You’re smart. So why aren’t you worth $73.1 billion?
A new study suggests the most successful people are just the luckiest people.
The legendary conversation about “rich people” that supposedly took place between novelists F. Scott Fitzgerald, author of The Great Gatsby, and Ernest Hemingway goes something like this: Fitzgerald is quoted as saying, “The rich are different from you and me.” Hemingway is quoted as replying, “Yes, they have more money.”
While that exchange never actually happened (the tale is really based on things written by Fitzgerald and Hemingway), Fitzgerald raises an interesting question: are the rich different from everyone else besides the fact that they have a lot of money as Hemingway points out?
When I was a boy, my father told me that financial success is due mainly to getting a good education (he used the words “education” and “intelligence” interchangeably) and having the ability to communicate and negotiate. My father was a smart man, but if there’s one thing he didn’t tell me, it’s that luck plays a large role in achieving success. Plus there is a vast difference between education and intelligence, the latter involving natural talent.
Just think about it, for some people it only makes sense that just because you did not finish college doesn’t mean you won’t be rich. There are plenty of examples of talented people who live a rich life without educational achievement — from celebrities like Ellen DeGeneres who dropped out of college after only one semester to insanely successful entrepreneurs like Virgin’s Richard Branson who dropped out of high school at the age of 16.
So, back to the question of what rich people have that you don’t. Other than money.
While thinking about the question, I was reminded of a comedian besides Ellen who gets a lot of ink online, and I don’t know why. Kathy Griffin.
Griffin brings to mind a redhead from my past — I’ll call her Ann— who was amazingly talented and constantly had everyone in stitches with her stories. I don’t know what happened to Ann. While in my opinion she was far more talented than the redheaded Griffin, she was never on TV that I know of, let alone have her own cable special.
Likewise, I’ve met a number of unbelievably talented entrepreneurs over the years whose drive would give Richard Branson a run for his money. But none of these people own trains, planes and spaceships bearing their brand name.
So what separates the Ellen’s, the Griffin’s, and the Branson’s from the Ann’s and rest of the talented people out there?
Recent research from the University of Catania in Italy says it is luck. And get this: they say talent never guarantees success…and vice-versa.
To understand it all, flash back to your school years. Remember “grading on a curve?”
In their February 2018 paper “Talent vs Luck: the role of randomness in success and failure,” the team at the University of Catania reminds us of the long-standing belief that intelligence or talent follows a normal or “bell curve” distribution in the population. That’s the reason the normal distribution has been embedded in many practices: employee reviews, compensation plans and yes, even how our children are graded as students.
Without being technical, the normal distribution means that we have a small number of exceptionally talented people in the world and an equivalent number of people without talent with the bulk of everyone else clumped around the average. If you plot this, the graph takes the shape of the bell above.
But here’s the thing: the distribution of the world’s wealth follows an entirely different pattern called the Pareto distribution.
Named after the Italian economist Vilfredo Pareto, the Pareto distribution, commonly called the 80/20 Rule, says that 80% of our results come from 20% of our efforts. For example, in business terms, 80% of sales come from 20% of salespeople.
You can apply the 80/20 Rule to most things in life, including the distribution of wealth.
In fact, Pareto’s 1906 observation that 80% of Italy’s wealth was controlled by 20% of people has held up extremely well over the years. Today, 20% of the world’s population controls 82% of the world’s wealth.
It is this discrepancy between a normal distribution and a Pareto distribution that got the researchers at the University of Catania thinking that something else is at work when it comes to getting rich.
They considered dark energy, the mysterious force believed to govern the universe. I’m joking, of course, but they did conclude that just plain old luck has a lot to do with it.
In fact, and this is going to be painful, the team found that almost never do the most talented people — like my friend Ann— reach the highest peaks of success.
Here’s how they put it: “…if it is true that some degree of talent is necessary to be successful in life, almost never the most talented people reach the highest peaks of success, being overtaken by mediocre but sensibly luckier individuals.”
The team reached this conclusion with the help of a computer model that looked at different events that had happened in people’s lives over a 40-year period and ranked them according to how lucky or unlucky these events were.
Is this talent model to be believed?
I don’t know. But if you do the math, you will find that Facebook CEO Mark Zuckerberg has made $6 million for every day of his 33-year life. Is he really that talented? After all Zuckerberg, a Harvard dropout, was just a kid eating pizza with a friend when he launched Facebook in 2004 at the age of 19. Todays he’s worth over $73 billion.
To return to my friend Ann— perhaps at the expense of asking the obvious — is luck what separates Ann from famous comedians like Kathy Griffin?
Let’s not waste too much time on that question. The best response might be just to point out that most startups fail, whether they are a comedy act or a brick-and-mortar business. Even billionaire Richard Branson had his share of wrong turns and miscalculations.
So yes, luck — or lack of it — could have been a factor with Ann. But what some people call luck includes the ability to rebound, rebrand, and shift focus. That’s what Branson did when his first company lost money.
That being said, the new study from Italy strongly suggests the role of luck by its traditional definition is far greater than originally envisioned in getting rich, and that in general mediocre-but-lucky people are more successful at becoming rich than talented-but-unlucky people.
Just think about that — not knowing where true talent lies has enormous implications for such things as recognition awards. If the Italian study is to be believed, it suggests that such honors often fail to achieve the results they’re intended to. In the researcher’s words: “It sheds new light on the eﬀectiveness of assessing merit on the basis of the reached level of success and underlines the risks of distributing excessive honors or resources to people who, at the end of the day, could have been simply luckier than others.”
How do you feel about that? Is there some magical connection between being lucky and being rich? Has luck affected your chance of success?