23 ms·

Huge success in business is largely based on luck: new research

252 points by hhs 7y ago

graeme 7y ago
The new research cited in the title is the author’s book: https://www.amazon.co.uk/Luck-Business-Idea-Ideas-Management/dp/1138094269/ref=sr_1_1 https://www.amazon.co.uk/Luck-Business-Idea-Ideas-Management... The article discusses older research
ampdepolymerase 7y ago
And luck too can be bought. With enough capital you can afford to play the game again and again.
- Alex3917 7y ago
  > And luck too can be bought. With enough capital you can afford to play the game again and again. If luck regresses to the mean both within and between startups, then it stands to reason that the value of more iterations is limited. I think it's probably more valuable just to be able to recognize which direction you're likely to regress toward.
  - jjeaff 7y ago
    I'm not sure what you mean? If winning means getting 3 heads in a row by flipping 3 coins, and you have 3 coins to flip and someone else has 1,000 coins to flip, the second person is much more likely to win.
    - deleted 7y ago
      [deleted]
  - teucris 7y ago
    Sure, but it seems to me that most can afford roughly one iteration at most. I would argue that being able to roll fair dice multiple times is still better than having weighted dice that you only get to roll once.
  - Bootwizard 7y ago
    Tell that to firms like Softbank. They have enough money to play the game as long as they want. Even massive loses don't make them blink until WeWork happened.
    - Alex3917 7y ago
      That's largely irrelevant. The question is what is the optimal strategy for each player given the assets that they have. No one would deny that some people are starting off with vastly more assets than others.
  - wpietri 7y ago
    Not really, because the returns and losses are asymmetric. If you lose, you lose maybe a million bucks of your own money, probably less. But if you win, you could be a billionaire. This means that people with rich families and rich connections can afford to play the game as much as they have a taste for.
- ttul 7y ago
  This is why startups are a game for rich kids. If you know you can’t really lose, then you can just try again and again until you hit the three cherries.
  - mfrye0 7y ago
    Not necessarily. If you fail, just get a job, save up more money, then try again. The more you fail, the more you learn, the greater the likelihood of success the next time around.
  - eloff 7y ago
    I think rich kids will often lack the inner motivation and discipline to see a startup through. That's the flip side of knowing you can fail and it won't impact your life negatively. Startups are really hard, if you don't have that burning desire and fear of failure driving you forward, I don't think too much of your chances. Anyone rich, or not can try again and again, it will just be harder for people who also need to figure out how to pay the bills.
    - robocat 7y ago
      Agree. And richkid can only found X startups in their lifetime. If they play the VC game, returns are still extremely variable. If they play a bigger game, then they start to be playing the same game as other players that the public can invest in (directly or indirectly) i.e. no advantage.
    - Bubbadoo 7y ago
      if you look at many startups that had successful outcomes, you'll generally find people who, if not rich, at least come from affluence. Affluence affords them the ability to take on more risk than say someone from a modest background, saddled with student loan debt. Generally, just because someone comes from wealth, it doesn't mean they won't work hard. I believe your comment is targeted more towards the trust-fund babies, who go through life having mommy and daddy pay for everything. Why work, when it'll all come to you?
  - robocat 7y ago
ronilan 7y ago
Two long time friends walk down the street. Sees one something shiny and picks it up. “A gold coin!”. At exactly the same time a bird poops on the second’s head. They are upset. They blame their friend. “If you hadn’t stopped the poop would have missed me”. “Further more”, they say, ”here is the full list of all the bad decisions I made through life and anyone and anything that has ever wronged me and brought me to the shity situation I’m in”. “You included”. “No”, says the first, “Our situation couldn’t have been better”. “Further more here is a list of all the smart decisions I have made and anyone and anything that have supported and elevated me to where I am to day“. Then they looks at their poop covered friend and say ”I do not associate with negative thinkers”. And friends they are no more. End.
- cheez 7y ago
  Brilliant
- deleted 7y ago
  [deleted]
lihaciudaniel 7y ago
"I'd rather be lucky than smart... in business"
jcims 7y ago
There's a lot of lucky business that fold because they can't deal with the success. So huge success requires both luck and skill/hard work.
- alpha_squared 7y ago
  This is somewhat similar to winning the lottery vs building capital. Most winners go broke a few years later because instantaneous wealth often lacks discipline for managing it. Acquired wealth often takes time and the discipline is built along the way.
x3n0ph3n3 7y ago
What's the difference between luck and unknown dependent variables?
- hogFeast 7y ago
  The study of luck is called ludometrics (there are a few interesting papers related to sports on Arxiv). It is very tricky and there are several competing notions of luck...I am not convinced that the method in the article is particularly useful, particularly as it involves human decision-making where you see power laws all the time...which doesn't necessarily indicate luck. Maybe you could argue that the scale of the success is outsized but this is largely a function of the way people consume, not luck...I don't know, it is tricky (and I have spent a lot of time looking at this problem in sports).
- wpietri 7y ago
  Good question. At least one for me is that I'm only interested in variables that are usefully measurable up front. So if somebody starts a business before the factors that make it huge are reasonably discernible by people at the time, I'd call that luck. I also think things that are outside of the control of the actors are reasonably called luck. E.g., I'm in software in good part because my dad happened to get into software in the 1960s. He only got into it because his dad was well placed at a company that wanted to automate a lot of then-manual appraisal calculations, and they pulled him in to figure it all out. A couple years earlier and he'd have been too young. A couple years later and he would have been gone from his home town. That's why Warren Buffett talks about winning the "ovarian lottery": https://www.cnbc.com/2018/05/04/warren-buffett-says-the-key-to-his-success-is-luck.html https://www.cnbc.com/2018/05/04/warren-buffett-says-the-key-...
kangnkodos 7y ago
Did the author take the power law into account? A number one song earns two times as much as number two song. And a number two song earns two times as much as a number three song earns and so on. All I need to do is sign up one or two consistently good bands to make my whole career. If I also sign up a bunch of one hit wonders, it's OK. You see something similar in stocks. The big cap stocks are most likely to shoot way, way up. If you invest in the next bunch down, the mid cap stocks, then historically, you would not have made as much money. It's possible that if you count the names of winners and losers, that the author is right, and there are more winners in the midcaps than the large caps. But if you own large caps, you will own a few stocks shooting way, way up like Amazon and lots of stocks that lose a little. If you own mid caps, you might own a lot of stocks that go up a little, and only a few stocks that go down. But because of the power law, you only need to own a few stocks like Amazon in your portfolio to make more money with large caps than mid caps.
