{"id":7336,"date":"2016-09-05T11:08:44","date_gmt":"2016-09-05T03:08:44","guid":{"rendered":"http:\/\/www.masterkl.com\/78\/?p=7336"},"modified":"2016-09-05T11:08:44","modified_gmt":"2016-09-05T03:08:44","slug":"bloomberg-why-luck-plays-a-big-role-in-making-you-rich","status":"publish","type":"post","link":"https:\/\/www.masterkl.com\/78\/bloomberg-why-luck-plays-a-big-role-in-making-you-rich\/","title":{"rendered":"Bloomberg: Why Luck Plays a Big Role in Making You Rich"},"content":{"rendered":"

Kevin Lau \u5289\u570b\u5049\uff1a\u300c\u5c0f\u5bcc\u7531\u5109\uff0c\u5927\u5bcc\u7531\u5929\uff0c\u6240\u8b02\u4e00\u547d\u4e8c\u904b\u4e09\u98a8\u6c34\uff0c\u52aa\u529b\u91cd\u8981\uff0c\u77e5\u8b58\u91cd\u8981\uff0c\u4f46\u6c92\u6709\u597d\u547d\u3001\u597d\u904b\u6c23\uff0c\u4e5f\u662f\u5f92\u52de\uff01\u300d<\/span><\/p>\n

\u539f\u6587\uff1a<\/p>\n

Robert Frank was playing tennis one cold Saturday morning in Ithaca,\u00a0N.Y., when his heart stopped. Sudden cardiac arrest\u2014a short-circuit in the heart\u2019s electrical signaling\u2014kills 98 percent of its victims and leaves most of the rest permanently impaired.<\/p>\n

Yet two weeks later, Frank was back on the tennis court.<\/p>\n

How did this happen? There was a car accident a few hundred yards away from where Frank collapsed. Two ambulances responded but the injuries were minor and only one was needed. The other ambulance, usually stationed five miles away, reached Frank in minutes.<\/p>\n

<\/div>\n

\u201cI\u2019m alive today because of pure dumb luck,\u201d says Frank, a 71-year-old economics professor at Cornell University.\u00a0Or you can call it a miracle. Either way, Frank can\u2019t take credit for surviving that day. From coincidence or the divine, he got help.\u00a0Nine years later, he\u00a0is still grappling with the concept of luck. And, applied to his field of economics, it\u2019s led him into some dangerous territory: wealth.<\/p>\n

Talk about luck and money in the same sentence, he says, and prepare to deal with \u201cunbridled anger.\u201d U.S. Democratic Senator Elizabeth Warren of Massachusetts and President Barack Obama were pilloried for suggesting rich Americans should be grateful for what Obama called \u201cthis unbelievable American system that we have that allowed you to thrive.\u201d Even referring to the wealthy as \u201cthe luckiest among us\u201d\u2014as Idid<\/a> a few months ago\u2014can spark some unhinged reactions.<\/p>\n

\u201cThere are people who just don\u2019t want to hear about the possibility that they didn\u2019t do it all themselves,\u201d Frank says.<\/p>\n

Mild-mannered and self-effacing, he\u00a0isn\u2019t about to tell the rich \u201cyou didn\u2019t build that,\u201d as Obama did (and likely\u00a0regretted). Frank\u2019s new book, Success and Luck: Good Fortune and the Myth of Meritocracy<\/a>,<\/em> is a study in diplomacy. Combining memoir with\u00a0academic research, it\u2019s an earnest argument that all of us\u2014even the rich\u2014would be better off recognizing how luck can lead to success.<\/p>\n

<\/div>\n

You did build that\u2014mostly<\/h2>\n

First, Frank wants to make clear, you did<\/em> build that\u2013for the most part. Bill Gates, Warren Buffett, or any other wildly successful person didn\u2019t merely get lucky. \u201cIt\u2019s clear that most of the biggest winners in the marketplace are both extremely talented and hardworking,\u201d he writes.<\/p>\n

In fact, a prerequisite of success in many fields may be a strong refusal to believe in luck. The idea of \u201cmaking your own luck\u201d is great motivation, while nothing can kill your drive more than suspecting the game is rigged.\u00a0The reality, however, is that luck does matter. It\u2019s hard to see in your own life if things are going well: Frank says it\u2019s like running with a tailwind, as opposed to a headwind.<\/p>\n

It\u2019s easier to see in aggregate statistics: In professional hockey leagues, researchers have noticed, 40 percent of players are born in the first three months of the year, while just 10 percent were born in October, November, and December. The reason must be that Jan.\u00a01\u00a0is the birth date cutoff for youth hockey teams, Frank says, and older kids end up getting a lifelong advantage over their peers.\u00a0<\/strong>A similar phenomenon has been found among CEOs. A\u00a0third fewer chief executives were born in June and July than you\u2019d expect by chance. Kids born in the summer tend to be the youngest in their classes starting school.<\/p>\n

The influence of your birthday\u2014certainly something outside your control\u2014may be small in the grand scheme of subsequent wealth and success. But even the most talented people in the world can point to coincidences that gave them a crucial edge. Frank cites the 60-year-old Gates: Despite growing up in the 1960s, the co-founder of Microsoft Corp. happened to attend the rare school that offered students unlimited access to computers.<\/p>\n

Or consider the actor Bryan Cranston. After decades as a well-respected performer on television and film, the series Breaking Bad<\/em> made Cranston, 60, a true star. But, Frank notes, Cranston almost didn\u2019t get to play the show\u2019s central character, Walter White. Both\u00a0John Cusack and Matthew Broderick turned down the role before\u00a0producers agreed to offer it to\u00a0the less-famous Cranston. \u201cYou can have talent, perseverance, patience, but without luck you will not have a successful career,\u201d the actor has said.<\/p>\n

