When I made it to IIT Bombay, what I heard was that it I was destined to do so
My parents went to the IITs, but I naturally heard that I was supposed to. For some reason, the genes endowed to me enabled me to make it to the IITs. The reams of notes, stacks of books, or hours of preparation didn’t count.
Luck or skill?
A dictionary would classify luck as a ‘force’ that causes success or failure by ‘chance’ and not through one’s actions. In line with the definition, most people treat luck synonymous with chance – occurrence of a relatively low probability event.
However, those with a more superstitious bent of mind might link luck to supernatural powers that exist in the universe and influence outcomes.
Some others consider luck to be a personal attribute – a person is considered ‘lucky’ when outcomes usually turn out in her favor, when the skill or effort is not apparent.
Notions about luck change when we grow from being kids to adults. The childish mind might still believe in superpowers or miracles.
Our perception of luck has more to do with psychology than probability. Depending on the context and people involved, we tend to have different views on the role of luck in shaping outcomes.
Skill, on the other hand, has less to do with chance and more with deliberate human action. It is a process or series of steps that stems from one’s ability to use knowledge or past experience to achieve an intended goal.
Activities that involve skills can be easily reversed. You can come last in the 100m sprint by deliberately running slower or lose a chess match by knowingly playing the wrong moves.
However, you may not be able to lose in a roulette on purpose.
Objectively, we can place activities on a continuum of almost pure skill (say a game of chess) to almost pure luck (say a slot machine). Our approach to an activity can vary as a function of its place on this continuum.
Outcomes in investing, business, games are a combination of luck (chance occurrence of some events) and skill. However, the mind seems to have certain psychological defense mechanisms that make it hard to tell the relative contribution of each.
The mind tends to attribute favorable outcomes to skill. For example, in cricket, you used great timing to hit the ball, adept research allowed you to pick a stock that has grown in value.
However, negative outcomes have higher contributions of (bad) luck – an unlucky edge that resulted in a dismissal, or poor economic conditions that cause a stock to fall.
Activities of skill are guided by process rather than probability. In a game of chess, you are more likely to adjust your strategy depending on the context and not past outcomes. Also, you would back yourself to win even after winning the past many games.
Research shows that our brains corect for patterns that seem statistically unlikely and ‘regress to the mean.’ While luck is something you can’t operate on or manipulate, the bets we take tend to get riskier when we lose and safer as we win.
On the continuum, outcomes with a higher ratio or luck to skill tend to revert to the mean faster. On the contrary, outcomes dominated by skill show high degrees of persistence.
We have seen sports stars retain their world rankings or elite spots for many years at a stretch – Roger Federer (tennis), Pele (football), Sachin Tendulkar (cricket) are but a few examples of men of great skill playing sports that are skill dominated.
Given the persistent nature of skill based outcomes, a small number of outcomes make it difficult to sort skill and luck – 5 appearances of the best and average player might not give you much to go on. However, with 50 or 500, you would be in a much better position to point out the more skilled player.
Moreover, in shorter samples, the roles of luck and skills are often hard to tell apart given performance metrics focus largely on outcomes rather than process. More often than not, results are also driven by elements that one can’t control.
The process of achieving outcomes – long hours of practice, in-depth research or training reflect elements of the outcomes that one can control.
Luck is the random component of activities, but can we capture more of the positive part in our activities? – increasing the proverbial ‘catchment area’ for luck.
While many large business successes are results of strokes or luck and some of the great inventions happen by accident, what we might fail to recognize is that the inventors are uniquely equipped to observe these events and great leaders take action to make use of random opportunities.
Startup founders don’t ‘stumble on things’ sitting down. They are constantly moving around, increasing the catchment for random events and (unknowingly) taking advantage of the ‘reversion to the mean.’
You are more likely to roll a six if you roll more dice.
‘Creating luck’ comes down to preparation and recognition. The ‘preparation’ part is the long haul habits, hours of training and research that goes into addressing the ‘skill’ part of any activity.
However, sound ‘preparation’ also inculcates the ability to recognize and use events that occur by chance and be in a position to take advantage of them. You don’t win a race only on the day you run it.
The winning starts much earlier, during the preparation phase of building skill and being able to take notice of and utilize the ‘luck’ component that drastically improves the chance of success.
It takes years indeed, to become an overnight success.