Math That Proves The Rich Are Luckier Than Everyone Else - Not Smarter/More Talented

AlainLocke

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Analysis: If you're rich, you're more lucky than smart. And there's math to prove it

No one who’s studied business as long as I have — more than 40 years now — should be shocked by the headline above. In fact, I’ve believed for years that luck is a better determinant of success than smarts (or effort). It’s why I adopted a motto soon after my journalism career kicked off that tried to capture the perception: “There is no big-time.” That is, it’s remarkable how many at the top are, well, unremarkable. So I figured luck had to play a lead role in their ascension. I’ve never had occasion to change my mind.

But of course, this was a subjective judgment. Now, however, comes support for the cynicism: a study that claims the predominance of luck over talent in the distribution of wealth has been mathematically confirmed. Two Italian physicists — Alessandro Pluchino and Andrea Rapisarda — and one economist — A. E. Biondo —make the case, and they’ve got a computer model to back it up.

“We suggest that such an ingredient is just randomness,” write the authors. “In particular, we show that, 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 practical implication is pretty clear: “It 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.”




If you’re so smart, why aren’t you rich? Turns out it’s just chance.

The distribution of wealth follows a well-known pattern sometimes called an 80:20 rule: 80 percent of the wealth is owned by 20 percent of the people. Indeed, a report last year concluded that just eight men had a total wealth equivalent to that of the world’s poorest 3.8 billion people.

This seems to occur in all societies at all scales. It is a well-studied pattern called a power law that crops up in a wide range of social phenomena. But the distribution of wealth is among the most controversial because of the issues it raises about fairness and merit. Why should so few people have so much wealth?

The conventional answer is that we live in a meritocracy in which people are rewarded for their talent, intelligence, effort, and so on. Over time, many people think, this translates into the wealth distribution that we observe, although a healthy dose of luck can play a role.

But there is a problem with this idea: while wealth distribution follows a power law, the distribution of human skills generally follows a normal distribution that is symmetric about an average value. For example, intelligence, as measured by IQ tests, follows this pattern. Average IQ is 100, but nobody has an IQ of 1,000 or 10,000.



The same is true of effort, as measured by hours worked. Some people work more hours than average and some work less, but nobody works a billion times more hours than anybody else.

And yet when it comes to the rewards for this work, some people do have billions of times more wealth than other people. What’s more, numerous studies have shown that the wealthiest people are generally not the most talented by other measures.


Today we get an answer thanks to the work of Alessandro Pluchino at the University of Catania in Italy and a couple of colleagues. These guys have created a computer model of human talent and the way people use it to exploit opportunities in life. The model allows the team to study the role of chance in this process.

The results are something of an eye-opener. Their simulations accurately reproduce the wealth distribution in the real world. But the wealthiest individuals are not the most talented (although they must have a certain level of talent). They are the luckiest. And this has significant implications for the way societies can optimize the returns they get for investments in everything from business to science.

Pluchino and co’s model is straightforward. It consists of N people, each with a certain level of talent (skill, intelligence, ability, and so on). This talent is distributed normally around some average level, with some standard deviation. So some people are more talented than average and some are less so, but nobody is orders of magnitude more talented than anybody else.

This is the same kind of distribution seen for various human skills, or even characteristics like height or weight. Some people are taller or smaller than average, but nobody is the size of an ant or a skyscraper. Indeed, we are all quite similar.


The computer model charts each individual through a working life of 40 years. During this time, the individuals experience lucky events that they can exploit to increase their wealth if they are talented enough.

However, they also experience unlucky events that reduce their wealth. These events occur at random.

At the end of the 40 years, Pluchino and co rank the individuals by wealth and study the characteristics of the most successful. They also calculate the wealth distribution. They then repeat the simulation many times to check the robustness of the outcome.


When the team rank individuals by wealth, the distribution is exactly like that seen in real-world societies. “The ‘80-20’ rule is respected, since 80 percent of the population owns only 20 percent of the total capital, while the remaining 20 percent owns 80 percent of the same capital,” report Pluchino and co.

That may not be surprising or unfair if the wealthiest 20 percent turn out to be the most talented. But that isn’t what happens. The wealthiest individuals are typically not the most talented or anywhere near it. “The maximum success never coincides with the maximum talent, and vice-versa,” say the researchers.

So if not talent, what other factor causes this skewed wealth distribution? “Our simulation clearly shows that such a factor is just pure luck,” say Pluchino and co.

The team shows this by ranking individuals according to the number of lucky and unlucky events they experience throughout their 40-year careers. “It is evident that the most successful individuals are also the luckiest ones,” they say. “And the less successful individuals are also the unluckiest ones.”
 

Mr Mulsanne

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Well wealth is a product of inheriting economical leverage to stand on so that itself is a product of luck.Your grandparents were lucky enough to buy a five bedroom house in downtown for 250k and selling that same house for millions and the money can be used to buy rental properties or set up businesses.Being born into riches or wealth is a prime example of luck.
 

DEAD7

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:heh:These “don’t feel bad they are just lucky” stories are genius.
They get eaten up.

I bet a rich person paid to have this piece written.




Edit: right after this is a “college isn’t worth it” thread
:mjlol:
I see y’all
 
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:heh:These “don’t feel bad they are just lucky” stories are genius.
They get eaten up.

I bet a rich person paid to have this piece written.




Edit: right after this is a college isn’t worth it thread
:mjlol:
I see y’all
This is a study.
Most VISIBLE rich people lie about their comeups, and then sell the lie.
Wealth transfers and connects >>> whatever you've been told.
Room full of rich men? ONE out of maybe 1000 is truly "self made".
There are doors and ceilings...
 

Flywin Lannister

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First of all it’s nice to see people looking up other things online besides IG thots and angry black women who hate black men


I wonder to what extent their research took relationships into account. Most people seem to get promoted not because they did a great job but because they sucked up to their boss and never disagreed, not once. That’s not luck, that’s a strategy to move up in a company/field and earn more money. Now if that puts them in the 20% of top earners I doubt it, the 20% have a different type of way of communicating with each other and sucking up isn’t part of it since they’re all bosses but relationships are also key to being allowed to be part of the 20% circle. And those relationships can partially be because or luck (the right introduction by the right friends/family members) but it’s not only luck, a complete bum won’t become COO at Microsoft.
:jbhmm:
 

lotteryplaya

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The rich really believe in their supremacy they assume their kids will be geniuses and elite athletes. After getting them the best trainers and private coaches their kids get blown off the court or field by regular kids. They have to herd their kids into those expensive sports the average kid cant afford to play. Speaking of luck I need to get lucky with the lottery or something big soon.:wow:
 
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