Could Cranston or Gates have achieved wealth and fame\u00a0without these lucky breaks? Of course it\u2019s possible. But Frank\u2019s thesis is that our economy is changing in ways that amplify the role of luck in making the difference.<\/p>\n

Winner-take-all markets<\/h2>\n

For more than 20 years, Frank has been studying the rise of winner-take-all markets\u2014fields of fierce\u00a0economic competition in which\u00a0only a few top performers take home the bulk of the rewards. More and more of the economy is starting to look like sports or music, Frank says, where millions of people compete and the winners are paid\u00a0thousands of times more than the runners-up.<\/p>\n

Another example he gives is the humble\u00a0neighborhood accountant. In the 20th<\/sup> century, the typical accountant was competing against nearby rivals. If you\u00a0worked hard, there was a\u00a0good chance of winning over the most lucrative clients\u00a0in town.\u00a0Today, neighborhood\u00a0accountants face much more competition: Sophisticated global accounting firms can swoop in and sign up their biggest clients. Tax preparation, an accountant\u2019s bread and butter, has been mostly swallowed up by two large players\u2014H&R Block for storefront preparation and TurboTax online.<\/p>\n

\u201cTechnology has enabled people who are best at what they do to extend their reach geographically,\u201d Frank says. TurboTax was initially just one of a number of tax\u00a0software programs on the market. But, as happened with search engines and social media sites, it was able to win over customers early, and its competitive advantage snowballed. TurboTax now dominates online tax preparation\u2014thousands of local accountants replaced by one company.<\/p>\n

In these winner-take-all markets, luck can play a huge role. A simulation conducted by Frank shows how: Imagine a tournament in which every contestant is randomly assigned a score representing their skill. In this simple scenario, the most skilled person\u00a0wins. The more competitors there are, the higher the score the winner will likely have.<\/p>\n

Now introduce chance by randomly assigning each participant a \u201cluck\u201d score. That score, however, can play only a tiny role in the ultimate outcome, just 2 percent compared with 98 percent allotted to skill. This minor role for chance is enough to tilt the contest\u00a0away from the top-skilled people. In a simulation\u00a0with 1,000 participants,\u00a0the person with the top skill score prevailed only 22 percent of the time.\u00a0The more competition there is, the hardest it is for skill alone to win out. With 100,000 participants, the most skilled person wins just 6 percent of the time.<\/p>\n

Frank writes:<\/p>\n

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\u2019s rarely a winner who wasn\u2019t also very lucky.<\/p><\/blockquote>\n

Winner-take-all markets can end up creating vast wealth differences between the lucky and unlucky.\u00a0One person\u2014smart, persistent, but unlucky\u2014struggles, while an equally (or even slightly less) talented and hard-working person gets a lucky break that can reap millions, or billions, of dollars.<\/p>\n

How to make things fair? Guess<\/h2>\n

We can\u2019t control our luck, so what else can we do? Frank says the only solution is to invest more in education and infrastructure and all the other things we know help everyone succeed. The more we spend on these public goods, the more people have a chance to get lucky, he says.\u00a0That, of course, means higher taxes. But Frank, ever diplomatic, assures the wealthy that this won\u2019t hurt nearly as much as they might fear.<\/p>\n

Which would you rather drive, he asks, a $150,000 Porsche on a well-maintained highway, or a $333,000 Ferrari on roads with deep potholes?\u00a0The question scores a couple points. First, Frank is arguing, everyone benefits if we invest more in the general public welfare, including the rich. Second, we need to think more about the difference between a $150,000 car and a $333,000 car.<\/p>\n

The increasing concentration of wealth at the top of the economic spectrum has created fierce competition for the finer things. \u201cIt\u2019s not that people are jealous or want to outdo each other,\u201d Frank says. It\u2019s just that everyone\u2019s expectations have skyrocketed\u2014how fast a car should be, how large a home to build, or how elaborate your wedding can be. It\u2019s hard to throw a $4,000 reception when everyone in your social circle is spending $100,000.<\/p>\n

Frank likens us to male elk, who\u2019ve evolved to grow huge antlers only because they provide an extra advantage in winning mates. If every bull elk could shrink his\u00a0antlers at once, he\u2019d find it easier to walk through the woods and escape predators. Instead, male elks are stuck in a \u201cpositional arms race.\u201d<\/p>\n

For humans, at least, tax policy could help deescalate this wasteful competition, Frank says. He proposes a progressive consumption tax, one that would tax how much people spend by giving tax breaks for money they saved. The wealthy would pay more in taxes, sure, but it wouldn\u2019t hurt as much as they think. If everyone else in your income tax bracket also owes more to the Internal Revenue Service, you still maintain your \u201crelative position\u201d in the hierarchy.<\/p>\n

The most successful people will still be able to afford the best stuff\u2014the waterfront homes, the front-row seats, the haute couture\u2014but they\u2019ll feel less pressure to spend, and they\u2019ll have less competition for the rarest luxury goods.<\/p>\n

Frank knows this argument is a hard sell. But some perspective helps: The political consensus can flip rapidly if good arguments are offered, he contends. So he wants to spend the rest of his life\u2014the extra years he was given on that tennis court nine years ago\u2014explaining how much better off we\u2019d be if we acknowledged our luck.<\/p>\n

\u201cThe fact that anyone exists at all is so astronomically improbable,\u201d Frank says. \u201cThe fact that you\u2019re here to live and breathe and enjoy a sunset\u2013what an unbelievably unlikely thing.\u201d<\/p>\n

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