- deleted 7y ago
  [deleted]
- T-A 7y ago
  > If you invest in the next bunch down, the mid cap stocks, then historically, you would not have made as much money. https://www.marketwatch.com/story/dont-overlook-mid-cap-stocks-they-beat-large-caps-by-a-mile-in-the-long-run-2019-01-17 https://www.marketwatch.com/story/dont-overlook-mid-cap-stoc...
- icedchai 7y ago
  This almost makes sense, except for the fact that small caps and mid caps both give you greater returns long term than large caps: https://fourpillarfreedom.com/stock-returns-small-cap-vs-mid-cap-vs-large-cap/ https://fourpillarfreedom.com/stock-returns-small-cap-vs-mid...
npsimons 7y ago
The dirty little secret that the successful don't like to admit. Plenty of people worked as hard as they did - the only difference between them and the "losers" is that they got lucky. That being said, you'll never win if you don't try. One must be prepared to take advantage of opportunity ("luck") when it happens, and showing up consistently (being in the right place) is half the battle. Being smart and working hard at the right things also vastly increases one's chances.
- mindcrime 7y ago
  The dirty little secret that the successful don't like to admit. Note the distinction between your statement about "the successful" and the topic at hand - "huge success". Success isn't a simple binary dichotomy... it is, IMO, more of a continuum. One can be "successful" without being, say, a billionaire founder of a Silicon Valley unicorn. I would argue that we should keep this in mind when talking about what goes into success. Yeah, it probably does take some "luck" to become the billionaire guy (say, Mark Cuban or Mark Zuckerberg). But becoming the owner of a successful and growing landscaping business, or car dealership in your local town, etc., etc., etc? Maybe not as much so. That being said, you'll never win if you don't try. One must be prepared to take advantage of opportunity ("luck") when it happens, and showing up consistently (being in the right place) is half the battle. Being smart and working hard at the right things also vastly increases one's chances. Agreed. And since what most people are really talking about when they say "luck" - which is to say chance, uncontrollable events - are outside of our control anyway, there's no real reason to even think about it. All one can do is work as hard as possible, engage in the behaviors that tend to (create|discover|capture|foster|whatever-you-want-to-call-it) "good luck" and just take the ride as far as it goes. Cliches may be trite, but as a certain character in a certain movie once said "just because something is trite doesn't make it less true". And the old cliches "the harder I work, the luckier I get" and "luck = preparation + opportunity" still hold as far as I'm concerned.
- zipwitch 7y ago
  Then there's what's often called "privilege" (circumstances of birth). What are the consequences to you of taking a risk on being lucky and missing? For some people, dropping out of college and spending a few years working on a project that might pay out spectacularly is negligible. Sure, it's a few years of lifespan, but you learned some stuff and your future trajectory isn't going to be dragged down by a failure in your early 20s. For others, one shot is all they'll ever get. If they don't get the degree and the right job out of college, the trajectory of their life will be permanently inflected downward. Circumstances of birth have a huge impact on what chances are rational to take.
leovander 7y ago
Most of the stories on How I Built This [0] say they got a lucky break, but they worked their butts off. More so "You miss 100% of the shots you don't take.", therefore increasing their "luck"? [0] https://www.npr.org/podcasts/510313/how-i-built-this https://www.npr.org/podcasts/510313/how-i-built-this
- stbtrax 7y ago
  Most of their stories also involve having parents and family able to plop down tens of thousands of dollars in initial investment, and being able to provide for their family while not making an income
  - strbean 7y ago
    In the food and beverage sector, it is also fun when they casually mention "and I happened to have a family friend who was the head buyer for Whole Foods" or something to that effect.
- Bartweiss 7y ago
  What I think this underestimates is the exponential nature of big wins. If you make a lot of shots, you'll get some successes, and this can be a reliable path to some good outcomes in life. But founding a billion-dollar company or beating the market for a decade means making a lot of shots in a row. It's not enough to succeed at a high-risk, high-reward gamble, you have to either take impossible odds or keep putting all your winnings back into the next wager. (Less abstractly: landing funding for your company, selling the product, escaping fatal competition, refusing the buyout, and so on.) That doesn't make "take a lot of shots" untrue advice, obviously that still improves your odds, but it has two major implications. First, taking more shots may be less effective than improving your odds or raising your wager so you don't need as many wins. Second, there's no guarantee that an individual can ever have a reasonable expectation of winning big. It seems possible that the only strategy capable of making you Bezos-level rich doesn't pay out decently inside one lifetime.
  - bsder 7y ago
shahbaby 7y ago
And after they win big, they build an audience of suckers with which they share the "secrets" of their success.
dang 7y ago
A couple of old pg comments come to mind. https://news.ycombinator.com/item?id=1621768 https://news.ycombinator.com/item?id=1621768 https://news.ycombinator.com/item?id=514177 https://news.ycombinator.com/item?id=514177
buboard 7y ago
there is no data in the referenced article
- qnsi 7y ago
  he only links to his book. If you are interested it seems he cites a lot of his research, eg 2% of papers mentioning luck is his work: https://www.tandfonline.com/doi/abs/10.1080/19416520.2016.1120971 https://www.tandfonline.com/doi/abs/10.1080/19416520.2016.11...
- zwaps 7y ago
  https://scholar.google.com/citations?user=c9egBlsAAAAJ&hl=de&oi=ao https://scholar.google.com/citations?user=c9egBlsAAAAJ&hl=de...
aphextim 7y ago
>Luck Is What Happens When Preparation Meets Opportunity - Roman philosopher Seneca
- nestorherre 7y ago
  Came in to post this, left satisfied. However, I like to add to the end: "...and you act upon it"
open-source-ux 7y ago
Luck plays a big factor in the success of many products. We think success = product excellence: how else could a product rise to a leading position in the market or to such pre-eminence unless it was better than the alternatives? Although success is sometimes tied to product excellence, the mountain of successful products that range from mediocre to terrible shows there's often little reason or rhyme to a product's success. There's even an element of luck here in Hacker News. Just take a look at 'Show HN' - there are many excellent projects that get no attention or traction at all. And then there a few lucky ones that suddenly take-off. There's no "wisdom of the crowds" moment that propels one project to success over another because it's more worthy or excellent - it really is random in so many cases.
tasubotadas 7y ago
The only research that is referenced there is the https://journals.aom.org/doi/pdf/10.5465/AMBPP.2018.19 https://journals.aom.org/doi/pdf/10.5465/AMBPP.2018.19 which only has an introduction.
