Absolute junk science. A negative contribution to net human insight.
>The simulations show that although talent has a Gaussian distribution among agents, the resulting
distribution of success/capital after a working life of 40 years, follows a power law which respects
the ”80-20” Pareto law for the distribution of wealth found in the real world.
As opposed to what? What kind of distribution might you expect? Based on the insanely simple model that was presented, what other possible outcome could have been drawn?
>In this paper, starting from very simple assumptions, we have presented an agent-based model
which is able to quantify the role of talent and luck in the success of people’s careers.
No, you have not. You have presented an agent-based model which is able to quantify the role of talent and luck in a 2D roulette game with a completely contrived, non-empirical bias parameter you've named "talent". It bears literally no relationship to reality, where random massive doublings of wealth are the exception, not the rule.
It really bothers me that people write news articles about the impact of this "research".
> It really bothers me that people write news articles about the impact of this "research".
News articles about science, even good science are often terrible. The most common problems I see are oversimplifying, overgeneralizing and overstating conclusions. Many readers then further generalize and simplify what they read in the article.
I just saw this recently with an article about a study that concluded (and I'm oversimplifying here) that NSAIDs are a better first-line treatment for arthritis pain than opioids. By the time a layperson was referencing it in conversation, they had concluded that it's never a good idea to use opioids to treat any pain.
I'd love to see your model. Criticizing a model is relatively easy, coming up with something that describes the reality (in this case, Pareto distribution of wealth) yet better is much harder.
> As opposed to what? What kind of distribution might you expect?
For one thing, they might have expected the result not to be dominated by luck.
> It bears literally no relationship to reality, where random massive doublings of wealth are the exception, not the rule.
I don't think this will help to control the luck as opposed to talent. I suspect the problem is in the "leverage". Having more wealth makes it easier to accrue more wealth in the future, however, the same is not true for talent. Having more talent doesn't help you get much more talent.
So eventually, regardless how big your talent can be, the accrued wealth will dominate the end of the distribution. The rate at which the wealth is accrued doesn't matter, it will only reduce social mobility.
Addendum: Interestingly, the model actually shows what we would expect for low to middle end of income distribution, that talent there is more important than wealth. Which is in line with my explanation.
R/economics went over this a bit too. There are other issues with the model that and to make it very poor:
* - fixed rate of return (doubled or halved) make luck play an oversized role. One of talents greatest contributions is knowing how to let your winners run and cut your losses. The setup is close to a random walk by definition.
- risk reduction is hugely important. High earners especially when speaking of finance tend to know how to reduce risk. Only fools always bet half they capital in every decision.
* - talent would understand what events are more likely to succeed than just every event having the same probability.
- talent and preparation generate events. The more you prepare the more chances you'll have available. Most successful people have failed multiple times but keep trying.
- no learning. One of talents great benefits is learning from mistakes. And when combined with increased number of chances that talent provides, this is a critical feedback cycle the model misses.
- competition. Businesses aren't competing against the impersonal universe, but against other individuals. The trial events should have occurred in that context. If they really wanted to keep this silly 2D thing, it would have been better to have two agents roll against each other when meeting, taking talent into consideration.
Basically the model made everybody similar and then had an exponential random function. With such small tails in the talent pool, there is no other decision it could have reached. I'm shocked this is being upheld as valid research.
* Edit: The response by @edmccard below says that a couple of these might also be luck based (those related to evaluating events), and that is a really valid point. We know that stock pickers are mostly luck for example. It would seem plausible this also extends to evaluating what job to enter or what company to start.
Still not possible to easily type asterisks on HN without them getting interpreted as italics
>...One of talents greatest contributions is knowing how to let your winners run and cut your losses...
>...talent would understand what events are more likely to succeed...
If we already know that these things are the result of talent and not luck, and if it's a foregone conclusion that the model gives an "oversized role" to luck, then I guess these kinds of investigation are doomed from the start.
My status on this is that the model could be a good model, but that hasn't been established. You cannot reason from "the outcomes look like reality" to "the parameters and mechanisms in the model are the same as the parameters and mechanisms in reality." That is backwards.
One thing you can say is, "IF reality's parameters and mechanisms are like this model's, you would expect the outcome that we in fact observe in reality." This is evidence, if not particularly strong evidence. There are infinitely many models that lead to the similar outcomes that we observe in reality, and an even larger infinitely many models that don't.
