“If any of you go running or ride a bike, you’ll know that when you’re running of bicycling into the wind, you’re very aware of it. You jut can’t wait till the course turns around and you’ve got the wind at your back. When that happens, you feel great. But then you forget about it very quickly – you’re just not aware of the wind at your back. And that’s just a fundamental feature of how our minds work. We’re just going to be more aware of those barriers than of the things that boost us along.” – (Success and Luck)
Author: Robert H. Frank
Publisher: Princeton University Press
Publication Date: 2016
Origin: I came across a Nautilus article, Don’t Tell Your Friends They’re Lucky, which was essentially an interview with Robert H. Frank about the release of Success and Luck. I’ve read quite a bit about randomness, luck, the impact of the unpredictable, etc., so the article and book were right up my alley.
Summary: Success and Luck is both an exposition of the underappreciated role luck plays in life, and an argument in favour of policy change towards the adoption of a steeply progressive consumption tax. (didn’t see that comin’, did ya!)
In the first role, the book succeeds magnificently; in the second, it at least offers a compelling argument worthy of discussion.
In Frank’s words, “The claims I’ll defend in the pages ahead are ambitious – that successful people tend to understate luck’s role in their success, making them reluctant to support the kinds of public investments without which everyone becomes less likely to succeed; and that a relatively simple, unintrusive change in public policy could free up more than enough resources to redress this investment shortfall.”
Success and Luck begins with Frank relaying the role luck has played in his own life, and how his interests in luck and economics combine.
The next five chapters provide an education on how enormously luck impacts our lives, why we often don’t notice, and why not noticing matters a great deal:
- Why Seemingly Trivial Random Events Matter
- How Winner-Take-All Markets Magnify Luck’s Role
- Why the Biggest Winners Are Almost Always Lucky
- Why False Beliefs About Luck and Talent Persist
- The Burden of False Beliefs
Frank’s ‘arguments’ are more often that not simply straightforward statements of non-controversial facts, backed up by useful and accessible examples. The simplicity is almost confusing, though, because while nothing he says is complicated, it is all nevertheless under-recognized and under-appreciated in society. For anyone who’s opposed to Frank’s thesis, it must be pretty annoying, because such a person would find him or herself arguing against truth. Ah well, many do so nowadays. But I digress…
With this foundation out of the way, Frank is ready to move onto his policy platform. In the chapter, We’re in Luck: A Golden Opportunity, he basically explains that we’re in an incredibly lucky society, as evidenced by the sheer amount of waste that exists everywhere – only a lucky society could be so prodigiously productive so as to survive despite massive inefficiencies. As Frank says, “Paradoxically, then, many societies are lucky precisely because their current consumption patterns are so wasteful. It’s lucky to be wasteful because the mere existence of waste always implies opportunities to make everyone better off.”
As I’m fond of saying, this waste and these problems, presents us with a tremendous opportunity: we can reduce our wasteful activities in such a manner as to benefit society as a whole (relax, rich folk…you benefit, too).
Frank’s policy argument is based on five simple premises:
- Frames of reference matter. A lot.
- Each person’s spending depends in part on what others spend.
- The costs of failure to keep pace with community spending norms go well beyond mere hurt feelings.
- Positional concerns spawn wasteful spending, even when everyone is well informed and rational.
- The good news is that a simple change in the tax system would eliminate many wasteful spending patterns.
At this point, Frank reveals the simple proposal he promised us at the beginning of the book: a steeply progressive consumption tax. In his words, “Without demanding painful sacrifices from anyone, this relatively simple policy change would enable us to put trillions of dollars a year to work rebuilding the institutions and infrastructure that reliably translate talent and effort into success-in other words, the kind of environment people would be lucky to be born into.”
My Take: Overall, I enjoyed Success and Luck, and found it to be straightforward, concise, and interesting. Throughout, I found myself thinking to many of my own lucky breaks, and appreciating just how fortunate I’ve been. And I feel confident that admitting that doesn’t diminish the fact that I’ve also worked very hard, in life, academics, and my career. The two can co-exist, and I just with more people understood that.
As Frank says, “To acknowledge that seemingly trivial random events often matter enormously is not to suggest that success in life is independent of talent and effort.”
Regarding all the luck stuff…
I enjoyed Frank’s points and explanations; while much of it is old-hat for me, his explanations were clear, concise, and well-supported. The reality is that luck plays an enormous role in our lives. If successful people realized that, and weren’t so utterly convinced that their success is based entirely on their own efforts, then society as a whole (including those successful people) would be a whole lot better off. Not holdin’ my breath, though.
Regarding the steeply progressive tax policy…
While I’m sure the adoption of such a policy would be somewhat more complicated than Frank makes it out to be, and no doubt with a few surprises, for someone relatively new to tax policy (i.e., me), it sounds a whole lot better than the ridiculous arguments coming from both sides nowadays (e.g., “earnings cap!” on the left, and the absurdity of tax reductions for the wealthy on the right). Again, though, not holdin’ my breath.
