What Kind of Lucky Are You?
"You've got to ask yourself one question: 'Do I feel lucky?'"
“You never know what worse luck your bad luck has saved you from.”
~Cormac McCarthy
I am one of the luckiest people in history.
To be born into a prosperous American family in 1960 with smart parents is to start life on third base. The odds against my very existence are astronomical (Google tells me around 1 in 400 trillion).
But I think there’s more to luck than that.
I’ve always felt that the luckiest people I know have a talent for (1) recognizing circumstances, not of their own making, that are conducive to a favorable outcome, and (2) quickly taking advantage of those circumstances.
“Dumb” luck is, as the name suggests, dumb. It requires no awareness of your situation or action beyond simply being there when it hits. “Smart” luck is different. Smart luck involves awareness followed by action before the circumstances change.
So, I have good old dumb luck to thank for being born when I was and for coming of age just as computers were advancing to the point where I could use them to write What Works on Wall Street. Try as I might, I cannot claim that any stroke of genius on my part set up these circumstances.
Was I also lucky to start my stock market investments near the peak of interest rates, allowing me to spend the majority of my adult life in a falling-rate environment?
You betcha!
BUT… these favorable conditions would have been meaningless if I hadn’t fought hard to get the data for my book.
Likewise, this stroke of timely dumb luck would have been wasted had I allowed the conventional wisdom of my youth to sour me on the stock market. For those too young to remember, everyone HATED the stock market for most of the 1980s and much of the 1990s. In the early ‘80s, all the “smart” folks were going into real estate and hard assets. Stocks were for losers. It wasn’t until the late ‘90s that everyone loved the stock market.
So, yes, circumstances were nearly ideal for me to succeed as a stock market investor and author, but I needed to actively decide to take advantage of them.
I’ve also experienced being in the right place at the right time and yet making the wrong choice. In 1999, I founded an online investment advisor called Netfolio. It was one of the first robo-advisors. In early 2000, we got a ridiculous offer from one of Wall Street’s largest investment banks that would have made everyone associated with Netfolio crazy rich.
I said no.
Even at the time, I realized how incredibly lucky I was to get the offer, but I failed to grab it. I failed to take advantage of the wonderful spot Karma had placed me in and passed on the deal. In other words, I failed to act when the rare, favorable, and lucky circumstances were at hand. Had I done so, I’m sure many people would have attributed my incredible luck to skill on my part. I’m pretty sure I would have attributed my luck to skill, too.
And yet… I don’t regret the experience. On reflection, it gave me a really good understanding of the role of luck. The writer Damon Runyon once said, “The race may not always be to the swift nor the victory to the strong, but that's the way to bet.” I agree. Having been on both sides of luck, I think luck is bound up in many outcomes in life, yet how you react and play your hand determines how lucky you will be.
My friend and past guest George Mack phrases it another way with his “Luck Razor.” He writes: “If given 2 options, pick the one that has the most luck potential. E.g. Cocktail party vs watching Netflix. Which one has the highest potential for future luck?”
In my opinion, people who can suss out potentially random favorable circumstances and jump in to take advantage of them will end up being “luckier” than those who can’t.
I’ve always loved Carl Orff’s Carmina Burana, which is based on a series of medieval poems about the cruelty of fate. The first, “O Fortuna,” has some cool lyrics. It’s in Latin, but since it’s been a long time since I took Latin, here are the opening lyrics in English:
“O Fortune, like the moon
You are changeable, ever waxing, ever waning;
Hateful life
First oppresses and then soothes as fact takes it;
Poverty and power
It melts the like ice.”1
The point is that humans have alternately blamed and praised fate for our condition in life forever.
I think the key to being luckier than the average person is having an open mind, looking for potentially unusual (i.e., lucky) circumstances, and then acting quickly to take advantage of them.
So, next time you find yourself blessed with a stroke of dumb luck, remember, that’s just the beginning. The real question is: what are you going to do with it?
This is an updated version of a thread I posted on Twitter/X in March 2018, which was inspired by this Tweet from Morgan Housel.
As someone who has known the author since we were very young men. I am impressed by his self reflection and willingness… no, eagerness to share his hard won wisdom in a public forum. But in regards to his “Luck”. Chance favors the prepared mind. And Jim was always “prepared”.
Amazing thanks Jim.