- qnsi 7y ago
  Study where he searches for luck in full text and finds 2% mention luck https://www.tandfonline.com/doi/abs/10.1080/19416520.2016.1120971 https://www.tandfonline.com/doi/abs/10.1080/19416520.2016.11...
gdubs 7y ago
It’s human nature that when something good happens, we like to credit ourselves. When something bad happens, we tend to blame others.
graycat 7y ago
Yes, the important role of luck is what is true usually, and even nearly always. If you were picking life directions, startup projects, etc. from such directions and projects randomly, i.e., uniformly distributed across such directions and projects and independent of everything else, then the usual, more accurately, the average (expectation) is what you should expect to get. BUT, BUT, BUT you do NOT have to pick directions and projects this way!!!! There are other ways to pick. Yes they are rarely done, but there is a beautiful even spectacularly good history! The first key is, use more and hopefully better information than is usual. Here are some such projects: There used to be typewriters and carbon paper. Not so good. So, Xerox developed and sole a much better solution. Presto, bingo, super big success. Typewriters remained clumsy -- with the labor, a massive economic waste. IBM developed and sold their Selectric typewriters with a little spool for "corrections". It was much better and a big success. Typewriters were still a pain. Along came personal computers. Even with just 640 KB of memory, no hard disk, and only 8" diskettes for storage, and a dot matrix printer, they were MUCH better than typewriters. With a daisy wheel printer with a carbon ribbon, they were much better, still. They sold "like hot cakes". It's possible to have a toothache. I got one of those: I'd gritted my teeth getting CorelDraw working with PostScript output; nice output, but I cracked two molars. On one I had a root canal procedure and a gold crown. Eventually the other one let some infection into the center of the tooth. Result: CO2 pressure; worst pain imaginable. In about an hour, the CO2 pressure was high enough to leak out via the crack, and then an hour later the pain started again. I went to the ER. About then the pain started again. The ER physician just took out a Q-tip, dipped it in a small bottle, painted my tooth, and I was OKAY!!!!! He said he used Benzocaine which is what dentists use before giving an injection and is over the counter. So I rushed to a drug store and stocked up! So, Benzocaine -- works GREAT, got to have such a sore tooth to understand the real value. Not much chance of no market for Benzocaine! Result: A few days later the pain quit. A few weeks later, the tooth was loose in its socket. A week later it was gone! We can all see places where there is a need and some good technical work will create a great solution highly desired by the market. Sure, about the best will be one pill taken once that cures any cancer with no side effects. All we need is the pill, and presto, bingo, a 100 X unicorn! Sure, so far after no doubt some $billions in research funding, no one knows how to make that pill. But there is progress, and on and on we will be curing cancers until we have cured all or nearly all of them. Some of the cures will be very valuable. So find a big need; use some advanced, leading edge, partly original, difficult to duplicate or equal, technology to get a terrific solution. Tell the world. Buy a nice place in Aspen, along the Florida coast, in Maine, on Long Island (as in the Audrey Hepburn movie Sabrina), in Shenandoah, etc. and enjoy life! So, given a problem, need a solution. Can we have any faith in technology? Hmm .... In WWII, the world learned, YES: Radar, penicillin, the proximity fuse, sonar, jet engines, code making and breaking, and The Bomb. Later the world learned from the SR-71, the Navy's nuke powered submarines, the Navy's version of GPS later done by the USAF, Keyhole, basically a Hubble but aimed at the earth, and much more. These projects were funded mostly by the US DoD, and the track record, batting average, bang for buck were terrific. In particular, the US DoD can look at a project proposed just on paper, evaluate it, go or not go, and achieve the track record. Very little luck needed! Apparently Silicon Valley can't/won't do projects this way. So, there is an opportunity: If can find the problem, stir up the technology, and write the software, all as a small project, small team, maybe even sole, solo founder, then maybe can shop for those nice houses and no luck required! Common? The usual? No. Possible? Yes. Back to it!
6gvONxR4sf7o 7y ago
> Such reference to luck is rare in management research. A review of the use of luck in leading management journals suggests that only 2% of articles mention the word. Business media and educators need to acknowledge that we have a lot of offer to help practitioners to make fewer mistakes in business and everyday life, but there is little we can teach about how to become exceptionally successful. What bullshit. In research, we have a zillion different words for chance or luck or stochasticity or randomness. There's a whole language for it. Citing the lack of one of the least precise terms as evidence that there's a gap that needs acknowledging is ridiculous, and the author surely knows it. I get that he's trying to sell his book, but come on.
- qnsi 7y ago
  I was skeptical it was a simple search for „luck” and he doesnt link to the review but only his book. I bought the book and found the source to the original study[1]. It actually looks like they searched for luck articles, altough in this paper he goes and talks about how different words are used for luck. I dont have time to examine further [1] Good Night, and Good Luck: Chengwei Liu & Mark De Rond 2016
  - hhs 7y ago
    Thanks for the study citation. This has an accessible pdf paper available: https://www.repository.cam.ac.uk/handle/1810/255796 https://www.repository.cam.ac.uk/handle/1810/255796
cynicaltoss 7y ago
(Using a throwaway for soon to be obvious reasons). After being involved in several early stage startup companies and the usual cast of characters (individual founders, angels, boards of all sorts, investors, etc) my deeply held personal belief is that after intelligence and hard work moral/ethical flexibility is the largest single factor in individual success in business. In virtually every scenario I've been involved in the individuals that made out 10x or greater (compared to others) did so because they were willing to do things the others were not. I suppose one could frame it as "luck" but my experience has been "making your own luck" is frequently only moderated by your own ability or willingness to lie, cheat, manipulate, and generally be as soullessly ruthless and self-serving as possible. Consider two people. Both graduate from a top-tier law school and join a firm as junior partners. One graduate sees nothing but tax avoision, various shady legal maneuverings, high net worth senior partner infighting and politics, etc. The other sees nothing but money, power, and opportunity. One of the junior partners is disgusted by this and leaves the firm to go back to their hometown and start a family law practice. They settle into a decent upper-middle class lifestyle. The other junior partner stays on, climbs the ladder, and goes on to join the top X percent of the population in income and net worth. Both are intelligent. Both worked hard. Both are "successful". However one junior partner saw people at (arguably) their worst and was disgusted by it. The other couldn't wait to really get in the game and play... Hypothetical simple example but virtually identical to what I've seen play out continually in business.