Their model is if you have a lucky event you have P(talent) chance of doubling your capital and if you hit an unlucky event your capital is halved. Any step in time where you neither experience luck or unluck you are left unchanged. It seems wrong on face for several reasons:
- You need to be "lucky" in order to ever increase your wealth, which makes the "finding" that luck is more important than talent completely obvious from the way the model was designed
- Capital only changes by multiplication and division, so the fact that this model "recreated" the power distribution we see in wealth in the world is obvious from the setup. It was designed to be a power distribution and couldn't be anything else
- Talent has no effect on your life during unlucky or neutral periods in their model. This obviously fails to conform to the real world.
tldr; they designed a power-distributed model where luck was clearly more important than talent, and "discovered" that it showed a power distribution where luck is more important than talent.
This paper reminds me of an article I read yesterday about how we are no longer in the information age, but rather the "reputation" age. Goes to show, even science that might seem reputable to the average layperson can be complete garbage.
The model shows that a mix of luck and merit can lead to highly unequal outcomes in which success is only tenuously linked to merit. There are other models yielding similar results, as for example outlined in Robert Frank's enjoyable book Success and Luck: Good Fortune and the Myth of Meritocracy. I don't find the mechanism entirely implausible, but that's a longer discussion.
These models are an important counterpoint to naive "Economism" [1] models (where income = marginal product, thus just and justified and necessary for efficiency), and thus relevant for an informed policy discussion.
I still think the focus on wealth/income inequality rather than on absolute poverty is irrational. I've seen people justify it to me on the grounds that people care about relative poverty, which to me reads "people are jealous". But then the result is:
1) A focus on inequality is irrational.
2) People focus on inequality for irrational reasons.
This means that if policy-makers and intellectuals fully give in to the people's wishes, we'll accept decreases in wealth in exchange for more equality indefinitely. If this sounds like a strawman, it's because we have "backstops" to inequality-decreasing wealth-destruction. But why should we tolerate any wealth destruction at all?
And if reducing inequality is possible without wealth destruction, why focus on inequality?
(This is besides the "Oxfam problem" -- there never is a coherent definition of "wealth" and Oxfam never seems to fully value people's homes and work animals and suchlike in poor countries.)
The reason we care so much about inequality has nothing to do with jealousy and everything to do with power[1]. As resources are a major source of power (and often vice-versa), and because power is relative, inequality of resources means inequality of power. And as power means influence (and so the ability to reduce another's freedom), inequality reduces overall freedom.
As freedom can never be total[2], the question is do we prefer to reduce the freedom of the powerful few (whose freedom is already large) in order to increase that of the many, or vice-versa?
So while absolute income is certainly very important, ignoring inequality is simply irrational for someone who values freedom.
[2]: One person can be totally free; two cannot. X would either be free to infringe on Y's freedom or not -- in either case, freedom is no longer total.
This is an interesting answer. But I'm not sure if inequality-of-power-driven-by-inequality-of-wealth can be problematized (put into the discussion and on the agenda) and fought in such a way that equalizes power. We're shuffling power around and the dynamics of power inequality aren't clear at all.
Young men see rich men with beautiful women flying to anywhere they want on the planet. Only a few of them will get that when they're older, and it oftens boils down to intelligence, work ethic, cleverness, other abilities like athletics and looks, and a few lucky breaks that they take advantage of. Exceptions being inherited wealth. Law of averages, those who do make it are hard working and intelligent. Law of averages, those who do not are often less so. However, everyone still wants the hot girl and the jet. So what's the right thing to do? Take "power" from [Hard working and intelligent]U[Scott Disick, Donald JR] to normalize influence across everyone? Should the group, who by and large, has contributed more to the society not have proportionally more say? And then the issue becomes more nuanced when you take into account inheritance and things of that nature.
Unfortunately, human society is made up of humans, irrational though they may be. A high degree of inequality usually indicates one of two things: a dictatorship, or a society that is liable to vote in populist leaders (and hence potentially turn into a dictatorship). An highly unequal society is not a healthy society.
"An highly unequal society is not a healthy society."
That's the most important point. If people stop feeling that they have a part of growth in the economy they stop engaging and a country loses cohesion.
"People are jealous" seems to me like the uncharitable formulation. I'd phrase it more along the lines of: "we evolved in small tribes and are more acutely aware of relative status than absolute welfare." Most people's assessment of how well off they are comes from comparison with their neighbors rather than absolute knowledge of weather they have enough.
I agree though that eliminating severe poverty is a more worthy humanitarian goal than trying to produce equity.
Inequality is intensely tied to social mobility. Check out the Great Gatsby Curve or this talk on snowball inequality. The common sense way to think of it is that as the rich entrench themselves further and further apart from the rest of us, it becomes harder and harder to jump the gap, the rich stay rich, the poor stay poor and we move from meritocracy to aristocracy.
I would say we have already reestablished a de facto aristocracy.
