Economist Robert Frank is concerned. Concerned that not enough people recognize the role that good fortune and luck plays in their success, and that too many people attribute their success entirely to their own hard work and virtue. It particularly concerns Frank that the wealthiest among us ascribe so much to this belief that, through the myth of meritocracy, they fight paying their taxes and contributing to their communities. This misunderstanding about the role of luck, he writes, makes a big difference in peoples' understanding of private versus public spending. And so he journeys on to set the record straight in Success and Luck: Good Fortune and the Myth of Meritocracy.
Trivial events can determine the outcomes of people's entire lives, Frank argues. The Mona Lisa became famous because someone stole it, Frank writes, and the intrigue and press around its reappearance led to it being the first artwork reproduced in newspapers around the world. Al Pacino and Bryan Cranston became famous actors through strokes of luck in which other more famous actors turned down their star-making roles. Bill Gates had a leg up in computing because he attended one of the few private schools in the country as a child that had a computer programming terminal that gave instant feedback on programming errors, and he had unlimited access to it – and when asked how many other people had such access to learn early programming before college, he is quoted as saying, "If there were 50 in the world, I'd be stunned. I had a better exposure to software development at a young age than I think anyone did in that period of time, and all because of an incredibly lucky series of events."
Frank discusses the fact that in the world of professional hockey, approximately 40 percent of pro players were born in January, February or March, while 10 percent are born in the last three months of the year. He argues that January 1 is usually the cutoff date for participation in youth hockey, and kids closer to that date were larger and more physically developed, giving them an early advantage on the hockey rink that translated that followed them into adulthood.
Also, professors in the ten top economic departments in the US are more likely to get tenure the closer their last names are to the beginning of the alphabet – because the tradition in economics is to list the authors of papers in alphabetic order, thus making people at the beginning of the alphabet appear more important. This tendency is not seen in other disciplines where listing last names alphabetically on co-authored papers is not the norm.
Further, the fact that presently many markets are "winner-takes-all" – in which relative performance is more important than absolute performance – and the highest rewards tend to go to the people who win the competition for dominance – further magnifies the role of luck, Frank believes.While the most talented and energetic will invariably rise to the top of any contest, there's often one little extra stroke of good fortune that puts one across the finish line ahead of others. As an illustration, Frank cites the world record holders for track events, showing that 7 of 8 of the world record holders had a tailwind (literally, a lucky wind at their back, pushing them forward) on the day they broke the record. Further, 7 of 8 the previous record holders for each of these records /also/ had a tailwind at their backs; none had a headwind slowing them down.
Yet, this belief that success has little to do with luck continues to be persistent. Frank turns to psychological research on our beliefs about success, here, positing that people tend to downplay the importance of luck because, if luck the reason some people succeed over others, that belief could discourage people from doing the hard work to overcome the obstacles to their goals.
As he points out, many people believe they're more talented than they actually are. Surveys show that most people believe they're in the the top half of any given distribution of talent. In this study, 70 percent of the faculty surveyed at a university believed they were in the top 25 percent of teaching ability. In this study, 87 percent of students in an MBA program believed they were in the top half of their class, academically.
Further, many people believe they've created their own luck. Lottery winners, he notes, often have detailed reasons why their personal skills and insights made them pick the numbers that won the lottery. Further, "Hindsight bias," the tendency to believe that events are more predictable than they actually are can be even stronger when people achieve success; as Frank tells us of the work of Duncan Watts, it's generally pretty simple to invent a story after success about how that success was meant to be.
Finally, people tend to underestimate how good fortune has brought success, and overestimate the role of bad luck when failure occurs. These are convenient psychological biases that allow us to work harder to achieve our goals and let us off the hook when we haven't met them.
The one area where personal luck eclipses all others, Frank writes, is in the lottery of country of birth. "No matter how talented and ambitious you may be, material success is only a remote possibility in the world's poorest countries," he reminds us. You can not choose what environment you are born into. However, societies shape those environments in huge ways. Those of us born into developed countries are the lucky beneficiaries of all the investments our predecessors made to those countries.