- reverend_gonzo 7y ago
  While I entirely agree with your premise. I don't think that is the best example. Given those hypothetical people, I would bet that the one who went back to his homewtown actually enjoys his life, while the other is miserable, but surrounded in gold. If the latter takes his ball and goes home, now that's a different story.
  - ronilan 7y ago
    Takes his snowboard and goes home. Yes.
  - cynicaltoss 7y ago
zip1234 7y ago
The article uses the 'Forbes 100 fastest growing companies' list and equates it with the most successful companies. Fastest growing does not mean most successful.
jmfayard 7y ago
People always make fun of the little girl who wants to become the next Madonna. So totally unrealistic right? And then they read startup porn and copy Elon Musk habits to become as insanely successful as him. Or at least as Peter Thiel. I'm with the little girl. Her dream is not less realistic than the second one, but much more meaningful.
- koonsolo 7y ago
  You do not need to be Elon Musk to make a good living from your business, but you will need to be in the top 0.1% to make a good singing career.
  - goatherders 7y ago
    Not even close. There are literally thousdand upon thousands of singers you have never heard up that hsvw good careers.
    - koonsolo 7y ago
      Thousands is not that much is it? Just look at the tv show 'the voice' and look at how many contestants they start with, and how many end up making a living out of it. The number of people with businesses are not expressed with "thousands".
      - solveit 7y ago
        Not even kidding, I love how HN commenters understand orders of magnitude.
      - goatherders 7y ago
        Using a network TV show as the measuring stick is a little silly. That's like saying the only chefs who make a living out of it are the ones that make it to Chopped or Top Chef. There are plenty of singers that work with bands, operas, theater companies, studios, schools, as performers, as songwriters, as backing singers and on and on. The living they make is every bit similar to the living made by a guy that owns a pest control company or a woman that owns a small bookkeeping firm.
IanDrake 7y ago
The beginning of this article seems to conflate "success" with riding a short term "fad". Only after you conflate those two, you can equate success with luck. Once you get out of SV, business success has little to do with fart apps and birds that are angry or have flappy appendages and more to do with skill, knowledge, and hard work.
gweinberg 7y ago
To be hugely successful, you have be extremely talented AND work extremely hard AND be lucky. Because there are lots of other hard working talented people out there. This isn't news, it's written in Ecclesiastes and it probably wasn't novel even back then.
- hhs 7y ago
  Also, you need to be solving the right question.
- koheripbal 7y ago
  There seems to be this overwhelming effort these days to attribute the success of successful people as either entirely due to luck and/or to inheritance. The allure of this belief is, of course, the self-gratification that comes with not having to blame your own lack of success on yourself. My company acts as an incubator for insurance agencies, of the many dozens we've setup, most fail, and maybe 20% succeed. What's interesting is how evident it is which ones will fail, and which will succeed within the first month of working with them. Those that succeed demonstrate hard work, intelligence, and thoughtfulness in their work. ...and it's not easy finding those three things in one person. Those that fail tend to have any number of personality flaws ("flaws" might be too harsh a word) that prevents them from succeeding. Many are emotional, which drives them to be very cyclic in their motivation level. Others lack the analytical skills to manage their cash flows. Some burn relationships by being consistently combative. It's honestly easy to ruin a startup - almost any major personality flaw will corrupt such a small team and alienate people. Luck follows the laws of averages - over enough time, the good luck balances out with the bad luck - whereas hard work and intelligence are persistent. Our successful agencies have each had their own story, and been successful at different speeds, but all ultimately made it.
  - brnt 7y ago
    If I replace your interpretation of ethical back from emotional, your post seems to be restating the article.
  - LiquidSky 7y ago
pedalpete 7y ago
"The harder you work, the luckier you get." - Gary Player
- blunte 7y ago
  There are probably some immigrants working three jobs who would disagree with that claim. "The wealthier and more connected your family is, the luckier you get." - me. No amount of hard work beats starting off with all the opportunities and plenty of OPP to work with.
  - pedalpete 7y ago
    I'd like to have you pose that question to Max Levchin, Sergey Brin, Sataya Nadella, Sundar Pichai, and I'm sure others in the community can add to that list. Those are only the ones who have been lucky in rising to the top of tech. Look at all the athletes who have started with nothing, actors, artists, scientists. I won't disagree that those who are well connected are starting off in a luckier position, but there are MANY examples of the lucky and lazy falling from grace. Can I suggest you don't look at the world as a zero-sum game. What is "OPP" in your parlance, I know a few acronyms of that, but nothing that fits.
aaron695 7y ago
This article is not saying success is based on luck. It's not saying long term success is based on luck. It is not saying the hugely successful companies or hugely successful people are based on luck. It's saying a temporary 'rate of change' on success should not be confused with success. It is saying people should not look when success fluctuates for a company or person. But before or after. It then screws up and says "myth of meritocracy" in the last line which has nothing to do with what they are saying and confuses people.
cameldrv 7y ago
Luck is just a set of factors that the author didn't model. There is a reason for everything, some reasons are just more complicated than others.
mikhailfranco 7y ago
Great interview with Demis Hassabis from the BBC (hint skip the journo intro). It's meanderingly biographical, with insights about the long path to success: internships, curiosity, startups, commitment, burnout, trusted team mates and eventual successes ... ‘Just because you passionately believe in it, that doesn't make it a good idea’. https://www.bbc.co.uk/sounds/play/p06qvj98 https://www.bbc.co.uk/sounds/play/p06qvj98
adelHBN 7y ago
When I started my first start-up the elderly amongst my family and friends said more than anything, we wish you "luck".
c0nsilienc3 7y ago
Well, it's not called survivorship bias for no reason. This kinda reminds me of that show Halt and Catch Fire. Their computer, their next video game platform, their next search engine... all of it was poised to become the next big thing. Except it didn't. They were beaten by Apple, Nintendo, Yahoo, etc. Lots of people have the same ideas about what can be successful--some idea about some underserved market or whatever. They're all working at it night and day on little to no sleep. They're all extremely smart and talented. Many of them are willing to play dirty. Only few get lucky.
allie1 7y ago
How does that explain serial entrepreneurs that have more than 2 successful startups under their belt? Or VCs with a long track record of successful investments?
deleted 7y ago
[deleted]

