"We have to figure out what kind of people are we going to be and what policies will help us be our best selves."
How important is luck? Few questions more reliably divide conservatives from liberals. Conservatives are correct that people who amass great fortunes are almost always extremely talented and hardworking. There are of course exceptions — think of lip-synching boy bands, or derivatives traders who got spectacularly rich before bringing the world economy to its knees. But as liberals also rightly note, countless others are hardworking and talented, yet never earn much.
A growing body of evidence suggests that chance events play a much larger role in important life outcomes than most people once imagined. My interest in this subject stems in part from the fact that random events have figured so prominently my own history.
Perhaps the most extreme example occurred on a chilly November Saturday morning in 2007, when I was playing tennis at an indoor facility with my longtime friend and collaborator, the Cornell psychologist Tom Gilovich. He later told me that as we sat between games early in the second set, I complained of feeling nauseated. The next thing he knew, I was lying motionless on the court.
When he kneeled to investigate, he discovered that I wasn’t breathing and had no pulse. He yelled out for someone to call 911, then flipped me onto my back and started pounding on my chest—something he’d seen many times in movies but had never been trained to do. He says that after what seemed like forever, he got a cough out of me, but moments later I was again motionless with no pulse.
The tendency to deny luck’s importance leaves successful people more reluctant to underwrite the public investments without which their own success would have been far less likely.
Shortly after that an ambulance showed up. Since ambulances are dispatched from the other side of town, more than five miles away, how did this one arrive so quickly? By happenstance, about half an hour before I collapsed, two ambulances had been dispatched to two separate auto accidents that had occurred close to the tennis center. Since the injuries involved in one of them weren’t serious, one of the drivers was able to peel off and travel just a few hundred yards to get to me. The EMTs put the paddles on me, then rushed me to our local hospital. There I was loaded onto a helicopter and flown to a larger hospital in Pennsylvania, where they put me on ice overnight.
Doctors later told me that I’d suffered an episode of sudden cardiac death. They said that 98 percent of those who experience such episodes don’t survive them and that most of the few who do are left with significant cognitive and other impairments. And for three days after the event, my family tells me, I spoke nonstop gibberish from my hospital bed. But by day four I was discharged with a clear head. Two weeks later, after having passed the first cardiac stress test my doctors could schedule, I was playing tennis with Tom again.
If that extra ambulance hadn’t happened to be nearby, I would not have survived. Some friends have suggested that I was the beneficiary of divine intervention, and I have no quarrel with those who see things that way. But that’s never been a comfortable view for me. I believe I’m alive today because of pure dumb luck.
Not all chance events lead to favorable outcomes, of course. Mike Edwards is no longer alive simply because chance frowned on him. He was the cellist in the original group that became the Electric Light Orchestra, the British pop band. He was driving on a rural road in England in 2010 when a 1,300-pound bale of hay rolled down a steep hillside and landed on top of his van, crushing him to death. He hadn’t broken any laws that day. By all accounts, he was a well-liked, decent, and peaceful man. That his life was snuffed out by a runaway bale of hay was just bad luck, pure and simple.
Most people have no difficulty embracing the view that I’m lucky to have survived and that Edwards was unlucky to have perished. But in other domains, randomness often plays out in far more subtle ways, causing many of those same people to resist explanations that invoke luck. In particular, many seem uncomfortable with the possibility that success in the marketplace depends to any significant extent on luck.
Psychologists use the term “hindsight bias” to describe the human tendency to think that events are more predictable than they are. This bias operates with particular force when people observe unusually successful outcomes.
Brian Cranston is today one of the most celebrated actors in his profession. Not long ago, however, he was best known for his supporting role in a TV sitcom. When the producer Vince Gilligan proposed casting him in the leading role of his upcoming TV series, Breaking Bad, studio executives were reluctant to invest so heavily in an actor who had never been cast in a major dramatic lead role. So they offered the Walter White role to John Cusack. And when Cusack turned them down, they tapped Matthew Broderick, who also declined. Gilligan again pressed his case that Cranston would be right for the part, and executives finally relented.
Breaking Bad went on to become one of the most successful TV drama series of all time, in no small part because of Cranston’s riveting portrayal of the ailing high school chemistry teacher turned meth kingpin. Cranston earned four Emmy Awards during the show’s five seasons and is a gifted performer, to be sure. But there are thousands of other gifted performers who continue to labor out of the limelight. It seems safe to say that the middle-aged Cranston would not have become a superstar if either Cusack or Broderick had taken the Walter White role. Cranston was lucky.
