Risk and Luck
We like to think that all of our success is a direct result of our hard work. Indeed, a lot of our success can be attributed to doing hard work. We done a lot of research and made a smart decision, and that decision paid off. Or we thought of a great idea and worked hard to bring that idea into fruition, and it worked out. But, contrary to public belief, hard work is not the only component of success. Luck also plays a major role in being successful. Sure, you may start a company that becomes successful because you worked hard. But there is a lot of luck involved there too. People were ready for your product; investors were ready for your product. In fact, if you ask a successful founder “do you remember any time when you felt lucky” they will almost always be able to render many responses to that question. The truth is that hard work is a critical component of success — without working hard, we would accomplish nothing — but there is also an element of luck in every decision that we make.
Before we continue, it is important to define what I mean by luck. Risk refers to when you take a chance on something, and, as you know, you may often end up with a bad outcome. Luck, on the other hand, refers to when you make a bad decision or do something that doesn’t seem like it will work and end up realizing a great outcome. Risk is when you make a bet on a stock you expect to go up based on your research. Luck is when you do no research and the stock ends up appreciating in value anyway. In order to understand risk, you need to understand luck. This is because, as much as we would like to believe otherwise, luck plays a critical role in our lives. Luck is everything that is outside of your control but works out anyway. In mitigating risk, we have the ability to make decisions that can help sway the odds in our favor. In luck, we have no control whatsoever — we may or may not experience it at any time.
The reason that we often ignore luck is that it is confusing. When we think about luck, it makes us consider the fact that not everything we do is inside of our control. We may make a decision and its outcome could just be our getting lucky, rather than because we made a smart decision. When we think about risk, though, we understand that there can be a positive or negative outcome, and that there are precautions we can take to mitigate that risk — we can educate ourselves, change our position, et cetera. Luck makes us feel like we are not in control, and we tend to ignore it because we want to feel like our hard work was the result of our success. If we fail to think about luck in enough depth, though, then there can be serious consequences.
Humans naturally spend a lot of time managing risk. Investors try to mitigate the prospects of making a bad investment; insurance companies try to ensure their funds can stay stable, even when someone makes a claim; we buy auto and home insurance so we are protected in case something happens. But we don’t spend enough time thinking about luck. We don’t say that luck was part of our success; we always talk about how we have mitigated risk. We think that luck isn’t important because it is unpredictable and unknown, whereas risk is predictable and relatively easy to identify. We like to ignore luck because of our ego — we want to make ourselves look like we are great. Failing to consider luck though means that we may focus on trying to replicate the circumstances around our luck with the vision of achieving a similar outcome. Because the past outcome was a product of luck, then we have likely wasted our time trying to produce the same outcome. One of the greatest opponents to success is when we let our egos get in the way of our decision-making, and luck is just one of many ways that this can happen.
Luck is a critical part of our lives. Investors are often lucky that a company survives — many things could have gone wrong at many critical junctures. Founders are often lucky that a company survives — their product suddenly takes off due to a last-chance marketing campaign they run; or they start a referral program that grows massively. Therefore, we should spend more of our time considering the impact of luck on our lives. If we think that some things in our lives are down to luck, then we will be able to better account for serendipity in our lives. We will not try to replicate past situations with the goal of achieving the same or a similar outcome — we will know that outcome was realized because of luck. Everyone should take a step back and think: some things were because I worked hard, but others were because of luck and will likely not happen again. Luck can increase confidence in our abilities and if we let that influence our ego too much, we could easily fail.
Another thing that is worth nothing about luck is that we cannot ignore it, even if we try to. We often try to forget about risks and claim that it was our abilities and skills that made us realize a good outcome. And we do the same for luck too. But as with risk, it will still always be there — your decisions and outcomes will be attributable to risk or luck. The difference is that we often realize risk in the moment, and our minds start to work hard to mitigate that risk — this is a natural part of being a human. But we only realize luck after something has happened. “We were so lucky that an investor came to us today, or we wouldn’t have had enough capital to keep going” is not something you can say or think about until after the experience. We shouldn’t ignore luck because doing so would just be like ignoring risk — both are irresponsible.
Indeed, many people try to undermine the influence of luck in our lives, for the reasons aforementioned — we like to think we are in control of our actions. I think though that it is incredibly important for us to understand that luck is part of our lives and that not everything we do is because we have worked hard. Sometimes, what we are doing just works out. Something happens in our favor that we didn’t expect. We could say that it was because we were skilled, but that would be creating an illusion and would lead us to make irrational decisions in the future. Luck is just a part of life, and, especially for businesspeople, it serves as a key reminder that sometimes things do just work out in the end, even if we didn’t expect them to. Be open-minded and realize that there may be things that happen in your favor that you can’t control — I find accepting that fact to be a refreshing reminder that faith is worth our time.