252 points by hhs 7y ago

The new research cited in the title is the author’s book: https://www.amazon.co.uk/Luck-Business-Idea-Ideas-Management/dp/1138094269/ref=sr_1_1 https://www.amazon.co.uk/Luck-Business-Idea-Ideas-Management... The article discusses older research

ampdepolymerase 7y ago

And luck too can be bought. With enough capital you can afford to play the game again and again.

Alex3917 7y ago
> And luck too can be bought. With enough capital you can afford to play the game again and again. If luck regresses to the mean both within and between startups, then it stands to reason that the value of more iterations is limited. I think it's probably more valuable just to be able to recognize which direction you're likely to regress toward.
- jjeaff 7y ago
  I'm not sure what you mean? If winning means getting 3 heads in a row by flipping 3 coins, and you have 3 coins to flip and someone else has 1,000 coins to flip, the second person is much more likely to win.
  - deleted 7y ago
    [deleted]
- teucris 7y ago
  Sure, but it seems to me that most can afford roughly one iteration at most. I would argue that being able to roll fair dice multiple times is still better than having weighted dice that you only get to roll once.
- Bootwizard 7y ago
  Tell that to firms like Softbank. They have enough money to play the game as long as they want. Even massive loses don't make them blink until WeWork happened.
  - Alex3917 7y ago
    That's largely irrelevant. The question is what is the optimal strategy for each player given the assets that they have. No one would deny that some people are starting off with vastly more assets than others.
- wpietri 7y ago
  Not really, because the returns and losses are asymmetric. If you lose, you lose maybe a million bucks of your own money, probably less. But if you win, you could be a billionaire. This means that people with rich families and rich connections can afford to play the game as much as they have a taste for.
ttul 7y ago
This is why startups are a game for rich kids. If you know you can’t really lose, then you can just try again and again until you hit the three cherries.
- mfrye0 7y ago
  Not necessarily. If you fail, just get a job, save up more money, then try again. The more you fail, the more you learn, the greater the likelihood of success the next time around.
- eloff 7y ago
  I think rich kids will often lack the inner motivation and discipline to see a startup through. That's the flip side of knowing you can fail and it won't impact your life negatively. Startups are really hard, if you don't have that burning desire and fear of failure driving you forward, I don't think too much of your chances. Anyone rich, or not can try again and again, it will just be harder for people who also need to figure out how to pay the bills.
  - robocat 7y ago
    Agree. And richkid can only found X startups in their lifetime. If they play the VC game, returns are still extremely variable. If they play a bigger game, then they start to be playing the same game as other players that the public can invest in (directly or indirectly) i.e. no advantage.
  - Bubbadoo 7y ago
    if you look at many startups that had successful outcomes, you'll generally find people who, if not rich, at least come from affluence. Affluence affords them the ability to take on more risk than say someone from a modest background, saddled with student loan debt. Generally, just because someone comes from wealth, it doesn't mean they won't work hard. I believe your comment is targeted more towards the trust-fund babies, who go through life having mommy and daddy pay for everything. Why work, when it'll all come to you?
- robocat 7y ago

ronilan 7y ago

Two long time friends walk down the street. Sees one something shiny and picks it up. “A gold coin!”. At exactly the same time a bird poops on the second’s head. They are upset. They blame their friend. “If you hadn’t stopped the poop would have missed me”. “Further more”, they say, ”here is the full list of all the bad decisions I made through life and anyone and anything that has ever wronged me and brought me to the shity situation I’m in”. “You included”. “No”, says the first, “Our situation couldn’t have been better”. “Further more here is a list of all the smart decisions I have made and anyone and anything that have supported and elevated me to where I am to day“. Then they looks at their poop covered friend and say ”I do not associate with negative thinkers”. And friends they are no more. End.

cheez 7y ago
Brilliant
deleted 7y ago
[deleted]

lihaciudaniel 7y ago

"I'd rather be lucky than smart... in business"

jcims 7y ago

There's a lot of lucky business that fold because they can't deal with the success. So huge success requires both luck and skill/hard work.

alpha_squared 7y ago
This is somewhat similar to winning the lottery vs building capital. Most winners go broke a few years later because instantaneous wealth often lacks discipline for managing it. Acquired wealth often takes time and the discipline is built along the way.

x3n0ph3n3 7y ago

What's the difference between luck and unknown dependent variables?

hogFeast 7y ago
The study of luck is called ludometrics (there are a few interesting papers related to sports on Arxiv). It is very tricky and there are several competing notions of luck...I am not convinced that the method in the article is particularly useful, particularly as it involves human decision-making where you see power laws all the time...which doesn't necessarily indicate luck. Maybe you could argue that the scale of the success is outsized but this is largely a function of the way people consume, not luck...I don't know, it is tricky (and I have spent a lot of time looking at this problem in sports).
wpietri 7y ago
Good question. At least one for me is that I'm only interested in variables that are usefully measurable up front. So if somebody starts a business before the factors that make it huge are reasonably discernible by people at the time, I'd call that luck. I also think things that are outside of the control of the actors are reasonably called luck. E.g., I'm in software in good part because my dad happened to get into software in the 1960s. He only got into it because his dad was well placed at a company that wanted to automate a lot of then-manual appraisal calculations, and they pulled him in to figure it all out. A couple years earlier and he'd have been too young. A couple years later and he would have been gone from his home town. That's why Warren Buffett talks about winning the "ovarian lottery": https://www.cnbc.com/2018/05/04/warren-buffett-says-the-key-to-his-success-is-luck.html https://www.cnbc.com/2018/05/04/warren-buffett-says-the-key-...

kangnkodos 7y ago

Did the author take the power law into account? A number one song earns two times as much as number two song. And a number two song earns two times as much as a number three song earns and so on. All I need to do is sign up one or two consistently good bands to make my whole career. If I also sign up a bunch of one hit wonders, it's OK. You see something similar in stocks. The big cap stocks are most likely to shoot way, way up. If you invest in the next bunch down, the mid cap stocks, then historically, you would not have made as much money. It's possible that if you count the names of winners and losers, that the author is right, and there are more winners in the midcaps than the large caps. But if you own large caps, you will own a few stocks shooting way, way up like Amazon and lots of stocks that lose a little. If you own mid caps, you might own a lot of stocks that go up a little, and only a few stocks that go down. But because of the power law, you only need to own a few stocks like Amazon in your portfolio to make more money with large caps than mid caps.

