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Sunday
Aug072016

RS 165 - Robert Frank on "Success and Luck"

Release date: August 7th, 2016

Robert Frank

If someone asks you, "What caused your success (in finance, your career, etc.)?" what probably comes to mind for you is a story about how you worked hard and made smart choices. Which is likely true -- but what you don't see are all the people who also worked hard and made smart choices, but didn't succeed because luck wasn't on their side.

In this episode, Julia chats with professor of economics Robert Frank about his latest book, Success and Luck: The Myth of the Modern Meritocracy. They explore questions like: Why do we discount the role of luck in success? Has luck become more important in recent years? And would acknowledging luck's importance sap our motivation to try?

Robert Frank's Website

Robert's Pick: "Micromotives and Macrobehavior" by Thomas C. Schelling

Robert's Interview on Fox Business

Podcast edited by Brent Silk

 

Full Transcripts 

Reader Comments (23)

I found this podcast by working hard.

Thanks.
August 7, 2016 | Unregistered CommenterEuropean
I found this podcast entertaining, and Frank is obviously a kind man doing great work by bringing luck more into the spotlight. However, I believe he endorses too much permissiveness of inaccurate but supposedly adaptive ideas.

For example, he argues how it may be adaptive to attribute one's failure to bad luck but one's success to hard work. Julia's comment about local maximums and global maximums is really pertinent here. Sure, it may be a local maximum to believe this so you don't lose self-confidence, but can't one retain just as much self-confidence without delusion and with a simple openness to learn from mistakes?

I find it much stronger to argue that delusional ideas are more often than not horribly maladaptive in a global sense since they require inaccurate models of reality to function. In the case of attributing failure purely to luck one may deny one's potential contribution to the outcome by maintaining behaviors that are keeping the person from success. On the other hand, if I open to the fact that my success also relies on luck, I give make myself more awareness of how to influence those outcomes I didn't know contributed to my success in the beginning. From both sides, retaining a delusion is highly globally maladaptive.

Julia's counterarguments were spot on and I agree wholeheartedly that there are ways to think about these things which are empowering and true. Work hard so you are at the tail end of the normal distribution and earned the right to be successful. Be grateful when success comes because it wasn't due just to your hard work that it came. Seems simple enough.
August 8, 2016 | Unregistered CommenterThomas Meli
I listened to the fox news interview and was floored by how defensive the host was. I didn't think any news outlet could hire someone as unwilling to listen and outspokenly wrong. He really did prove your point ;)
August 9, 2016 | Unregistered CommenterRyan
I don't agree with Frank's thesis on luck but i do think he has great insight on how chance works. To call the catalyst to someones success luck is to generalize all the variables and ways they increased their probability of reaching that goal. It would be nearly impossible to predict all the factors that lead someone to be successful but in hindsight you could generalize those variables as luck. Which, when Frank give's the example of asking people to recall times they thought they were lucky many people happily obliged. in conversation it would be much easier to refer to the gray area as luck instead of scientifically detailing a hundred things you did increasing your chances to become successful.

I would imagine there are 4 main variables that would carry the most weight in your chances of success. Those would be hard work, skill, character, and being in the right place at the right time. With the right place/time variable let's say that you randomly came across someone that was key to your success. It would be easy to say you were lucky to have randomly run into this person on a train, at a coffee shop, or beach, etc but you could also say that you just happened to be in a geographical area with a like-minded individual who has the same drive, goals, or complimentary characteristics to you. Was it really luck or was it because you were open to the possibility, whether actively or subconsciously, towards something that would continue you on a successful path?