The richest live like kings. Actually they enjoy a level of luxury that even the richest kings of old couldn't possibly have imagined. They basically live like gods, with virtually unchecked power, influence and wealth.
It is possibly the most lavish private home in the world, and it overlooks the absolutely crushing poverty of Mumbai's worst slums. The sheer level of cognitive dissonance is mindboggling.
The word meritocracy was invented as a sarcr term to describe aristocracy wearing false dressing of equal opportunity.
That's why people clamoring for "meritocracy" today are
looked down upon for their self-unawareness.
The focus on inequality is irrational only for rich people or machines. Humans are social beings right from the start. You always compare yourself to others. Given that wealth mostly depends on your birth and not on your efforts given your resources, the focus on inequality is very rational.
> we'll accept decreases in wealth in exchange for more equality indefinitely.
That doesn't necessarily follow, I imagine that there is a level of inequality where total wealth, or at least total utility, even for the rich, starts to go down. For instance once you start having to go to private school, and live in a walled off community to keep the unwashed proletariat out so they don't steal from you / kill you.
You have to accept that people are irrational and deal with it, or modify them genetically.
Poor people in the US often lead nightmarishly stressful daily lives to make ends meet, having to work long hours doing self-destructive jobs, and being ever exposed to ruin by chance events. Their likelihood of achieving peace and happiness is quite orthogonal to whether they have plumbing, refrigeration, TVs and smartphones. It need not have anything to do with jealousy.
I agree with you completely. I got downvoted on a thread several weeks ago for finding issue in the US placing below Mexico on a "(relative) child poverty" measure. Regardless of whether their methodology or even results are correct - I think it's guaranteed that many readers will distort that information and propagate that distortion onward.
But, pardon my cynicism and condescension, but, try arguing that with a group of social scientists/mathematicians doing null hypothesis papers with p-values at 1 SD, as well as with people, who frankly, are jealous of others and want more.
Unfortunately, on the flip side, I think there is still a "how big can my neighbor's house get relative to mine before I consider organizing a mob to break into it and steal all the jewels" element to human nature and society.
>people, who frankly, are jealous of others and want more.
That's always what it boils down to, isn't it? The one argument the hardcore libertarians and FYGM people always fall back to is "well, you're just jealous. If you just worked harder, you could afford it too", which has been shown again and again to be blatantly false and a clear example of a just world fallacy.
Luck plays an enormous part in how successful you are in life. There is obviously also a factor of being able to do something with those instances of luck, and again being born into the right family, having gone to the right school or having had the right encouragement is a huge factor. Once again, it boils down to luck, especially being born into the right family, with resources and support and an already-in-place social network to groom you and give you those opportunities.
Do you think the son of an alcoholic single mother has the same chances in life as the son of a bank director?
Social mobility is possible, but the deck is severely stacked in favor of those who already have the most.
Same reason we hate google/amazon or any other (almost) monopolies. Money buys speech, power, influence, mind control. There is a reason rich contribute so much to political campaign donations.
America's aversion to the role of luck is based on the Protestant work ethic. There is no chance and everything is predetermined by God's grace. God's grace is demonstrated by hard work, frugality, and discipline. There is a concept of double predetermination where you already need to be saved to be saved. Which means the poor is poor not because of chance, but because they lack God's grace.
Be that as it may, this blog is about a specific paper and the strength of its claims. I don't really think puritanism has anything to do with whether this paper's model or inferences are sound.
But puritanism's remains are responsible for many of the opinions critical of the paper's conclusions. Just ask a few wealthy persons about this paper or others like it: they are usually fiercely critical and have bought completely into ideas that support their "blessed" position in society.
The irony is not lost on Catholics, who are the recipient of much criticism from Protestants who view "saved by works" as an insult to God's grace. (The theology is actually a mix of both since faith without actions is inconsistent, but I'm refering to the stereotype from the Protestant side.)
It's funny how old religious ideas are simple observations in a way. By doing something everyday you just accumulate lots of subtle knowledge and roots in any domain. So mathematically you have lots of chances to get it right at one point. More than "luck" to me the main factor is a blend of inner desire and context that allows you just enough time to think and do.
Jim Carrey said it best (paraphrased): It is by sheer luck that an opportunity presents itself. But once it does it is up to you to have the means to execute on it, and to execute on it. The good news is that opportunities present themselves often in life. So just get to where you can act on them, and once you see one, act.
amusing that a comment designed to mock the irrationality and simple-mindedness of "Americans", itself provides a strong example of overgeneralizing entire populations, society and culture into simple, easy-to-understand tropes suitable for simpletons.
> It could be that the results were built into the model’s design.