deleted 7y ago
[deleted]
T-A 7y ago
> If you invest in the next bunch down, the mid cap stocks, then historically, you would not have made as much money. https://www.marketwatch.com/story/dont-overlook-mid-cap-stocks-they-beat-large-caps-by-a-mile-in-the-long-run-2019-01-17 https://www.marketwatch.com/story/dont-overlook-mid-cap-stoc...
icedchai 7y ago
This almost makes sense, except for the fact that small caps and mid caps both give you greater returns long term than large caps: https://fourpillarfreedom.com/stock-returns-small-cap-vs-mid-cap-vs-large-cap/ https://fourpillarfreedom.com/stock-returns-small-cap-vs-mid...

npsimons 7y ago

The dirty little secret that the successful don't like to admit. Plenty of people worked as hard as they did - the only difference between them and the "losers" is that they got lucky. That being said, you'll never win if you don't try. One must be prepared to take advantage of opportunity ("luck") when it happens, and showing up consistently (being in the right place) is half the battle. Being smart and working hard at the right things also vastly increases one's chances.

mindcrime 7y ago
The dirty little secret that the successful don't like to admit. Note the distinction between your statement about "the successful" and the topic at hand - "huge success". Success isn't a simple binary dichotomy... it is, IMO, more of a continuum. One can be "successful" without being, say, a billionaire founder of a Silicon Valley unicorn. I would argue that we should keep this in mind when talking about what goes into success. Yeah, it probably does take some "luck" to become the billionaire guy (say, Mark Cuban or Mark Zuckerberg). But becoming the owner of a successful and growing landscaping business, or car dealership in your local town, etc., etc., etc? Maybe not as much so. That being said, you'll never win if you don't try. One must be prepared to take advantage of opportunity ("luck") when it happens, and showing up consistently (being in the right place) is half the battle. Being smart and working hard at the right things also vastly increases one's chances. Agreed. And since what most people are really talking about when they say "luck" - which is to say chance, uncontrollable events - are outside of our control anyway, there's no real reason to even think about it. All one can do is work as hard as possible, engage in the behaviors that tend to (create|discover|capture|foster|whatever-you-want-to-call-it) "good luck" and just take the ride as far as it goes. Cliches may be trite, but as a certain character in a certain movie once said "just because something is trite doesn't make it less true". And the old cliches "the harder I work, the luckier I get" and "luck = preparation + opportunity" still hold as far as I'm concerned.
zipwitch 7y ago
Then there's what's often called "privilege" (circumstances of birth). What are the consequences to you of taking a risk on being lucky and missing? For some people, dropping out of college and spending a few years working on a project that might pay out spectacularly is negligible. Sure, it's a few years of lifespan, but you learned some stuff and your future trajectory isn't going to be dragged down by a failure in your early 20s. For others, one shot is all they'll ever get. If they don't get the degree and the right job out of college, the trajectory of their life will be permanently inflected downward. Circumstances of birth have a huge impact on what chances are rational to take.

leovander 7y ago

Most of the stories on How I Built This [0] say they got a lucky break, but they worked their butts off. More so "You miss 100% of the shots you don't take.", therefore increasing their "luck"? [0] https://www.npr.org/podcasts/510313/how-i-built-this https://www.npr.org/podcasts/510313/how-i-built-this

stbtrax 7y ago
Most of their stories also involve having parents and family able to plop down tens of thousands of dollars in initial investment, and being able to provide for their family while not making an income
- strbean 7y ago
  In the food and beverage sector, it is also fun when they casually mention "and I happened to have a family friend who was the head buyer for Whole Foods" or something to that effect.
Bartweiss 7y ago
What I think this underestimates is the exponential nature of big wins. If you make a lot of shots, you'll get some successes, and this can be a reliable path to some good outcomes in life. But founding a billion-dollar company or beating the market for a decade means making a lot of shots in a row. It's not enough to succeed at a high-risk, high-reward gamble, you have to either take impossible odds or keep putting all your winnings back into the next wager. (Less abstractly: landing funding for your company, selling the product, escaping fatal competition, refusing the buyout, and so on.) That doesn't make "take a lot of shots" untrue advice, obviously that still improves your odds, but it has two major implications. First, taking more shots may be less effective than improving your odds or raising your wager so you don't need as many wins. Second, there's no guarantee that an individual can ever have a reasonable expectation of winning big. It seems possible that the only strategy capable of making you Bezos-level rich doesn't pay out decently inside one lifetime.
- bsder 7y ago

shahbaby 7y ago

And after they win big, they build an audience of suckers with which they share the "secrets" of their success.

dang 7y ago

A couple of old pg comments come to mind. https://news.ycombinator.com/item?id=1621768 https://news.ycombinator.com/item?id=1621768 https://news.ycombinator.com/item?id=514177 https://news.ycombinator.com/item?id=514177

buboard 7y ago

there is no data in the referenced article

qnsi 7y ago
he only links to his book. If you are interested it seems he cites a lot of his research, eg 2% of papers mentioning luck is his work: https://www.tandfonline.com/doi/abs/10.1080/19416520.2016.1120971 https://www.tandfonline.com/doi/abs/10.1080/19416520.2016.11...
zwaps 7y ago
https://scholar.google.com/citations?user=c9egBlsAAAAJ&hl=de&oi=ao https://scholar.google.com/citations?user=c9egBlsAAAAJ&hl=de...

aphextim 7y ago

>Luck Is What Happens When Preparation Meets Opportunity - Roman philosopher Seneca

nestorherre 7y ago
Came in to post this, left satisfied. However, I like to add to the end: "...and you act upon it"

open-source-ux 7y ago

Luck plays a big factor in the success of many products. We think success = product excellence: how else could a product rise to a leading position in the market or to such pre-eminence unless it was better than the alternatives? Although success is sometimes tied to product excellence, the mountain of successful products that range from mediocre to terrible shows there's often little reason or rhyme to a product's success. There's even an element of luck here in Hacker News. Just take a look at 'Show HN' - there are many excellent projects that get no attention or traction at all. And then there a few lucky ones that suddenly take-off. There's no "wisdom of the crowds" moment that propels one project to success over another because it's more worthy or excellent - it really is random in so many cases.

