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.
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:
- An understanding that we are not born on equal footing and bad luck does strike, so we should practice empathy and compassion towards others.
- An understanding that luck (both good and bad) has very real consequences in our lives.
- All work is temporary. So, save as much as you can, while you can.
- 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.
- 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.
This was a great post! I just found your blog recently and have been reading the whole thing and I’m obsessed! Thank you for sharing your ideas, experiences, and thoughts. It’s already made a great impact on me and how I approach my finances and I’m so grateful!
The whole dang thing? Ahhh!!! I better clean up some of the embarrassing stuff. ;-)
Thanks for the love.
Whole thing! Better act fast before I get to the good stuff!
Great post! I have been following your blog the last couple months and enjoy your insights.
Luck and the ability to take a risk in the first place.
I am an amateur student of human adaptation, examining how and why successful things happen. Sometimes you do see only luck playing a role but more often than not you see luck following up an initial action of taking a risk or forcing a change.
I’ll share an example from this week. I’ve had the pleasure of meeting contractors this week for a basement finish and I’ve been surprised at how many of them are ex-addicts, whether alcohol, medications or illegal narcotics. All of them have talked to me about their experiences making the transition and all have stated how much better their lives are adapting to life without chemical influence. Interestingly, none of them were expecting the upturn in life success as a consequence of their transition. I would argue they were unlucky and ill-prepared for temptations when they came, but once there they took the risk of leaving their crutch and seeking something better for them they found their luck changing, that they could create opportunities and more importantly, capitalise on them.
GE, as always, great blog, great content. Thanks for creating the opportunity for yourself and creating material for adaptations for everyone else.
Good story, appreciate the share.
I was glad to see you talked through the effort required if you were still lucky enough to have good timing.
Bills Gates was lucky enough to live near one of the first computers, and as he learned on it, he grew skills that eventually led to Windows.
This makes me reflect on two things:
1. Outliers by Malcolm Gladwell. Its a book that talks through the 10,000 hour rule, and how some were lucky enough to get into positions that helped them easily practice for those hours
2. Talent vs Skill – Will Smith talks through these often in his interviews. Talent, what you’re born with. Skill, hours of practice developing. Someone can have luck, but not many will go through 300 applications for a job. It seems you are one with talent while developing your skills!!
Awesome post – keep up the great work!
Great post. I know it’s in the scope of finance and building your career (equaling more money, hence finance) but it can be applied to pretty much anything. Romantic relationships, making friends, becoming better at sports, whatever. Some people are naturally better at flirting/better looking, tell better jokes to make friends, have more coordination for sports. But you can always work on self-improvement in various ways to make yourself better.
Unfortunately, most people aren’t very empathetic and won’t really consider your life story, they’ll just judge you based on how you act and look. If you’ve had a rougher life than most and it negatively impacts how you present yourself, you have my sympathy but too bad. It’s up to you to make yourself into the best version of yourself so you can live the happiest life possible, regardless of the cards you’ve been dealt.
Thanks for sharing this. I am so happy that I came across to this one. I believe luck plays certain role in financial success.
I absolutely agree with this post, luck plays a very important role in our life I seen people with same knowledge as me or less get better financial opportunities than me and vice versa.
Excellent Post! Thanks for putting the luck and success of life in perspective. I’ve been reading your posts on your website since 2008-2009, and have gained plenty of vitial information to benefit me
I definitely agree with everything you said here. I’ll take it a step further, though: ALL of success and failure is luck, and, even though it doesn’t feel like it, it’s completely out of your control.
Free will, in other words, is inconsistent with the basic laws of time.
Here’s a thought experiment:
Imagine you’re reading Harry Potter. On page 114, Harry decides to pick up his wand and cast a spell. Did Harry actively make that decision out of his own free will?
The answer that most people give: “No, of course not. Harry’s a character in a novel. JK Rowling decided that he would pick up his wand on that page, and that’s why he did it.”
What if you’re reading page 114 for the first time and you don’t know that Harry’s about to pick up his wand? Does that change anything?
“No. On page 114, Harry picks up his wand and casts a spell. That will never change.”
So, imagine you’re sitting on the couch and you decide to get up and take a walk at 2:30PM. Did you make that decision out of your own free will?
The answer that most people give: “Yes, of course. I have free will.”
But time functions just like page numbers in a novel. At 2:30PM on 5/17/2017, you got up and took a walk, just like how, on page 114, Harry cast a spell.
Then the counterargument is: “But I’m writing my book as I go. JK Rowling wrote Harry’s.”
Nope. You’re just “reading” the current moment. When you read page 114 for the first time and you didn’t know Harry was going to pick up his wand, it didn’t mean Harry was suddenly granted free will.
My point: We are all characters in Father Time’s novel.
Just because I’m stuck on page 2:04PM on 5/17/2017 and I can’t flip to 12/26/2017 to see how Star Wars turns out doesn’t mean that I’m writing the book. Father Time is always the author. If I can’t go back and change what I did yesterday, there’s no proof that my decisions have any effect.
If anyone wants to make an argument citing Heisenberg’s uncertainty principle as a necessary “exemption” to this rule, I have this to say: just because quantum uncertainty exists in SOME degree doesn’t prove that we, on the individual level, have control over that chaos. An argument for randomness isn’t an argument against determinism.
That’s not to say that there aren’t legitimate arguments supporting indeterminism, but I think strict determinism is the theory most consistent with what we currently know about time, and I think it goes a long way in helping some people engage in more altruistic endeavors.
It’s why I give 10% of my income to charity, and I will likely continue to do so for the rest of my life.
If you study certain literature using this viewpoint, the intended meaning becomes very clear. For example, Mary Shelley’s Frankenstein provides example after example showing that, while Frankenstein’s creation was fundamentally good — even going so far as to cut wood for strangers and save a drowning girl —
the world slowly turned him into a monster. That’s because he lacked any feeling of self-efficacy.
Which brings me to my next point: a belief in strict determinism affects a person’s belief in their self-efficacy, which some studies show leads to aggression and selfishness (Baumeister’s “Prosocial benefits of feeling free . . .”)
My point then becomes, at best, morally nihilistic and, at worst, antisocial.
Generally, that is.
I only share it because it worked for me. I’m fully convinced that some people are born into cyclical poverty and shouldn’t have to take the brunt of ethical responsibility for their actions, which were formed as a result of everything that’s ever influenced them, not by their individual decisions.
How can we expect a young man in the Bronx to work harder if no one’s ever taught him the value of hard work?
Great post, and great points.
I just realized I wrote way too much and it looks weird in the comments. Sorry.
Love both of the ideas here.. I think I’m much older than most of your readers/posters and can speak from experience that you can enhance your luck by saying yes to interesting opportunities and being willing to try and work hard.. but there is no doubt that my success (as hard earned as it feels) is the result mainly of a series of chance encounters that put me in touch with people who could give me opportunities along the way. If I wasn’t an educated, middle class white guy, born with a bit of intelligence, into an educated family, in the second half of the 20th century in the United States, (none of these advantages earned by me) my chances of meeting those folks, and being able to impress them enough to give me a chance would be just about nil.. hard to imagine that my current status (and bank account) would be the same. good blog btw—keep it up…
Thanks for this very refreshing post, G.E. I’m often reminded how luck played a major part in my life when I see discussions about the immigration “crisis” right now. I wonder what I would do if I was born in an impoverished country just across the border from the U.S. I’m positive I would come to the U.S. by any means to provide my family a better life.
I had absolutely nothing to do with being born in the U.S. It was pure luck. I’m grateful for that luck and I totally understand why someone would risk their lives to migrate here.