I have mentioned many times that when we succeed in business or a planned project, we attribute that success to our ability to plan and follow through, our ability to anticipate situations and adapt to changes as they occur. When we fail to attain our objectives, then we analyze what when wrong- oftentimes to find the blame does not lie within ourselves or our organizations.
Of course, luck- or fortune- favors those of us who plan. We develop scenarios to be able to maintain our nimble responses when things don’t work quite the way our simulations project. However, I have often felt that our success can often be attributed to the “perfect alignment of the stars”, just as much as our efforts.
Well, it’s not just me. Michael Mauboussin, adjunct professor at Columbia and chief investment strategist at Legg Mason, feels the same way. He just finished writing a new book: The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing. It’s a book worth reading-often!
Given the title, it’s not surprising that Mauboussin feels the need to explain luck- which he recognizes is different from being fortunate. Luck involves situations where the outcome could have come out otherwise. So, one can be lucky in cards, but not in birth, where we may be fortunate to be born to a rich or intelligent family.
Skill (the other key word in the title) is our ability to use our knowledge effectively and with ease of execution or performance. Skill can be honed via practice; it’s a process, not an event. However, as we become more skilled, then luck becomes the variation in results. As we as a group become more skillful, then the differences in performance between the best and the average or even the best and the worst of the lot becomes much smaller. When only some of us are skilled, then that difference in performance is huge and luck plays a smaller factor.
Think of baseball players. (First, we must assume that the top 150 baseball players are pretty skilled.) Let’s just consider the top few right now- Buster Posey, Miguel Cabrera, Andrew McCutchen, Mike Trout, and Andre Beltre. These five folks had batting averages that ranged from 321 to 336, each with more than 500 at bats. This means in any individual game series (3 games, with a total of about 12 at bats), each of these guys should get a hit between 3.8 and 4 times. Not much difference. And, the luck of who pitches to him, the position of the fielders, or their attention to the game, can have about as much influence as the skill of the batter. The ability of a player to have a hitting streak is luck combining well with his skill. (One needs above average skill and above average luck. It’s the most skilled players that have the most streaks.)
It’s why when I played pinochle or bridge in college and grad school, I refused to play any opposing team that would not commit in advance to 90 minutes of play. Because, if we played for shorter periods, then luck could overwhelm my skill- but given a certain play time, I could be assured that the deal of the cards would not change my overall outcome.
Which brings up the other issue I discuss a lot- causation and correlation. Maubussin recognizes that we work hard to link cause to effect. Therefore, given a successful outcome, we search for a cause- and attribute that to the skill (or the individual), and not to luck. Given that, we, as humans, do not discriminate well between the amount of skill and luck that determines a given outcome.
Mauboussin, being the investment guru at Legg Mason that he is, understand that this is why investors often pick the wrong mutual fund managers. He knows that managers can do the wrong things and get good outcomes or do the correct things and obtain good outcomes. Instead, he wants (and knows this makes the difference) investors to choose managers based upon the decision-making processes they employ, which means one needs to discern the numerical measures that will so determine the process.
What is the take-away for us? We need to hone our skills, examine various scenarios, so that we can achieve the best success. (That’s why one needs business plans.) We need to monitor our results (key performance indicators), so that we can see when luck may be coming our way- or waning and adjust our efforts accordingly.
May your skills be large, so that luck can come your way.
You can order the book right here…
Lucky to have come across this post or a skilled researcher? You be the judge. 🙂
Hmm. Your skill afforded your luck to make that extra leap, Cathy! 🙂
I enjoyed your article. It helped in untangling the different words and their meanings.
shawn recently posted..Webinars, Flu & Thanksgiving, Oh My! Along With a Free Gift
Glad to oblige, Shawn! Thanks for the visit.
Personally, I don’t see that being born to a good family is anything, but luck. And on the other hand having the gifts we draw with our birth we can develop skills to succeed if we were not born to a good family.
Ann Mullen recently posted..In Home Care Givers and Workplace Discrimination
I understand that the difference between fortunate and luck is somewhat nuanced, Ann- but I like his differentiation. We can MAKE our own luck- but being prepared, being skilled, and taking advantage of various situations. However, we cannot effect changes in other things- that’s what makes it fortunate or unfortunate.
Here’s a better example:
We are waiting for a bus on the corner of 1rst and Main. The light is red, so we are waiting on the sidewalk. We are watching the cars and trucks to insure that no one is veering off the road. And, as we do so, we are – G0d forbid- hit by a drive by shooter. We were diligent making sure we stayed where we were safe. We were UNFORTUNATELY in the line of fire of a deranged individual. (Of course, we could make better luck by demanding that the BS about gun control is just that… But, that’s a matter for a whole different discussion.)
I like your 90 minute minimum rule. Could see other situations where applying that sort of stipulation would level the playing field.
Carolina HeartStrings recently posted..ANTIQUES – ELIZA, THE MAKING OF A LADY
Glad you found the post useful and interesting, Alessa…