tasubotadas 7y ago

The only research that is referenced there is the https://journals.aom.org/doi/pdf/10.5465/AMBPP.2018.19 https://journals.aom.org/doi/pdf/10.5465/AMBPP.2018.19 which only has an introduction.

qnsi 7y ago
Study where he searches for luck in full text and finds 2% mention luck https://www.tandfonline.com/doi/abs/10.1080/19416520.2016.1120971 https://www.tandfonline.com/doi/abs/10.1080/19416520.2016.11...

gdubs 7y ago

It’s human nature that when something good happens, we like to credit ourselves. When something bad happens, we tend to blame others.

graycat 7y ago

Yes, the important role of luck is what is true usually, and even nearly always. If you were picking life directions, startup projects, etc. from such directions and projects randomly, i.e., uniformly distributed across such directions and projects and independent of everything else, then the usual, more accurately, the average (expectation) is what you should expect to get. BUT, BUT, BUT you do NOT have to pick directions and projects this way!!!! There are other ways to pick. Yes they are rarely done, but there is a beautiful even spectacularly good history! The first key is, use more and hopefully better information than is usual. Here are some such projects: There used to be typewriters and carbon paper. Not so good. So, Xerox developed and sole a much better solution. Presto, bingo, super big success. Typewriters remained clumsy -- with the labor, a massive economic waste. IBM developed and sold their Selectric typewriters with a little spool for "corrections". It was much better and a big success. Typewriters were still a pain. Along came personal computers. Even with just 640 KB of memory, no hard disk, and only 8" diskettes for storage, and a dot matrix printer, they were MUCH better than typewriters. With a daisy wheel printer with a carbon ribbon, they were much better, still. They sold "like hot cakes". It's possible to have a toothache. I got one of those: I'd gritted my teeth getting CorelDraw working with PostScript output; nice output, but I cracked two molars. On one I had a root canal procedure and a gold crown. Eventually the other one let some infection into the center of the tooth. Result: CO2 pressure; worst pain imaginable. In about an hour, the CO2 pressure was high enough to leak out via the crack, and then an hour later the pain started again. I went to the ER. About then the pain started again. The ER physician just took out a Q-tip, dipped it in a small bottle, painted my tooth, and I was OKAY!!!!! He said he used Benzocaine which is what dentists use before giving an injection and is over the counter. So I rushed to a drug store and stocked up! So, Benzocaine -- works GREAT, got to have such a sore tooth to understand the real value. Not much chance of no market for Benzocaine! Result: A few days later the pain quit. A few weeks later, the tooth was loose in its socket. A week later it was gone! We can all see places where there is a need and some good technical work will create a great solution highly desired by the market. Sure, about the best will be one pill taken once that cures any cancer with no side effects. All we need is the pill, and presto, bingo, a 100 X unicorn! Sure, so far after no doubt some $billions in research funding, no one knows how to make that pill. But there is progress, and on and on we will be curing cancers until we have cured all or nearly all of them. Some of the cures will be very valuable. So find a big need; use some advanced, leading edge, partly original, difficult to duplicate or equal, technology to get a terrific solution. Tell the world. Buy a nice place in Aspen, along the Florida coast, in Maine, on Long Island (as in the Audrey Hepburn movie Sabrina), in Shenandoah, etc. and enjoy life! So, given a problem, need a solution. Can we have any faith in technology? Hmm .... In WWII, the world learned, YES: Radar, penicillin, the proximity fuse, sonar, jet engines, code making and breaking, and The Bomb. Later the world learned from the SR-71, the Navy's nuke powered submarines, the Navy's version of GPS later done by the USAF, Keyhole, basically a Hubble but aimed at the earth, and much more. These projects were funded mostly by the US DoD, and the track record, batting average, bang for buck were terrific. In particular, the US DoD can look at a project proposed just on paper, evaluate it, go or not go, and achieve the track record. Very little luck needed! Apparently Silicon Valley can't/won't do projects this way. So, there is an opportunity: If can find the problem, stir up the technology, and write the software, all as a small project, small team, maybe even sole, solo founder, then maybe can shop for those nice houses and no luck required! Common? The usual? No. Possible? Yes. Back to it!

6gvONxR4sf7o 7y ago

> Such reference to luck is rare in management research. A review of the use of luck in leading management journals suggests that only 2% of articles mention the word. Business media and educators need to acknowledge that we have a lot of offer to help practitioners to make fewer mistakes in business and everyday life, but there is little we can teach about how to become exceptionally successful. What bullshit. In research, we have a zillion different words for chance or luck or stochasticity or randomness. There's a whole language for it. Citing the lack of one of the least precise terms as evidence that there's a gap that needs acknowledging is ridiculous, and the author surely knows it. I get that he's trying to sell his book, but come on.

qnsi 7y ago
I was skeptical it was a simple search for „luck” and he doesnt link to the review but only his book. I bought the book and found the source to the original study[1]. It actually looks like they searched for luck articles, altough in this paper he goes and talks about how different words are used for luck. I dont have time to examine further [1] Good Night, and Good Luck: Chengwei Liu & Mark De Rond 2016
- hhs 7y ago
  Thanks for the study citation. This has an accessible pdf paper available: https://www.repository.cam.ac.uk/handle/1810/255796 https://www.repository.cam.ac.uk/handle/1810/255796

cynicaltoss 7y ago

(Using a throwaway for soon to be obvious reasons). After being involved in several early stage startup companies and the usual cast of characters (individual founders, angels, boards of all sorts, investors, etc) my deeply held personal belief is that after intelligence and hard work moral/ethical flexibility is the largest single factor in individual success in business. In virtually every scenario I've been involved in the individuals that made out 10x or greater (compared to others) did so because they were willing to do things the others were not. I suppose one could frame it as "luck" but my experience has been "making your own luck" is frequently only moderated by your own ability or willingness to lie, cheat, manipulate, and generally be as soullessly ruthless and self-serving as possible. Consider two people. Both graduate from a top-tier law school and join a firm as junior partners. One graduate sees nothing but tax avoision, various shady legal maneuverings, high net worth senior partner infighting and politics, etc. The other sees nothing but money, power, and opportunity. One of the junior partners is disgusted by this and leaves the firm to go back to their hometown and start a family law practice. They settle into a decent upper-middle class lifestyle. The other junior partner stays on, climbs the ladder, and goes on to join the top X percent of the population in income and net worth. Both are intelligent. Both worked hard. Both are "successful". However one junior partner saw people at (arguably) their worst and was disgusted by it. The other couldn't wait to really get in the game and play... Hypothetical simple example but virtually identical to what I've seen play out continually in business.