Every true mathematical proposition is a tautology. I don't find this point particularly convincing. As long as the model's predictions match reality in interesting ways, it can lend possible insights on why reality might have certain characteristics.
> Like getting an improbable series of heads when flipping a coin long enough, improbable clusters of events are bound to occur for at least some agents in a large enough set.
Yes, but what's alarming is how most agents' capital fell from bad luck alone, and how good luck only seemed to benefit a very small subset of the population, and talent was not any kind of guarantee. These characteristics of life are denied by many people, so to see it reflected in such a simple model is, I hope, instructive.
> Why should capital growth only occur on chance events, when most workers are paid wages in exchange for their work?
The way I see it, chance events that exponentially increase wealth drown out one's piddling wages. Wages don't seem particularly relevant to why Warren Buffet and Bill Gates have billions, and many people live paycheck to paycheck.
>> It could be that the results were built into the model’s design.
>Every true mathematical proposition is a tautology. I don't find this point particularly convincing. As long as the model's predictions match reality in interesting ways, it can lend possible insights on why reality might have certain characteristics.
I think the problem is that nothing about the model lines up with reality. For example:
- Each agent begins with an identical amount of capital. -- nothing like the real world.
- Every 6 months you have the possibility of doubling or halving your capital. -- nothing like the real world.
- Chance of doubling capital is proportional to talent. -- nothing like the real world.
As an argument for such a simple model they provide:
> The previous agents’ rules are intentionally simple and can be considered widely shareable, since they are based on the common sense evidence that success, in everyone life, has the property to both grow or decrease very rapidly.
Sure, success/failure _can_ increase or decrease rapidly, but is it the rule? Arguing the basis of your entire model on "common sense" seems weak. It would be better if they had provided at least some real world data where this pattern emerges. In my experience people seem to move a little bit up or down from their baseline, but I have never personally seen a swing from rags to riches or the other way around.
If they had begun by drawing parallels to the ways in which we see the real world and letting the model simulate it into the future it would be more compelling. As it stands, it seems like a set of arbitrary rules designed to reach their desired conclusion, albeit weakly through "it looks pretty similar".
> - Each agent begins with an identical amount of capital. -- nothing like the real world.
Not relevant. Part of the main point was that even in the case of equal opportunity/equal starting points, bad luck readily overcomes talent, good luck rewards even the less talented, and so talent isn't any kind of guarantee, contra many people's claims.
> - Every 6 months you have the possibility of doubling or halving your capital. -- nothing like the real world.
I don't think this is relevant either. You can pick any progression you want and it won't affect the final results. The point is to simulate regular opportunities of dramatically increasing one's wealth. So again, even when faced with equal opportunity, dramatic wealth inequality just due to luck seems inevitable.
> - Chance of doubling capital is proportional to talent. -- nothing like the real world.
The claim that wealth is proportional to "talent" is widely believed. This paper puts it to the test and refutes it. That's one of the main points.
> In my experience people seem to move a little bit up or down from their baseline, but I have never personally seen a swing from rags to riches or the other way around.
I addressed this in the post you replied to: small swings up and down are probably wage-driven. This doesn't explain wealth disparity, because dramatic swings in wealth will largely not be wage-driven. These events thus aren't of interest.
> If they had begun by drawing parallels to the ways in which we see the real world and letting the model simulate it into the future it would be more compelling.
Not as easy as you think. We have no idea what factors are involved. That's why we study models, and see how closely the results match with reality. That then gives us insight into how some parts of reality might work.
You listed 3 ways in which the model is "unrealistic". However, it seems to me that neither of the ways that are supposed to be more realistic will actually help the talented against the lucky.
Maybe you disagree and can expand why do you think making things more realistic in some aspect will make it behave better for the talented (especially on the high end of income distribution).
I completely agree with everything you've said. I think that an interesting way to gauge the accuracy of the model without doing major empirical research is to create models where talent is the decisive factor, and then compare which model's assumptions better capture what we know about the world. My guess is that for a variable to be a decisive factor, it must correspond to excessive control over others, thus not matching our colloquial definition of talent, but rather of power.
> I think that an interesting way to gauge the accuracy of the model without doing major empirical research is to create models where talent is the decisive factor
Exactly. This paper should be one among many models explored, but it's a good start.
In fact, I'm sure the paper's simulation can be run with a whole variety of parameters for luck's probability, talent, and bad/good luck's effect on capital. We can then see which set of parameters best matches some aspect of reality and possibly gain some new insight there too.
> Every true mathematical proposition is a tautology. I don't find this point particularly convincing. As long as the model's predictions match reality in interesting ways, it can lend possible insights on why reality might have certain characteristics.