Read This Book If: …Here’s the situation: if you’re a reasonable person, then you probably already suspect or recognize that luck’s had a pretty big impact in any success you’ve achieved. In that case, you might enjoy this book.
However, if you’re hellbent that no one but you deserves credit for your own successes, then you’d probably think you’re an exception to every point Frank makes. In that case, save yourself the effort and just keep being super-wrong about everything.
Notes and Quotes:
“Luck is not something you can mention in the presence of self-made men.” – E.B. White
- From the preamble, quoting E. B. White: “Luck is not something you can mention in the presence of self-made men.”
- pxii of the Preface explains the origins of the word meritocracy – origins which will surprise many (and surprised me): “The term itself was coined in 1958 by the British sociologist (and later lord) Michael Young in a scathing satire of the British educational system. In The Rise of the Meritocracy, he argued that encouraging successful people to self-aggrandizingly attribute their success solely to their own efforts and abilities would actually make things worse, on balance.“
- pxii, continues: “The rhetoric of meritocracy appears to have camouflaged the extent to which success an failure often hinge decisively on events completely beyond any individual’s control.”
- pxviii: note to self
- p7: “As the economist Branko Milanovic has estimated, roughly half the variance in incomes across persons worldwide is explained by only two factors: country of residence and the income distribution within the country. As Napolean Bonaparte once observed, ‘Ability is of little account without opportunity.'”
- p10, on winner-take-all markets: “Technology has been creating similar winner-take-all markets in other domains, including law, medicine, sports, journalism, retail, manufacturing, even academia. In these and many other arenas, new methods of production and communication have amplified the effect of chance events, greatly magnifying the gaps between winners and losers.”
“Why do so many of us downplay luck in the face of compelling evidence of its importance? The tendency may owe in part to the fact that by emphasizing talent and hard work to the exclusion of other factors, successful people reinforce their claim to the money they’ve earned.”
- p11: “Why do so many of us downplay luck in the face of compelling evidence of its importance? The tendency may owe in part to the fact that by emphasizing talent and hard work to the exclusion of other factors, successful people reinforce their claim to the money they’ve earned. But I’ll consider another possibility, which is that denying the importance of luck may actually help people surmount the many obstacles that litter almost every path to success.”
- p16: “Paradoxically, then, many societies are lucky precisely because their current consumption patterns are so wasteful. It’s lucky to be wasteful because the mere existence of waste always implies opportunities to make everyone better off.”
“To acknowledge that seemingly trivial random events often matter enormously is not to suggest that success in life is independent of talent and effort.”
- p39, what so many people miss, which causes self-defense mechanisms to kick in: “To acknowledge that seemingly trivial random events often matter enormously is not to suggest that success in life is independent of talent and effort.”
- p39 also includes this quote from Charlie Munger: “The safest way to try to get what you want is to try to deserve what you want.”
- p57, reminiscent of The Improbability Principle: “The huge difference between the likelihood of a strange event happening to you now and the likelihood of that event happening to someone, sometime, clouds our intuition about highly improbably events.”
- p63: “Chance events are more likely to be decisive in any competition as the number of contestants increases. That’s because winning a competition with a large number of contestants requires that almost everything go right. And that, in turn, means that even when luck counts for only a trivial part of overall performance, there’s rarely a winner who wasn’t also very lucky.”
- p66: “With large contestant pools, then, there will almost always be someone who is almost as skillful as the most talented contestant, but is also significantly luckier. So even when luck counts for only a tiny fraction of total performance, the winner of a large contest will seldom be the most skillful contestant, but will usually be one of the luckiest.”
- p70, perhaps apocryphal, but funny nonetheless…quoting Amos Tversky in a short section on how the findings of behavioural economics help to explain why myths about luck and success persist: “My colleagues, they study artificial intelligence. Me? I study natural stupidity.”
- p75 begins to explain one positive aspect of ignoring the role of luck: that, if we truly appreciated how much our success depends on luck to overcome the myriad obstacles in our way, we might never embark on anything particularly difficult
- p77: “And hence the paradox inherent in denying luck’s importance: Parents who teach their children that luck doesn’t matter may for that very reason be more likely to raise successful children than parents who tell their children the truth. When the going gets tough, as it inevitably does along almost every career path, someone who’s keenly sensitive to luck’s importance may be more tempted just to sit back and see what happens.”
“You’re just not aware of the wind at your back. And that’s just a fundamental feature of how our minds work.” – Tom Gilovich
- p80 reminds me of a recent long run I had on the shores of Lake Huron on a windy day: “The availability heuristic biases our personal narratives in a second way, because events that work to our disadvantage are systematically easier to recall than those that affect us positively. My Cornell colleague Tom Gilovich invokes a metaphor involving headwinds and tailwinds to describe this asymmetry: ‘If any of you go running or ride a bike, you’ll know that when you’re running of bicycling into the wind, you’re very aware of it. You jut can’t wait till the course turns around and you’ve got the wind at your back. When that happens, you feel great. But then you forget about it very quickly – you’re just not aware of the wind at your back. And that’s just a fundamental feature of how our minds work. We’re just going to be more aware of those barriers than of the things that boost us along.'”