I feel it's really a matter of how all the factors increase your chances of a desired outcome and not luck. That doesn't sell a book though...
August 11, 2016 | Unregistered CommenterJustin
Enjoyed this immensely. Perhaps we should stop using the term "luck" and substitute with "random" Derren Brown the English, rationalist, mentalist, illusionist (!!) once did a show https://www.youtube.com/watch?v=O4mN33w5Ftw on the secret of luck where he engineered a social experiment in an entire English town. One take-away, of many, is that those who think themselves "unlucky" fail to optimise random opportunities when they arise to their detriment. Worth a watch. Thanks again.
August 11, 2016 | Unregistered CommenterDermot Hanway
“Captaincy is 90% luck and 10% skill. But don’t try it without that 10%”: Richie Benaud, past captain Australian cricket team.
August 12, 2016 | Unregistered CommenterAlan Long
The leftism is strong with this one. As I expected, the examples of success given are successful CEOs, an actor, and a work of art, namely the Mona Lisa which I agree is overrated. I suspect that part of the reason that successful investors like Soros and Buffett, and A-list actors, entertainers, artists, supermodels, and writers are such leftists is that they know how much their success depends on luck, and if they hadn't been "discovered" they'd still be starving artists/actors/musicians, especially the less talented ones.
But simply avoiding poverty doesn't require a lot of luck in the U.S., and is straightforward. Don't get involved in crime or drugs. Don't have children you can't afford or before you finish school. Don't drop out of school. And to reach upper middle class, study hard and do well in school, get a useful degree, and don't accumulate debt.
I knew a lot of immigrant students in school who were poor but well-behaved and smart, and now they're engineers and doctors. The luck that matters is to be blessed with intelligence, health, and good parents. But I remember stupid American students asking me why I study so much for tests when I always set the curve anyway, as if it's genetic. I told them, "How the hell do you think I set the curve?"
Now, BAD luck can ruin anyone's life. Getting struck by a drunk driver or by cancer can ruin your life just like that. For that, we need a safety net, as well as to give the aforementioned immigrants a leg up. But when some people are stuck in poverty for generations, that's not bad luck, and these days it's not racism either. That's a culture of poverty, crime, and bad parenting. Does peer pressure and culture put pressure on kids to get good grades and stay out of trouble, or to do drugs, hook up, and join gangs?
August 12, 2016 | Unregistered CommenterMax
By the way, a lot of those aforementioned poor but smart and ultimately successful immigrants were fleeing socialist countries where their opportunities were very limited.
But the British-American Fox Business host was pretty hilarious when he started talking about all the risks he took, and even asked, "Do you know what risk is implied for this level of success?" And Frank just replied, "I do," instead of pointing out that risks by definition involve good and bad luck. We do hear that very successful people take big risks, but of course so do very unsuccessful people. But it's not a risk to do well in school and major in something useful like accounting or engineering. In fact it's quite safe. It's a bigger risk not to do these things.
August 12, 2016 | Unregistered CommenterMax
I think this was an important podcast, although it's not the first time I've heard these ideas expressed. Nearly a year ago, I tweeted that "Most successful people are prone to attribute their successes to hard work and their failures to bad luck even when the reverse is true," and that was in response to something else I'd read. The infamous Fox Business interview is SOP for their network; they like to find a liberal "whipping boy" and flog him on the air to rile up their usual audience. I believe that Warren Buffett endorses the position that taxing the upper echelon more heavily is good for society. And I was amused at the earlier comment decrying Frank's "leftism," which struck me as knee-jerk conservatism despite the post hoc rationalizations.
August 12, 2016 | Unregistered CommenterRichard Schloss
Lyrics from the great Soviet protest song, "Bound by One Chain"

It's possible to believe in the absence of faith,
And it's possible to do the absence of work.
Paupers pray and pray,
That their poverty is guaranteed.

(They'd rather have a guaranteed low standard of living than face uncertainty.)

Here women are seeking but find only aging,
Here the measure of work is fatigue.

(Not productivity or value. "From each according to his ability.")
August 13, 2016 | Unregistered CommenterNautilus Pompilius
I think it's funny how people can recognize how just one instance of very bad luck can ruin someone's life, but don't recognize how much good luck it takes to not have that that one instance or many instances of bad luck.
August 14, 2016 | Unregistered CommenterChloe
Robert Frank was talking about the kind of good luck that leads to success, which is then attributed to talent and hard work. Staying healthy and not getting into car accidents is great, but it doesn't necessarily lead to success. It's the flip side of the bad luck that can lead to ruin. But people can still mitigate risks: buy health insurance, don't smoke, buckle up, save for a rainy day, prepare an emergency kit, hope for the best prepare for the worst, you get the idea.
August 14, 2016 | Unregistered CommenterMax
I think Robert Frank was talking about the kind of luck that's not having good luck. You can't have one without the other. It's hard to see how someone with a disabling brain injury in a car accident in youth is supposed to be successful. Not having that happen is good luck. It's demonstrated in the exchange where Julia mentions how the person who's asked about what if he was born poor in Africa, and fails to recognize, if he was born poor in Africa, he might not have the same abilities, health, and infrastructure through his early life to make him the type of person with education, intellect, and the ambition to persevere. Not having those things is bad luck. Having those things is good luck. (After all, nobody chooses where they're born and with whom they spend the early years of their life.
August 14, 2016 | Unregistered CommenterChloe
Hypotheticals like "What if you were in X's shoes?" usually imply that you are still you in the hypothetical scenario. Otherwise, the answer would always be, "I'd do exactly what X did because I'd be X and not me," which isn't very insightful. But sure, if you're born into a culture of poverty or a communist regime that punishes instead of rewards intellect and ambition, that would suck. You'd be lucky to emigrate.

Google founder Sergey Brin had the bad luck of being born Jewish in the Soviet Union. His father Mikhail said, "I had all A’s except for three classes where I got B’s: history of the Communist Party, military training and statistics. But nobody would even consider me for graduate school because I was Jewish. That was normal.” So he became an economist for the central planning agency. “I was trying to prove that, in a few years, living standards in Russia would be higher than in the United States. And I proved it. I know enough about math to prove whatever you want."
But Sergey was lucky that his father announced, "We cannot stay here anymore," after attending a conference in Warsaw, where he learned about life outside the Iron Curtain. And he was lucky that his family was granted an exit visa and didn't stay stuck as refuseniks. He was better off being a poor immigrant in the U.S. than living relatively comfortably in Moscow.