I don’t really understand what you’re trying to say here, do you mind clarifying? Are you saying you don’t find the point convincing because it’s vacuous?
> Are you saying you don’t find the point convincing because it’s vacuous?
I'm saying the article's objection that the "results are built into the design" is indeed vacuous, because this will be true of every mathematical model.
The question is how well the model's results match reality, which can yield insight on reality.
That said, there is of course a "spectrum" of tautologies. Models with simpler input parameters should carry more weight, because they would yield clearer insights and would be easier to match against reality. Models with complex input parameters are not only less likely to match reality, they don't yield much insight into fundamental causes.
I think generally modelling life in 2d grid with simplifications such as talent = 0.0 - 1.0 and events doubling or halving capital with a deterministic number of "good/bad" events isn't going to give you anything real as output. I don't like this sort of science, it stinks of foregone conclusion. Running the model itself is irrelevant as the outcome is pretty obvious by the maths put into it.
How far is it really from just writing console.out("my hunches are correct!");
Maybe in a future world of modelling where we feed real-world data into the model then maybe we can get somewhere?
They introduced talent as a bias in capitalizing on doubling events (the less talent, the less doubling events in proportion). A priori you would consider that this should lead to the talented being overrepresented in the higher percentiles of capital, yet they discover this bias does not dominate over the underlying uniform randomness of merely encountering a doubling event.
So no, I wouldn't say the conclusion is foregone. It shows an example where something that can reasonably be called talent (the ability to capitalize) is not as important as luck (the chance encountering of an event where you can capitalize).
> So no, I wouldn't say the conclusion is foregone.
With the distribution of people and events over space and the distribution of talent the end result was a given because its more likely for an arbitrary person to trigger multiple good events than for very specific "talented" people to trigger multiple good events even if their factor means they don't need as many good events to be "even".
Same way that if you had more events then people then the outcome would completely change because then "talent" would become a bigger factor than "finding an event".
Its just about what they decided to make scarce (events) in the model.
Yes. Therefore, ultimately, in a society without work, wealth should be distributed according to the happiness it delivers. If one person loves reading books and another person loves driving expensive cars, then it's clear how the money should be distributed.
On the other hand, this might take the fun out of driving expensive cars, because in a society with such wealth-distribution, having an expensive car doesn't mean "I'm more successful than you", but rather something like "I have a pathetic need to show off".
It could also mean "I simply enjoy driving cars with a lot of power and/or comfort, because the sensations are inherently pleasurable to me".
I love driving cars. Not to show off or because of prestige, I just really like driving, for some reason. I don't care if it's a 300hp grand tourer or a 60hp supermini, it's the act of driving that's enjoyable to me personally.
Not everything is a matter of "keeping up with the Joneses".
There's an old saying that goes something like, whether you will be successful in life or not will largely be determined by the following 3 things in the order of importance.
1. What country you were born.
2. What teacher and friends you end up having.
3. Your parents. ($, gene, personality, parenting)
Of course, I would add just random luck as 4th factor.
None of these, you have any control over.
We're all here mostly through our good luck. Yes, some of us work very hard, but so do most people in impoverished countries.
I tried to explain ( or briefly mention ) something similar that luck plays apart in one's success in job interviews. I thought I was being humble, and in truth I do think luck plays a part in many ways.
After a few times I stopped mentioning it. It is clear the world doesn't buy this idea.
Are you then assuming that two people with the same "talent" (your definition) would in probability then have the same outcomes? And the converse? Neither of these things are obviously true in practice, though measurements are admittedly difficult.
I didn't give any definition to talent, I just said that it is related, very closely, to luck so I don't see how you can oppose them to each other.
I see it similar to asking "what is more important for a fruit - the peel or the meat?" while you can't have one without another, both are there together making a fruit what it is :)
Well, sure. You have your luck as determined at conception, your luck of upbringing, and then your luck as an adult. They're all luck-based, but qualitatively different.
Are the rich wealthy because they somehow earned it? Examination reveals that this is not true and that the most extreme cases of wealth accumulation (which show a surprisingly consistent pattern across cultures) are attributable more to luck than to skill. Mark Buchanan examines this in his excellent book "The Social Atom" (pp.172-174):
If extreme wealth is largely due to luck then I see no reason why government should not lop the "lucky" portion off for its purposes. Of course there will always be argument as to precisely where the line is drawn between luck and skill.
Finally we must not forget bad luck, which makes fools of us all. Just as there are those who are super-wealthy due to luck, there are those whose livelihood has been destroyed by luck. I do feel an obligation to help them back onto their feet.
Robert Frank's book Success and Luck: Good Fortune and the Myth of Meritocracy is another enjoyable book about this (and supports your argument for some form of government redistribution).
