Seth's Blog : Compounded luck
Compounded luck
If you and I play a game of cards, the winner will largely be decided by luck. Get good cards and you come out ahead.
If you and I play 100 games of backgammon, the better player will win, because the luck of the dice regress to the mean, evening out over time, leaving skill as the dominant factor.
Good game design involves creating the conditions where early luck doesn’t destroy the rest of the game. A good roll or a good first hand shouldn’t eliminate the opportunity for other players to have a chance. This is why Monopoly is a more accurate social commentary than it is a good game.
When people talk about life and say, “there’s no such thing as luck,” they might be referring to the fact that in the long run, people who are prepared, persistent and granted the benefit of the doubt often do okay. But what they’re missing is that life (and our culture) isn’t constructed as a game that doesn’t reward early luck.
Early luck has a massive impact. Where you’re born, the caste society puts you in, whether or not you were appropriately precocious in various early ranking systems–these all get compounded. Malcolm Gladwell has written about birth month having a significant factor in who gets to play in the NHL–because where a Canadian kid plays hockey when he’s six adds up over the decades.
[If you’re a sports fan, that means we could create a second NHL, with just as many star players, simply by creating a different farm system for kids born six months later].
Compounding early luck is generally fine with people who have early luck. What a surprise. But it’s unfair and it’s also an talent-utilization problem that hurts everyone. When we fail to create the conditions for people to persist with resilience until the luck comes along, we all lose.
Organizations have the opportunity to invest in the long haul. They can take profits from early luck and apply them to areas where upsides will eventually appear. This is the secret of successful VCs like Brad Feld and Fred Wilson. A portfolio is a simple way to reduce the impact of luck (good or bad) over time.
But we’re all in organizations. We have a chance to not confuse early luck with skill, and take the steps to build enough resilience into our journey that we’re more likely to get where we’re going.
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