reverend_gonzo 7y ago
While I entirely agree with your premise. I don't think that is the best example. Given those hypothetical people, I would bet that the one who went back to his homewtown actually enjoys his life, while the other is miserable, but surrounded in gold. If the latter takes his ball and goes home, now that's a different story.
- ronilan 7y ago
  Takes his snowboard and goes home. Yes.
- cynicaltoss 7y ago

zip1234 7y ago

The article uses the 'Forbes 100 fastest growing companies' list and equates it with the most successful companies. Fastest growing does not mean most successful.

jmfayard 7y ago

People always make fun of the little girl who wants to become the next Madonna. So totally unrealistic right? And then they read startup porn and copy Elon Musk habits to become as insanely successful as him. Or at least as Peter Thiel. I'm with the little girl. Her dream is not less realistic than the second one, but much more meaningful.

koonsolo 7y ago
You do not need to be Elon Musk to make a good living from your business, but you will need to be in the top 0.1% to make a good singing career.
- goatherders 7y ago
  Not even close. There are literally thousdand upon thousands of singers you have never heard up that hsvw good careers.
  - koonsolo 7y ago
    Thousands is not that much is it? Just look at the tv show 'the voice' and look at how many contestants they start with, and how many end up making a living out of it. The number of people with businesses are not expressed with "thousands".
    - solveit 7y ago
      Not even kidding, I love how HN commenters understand orders of magnitude.
    - goatherders 7y ago
      Using a network TV show as the measuring stick is a little silly. That's like saying the only chefs who make a living out of it are the ones that make it to Chopped or Top Chef. There are plenty of singers that work with bands, operas, theater companies, studios, schools, as performers, as songwriters, as backing singers and on and on. The living they make is every bit similar to the living made by a guy that owns a pest control company or a woman that owns a small bookkeeping firm.

IanDrake 7y ago

The beginning of this article seems to conflate "success" with riding a short term "fad". Only after you conflate those two, you can equate success with luck. Once you get out of SV, business success has little to do with fart apps and birds that are angry or have flappy appendages and more to do with skill, knowledge, and hard work.

gweinberg 7y ago

To be hugely successful, you have be extremely talented AND work extremely hard AND be lucky. Because there are lots of other hard working talented people out there. This isn't news, it's written in Ecclesiastes and it probably wasn't novel even back then.

hhs 7y ago
Also, you need to be solving the right question.
koheripbal 7y ago
There seems to be this overwhelming effort these days to attribute the success of successful people as either entirely due to luck and/or to inheritance. The allure of this belief is, of course, the self-gratification that comes with not having to blame your own lack of success on yourself. My company acts as an incubator for insurance agencies, of the many dozens we've setup, most fail, and maybe 20% succeed. What's interesting is how evident it is which ones will fail, and which will succeed within the first month of working with them. Those that succeed demonstrate hard work, intelligence, and thoughtfulness in their work. ...and it's not easy finding those three things in one person. Those that fail tend to have any number of personality flaws ("flaws" might be too harsh a word) that prevents them from succeeding. Many are emotional, which drives them to be very cyclic in their motivation level. Others lack the analytical skills to manage their cash flows. Some burn relationships by being consistently combative. It's honestly easy to ruin a startup - almost any major personality flaw will corrupt such a small team and alienate people. Luck follows the laws of averages - over enough time, the good luck balances out with the bad luck - whereas hard work and intelligence are persistent. Our successful agencies have each had their own story, and been successful at different speeds, but all ultimately made it.
- brnt 7y ago
  If I replace your interpretation of ethical back from emotional, your post seems to be restating the article.
- LiquidSky 7y ago

pedalpete 7y ago

"The harder you work, the luckier you get." - Gary Player

blunte 7y ago
There are probably some immigrants working three jobs who would disagree with that claim. "The wealthier and more connected your family is, the luckier you get." - me. No amount of hard work beats starting off with all the opportunities and plenty of OPP to work with.
- pedalpete 7y ago
  I'd like to have you pose that question to Max Levchin, Sergey Brin, Sataya Nadella, Sundar Pichai, and I'm sure others in the community can add to that list. Those are only the ones who have been lucky in rising to the top of tech. Look at all the athletes who have started with nothing, actors, artists, scientists. I won't disagree that those who are well connected are starting off in a luckier position, but there are MANY examples of the lucky and lazy falling from grace. Can I suggest you don't look at the world as a zero-sum game. What is "OPP" in your parlance, I know a few acronyms of that, but nothing that fits.

aaron695 7y ago

This article is not saying success is based on luck. It's not saying long term success is based on luck. It is not saying the hugely successful companies or hugely successful people are based on luck. It's saying a temporary 'rate of change' on success should not be confused with success. It is saying people should not look when success fluctuates for a company or person. But before or after. It then screws up and says "myth of meritocracy" in the last line which has nothing to do with what they are saying and confuses people.

cameldrv 7y ago

Luck is just a set of factors that the author didn't model. There is a reason for everything, some reasons are just more complicated than others.

mikhailfranco 7y ago

Great interview with Demis Hassabis from the BBC (hint skip the journo intro). It's meanderingly biographical, with insights about the long path to success: internships, curiosity, startups, commitment, burnout, trusted team mates and eventual successes ... ‘Just because you passionately believe in it, that doesn't make it a good idea’. https://www.bbc.co.uk/sounds/play/p06qvj98 https://www.bbc.co.uk/sounds/play/p06qvj98

adelHBN 7y ago

When I started my first start-up the elderly amongst my family and friends said more than anything, we wish you "luck".

c0nsilienc3 7y ago

Well, it's not called survivorship bias for no reason. This kinda reminds me of that show Halt and Catch Fire. Their computer, their next video game platform, their next search engine... all of it was poised to become the next big thing. Except it didn't. They were beaten by Apple, Nintendo, Yahoo, etc. Lots of people have the same ideas about what can be successful--some idea about some underserved market or whatever. They're all working at it night and day on little to no sleep. They're all extremely smart and talented. Many of them are willing to play dirty. Only few get lucky.

allie1 7y ago

How does that explain serial entrepreneurs that have more than 2 successful startups under their belt? Or VCs with a long track record of successful investments?

deleted 7y ago

[deleted]