From my experience you can increase your luck in life by exposing yourself to more choices. This can be something as simple as having saved up money so you can quit your job whenever you want to. That in turn gives you the "luck" to get a better job if the opportunity presents itself.
I do 100% agree with this, recognizing, of course, that merely being in a position to have choices to begin with is _also_ a factor of luck. (Parents’ socioeconomic status; your own intelligence; if you had someone around to have taught you this, etc)
It is also a matter of having the resources to act on that lucky opportunity.
So it's two-fold, one is that you have the resources to expose yourself to more possibly lucky situations, the second is being able to actually do something about it.
Readit News
>The simulations show that although talent has a Gaussian distribution among agents, the resulting distribution of success/capital after a working life of 40 years, follows a power law which respects the ”80-20” Pareto law for the distribution of wealth found in the real world.
As opposed to what? What kind of distribution might you expect? Based on the insanely simple model that was presented, what other possible outcome could have been drawn?
>In this paper, starting from very simple assumptions, we have presented an agent-based model which is able to quantify the role of talent and luck in the success of people’s careers.
No, you have not. You have presented an agent-based model which is able to quantify the role of talent and luck in a 2D roulette game with a completely contrived, non-empirical bias parameter you've named "talent". It bears literally no relationship to reality, where random massive doublings of wealth are the exception, not the rule.
It really bothers me that people write news articles about the impact of this "research".
News articles about science, even good science are often terrible. The most common problems I see are oversimplifying, overgeneralizing and overstating conclusions. Many readers then further generalize and simplify what they read in the article.
I just saw this recently with an article about a study that concluded (and I'm oversimplifying here) that NSAIDs are a better first-line treatment for arthritis pain than opioids. By the time a layperson was referencing it in conversation, they had concluded that it's never a good idea to use opioids to treat any pain.
> As opposed to what? What kind of distribution might you expect?
For one thing, they might have expected the result not to be dominated by luck.
> It bears literally no relationship to reality, where random massive doublings of wealth are the exception, not the rule.
I don't think this will help to control the luck as opposed to talent. I suspect the problem is in the "leverage". Having more wealth makes it easier to accrue more wealth in the future, however, the same is not true for talent. Having more talent doesn't help you get much more talent.
So eventually, regardless how big your talent can be, the accrued wealth will dominate the end of the distribution. The rate at which the wealth is accrued doesn't matter, it will only reduce social mobility.
Addendum: Interestingly, the model actually shows what we would expect for low to middle end of income distribution, that talent there is more important than wealth. Which is in line with my explanation.
* - fixed rate of return (doubled or halved) make luck play an oversized role. One of talents greatest contributions is knowing how to let your winners run and cut your losses. The setup is close to a random walk by definition.
- risk reduction is hugely important. High earners especially when speaking of finance tend to know how to reduce risk. Only fools always bet half they capital in every decision.
* - talent would understand what events are more likely to succeed than just every event having the same probability.
- talent and preparation generate events. The more you prepare the more chances you'll have available. Most successful people have failed multiple times but keep trying.
- no learning. One of talents great benefits is learning from mistakes. And when combined with increased number of chances that talent provides, this is a critical feedback cycle the model misses.
- competition. Businesses aren't competing against the impersonal universe, but against other individuals. The trial events should have occurred in that context. If they really wanted to keep this silly 2D thing, it would have been better to have two agents roll against each other when meeting, taking talent into consideration.
Basically the model made everybody similar and then had an exponential random function. With such small tails in the talent pool, there is no other decision it could have reached. I'm shocked this is being upheld as valid research.
* Edit: The response by @edmccard below says that a couple of these might also be luck based (those related to evaluating events), and that is a really valid point. We know that stock pickers are mostly luck for example. It would seem plausible this also extends to evaluating what job to enter or what company to start.
Still not possible to easily type asterisks on HN without them getting interpreted as italics
>...talent would understand what events are more likely to succeed...
If we already know that these things are the result of talent and not luck, and if it's a foregone conclusion that the model gives an "oversized role" to luck, then I guess these kinds of investigation are doomed from the start.
One thing you can say is, "IF reality's parameters and mechanisms are like this model's, you would expect the outcome that we in fact observe in reality." This is evidence, if not particularly strong evidence. There are infinitely many models that lead to the similar outcomes that we observe in reality, and an even larger infinitely many models that don't.
