Embracing the role of luck
We like to think we are in control of our destiny. However, decades of research into chaos theory and behavioural economics should have taught us otherwise. There is more that is random in our economies than any of us really want to believe, and a few unpredictable nudges can have a major effect.
Given my interest in the topic, I was more than a little pleased to hear that an Ig Nobel Prize for 2022 was given to researchers who investigated the role of luck in success. The paper by winners Pluchino, Biondo and Rapisarda, titled “Talent vs Luck: the role of randomness in success and failure” challenges the way we think about maximising the success of our teams and investments.
The long-running Ig Nobel awards can best be described as fun with serious intent, awarding scientific, medical, and technological “achievements that make people laugh and then think”. In this case, we should think hard about the way we allocate valuable resources from capital to promotion opportunities.
Some time ago, I did a small exercise imagining job progression based only on chance. I imagined an organisation with ten job levels (ranked from entry to CEO). I initially put 512 people at the lowest level of my theoretical company and assign them to projects lasting 18 months. I then roll the dice and half of these projects, and hence the staff, succeed and the other half fail at the end of their projects.
The successful 256 are promoted to the next level and again assigned to projects with a 50% chance of success. The 128 whose projects succeed are again promoted. Following this pattern, by the ninth promotion, there are just two people at this level from the original group of 512. From these two, a final pair of projects and, continuing to assume 18 months per project, after 15 years one successful candidate is ready to be CEO!
You can similarly imagine such an approach for start-ups, investors, or academics. This matters because if success is random, we need to be careful in investing in people, projects, and companies. Or, at least prepared to do so with liberal use of the dice!
Pluchino, Biondo and Rapisarda created a model they called “Talent versus Luck (TvL)” simulating the impact of real-world events on individuals and found, perhaps unsurprisingly, that luck was more important than capability. They also found that serendipity played an important role in their simulated world. Luck is not just a role of the dice, but often the coming together of two ideas through chance encounters.
The authors recommend an impact strategy for funders that can be just as applicable to internal projects and candidates. Their TvL model shows that if the goal is to maximise the investment impact of capital, then distributing a small amount over a larger number of people and projects has a much greater impact than trying to pick a few winners for a larger investment.
Their model was most successful when funding was egalitarian in that it distributed resources evenly. The next most successful outcomes were achieved with randomised allocation of capital. The least successful models tried to identify more worthy individuals based on their prior success, as a proxy for talent. But that doesn’t mean that you shouldn’t look at success regardless of talent or luck as others will be allocating resources on that basis. It does, however, challenge “moonshots” where companies put large sums of investment capital into just one or two big things.
Increasingly we’re finding that it is only a small number of companies that provide most of the returns on stock markets and that star recruits in one context fail to breakthrough in another. We’ve long seen joke articles that pit random investment strategies (using monkeys, dice, or children for example) against the best professionals. Warren Buffett almost suggested as much in his 2020 letter to shareholders.
There are a number of lessons we can learn from this research. The first is that we need to be comfortable with the role of chance in our lives. We can do this by combining resources to maximise our portfolio whether it be in talent or investment decisions. We should also load the dice by maximising the role of serendipity through increasing the number of chance encounters across all aspects of our businesses.
Serendipity gives us some control back because we can do much to increase the number of chance encounters for ourselves and our organisations. This is the network effect in action! Serendipity is now being increasingly researched not just in knowledge management, but broader scientific circles given it plays such an important role. The European Research Council sees this as such an important priority that they’ve allocated a grant to biochemist Ohid Yaqub to quantify the role of serendipity in science.
The people I work with often hear me talk about the importance of both using and contributing to internal and external networks. In fact, I say it so often that they laugh, but hopefully it is increasing the odds of the “success dice” rolling their way!