced their success. Similarly, psychological research shows that cultivating gratitude increases prosocial behavior, improves subjective wellbeing, and enhances physical health. By denying luck's importance, successful individuals miss opportunities to experience these benefits. The tendency to attribute success entirely to personal qualities also creates distorted perceptions of fairness. Laboratory versions of the "ultimatum game" reveal that when people falsely believe they've earned advantageous positions through skill rather than random assignment, they behave more selfishly and feel more entitled to unequal distributions. This dynamic likely contributes to growing resistance to taxation among the wealthy, who increasingly view their pretax incomes as entirely self-created rather than partly enabled by collective investments. False beliefs about meritocracy also impose psychological costs on those who haven't succeeded. When the narrative suggests that outcomes reflect only merit, those facing disadvantages often internalize blame rather than recognizing structural barriers. This can lead to learned helplessness and reduced motivation, particularly among children from disadvantaged backgrounds who observe the limited mobility of equally talented peers. Another significant cost comes from wasteful spending patterns that emerge when people fail to recognize how context shapes perceptions of adequacy. As wealth concentrates at the top, expenditure cascades occur: the wealthy build larger houses, shifting reference points for those just below them, who then build larger houses themselves, continuing down the income ladder. These positional arms races consume substantial resources without improving wellbeing, since standards that define "adequate" simply adjust upward. Collectively, these costs suggest that more realistic acknowledgment of luck's role could benefit everyone—enabling greater prosperity, more sustainable environments for future generations, and improved psychological wellbeing even for society's most successful members.

Chapter 7: Rebuilding Meritocracy: A Progressive Consumption Tax Solution

The recognition that luck substantially influences success points toward a transformative policy solution: replacing the current income tax with a progressive consumption tax. This approach would align individual incentives with collective wellbeing, generating resources for crucial public investments without requiring painful sacrifices from anyone. Under this system, households would report their annual income and savings, with the difference (minus a large standard deduction) constituting taxable consumption. For example, a family earning $100,000 that saved $20,000 would have consumption of $80,000. With a standard deduction of $30,000, their taxable consumption would be $50,000. Tax rates would start low and rise progressively with consumption levels. This approach would reduce wasteful spending patterns that currently dominate high-income households. Many expenditures at the top—larger houses, costlier celebrations, more expensive vehicles—represent positional consumption that simply raises standards defining "adequate" without enhancing wellbeing. When everyone scales back such spending simultaneously, no one experiences relative deprivation. A progressive consumption tax creates incentives for precisely this beneficial coordination. Importantly, this tax would not diminish the desire to get ahead or erode work incentives. People would remain free to spend more by earning more, but they would face stronger incentives to save rather than engage in conspicuous consumption. The resulting higher savings rates would increase investment, boosting productivity and economic growth. Eventually, this growth would enable higher absolute consumption levels despite consumption representing a smaller percentage of total output. Unlike conventional sales taxes, which are highly regressive because lower-income households consume larger percentages of their incomes, the progressive consumption tax can be calibrated to achieve any desired degree of progressivity. Large standard deductions would ensure that basic necessities remain untaxed. Special provisions would handle large purchases like homes by spreading their consumption value over multiple years. The progressive consumption tax would also help reverse the expenditure cascades that have squeezed middle-income families. As wealthier households moderated their spending on positional goods, the pressure would diminish throughout the income distribution. This would ease the financial strain that has forced many families to work longer hours, undertake longer commutes, and accumulate unsustainable debt. The policy has attracted bipartisan support historically. Senators Pete Domenici (Republican) and Sam Nunn (Democrat) proposed a version in 1995. Milton Friedman, the free-market economist, advocated for it in 1943. More recently, scholars at the conservative American Enterprise Institute have endorsed the approach. While immediate adoption might seem politically unrealistic, future fiscal challenges will eventually necessitate major tax reform. When that moment arrives, the progressive consumption tax offers a rare opportunity to align individual incentives with collective wellbeing, creating prosperity while rebuilding the environments that make genuine meritocracy possible.

Summary

Recognizing luck's profound influence on success transforms our understanding of merit and achievement. While talent and effort remain essential prerequisites for success, they alone rarely explain exceptional outcomes, particularly in highly competitive domains. Through compelling evidence from simulations, experiments, and real-world examples, we discover that even when luck plays only a minimal role in performance, winners of large competitions are typically both highly skilled and unusually fortunate. This insight doesn't diminish individual agency but offers a more complete explanation of how success actually unfolds. The implications extend far beyond individual psychology to reshape our approach to social policy. By acknowledging luck's importance, we can design institutions that better serve collective interests while still rewarding talent and effort. Most promising is the progressive consumption tax, which would reduce wasteful positional spending while generating resources for investments that benefit everyone. This approach represents a golden opportunity to enhance prosperity without requiring painful sacrifices—a rare chance to create environments where genuine meritocracy can flourish. For anyone concerned with building fair and productive societies, these insights offer a foundation for policies that align individual incentives with our shared interest in creating conditions where talent and effort can truly thrive.

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Robert H. Frank

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