- You need to be "lucky" in order to ever increase your wealth, which makes the "finding" that luck is more important than talent completely obvious from the way the model was designed
- Capital only changes by multiplication and division, so the fact that this model "recreated" the power distribution we see in wealth in the world is obvious from the setup. It was designed to be a power distribution and couldn't be anything else
- Talent has no effect on your life during unlucky or neutral periods in their model. This obviously fails to conform to the real world.
tldr; they designed a power-distributed model where luck was clearly more important than talent, and "discovered" that it showed a power distribution where luck is more important than talent.
These models are an important counterpoint to naive "Economism" [1] models (where income = marginal product, thus just and justified and necessary for efficiency), and thus relevant for an informed policy discussion.
[1] See James Kwak's book of that title.
1) A focus on inequality is irrational. 2) People focus on inequality for irrational reasons.
This means that if policy-makers and intellectuals fully give in to the people's wishes, we'll accept decreases in wealth in exchange for more equality indefinitely. If this sounds like a strawman, it's because we have "backstops" to inequality-decreasing wealth-destruction. But why should we tolerate any wealth destruction at all?
And if reducing inequality is possible without wealth destruction, why focus on inequality?
(This is besides the "Oxfam problem" -- there never is a coherent definition of "wealth" and Oxfam never seems to fully value people's homes and work animals and suchlike in poor countries.)
As freedom can never be total[2], the question is do we prefer to reduce the freedom of the powerful few (whose freedom is already large) in order to increase that of the many, or vice-versa?
So while absolute income is certainly very important, ignoring inequality is simply irrational for someone who values freedom.
[1]: https://en.wikipedia.org/wiki/Power_(social_and_political)
[2]: One person can be totally free; two cannot. X would either be free to infringe on Y's freedom or not -- in either case, freedom is no longer total.
Young men see rich men with beautiful women flying to anywhere they want on the planet. Only a few of them will get that when they're older, and it oftens boils down to intelligence, work ethic, cleverness, other abilities like athletics and looks, and a few lucky breaks that they take advantage of. Exceptions being inherited wealth. Law of averages, those who do make it are hard working and intelligent. Law of averages, those who do not are often less so. However, everyone still wants the hot girl and the jet. So what's the right thing to do? Take "power" from [Hard working and intelligent]U[Scott Disick, Donald JR] to normalize influence across everyone? Should the group, who by and large, has contributed more to the society not have proportionally more say? And then the issue becomes more nuanced when you take into account inheritance and things of that nature.
That's the most important point. If people stop feeling that they have a part of growth in the economy they stop engaging and a country loses cohesion.
I agree though that eliminating severe poverty is a more worthy humanitarian goal than trying to produce equity.
https://en.wikipedia.org/wiki/Great_Gatsby_curve
https://voicerepublic.com/talks/snowball-inequality-meritocr...
The richest live like kings. Actually they enjoy a level of luxury that even the richest kings of old couldn't possibly have imagined. They basically live like gods, with virtually unchecked power, influence and wealth.
For one of the more extreme examples, consider this private dwelling: https://en.wikipedia.org/wiki/Antilia_(building)
It is possibly the most lavish private home in the world, and it overlooks the absolutely crushing poverty of Mumbai's worst slums. The sheer level of cognitive dissonance is mindboggling.
https://en.m.wikipedia.org/wiki/Meritocracy
That doesn't necessarily follow, I imagine that there is a level of inequality where total wealth, or at least total utility, even for the rich, starts to go down. For instance once you start having to go to private school, and live in a walled off community to keep the unwashed proletariat out so they don't steal from you / kill you.
You have to accept that people are irrational and deal with it, or modify them genetically.
I thought wealth follows power law which means eventually it concentrates so much that poor becomes poorer in absolute sense.
But, pardon my cynicism and condescension, but, try arguing that with a group of social scientists/mathematicians doing null hypothesis papers with p-values at 1 SD, as well as with people, who frankly, are jealous of others and want more.
Unfortunately, on the flip side, I think there is still a "how big can my neighbor's house get relative to mine before I consider organizing a mob to break into it and steal all the jewels" element to human nature and society.
That's always what it boils down to, isn't it? The one argument the hardcore libertarians and FYGM people always fall back to is "well, you're just jealous. If you just worked harder, you could afford it too", which has been shown again and again to be blatantly false and a clear example of a just world fallacy.
Luck plays an enormous part in how successful you are in life. There is obviously also a factor of being able to do something with those instances of luck, and again being born into the right family, having gone to the right school or having had the right encouragement is a huge factor. Once again, it boils down to luck, especially being born into the right family, with resources and support and an already-in-place social network to groom you and give you those opportunities.
Do you think the son of an alcoholic single mother has the same chances in life as the son of a bank director?
Social mobility is possible, but the deck is severely stacked in favor of those who already have the most.
