Talent vs Luck: the role of randomness in success and failure, a 2018 paper that won the 2022 Ig Nobel Prize in Economics.
Model
This paper presents a mathematical model to simulate the process of human wealth accumulation. The conclusion is that the wealthiest person are not the most talented one, so luck is underestimated. In this model, everyone starts with the same wealth and is randomly distributed on a map. There are good luck events and bad luck events on the map, and these events move every round. When encountering a good luck event, the more talented a person is, the more likely they are to double their wealth; when encountering a bad luck event, their wealth is halved. A certain number of rounds are run to simulate the good and bad luck events that a person encounters in their lifetime. After simulation, it was found that the wealthiest person was mediocre in talent and not the most talented person.
The conclusion is written conservatively and does not say that talent is unimportant, only that luck is underestimated. If the reader is not careful, it is easy to conclude that success is all due to luck and talent and hard work are unimportant, so from now on I don’t have to work hard. And then you rich people are just luckier than me and not smarter than me, so don’t be ungrateful. It seems that life can be given up now because life depends only on luck.
Is talent really unimportant?
The paper discusses different parameter settings. When the variance of talent distribution is large, the most talented person accumulates the most wealth; when there are more good luck events, people with higher talent have more opportunities to accumulate wealth. Different parameters will have different conclusions, so the key point is why these parameters were chosen? The paper does not cite any empirical research to support which set of parameters is closest to the real world, so the author can only say that luck is more important than imagined. More strictly speaking, applying the conclusions obtained by the paper directly to the real world is just telling stories by feeling. And after reading it and concluding that life depends only on luck, it can only be said that it was “over-translated”. How do you know which set of parameters is closest to the real world?
If you read this paper carefully, it says that the higher your talent, the more capable you are of seizing good luck events to improve your personal wealth, including intelligence, skill, smartness, stubbornness, determination, hard work, risk taking and so on. In this paper, hard work and skills are part of talent and uncontrollable factors are luck. On average, those with good professional skills will have higher incomes and can accumulate wealth faster. Finding a part-time job outside of your regular job can 100% increase your income. The paper has always focused on “the richest” person. Of course in reality if you want to become the richest person you definitely need luck. But on average, harder working and smarter people do have more wealth.
Conclusion
Success certainly has to do with luck, but no one can do anything about luck. The factors that can grasp good luck are not only intelligence but also hard working. The more correct hard work, the higher the expected value brought by good luck. In the long run, the probability of accumulating more wealth will be higher. This is what we can do. Attributing all results to luck is of no help to life. In modern times, compared to the past, success depends more on judgment and effort than on information gaps. Now is the era of information explosion. Almost all information can be found on the Internet. By identifying correct information and working hard, everyone has a better chance of success than in the past.