In a previous episode of Rationally Speaking, the guest, Bryan Caplan, argued that genetics accounts for people's success, and parenting makes little difference, but as I recall, even he acknowledged that moving to a different country or environment does make a difference.
August 15, 2016 | Unregistered CommenterMax
Justin wrote:

"I feel it's really a matter of how all the factors increase your chances of a desired outcome and not luck. That doesn't sell a book though... "

Sounds like you're just making up narratives to show that a known conclusion was inevitable. Very unscientific.
August 16, 2016 | Unregistered CommenterGreg Esres
Garry Kasparov said, in chess the rules are fixed and the outcome is unpredictable, while in Russia it's vice-versa.
August 16, 2016 | Unregistered CommenterMax
Excellent podcast and need some opinions?
Has medical science gone to far with keeping people alive?
Example: A intelligent person suffers a Traumatic Brain Injury and can pass away naturally.
Nero Surgeons keeps them alive knowing the patient will end up in a wheelchair brain dead.
Friends and family will say to this person you are so lucky to be alive.
Is this person so lucky to be alive?
August 18, 2016 | Unregistered CommenterRobert Frank
Great talk I really enjoyed it. I agree that most of our Success is due to Luck because we are connected to too many things in Life that all have their say in the outcomes we end with. To say that it was all/mostly 'Hard Work' is implying that you have total control of everything around you. I believe these type of feelings about ones Success are generated from what Society tells us about being rewarded for our hard work with Material Wealth and justifying those who have Less because they "didn't" work hard enough.
August 20, 2016 | Unregistered CommenterErnesto
I really wish you had called out the guest on his assumption that rich people spend all their marginal dollars on relative status signaling and other perfectly inelastic goods. Maybe the rich like their diamonds to be larger regardless of the size of other people's diamonds. And more empirically, rich people often direct their consumption towards causes they care about for whatever reason. You can certainly argue that it's better overall for taxes on the rich to be higher, but it is unambiguously worst for them.
August 24, 2016 | Unregistered CommenterAlexandre Zani
Reminds me of this Full Tilt Poker commercial: youtube /watch?v=ylEN7eH6Zyo
"We play because poker is not a scratch-off ticket, a half-court jumper, or a knock on wood. It's no game of luck, poker, it's a game of patience and well-timed aggression. We know when we play a little luck helps, but luck can't explain why final tables have so many familiar faces."
August 27, 2016 | Unregistered CommenterMax
Another relevant book is "The Drunkard's Walk: How Randomness Rules Our Lives" by Leonard Mlodinow.
August 29, 2016 | Unregistered CommenterDon Copler
There's also "Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets" by Nassim Nicholas Taleb for a non-leftist view.
August 30, 2016 | Unregistered CommenterMax
Obama's "You didn't build that" speech called for higher federal taxes on productive industry. Obama pointed out that productive industry benefits from police, firefighters, and roads. However, police, firefighters, and public works receive the majority of their funding from local and state taxes, not federal taxes. The federal government wastes massive amounts of capital due to incompetence, corruption, overly bureaucratic regulations. Obama did make a good argument that government research (DARPA actually) invented the internet, and many private industries benefited. Overall, however, Obama totally misjudged just how much private industry does contribute to the economy, and how little government contributes, and how in fact government often confounds private industry.

Your country of birth, your family, your body, your brain, and your health do have an enormous impact on your success, and you have no control over these factors.

As Julia suggests, the benefits of a deception amount to a local maximum, and deception does not lead to the correct developmental path in the long term.

The potential absence of free will and the effect of luck should not decrease the motivation of a truly rational person. That person will simply accept the existence of variables outside their control.

Our society probably should provide scholarships to the top quarter of students so they can attend college debt free. However, the federal government's student loan program has led colleges to aggressively add administrative staff and raise inflation adjusted tuition by 170% in the past three decades. Most colleges now have more administrative staff than professors. Also, raising taxes to pay for college for every student, when already so many of the students we educate hardly benefit, looks like a bad idea when we could instead lower taxes, put more money into the private sector, and create more productive occupations. If we ended open ended funding for colleges, prices would drop, and a small, reasonably sized scholarship for the best students would buy them all an education.

Robert Frank's Progressive Consumption Tax sounds very interesting. In theory, the tax would primarily burden only extraordinary luxuries. I do partially disagree with his statement that your diamonds might be a little smaller. Instead, since all bidders for diamonds would have less money, the diamonds would be the same size, they would just sell for a little less. This assumes that a significant number of countries have or place burdens on income available for extraordinary luxuries. In practice, people would find ways to avoid paying this tax, as people find ways of paying any steeply progressive tax. Maybe instead we could replace the income tax altogether and implement a flat, low rate consumption tax on luxuries.
December 9, 2017 | Unregistered CommenterJameson

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