The Role of Luck in Financial Success

Let’s delve into some philosophy, shall we?

Have you ever met a very financially successful individual (i.e. a business owner, CEO, or celebrity) and been absolutely dumbfounded as to just how in the world they got where they are?

On the flip side, have you met a super sharp individual with a strong work ethic and been similarly dumbfounded that they never ascended to a more prestigious position?

What separated these two individuals?

This is something that I’ve thought a lot about over the years. I’m a firm believer that luck (both good and bad) plays a huge role in financial success. As much as it is ingrained in the American psyche to believe that everyone is born equal and we can all just will our way to the top with the right effort and gumption to fulfill the American dream, that has not been my observance.

luck and finance

Across the social, political, and economic spectrum there are countless examples of luck having a profound role in one’s financial success:

  • If you are lucky enough to be born as a Kennedy, Bush, Clinton, or Trump, you have much better odds of political and financial success than just about everyone else.
  • If you are lucky enough to grow to the height of 6’11”, do you think you’d have slightly better odds of financial success through NBA stardom than if you are 5’4”?
  • If you are Larry Page and Sergey Brin, you are lucky to have met each other and even luckier that Excite CEO, George Bell, turned down your offer to sell your infant Google for $1 million in 1999.
  • If you are George Bell, you’re probably reminding yourself daily how unlucky you are to have said “no”.
  • If you’re Ron Wayne (one of Apple’s 3 founders), you were devastatingly unlucky enough to have sold your share of the company to Jobs and Wozniak for the stately sum of $800.
  • If you were lucky enough to be a pre-IPO tech worker at Yahoo, Google, EBay, or Amazon and stick around, you were an automatic millionaire (at least for a while).

These examples may seem to be on the extreme end of the spectrum, but every single one of us faces the realities of luck. From birth, we are born in to different socioeconomic and life circumstances. Right then and there, luck has already played a major role in the course of our lives. If you are born into poverty, your poor luck means that you are much more likely to have lower nutrition, safety, education, health, and nurture levels than someone born into extreme or even moderate wealth. The impact of that bad luck is very real. You’ve got a hill to climb. There are plenty of examples of random everyday luck in action:

  • If you were born from 1950 on, your odds of financial success are much higher than if you were born before 1600.
  • If you were born as a male, or attractive, or white, or tall, or an extrovert, or wealthy, your odds of financial success are much higher than if you were born as the opposite.
  • If you were lucky enough to be born with no major physical or mental disabilities, your odds of financial success are much higher than if you were.
  • If you were lucky enough to have not been prescribed a highly-addictive opioid pain killer that you became addicted to, your odds of financial success are much higher than if you were.
  • If you were born and raised in cities like Seattle or San Francisco, your odds of financial success are much higher than if you were born in Flint or Mobile.
  • In many ways, Americans are lucky enough to be born into the wealthiest country at the wealthiest time in history. Even if you were born in to poverty in this country, try convincing someone born in Malawi or Rwanda that you are the unlucky one.

I could go on and on…

Making Our Own Luck

Having said all this, I do believe that many of us are in position to make our own luck as well.

  • Those who push through coursework and studies versus putting in minimal effort have better odds of getting the high paying job than those who don’t.
  • Those who avoid taking shortcuts that land them in jail or worse have better odds of financial success than those who don’t.
  • Those who put in the effort of building up a strong network of friends and colleagues have better odds of landing in the right place at the right time than those who don’t.
  • Those who teach themselves how to properly save money and invest have better odds of financial success than those who don’t.
  • Those who take informed career risks versus staying comfortable in low-level positions have better odds of financial success than those who don’t.
  • Those who build up their communication, organization, stress-management, critical-thinking, improvisation, presentation, technological, and creative skills have better odds of financial success than those who don’t.

Yes, Sergey Brin and Larry Page got lucky in many ways, but they also nurtured some mad programming skills to put them in the position to get lucky. Kevin Durant was born with the genes to grow to 6’9″/240 lbs., but that alone didn’t make him an NBA star – he put in countless hours in the gym to fine-tune his skills.

All else being equal, it pays to be an active chaser versus a passive spectator.

Roman philosopher, Seneca, once said, “Luck is what happens when preparation meets opportunity”. I do think there’s a bit more randomness than that phrase permits, but it’s not a bad motto to live by so you don’t become too passive in waiting for luck to fall in your lap.

The Luck Takeaway

I look at the path of my own life as a combination of everything I’ve laid out here. In many ways, the birth lottery benefited me as a tall, white male born in the latter half of the 1900’s in the United States with no major mental/physical disabilities (that I’m aware of yet, at least), and I’ve had a few key interviews where the interviewer liked me enough to give me a shot. On the unlucky side, I was not born into wealth, I graduated at a time of minimal hiring, I had always lived in a middle class rural part of the country with limited job prospects, I am introverted, and I just missed out on the IPO-boom.

I’ve made plenty of mistakes along the way, but I have put in just enough effort to get myself through college with good grades, to power through 300+ applications before getting my first job, to perform well enough at my first job to land my 2nd job, to perform well enough at my 2nd job to get a big break in my 3rd job (a job that also inspired me to start this blog!), and to self-teach myself personal finance, and (mostly) avoid empty consumer temptations.

I think that is the case for most of us. We are the product of a whole lot of luck, randomness, and effort.

What I hope people take away from this is:

  1. An understanding that we are not born on equal footing and bad luck does strike, so we should practice empathy and compassion towards others.
  2. An understanding that luck (both good and bad) has very real consequences in our lives.
  3. All work is temporary. So, save as much as you can, while you can.
  4. An understanding that life can often be a series of random events. Sometimes things break your way, sometimes they don’t – how we respond is more important.
  5. A belief that we can influence and make our own luck through our efforts, and the hope that comes along with that.

There is comfort and peace in those lessons.

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