Luck By Chance

Nassim Nicholas Taleb has written a highly intelligent book about the role that chance plays in life and in the markets. It is not Taleb’s contention that success can be attributed entirely to luck. However, he says, one should accept that chance plays a greater part in events than most of us give it credit for. Often, with the benefit of hindsight, people attribute a positive outcome to their own actions, when in reality it may have been produced purely by chance. A person who is successful may turn arrogant enough to think that his success was purely owing to his own merits and skills. But one has only to look around to find that many people who are equally meritorious have not enjoyed an equal measure of success. Clearly, chance does play some part. The author cites the example of Croesus, King of Lydia and the wealthiest ruler of his time, to warn against hubris engendered by one’s good fortune. Croesus invites Solon, the Greek legislator famed for his knowledge and wisdom, to his court and tries to impress him with its grandeur and opulence. An indifferent Solon instead warns Croesus not to take his good fortune for granted, for it could at any time take a turn for the worse. Many years later, in a battle against Cyrus, the ruler of Persia, Croesus is defeated. When he is about to be put to death, Croesus recalls Solon’s warnings and shouts: “Solon, you were right”. This reference to Lady Luck’s inconstancy causes Cyrus to dwell on his own vulnerability and he grants Croesus a reprieve. A dentist may be richer than a rock star According to Taleb, in some professions, such as the stock markets, chance plays a greater part than in others, such as dentistry. If one puts a high premium

This article was originally published on April 29, 2011.