The Value of Luck June 6, 2012Posted by Peter Varhol in Technology and Culture.
In my research for the presentation that came to be called Moneyball and the Science of Building Great Teams (variations of which I’m probably giving at half a dozen venues this year, starting next week), I chanced to read Daniel Kahneman’s book Thinking, Fast and Slow. One of the topics Kahneman spends some time on is regression to the mean.
It’s a statistical phenomenon, stating simply that unusual events are, well, unusual. If we chance upon one, our subsequent observations are likely to be more in line with what we expect. This self-evident statement has a substantial impact on how we interpret things around us. Thanks to regression to the mean, we come to some incorrect conclusions of behavior and motivation.
For example, we praise exceptionally good performances, and are disappointed when subsequent attempts don’t do as well. Likewise, we criticize very poor performances, and we see subsequent performance improving. It’s easy to draw conclusions that are simply incorrect based on those results.
The writer Michael Lewis pointed me in the direction of Kahneman’s book with a Vanity Fair article called The King of Human Error. In Thinking, Fast and Slow, Kahneman notes that performance is based on some undefined combination of skill plus luck. In exceptional performances, good and bad, it’s most likely luck that is the deciding variable.
Lewis has recently acknowledged the role of good luck in his own life, and others have pointed out that if we are lucky over time, we begin to believe that it’s really our exceptional skill at work.
“All of a sudden people were telling me I was born to be a writer. This was absurd. Even I could see there was another, truer narrative, with luck as its theme.”
“Life’s outcomes, while not entirely random, have a huge amount of luck baked into them. Above all, recognize that if you have had success, you have also had luck — and with luck comes obligation.”
This man knows the difference between skill and luck. And knows that he needs to appreciate his luck just as much, if not more, than his skill.
This applies in greater or lesser form to each of us. I hold no grand position at a global tech company of note, though I would like to think that I’m talented enough to do so, had I fallen into the right opportunity. It’s a little late in my career for that to happen, and I’ve largely (grudgingly) come to terms with that. But I have been lucky in other ways, and certainly not in any financial pain.
Let’s all toast to our luck.