Page 35 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

Bill Gates experienced one in a million luck by ending up at Lakeside. Kent
Evans experienced one in a million risk by never getting to finish what he
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and Gates set out to achieve. The same force, the same magnitude, working

in opposite directions.

Luck and risk are both the reality that every outcome in life is guided by
forces other than individual effort. They are so similar that you can’t
believe in one without equally respecting the other. They both happen
because the world is too complex to allow 100% of your actions to dictate
100% of your outcomes. They are driven by the same thing: You are one
person in a game with seven billion other people and infinite moving parts.
The accidental impact of actions outside of your control can be more

consequential than the ones you consciously take.

But both are so hard to measure, and hard to accept, that they too often go
overlooked. For every Bill Gates there is a Kent Evans who was just as
skilled and driven but ended up on the other side of life roulette.

If you give luck and risk their proper respect, you realize that when judging
people’s financial success—both your own and others’—it’s never as good
or as bad as it seems.

Years ago I asked economist Robert Shiller, who won the Nobel Prize in

economics, “What do you want to know about investing that we can’t
know?”

“The exact role of luck in successful outcomes,” he answered.

I love that response, because no one actually thinks luck doesn’t play a role
in financial success. But since it’s hard to quantify luck and rude to suggest
people’s success is owed to it, the default stance is often to implicitly ignore
luck as a factor of success.

If I say, “There are a billion investors in the world. By sheer chance, would
you expect 10 of them to become billionaires predominantly off luck?” You