In his commencement address to Princeton University’s 2012 graduating class, Michael Lewis describes a similarly improbable chain of events that helped make him a celebrated author:
“One night I was invited to a dinner, where I sat next to the wife of a big shot at a giant Wall Street investment bank, called Salomon Brothers. She more or less forced her husband to give me a job. I knew next to nothing about Salomon Brothers. But Salomon Brothers happened to be where Wall Street was being reinvented—into the place we have all come to know and love. When I got there I was assigned, almost arbitrarily, to the very best job in which to observe the growing madness: they turned me into the house expert on derivatives. A year and a half later Salomon Brothers was handing me a check for hundreds of thousands of dollars to give advice about derivatives to professional investors.”
On the basis of his experiences at Salomon, Lewis published his 1989 runaway best seller, Liar’s Poker, which described how the new wave of Wall Street financial maneuvering was transforming the world:
“It sold a million copies. I was 28 years old. I had a career, a little fame, a small fortune and a new life narrative. All of a sudden people were telling me I was born to be a writer. This was absurd. Even I could see there was another, truer narrative, with luck as its theme. What were the odds of being seated at that dinner next to that Salomon Brothers lady? Of landing inside the best Wall Street firm from which to write the story of an age? Of landing in the seat with the best view of the business? Of having parents who didn’t disinherit me but instead sighed and said “do it if you must?” Of having had that sense of must kindled inside me by a professor of art history at Princeton? Of having been let into Princeton in the first place?
“This isn’t just false humility. It’s false humility with a point. My case illustrates how success is always rationalized. People really don’t like to hear success explained away as luck — especially successful people. As they age, and succeed, people feel their success was somehow inevitable. They don’t want to acknowledge the role played by accident in their lives.”
Chance events have always mattered, of course, but in some respects they’ve grown more important in recent decades. One reason has been the spread and intensification of what the economist Philip Cook and I have called winner-take-all markets. These markets often arise when technology enables the most gifted performers in an arena to extend their reach. Tax advice, for example, was once a quintessentially local undertaking. The best accountants in a town served the biggest clients, the next-best served the next biggest, and so on. But the development of user-friendly tax software transformed this market into one in which the most able practitioners can serve almost everyone.
Scores of competing tax programs battled for supremacy in the early years. But once reviewers reached consensus on which ones were best, rival programs became redundant, because it was possible to reproduce copies of the best ones at essentially zero cost. In the end, Intuit’s Turbo Tax captured almost the entire market. Its developers profited enormously, even as those whose programs were almost as good were being forced out of business. In such markets, the quality difference between best and second-best is often barely perceptible, but the corresponding difference in rewards can be enormous.
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. It’s one thing to say that someone who works one percent harder than others and is one percent more talented deserves one percent more income. But the importance of chance looms much larger when such small performance differences translate into thousands-fold differences in earnings.
The spread of winner-take-all markets has amplified the importance of chance in a second way. In almost all cases, the prodigious rewards that accrue to a handful of winners in these markets attract enormous numbers of contestants. And the more contestants there are, the more luck matters.
Imagine a contest with thousands of entrants, one that is completely meritocratic in the sense of being settled on the basis of objective performance alone. And suppose that 98 percent of each contestant’s performance is accounted for by talent and effort, only two percent by luck. Given these weights, it’s clear that no one could win without being both highly talented and hardworking. But less obvious, perhaps, is that the winner is also likely to have been among the luckiest of all contestants.
Luck matters so much in contests like these because winning requires that almost everything go right. There will inevitably be many contestants close to the top of the talent and effort scale, and at least some are bound to have been lucky as well. So even if luck has only a minuscule influence on performance, the most talented and hardworking of all contestants will usually be outdone by a rival who is almost as talented and hardworking but also considerably luckier. When I simulated the outcome of this specific contest a thousand times, only a small minority of winners had higher combined skill and effort levels than all other contestants.
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 denying the importance of luck may also help people surmount the many obstacles that litter almost every path to success.
Perhaps the most important such obstacle is that most of us find it harder to summon effort when the resulting rewards are either delayed or uncertain. Stressing luck’s importance reminds us that not even the most diligent current efforts can guarantee future success, and by so doing may encourage some just to sit back and hope for the best. If so, a tendency to deny luck’s importance may be perversely adaptive.
But there is also a dark side to that tendency. Evidence suggests that it makes successful people more reluctant to underwrite the public investments without which their own success would have been far less likely.
