Luck vs Talent: Why Billionaires are Successful

Whether you an entrepreneur starting a business or a veteran in your industry, you can’t deny that luck has some influence on your success. Sure! resilience, hard work, and talent do play a significant role in success but as Google billionaire Eric Schmidt puts it; there’s another that can’t be left off the list….. Luck!

Looking on as the world contends with the Covid-19 epidemic, It’s inevitable that most people will be looking towards the future for answers. Hard work will suffice to say be an important element in rebuilding the economy. But, there will only be a few very fortunate businesses and people who will rise to the top. My interest in the topic is to identify what will make these people or businesses luckier than most. But, also to what extent do the perceptions of luck discourage people from becoming entrepreneurs.

Mark Zuckerberg, during a Facebook Live event, acknowledges that one of the reasons he was able to do what he could is because he was raised with a certain amount of privilege and financial security. It is not too hard to google ‘luck and Business’ and find people like Warren Buffet attributing good fortune to most of his success. Does that mean that these giants, including Bill Gates, Steve Jobs, Ray Dalio, and Elon Musk are the luckiest people on the planet? What about historical figures such as Edison, the Wright brother, and Tesla? Were these people just the winners in the “Ovarian Lottery”?

Now, I’m not dismissing anyone’s success due to the hard work they put in, or the sacrifices they have made. It takes hard work, grit, and intelligence to grow a business. However, I am curious as to why there are entire research papers, news articles, and studies done on the role that luck has in an individual’s or a business’s success.

How would you measure luck?

Let’s do a thought experiment. Say you went to the same school as Bill Gates, in fact, you had occasional Sunday lunch with Bill’s family. You did the same activities as Bill, scored similar results on your academics as Bill, and enjoyed his love for diet coke. But, Bill is now a billionaire and you own a local grocery store. Let’s throw in a few franchises in the mix to set you up to par. Now, that’s not to say it is a bad thing being a successful franchise owner…..but Bill can afford to buy real estate on the moon if he wishes. Was Bill Gates just luckier than you?

Consider these findings – jamesclear.com:

• About half of the differences in income across people worldwide is explained by their country of residence and by the income distribution within that country,
• Scientific impact is randomly distributed, with high productivity alone having a limited effect on the likelihood of high-impact work in a scientific career,
• The chance of becoming a CEO is influenced by your name or month of birth,
• Those with last names earlier in the alphabet are more likely to receive tenure at top departments,
• The display of middle initials increases positive evaluations of people’s intellectual capacities and achievements,
• Females with masculine sounding names are more successful in legal careers.

Here’s one of those scientific studies I alluded to in the beginning. There’s a popular study done by Italian scientists, Alessandro Pluchino and Andrea Raspisarda. The study was an attempt to quantify the role of luck and talent in successful careers.

The research team created a model in which simulation runs were used to track 1000 individuals over 40-years. What they found was that 20 of the most successful individuals in the simulation held 44% of the total success. Which, coincidentally mirrors the real-world data that suggests wealth is unevenly distributed in the world, with just 8 men owning the same wealth as the poorest half of the world!

Based on this model, the research indicated that the level of talent had no direct correlation to the level of achievement of the participating agents. Which means that the most talented was not necessarily the most successful. In fact, most online scientific articles on the topic point to individuals of above-average talent accounting for the most successful.

“almost never [do] the most talented people reach the highest peaks of success, being overtaken by mediocre but sensibly luckier individuals”

Advances in Complex Systems Vol. 21, A. Pluchino. A. E. Biondo, A. Rapisarda

So if Intelligence or talent is not a guarantee of success and luck indeed has a bigger role in successful careers, are we to assume that being born male, in a wealthy family with an impressive network of high value and influential friends are the only true guarantee of success?

I believe to some extent yes, and no!

Building on this research, the Italian research team went one step further in their simulation. Playing God (so to speak), they explored the effectiveness of a number of different funding strategies.

What happens when the most successful agents (those with above-average intelligence) have access to a variety of different funding?

What they found was that over a period of 40-years the least effective funding strategy was those given to those who were already the most successful individuals. And the best funding strategy of them all was one where an equal number of funding strategies were distributed to everyone.

So, is it hard work or good fortune that determines success? Or is success just the result of randomness?

The Elements of luck

We can’t consider all the factors that made a figure like Bill Gates choose to start a software company that would lead to its ultimate domination of the industry. Or why Edison was the creator of the light bulb and not Tesla. Side note…In 1878, Thomas Edison was not the only person experimenting with the incandescent light. But he is the inventor. Illuminating right! What I’m trying to point at, what separated Edison from all the other brilliant inventors of that time?

James Clear, the author of Atomic Habits, has a fascinating perspective on the subject. His article “Absolute Success is Luck. Relative Success is Hard Work” is also what inspired my curiosity on the subject.