- p80 continues: “Gilovich notes that a Google image search on ‘headwind’ serves up numerous images…that capture the concept vividly. But an image search on ‘tailwind’ turns up very different results. As Gilovich explains, ‘You have to depict [the concept] schematically, you just can’t capture it in an image. And what’s true photographically is also true psychologically. That is to say, wince we’re goal-striving, problem-solving organisms, we’re naturally going to be oriented towards the barriers that we have to overcome… We readily spot the advantages others enjoy (that we don’t) and the difficulties we face (that others don’t), meanwhile merrily blind to our own advantages and the tribulations of others. And, being the jumping-to-conclusions machines that we are, we’re prone to weaving the evidence into a ‘victim-me’/’deserving-me’ narrative.’“
- p83 tears down a convenient-but-untrue narrative: “Laboratory studies by psychologists support the popular wisdom that liberals are more likely than conservatives to embrace the importance of luck in life. But there are numerous exceptions to this pattern, and the differences between opposing views are often far more nuanced than popular accounts suggest.”
- p84 has some good advice from David Brooks, a right-of-center columnist at the New York Times. A reader had written in, confused about how to feel about the impact of outside forces on one’s own life and success, and Brooks responded with: “You should regard yourself as the sole author of all your future achievements and as the grateful beneficiary of all your past successes… As you go through life, you should pass through different phases in thinking about how much credit you deserve. You should start your life with the illusion that you are completely in control of what you do. You should finish life with the recognition that, all in all, you got better than you deserved… As an ambitious executive, it’s important that you believe that you will deserve credit for everything you achieve. As a human being, it’s important for you to know that’s nonsense.”
- p90, recalling the definition of insanity and the state of Kansas’ recent real-life experiment with trickle-down economics: “Many tax cuts were adopted in the hope that they would stimulate economic growth by enough to prevent a decline in overall tax revenues, but it hasn’t worked out that way.” But hey, why not try again!
- p90: “If being born in a good environment is one of the luckiest things that can happen to anyone, it is failure to appreciate luck’s importance that has done the most to undermine our collective stock of good fortune. That’s because failure to appreciated luck’s importance has made successful people more reluctant to pay the taxes required to support the investments necessary to maintain a good environment.”
“Failure to appreciated luck’s importance has made successful people more reluctant to pay the taxes required to support the investments necessary to maintain a good environment.”
- p90 continues, for all the selfish asses out there: “More realistic beliefs about luck would not only make it easier to create and maintain environments that would sustain the luck of future generations; they would also improve the material living standards of even society’s most successful members.”
- p92 explains a very important point that most people – and especially most wealthy people – misunderstand…a misunderstanding that leads the wealthy to favour tax cuts and to oppose tax increases, even against their own best interest: “The effects of decline in any one person’s after-tax income are dramatically different for those of an across-the-board decline. If you alone experience an income decline, you’re less able to buy what you want. But when everyone’s income declines simultaneously, relative purchasing power is unaffected. And it’s relative purchasing power that determines who gets things that are in shorty supply.” What’s that mean? Well, the price of mansions would adjust in response to a change of purchasing power by the wealthy as a group (e.g., from a slightly higher tax rate), to correspond to their reduced purchasing power. So they’d still be able to afford the house. But the kicker is that they could afford the mansions and society could have highways that aren’t filled with potholes.
“Cuts, when they do come, typically occur not where they would make the most sense, but where those who would suffer from them are least able to push back.”
- p97, on the sad reality of government cutbacks – this phenomenon is why marginalized folks (or, really, just folks who can’t afford lobbyists) get repeatedly screwed by the system: “Cuts, when they do come, typically occur not where they would make the most sense, but where those who would suffer from them are least able to push back. An important result of deficits has thus been to reduce our investment in the future. The unborn citizens who will suffer as a result are simply unable to protest.”
- p103: “Failure to appreciate luck’s importance is of course not the only reason the wealthy have been lobbying for additional tax cuts. But it’s an important reason. The problem is compounded by the fact that disdain for luck is often greatest in those who possess the most power to influence political decisions about the tax code.”
- p103 and 104 make it abundantly clear that Stephen Schwarzman, the CEO of Blackstone, is a colossal asshole. Oh, the example is quite illustrative, though.
- p106: “Sensible views about taxes or any other subject do not reliably triumph over less sensible ones in the short run. But we should all take comfort in the fact that the long-run historical narrative bends toward truth. One reason is that when evidence for a particular view becomes compelling, the number or people who embrace it tends to snowball. Beliefs are contagious.”
- p111 to 121 describes the policy changes Frank believes are both straightforward and necessary
- p120: note to self
- p129, quoting Italo Calvino’s Palomar: “The ‘dead weight of an intolerant tradition prevents anyone’s properly understanding the most enlightened intentions.'”