I often think of Birkhaman Rai, the young hill tribesman from Bhutan who was my cook long ago when I was a Peace Corps volunteer in a small village in Nepal. To this day, he remains perhaps the most enterprising and talented person I’ve ever met. He could thatch a roof and repair an alarm clock. A skilled cook, he could also resole shoes. He could plaster a wall, after having made the plaster himself from cow dung, mud, and other free ingredients. He could butcher a goat. He could bargain tough with local merchants without alienating them.
Though he’d never been taught to read and write, there was almost no practical task in that environment that he couldn’t perform to a high standard. Even so, the meager salary I was able to pay him was almost certainly the high point of his life’s earnings trajectory. If he’d grown up in the U.S. or some other rich country, he would have been far more prosperous, perhaps even spectacularly successful.
As Warren Buffett once said, “Someone is sitting in the shade today because someone planted a tree 20 years ago.” Echoing Buffett’s thought, Massachusetts Senator Elizabeth Warren reminded audiences during her 2012 campaign that Americans are truly fortunate to have been born in a wealthy country with highly developed legal, educational, and other infrastructure. As she put it,
“There is nobody in this country who got rich on his own. You built a factory out there, good for you. …You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police and firefighters that the rest of us paid for. …You built a factory and it turned into a great idea, God bless—keep a big hunk of it. But part of the underlying social contract is that you take part of that and pay it forward for the next kid who comes along.”
The YouTube video of her remarks that day quickly went viral, with many commentators bitterly denouncing her failure to recognize that most successful entrepreneurs had made it essentially on their own.
On reflection, however, it’s difficult to dispute Senator Warren’s claim that being born in a good environment is an enormous stroke of good fortune. More important, it is the one form of good luck over which societies have any significant degree of control.
But that control requires high levels of investment, which many societies have lately been reluctant to support. Persistent government budget deficits, fueled in part by the demands of top earners for lower tax rates, have led to wholesale cutbacks in public investment in education and other infrastructure.
Relying in part on case studies of families in his hometown of Port Clinton, Ohio, the political scientist Robert Putnam illustrates how these cutbacks have diminished the opportunities available to many children. His case studies are bolstered by more systematic data from the Educational Longitudinal Survey by the Department of Education, which show that children from low-income families whose eighth-grade math scores were in the top quartile are actually less likely to graduate from college than the children of high-income families with bottom-quartile math scores. And with college tuition rising faster than even the cost of medical care, children of low-income families who do manage to earn their degrees are graduating with crushing student loan burdens.
Politicians on both sides of the aisle celebrate the American Dream, the ideal that talented people who work hard and play by the rules can get ahead, irrespective of their family backgrounds. No one can feel proud that this dream is now in tatters.
Yet proposals to increase public investment fall largely on deaf ears these days, because people see no politically realistic way to raise the necessary money. But coming up with the resources we need would be far easier than most people realize. That’s because of the seemingly plausible, but essentially false, belief that higher taxes would make it significantly harder for prosperous people to buy what they want.
That belief was on vivid display during a lunchtime conversation several years ago with one of my colleagues. When he asked whether I’d heard about all the new taxes that President Obama had in store for us and I said that I hadn’t, he expressed shock at my ignorance. I explained that it just didn’t make sense for people like us to worry about such things. When he asked why, I began by confirming that he agreed with me that there was no chance the government would enact tax changes that would threaten our ability to buy what we needed. (He and I are both authors of widely adopted textbooks, which in a town like Ithaca means we don’t spend nearly as much as we earn.)
I then asked whether he was worried that higher taxes would make us less able to buy what we wanted. Yes, that was exactly his worry! But since all our basic needs have already been met, the kinds of things that people like us want are mostly things that there aren’t enough of—say, a house with a commanding view of the lake, or a choice slip in the marina. To get such things, we have to outbid other people like us who also want them, people with similar tastes and incomes. So if the government raises our taxes, the taxes of those other people go up, too. And that leaves the bidding wars that determine who gets the things we want essentially unaffected. The best home sites and marina slips go to the same people as before.
In short, the effects of a decline in any one person’s after-tax income are dramatically different from 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 short supply.
Since the vast majority of income declines that people actually experience — whether from the loss of a job or a divorce or a home fire — are losses that affect only them, it’s perfectly natural for them to think of higher taxes as being just like other income losses. If you lose your job, you really are less able to bid successfully for a home with a view. But when everyone’s disposable income declines — as happens when taxes rise — it’s a totally different story.