James believes that both hard work and good fortune, as well as effort and randomness, plays a role in successful careers. His general rule is that the wilder the success, the more extreme and unlikely the circumstances that caused it. He refers to this as absolute success, “It’s often a combination of the right genes, the right connections, the right timing, and a thousand other influences that nobody is wise enough to predict.” This explains the difference between a wealthy person born in America and someone born into extreme poverty in Africa and living on less than R10 per day. This is his global view.

And then there is relative success which James calls a local view. This relative view considers your success compared to those similar to you.

At one point in a Tony Robbins seminar, Tony calls Bill Gates a “gutsy basted!” To help understand this term of endearment let’s take a look at Gates’ story from the local view:

When the first microcomputer, the Altair 8800, became available to the public in 1975, Bill Gates and Paul Allan were young Harvard students who saw the potential to implement a program to run the Altair 8800. Bill offered to demonstrate the implementation of the program, called BASIC, to Altair. The story goes that he had no working system at the time. Yet, in just eight weeks, Bill and Paul flew to the offices for the Altair. What’s even more astounding is that they had not tested the interpreter until that very moment. Fortunately, the first attempt was a success! And the manufacturer for the Altair bought the license from them.

What set Bill Gates apart from his competitors was that Bill would put in the effort to adapt his skills to a new and lucrative territory. Eventually, Microsoft, the company Bill and Paul started, would dominate in its field making them one of the richest men on the planet.

“The first step is intuition, and then comes with a burst, then difficulties arise.”

Thomas Edison

The reason Edison was able to discover the incident light bulb was that he was only one willing to test six thousand different filaments. Nikola Tesla once remarked that if Edison needed to find a needle in a haystack he would simply examine every straw until he found what he was searching for. Edison outlasted his competitors and the press to discover, in a piece of bamboo, the power to illuminate the world. which eventually led to him being credited as the inventor of the lightbulb. What set Edison apart from other investors is his tolerance for difficulties and the steady dedication with which he implied himself towards problem-solving.

We are what we repeatedly do. Success is not an action but a habit.

Aristotle

Warren Buffett points out that most people discover too late that “the chains of habits are too high to be felt until they are too heavy to be broken.” The habits that we create will either help us reach our goals or hamper any attempts. James Clear sums up relative success saying that the more local the comparison becomes, the more success is determined by hard work.

Depending on the lens you viewing life through both the local view and the global view are true. When you compare some of the most successful personalities in history the similarities they share are their habits and choices. These Individuals brought a sense of purpose to everything they do. They developed skill sets that complemented their interests. They pursued the opportunities that presented themselves. And they tend to exhibit more perseverance when faced with obstacles.

There’s also one final variable for the equation to work…. time! Time has a direct influence on how hard work and luck influences success. The best way to describe this is to use James Clears Slop of Success.

The Slope of Success

Let’s take a look at a hypothetical graph. Success is measured on the Y-axis. Time is measured on the X-axis. And when you are born, the privileges that are available to you determine the y-intercept. Those who are born lucky start higher on the graph. Those who are born into tougher circumstances start lower.

Let’s use John and Jake as two examples in this scenario. John is born to a middle-class family. His father is a surgeon at a private hospital and his mother is the head of a local arts foundation. While Jake was born in the township, his dad a local school teacher, and his mom the owner of a local spaza shop. Jake has not experienced the influences that made John’s life easier to move up the ladder. Jake was an avid reader and began consuming books and modeling his own habits after successful people he read about and encountered. Eventually, a successful real estate developer would provide the opportunity for Jake to work under his wing.

While they both do not start with the same privileges, Jake is able to compound his growth by simply doing the right things and modeling the behavior of people who succeeded in his line of interests. With a positive slope and enough time and effort, Jake was able to regain the ground that was lost due to being underprivileged. The key here is that you can only control the slope of your success, not your initial position.

According to James, “It doesn’t matter how successful or unsuccessful you are right now. What matters is whether your habits are putting you on the path toward success. You should be far more concerned with your current trajectory than with your current results.”

In any case, it is impossible to divorce the two. They both matter and hard work often plays a more important role as time goes on.

This is true not only for overcoming bad luck but also for capitalizing on good luck. Bill Gates might have been incredibly fortunate to start Microsoft at the right time in history or Elon Musk to start Tesla, but without decades of hard work, the opportunity would have been wasted.

Conclusion

“The more time passes from the start of a race, the less the head-start others got matters.”

James Clear

Seeing as that the world has is experiencing a lot of difficulties due to COVID-19 it’s important to note that this is not the first global calamity of this kind in history and it won’t be the last. You don’t have the ability to control your luck, whether it be good or bad.

It comes down to how you unfold the story of your life. You control how much effort and preparation you put toward your desired goals. It’s a mindset and a perspective that states that the winning formula for success means grasping opportunities and being able to step outside your comfort zone, and pushing yourself to your breaking point.

In the end, we cannot control our luck—good or bad—but we can control our effort and preparation. Luck smiles on us all from time to time. And when it does, the way to honor your good fortune is to work hard and make the most of it.