Yet, we in the US and UK have failed to maintain high levels of public investment. We've failed to maintain existing infrastructure, failed to expand existing infrastructure, failed to support public education, and dramatically reduced investment in children. And we've failed because the demand for government services is greater than the amount of tax revenue we collect, largely because there's been a huge, long-term decline in top marginal tax rates.
Because the wealthy fail to see that being born into a good environment made their wealth possible, they often are reticent to pay the taxes that would maintain that good environment both for themselves and for others, believing an entitlement to keep what they earn to themselves thanks to the myth of meritocracy; thus we have a conflict of private vs public consumption. But as Frank argues, cars are no good without roads, and roads are no good without cars. Taking this exploration of private versus public spending further, if you have a $150,000 Porsche and good roads, is that worse than having a $333,000 Ferrari and a road littered with potholes, on which you could not enjoy the power of the Ferrari? At some point, there are diminishing returns on fancy cars (and private wealth) if those purchases have been made at the expense of the general environment in which they are situated.
Keeping up with the Joneses, Frank supposes, is part of the big problem with the private overspending that leads to public under-contributions. Each person's spending, he asserts, depends in part on what other people spend. More spending by people at the top of the pyramid leads to pressure to spend more by people lower down, and those people must work longer hours to achieve basic goals. By his own "toil index," which tracks the number of hours a median earner must work to rent a house in a median school district, Frank estimates that it has been approximately 100 hours a month for the last ten years, up from 42 hours in 1972, and financial distress among so-called median or middle-class families is showing up in higher rates of divorce, bankruptcy, and longer commutes. Further, he argues, class position concerns equal wasteful spending, where people spend more money on things whose value is context sensitive: important to their peer groups but perhaps not important at all in the grand scheme of things. Therefore, he proposes the tax system be reformed to have a steeply progressive consumption tax, where people are taxed on their incomes after savings and investment are considered.
There is a social component to economic success, as Frank continues to remind us, because most economic success stories are a team effort. Thus people should also be concerned with earning the admiration of their peers. Hard work and talent aren't sufficient to earn admiration; successful people must also engender feelings of trust that a person will put the team's interests before their own self-interest. To this end, Frank conducted an experiment to see if the willingness to acknowledge the contributions of others to your success led to more esteem from others. He distributed the "success story" of a fictitious man to two groups of people; this story was exactly the same for each group except for the last paragraph. Group A was given a story that ended with the person attributing his success to his own hard work and skill; Group B was given a story that attributed the man's success to a few lucky breaks in addition to his hard work. He found that people reading version B, where luck helped him along, reported a higher likelihood of befriending the man and a higher likelihood that the man thought being kind to people was important. So, he concludes, one should acknowledge luck's role in success if one is interested in the friendship and opinion of others.
I found it a bit strange that acknowledging the contribution of others is conflated here with the acknowledgement of lucky breaks to one's success; one is an acknowledgement that the entire outcome can't be attributed entirely to a person's actions, while the other is an acknowledgment of the social capital that contributed to success.
Too many people refuse to acknowledge the debt they have to others for getting where they are, and this is a deficit of homo economicus that goes beyond luck. The lone cowboy who pulls himself up by his bootstraps is a narrative that doesn't recognize the work his wife does, for example, feeding him, cleaning his clothes, rearing his children and keeping his social life humming along smoothly. It doesn't recognize the teacher who gives him a break, the old friend who happens to be a loan officer at the bank who approves him even though he doesn't quite meet the requirements, etc. The person who denies the investments other people have made in him (beyond and outside public investments) denies the very social fabric and social capital from which he springs. This behavior in turn erodes the very social capital of the community to which he belongs. But, as Frank acknowledges, "failure to give luck its due is of course not the only reason we've failed to maintain the environments that so many of us have been fortunate enough to enjoy."
Success and Luck is an entertaining examination on why the meritocratic class should give a little more credit to their predecessors, and a little more money towards making sure America can continue to be a place where kids like they were can grow up to be people like they are now. The arguments in Success and Luck are made squarely to and for this audience. Let's hope they bother reading it.