Because getting what you want depends far more on relative spending power than absolute spending power, society faces a golden opportunity. Most of the income gains of the last forty years have been concentrated among top earners, who have been spending those gains in ways that have yielded negligible benefits. When all mansions grow larger and all wedding receptions get more expensive, the effect is merely to shift the frames of reference that define what’s considered special. If those same dollars had been channeled into productive public investment, families all along the income scale would have benefited enormously.
But no individual family can alter the nation’s spending patterns on its own. We must act collectively. That’s a challenge because the current political climate is more sharply polarized than at any point in recent history. Proposals to restore public investment meet stiff resistance, even from those who agree in the abstract that it must be done.
Some of that resistance springs from experiences that have led many to question the efficacy of government. Perhaps the most compellingly popular metaphor for ineffective government is the Department of Motor Vehicles, where long waits and imperious service are the stuff of legend. An Ohio blogger, for example, offered this description of a visit to a rural D.M.V. shortly after he’d moved to the state:
“It was an old stone building, very small, with just one woman working there. I walked in, and not seeing anybody else, didn’t bother with the plastic “take a number” cards and went right up to the counter. The woman glared at me and said sternly, ‘TAKE A NUMBER.’ I looked around, smiled at the absurdity, then took a number and sat down on the old wooden bench. There was nobody else in the room besides her and me. As soon as I sat down, she called out ‘ONE!’ I said, ‘Hey, that’s me!’ and put my number back on the peg, and returned to the counter.”
Although it’s no mystery that such experiences often spawn jaundiced views about government, the fact remains that no society can prosper without effective means for its citizens to act collectively. Without government, how could we defend ourselves, or enforce property rights, or curb pollution, or build and maintain the public infrastructure that makes us realize how lucky we were to be born here rather than in a desperately poor country?
Since government is unavoidable, it’s surely worth thinking about ways to make it better. Some societies have demonstrably more effective governments than others, after all, and some of our own government institutions function much better than others.
The possibility of creating more effective government institutions is clearly demonstrated by the striking contrast between the D.M.V. I dealt with when I first moved to Ithaca in the 1970s and the one that serves us today. The earlier version served up the same bureaucratic ineptitude described by the Ohio blogger, but today’s version is completely different.
A few years ago, I sold my car to an out-of-town buyer who said that he was excited to complete the transaction except for the fact that doing so would necessitate a visit to his local D.M.V. I urged him to register the car in Ithaca, saying he’d be in for a pleasant surprise. He reluctantly agreed, and much to his astonishment, we were out the door with his plates in less than 15 minutes. The transaction would have been even quicker if he hadn’t made several errors in filling out his forms, which a cheerful clerk patiently helped him to correct.
What caused this transformation? Curious to find out, I spoke with Aurora Valenti, the Tompkins County clerk who’d been in charge of our local D.M.V. for more than two decades before her recent retirement. When she first took office, she told me, employee morale was low and customer complaints were both bitter and frequent.
One problem was that people had to wait in a long line to process their forms, then queue up a second time to pay their fees. Ms. Valenti solved that problem by persuading state officials in Albany to provide terminals that could handle both tasks. Consumers now wait in only a single line.
Her second major initiative was to put clerks through a heavy dose of sensitivity training, telling them that “most customers would rather have a root canal than visit the D.M.V., and that’s making both you and them unhappy.” Her aim was to empower clerks to tell customers quickly and cheerfully that there were simply no problems they couldn’t solve.
The turnaround has been dramatic, and morale among employees now seems high. When I told the clerk who helped the buyer of my car why I’d suggested coming to the Ithaca office, she blushed with pride, saying that she and her colleagues really enjoy their jobs.
Annual surveys by Transparency International, a nonprofit group based in Berlin, provide further evidence of the possibility of good government. Those surveys consistently place the same nations—New Zealand, the Netherlands, Switzerland, Canada and the Scandinavian countries among them—atop the list of countries whose citizens think most highly of their governments. Few people in those countries view their government officials as corrupt, and most are satisfied with the quality of public services paid for by their taxes.
I stress the possibility of effective government in the hope of encouraging skeptics to keep an open mind about my claim that we could bequeath a much better society to our children without having to sacrifice anything of significant value. To accomplish that goal, the steps we need to take are not intrusive, nor do they require additional layers of bureaucracy. But we’ll be unlikely to take those steps if too many people feel certain they can’t work.
