Luck; Skill, or both?

Do you need luck, skill, or both to become successful? You can find many answers to this question. Some people say others have luck and they have great skills. Some people say you need both. The answer to this question starts with words ”It depends on.” and continues with ”what you are doing. Michael Mauboussin has written a great book, ”The Success Equation” which gives more answers to this question than I can give to you in this text.

Let's start with the definition of luck. It can be defined as ”A single unrelated event that gives you an advantage or a disadvantage.” Some people may say that you can work hard to be lucky. They say you can develop yourself to become luckier. These phrases do not apply to the definition of luck. What happens is that when you have better skills in what you do, luck strengthens your success. Skill can be defined as: ”An ability to use your understanding to execute an action or a decision.” The more skilled you are the better ability you have to do this on average. The last two words are the most essential ones. Single actions or decisions that give you a great result do not mean you are skilled. Great executions that you can deliver on an average day by day are the best symptoms of great skills.

Luck-skill-continuum

Different types of actions or decisions can be put into luck-skill-continuum. On one side of the continuum are actions or decisions that need only luck and on the other side are actions or decisions that need only luck. You can find most actions and decisions from the middle of the continuum. They are based on luck and skill. In the middle are the actions that are based on both luck and skill and from this point to the left luck becomes more important and from this point to the right skill becomes more important. Lottery and most games like roulette at the casino are completely on the left side of the continuum and games like chess are on the right side of the continuum. Ask yourself: ”Can you lose on purpose?” if you want to know about the position on the continuum. If you can lose on purpose, you are on the right side of the continuum. If you cannot, you are on the left side of the continuum. In the middle, you can find an author that sells lots of books. Shitty authors cannot sell any books, but good ones can still not sell if they are not lucky.

Three things tell you more about the actions or decisions and whether to put them to the left or right side of the continuum. The first one is the sample size. When you are on the right side of the continuum, even the small sample size of the results can tell you much about skills. For example, the time for a hundred-meter run can tell you whether the runner is a good or a bad one. In the lottery, you can put hundreds of coupons and how much you win tells you nothing. In other endeavors like playing poker, small samples tell you nothing about the skills of the player, but when you play hundreds or thousands of hands, more skilled players win and worse players lose much more.

The second one is the form of feedback you get. When you need to be skilled, the feedback you get is based on clear cause-effect relationships not random or complicated like on the left side of the continuum. In this side, the feedback you get will lead you to problems. You may think that you are skilled even though you are just lucky. This does not happen on the right side of the continuum.

The third one is the return to the average or to mean if you want to use the statistical word. When the endeavor is based on skill, the return to the average happens slowly. When the endeavor is based on luck, the return to the average happens fast. In the middle of the continuum, the speed of the return to the average is somewhere in between.

There is an interesting paradox about the role of luck in the middle of the continuum. The better the relative skills of the performers are, the more luck you need to perform better than average. What I mean with this is that when the average performance is closer to the best one, the more luck you need to succeed and vice versa. The bigger the difference between the average performer and the best performer there is, the less luck the best performers need. When this is the case, you have to be sure you are better than your opposition.

I kept this text short. Sorry for not publishing anything for a long time. Hopefully, I will get something published in the next two weeks after this.

-TT