Congress as currently constituted is of course unlikely to undertake significant new public investment. But with tens of millions of Baby Boomers slated to retire in the coming years, the country will be awash in debt unless we can find new sources of revenue. We could wait for the inevitable financial crisis to occur. Or we could start talking now about why it would make sense to take action more quickly.
In light of my personal history, I count myself fortunate not just to be alive, but to be able to participate in this conversation. Things could have so easily turned out differently. Sudden cardiac arrest deprives the brain of oxygen, which probably explains why I was unable to form new memories during the first several days following my collapse on the tennis court on that mid-November morning in 2007. You can only imagine my family’s profound relief when that problem suddenly seemed to vanish on day four. (I’d have been profoundly relieved myself except that I wasn’t even aware I had a problem.) Still unresolved at the time, however, was whether I might have suffered any enduring cognitive deficits of a more subtle sort.
To see where I stood, I went in January 2008 for a follow-up visit with the neurologist who’d examined me when I was in the hospital. One of the tests he’d given me in November was to ask whether I could remember three simple words — hat, shoe, and pen — that he’d asked me to hold in mind a few minutes earlier. Family members tell me that I couldn’t recall any of them, or even that he’d asked me to hold three words in mind.
In the ensuing weeks, as evidence of my recovery continued to accumulate, my incompetence at this task became a running joke in the family. One of my Christmas presents from my wife and our sons was a box entitled “the great triumvirate.” They asked me to guess what three things were in the box. Of course, I had no idea. When I opened it to find a Tilley hat, a Cross pen, and a tiny tennis shoe that Ellen had molded out of clay, they explained that these were the three words the neurologist had asked me about.
On the morning before going for my follow-up visit with the neurologist, I asked Ellen to test me with three new words. “Tree, box, squirrel,” she said, then asked me five minutes later whether I could recite them. Before answering, I asked whether she could remember them. She could not. (This test is harder than it seems!) But I was relieved that I could.
About 15 minutes into my session with the neurologist that afternoon, he told me he was going to ask me to remember three words. It was all Ellen and I could do to keep from cracking up when he used the same three words he had in November—hat, shoe, and pen! (Of course he would use the same words every time. How else could he remember them?) When he asked whether I could recall them five minutes later, I momentarily drew a blank. But then the image of the hat, shoe, and pen in my Christmas gift box flashed before my eyes, and I was out of there with a clean bill of health.
With the extra time I’ve been granted, I’ve continued trying to explain why greater investment in the infrastructure that fosters success would benefit not only poor and middle-income families, but rich families as well. This claim rests on the uncontroversial premise that the additional investment could be paid for by merely reducing the high rates of increases in high-end private consumption that serve mainly to raise the bar that defines adequate.
Public opinion shifts one conversation at a time. In my own recent conversations with highly successful people, I’ve seen opinions change on the spot. Many who seem never to have considered the possibility that their success stemmed from factors other than their own talent and effort are often surprisingly willing to rethink. In many instances, even brief reflection stimulates them to recall specific examples of luck breaks they’ve enjoyed along the way. And as laboratory experiments have consistently demonstrated, when people are prompted to reflect on their good fortune, they become far more willing to contribute to the common good.
If my claim that greater public investment would be a good thing strikes you as plausible, I hope you’ll discuss it with others. If we’re to change course, it will be because of conversations like these. Be encouraged, as I have been, that public opinion on any subject emerges from a complex dynamic process in which what people deem reasonable to believe depends in part on what their conversation partners believe.
Not even a decade ago, substantial majorities in all parts of the country were vehemently opposed to the legalization of same-sex marriage. Yet by 2010 opinion had become evenly divided, and by the spring of 2014, 59 percent of Americans endorsed marriage equality while only 34 percent were opposed.
Not even the most outspoken advocates of marriage equality foresaw this dramatic shift. Nor, for that matter, did pundits predict the sudden collapse of the former Soviet Union, or the events of Arab Spring. In each case, volatility and unpredictability were simply inherent features of social belief systems.
The upshot is that although popular beliefs may remain at odds with reality for considerable periods of time, the consensus can flip with surprising speed once good arguments begin to find their footing. And those arguments can spread only one conversation at a time.
Robert Frank is the HJ Louis Professor of Management and Professor of Economics at Cornell University's Johnson Graduate School of Management. This piece is adopted from his latest book, Success and Luck: Good Fortune and the Myth of Meritocracy (Princeton University Press).
Cornell economist Robert Frank explores one of our unequal world's key drivers.