Yes, we need to get rid of poor shaming, but that doesn't mean we should also get rid of the culture of hard word, frugality, and discipline.
Romans and USAmericans both owned slaves.
https://biblia.com/bible/nasb95/Rom%209.21-23
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Every true mathematical proposition is a tautology. I don't find this point particularly convincing. As long as the model's predictions match reality in interesting ways, it can lend possible insights on why reality might have certain characteristics.
> Like getting an improbable series of heads when flipping a coin long enough, improbable clusters of events are bound to occur for at least some agents in a large enough set.
Yes, but what's alarming is how most agents' capital fell from bad luck alone, and how good luck only seemed to benefit a very small subset of the population, and talent was not any kind of guarantee. These characteristics of life are denied by many people, so to see it reflected in such a simple model is, I hope, instructive.
> Why should capital growth only occur on chance events, when most workers are paid wages in exchange for their work?
The way I see it, chance events that exponentially increase wealth drown out one's piddling wages. Wages don't seem particularly relevant to why Warren Buffet and Bill Gates have billions, and many people live paycheck to paycheck.
>Every true mathematical proposition is a tautology. I don't find this point particularly convincing. As long as the model's predictions match reality in interesting ways, it can lend possible insights on why reality might have certain characteristics.
I think the problem is that nothing about the model lines up with reality. For example:
- Each agent begins with an identical amount of capital. -- nothing like the real world.
- Every 6 months you have the possibility of doubling or halving your capital. -- nothing like the real world.
- Chance of doubling capital is proportional to talent. -- nothing like the real world.
As an argument for such a simple model they provide:
> The previous agents’ rules are intentionally simple and can be considered widely shareable, since they are based on the common sense evidence that success, in everyone life, has the property to both grow or decrease very rapidly.
Sure, success/failure _can_ increase or decrease rapidly, but is it the rule? Arguing the basis of your entire model on "common sense" seems weak. It would be better if they had provided at least some real world data where this pattern emerges. In my experience people seem to move a little bit up or down from their baseline, but I have never personally seen a swing from rags to riches or the other way around.
If they had begun by drawing parallels to the ways in which we see the real world and letting the model simulate it into the future it would be more compelling. As it stands, it seems like a set of arbitrary rules designed to reach their desired conclusion, albeit weakly through "it looks pretty similar".
Not relevant. Part of the main point was that even in the case of equal opportunity/equal starting points, bad luck readily overcomes talent, good luck rewards even the less talented, and so talent isn't any kind of guarantee, contra many people's claims.
> - Every 6 months you have the possibility of doubling or halving your capital. -- nothing like the real world.
I don't think this is relevant either. You can pick any progression you want and it won't affect the final results. The point is to simulate regular opportunities of dramatically increasing one's wealth. So again, even when faced with equal opportunity, dramatic wealth inequality just due to luck seems inevitable.
> - Chance of doubling capital is proportional to talent. -- nothing like the real world.
The claim that wealth is proportional to "talent" is widely believed. This paper puts it to the test and refutes it. That's one of the main points.
> In my experience people seem to move a little bit up or down from their baseline, but I have never personally seen a swing from rags to riches or the other way around.
I addressed this in the post you replied to: small swings up and down are probably wage-driven. This doesn't explain wealth disparity, because dramatic swings in wealth will largely not be wage-driven. These events thus aren't of interest.
> If they had begun by drawing parallels to the ways in which we see the real world and letting the model simulate it into the future it would be more compelling.
Not as easy as you think. We have no idea what factors are involved. That's why we study models, and see how closely the results match with reality. That then gives us insight into how some parts of reality might work.
Maybe you disagree and can expand why do you think making things more realistic in some aspect will make it behave better for the talented (especially on the high end of income distribution).
Exactly. This paper should be one among many models explored, but it's a good start.
In fact, I'm sure the paper's simulation can be run with a whole variety of parameters for luck's probability, talent, and bad/good luck's effect on capital. We can then see which set of parameters best matches some aspect of reality and possibly gain some new insight there too.
I don’t really understand what you’re trying to say here, do you mind clarifying? Are you saying you don’t find the point convincing because it’s vacuous?
I'm saying the article's objection that the "results are built into the design" is indeed vacuous, because this will be true of every mathematical model.
The question is how well the model's results match reality, which can yield insight on reality.
That said, there is of course a "spectrum" of tautologies. Models with simpler input parameters should carry more weight, because they would yield clearer insights and would be easier to match against reality. Models with complex input parameters are not only less likely to match reality, they don't yield much insight into fundamental causes.
How far is it really from just writing console.out("my hunches are correct!");
Maybe in a future world of modelling where we feed real-world data into the model then maybe we can get somewhere?
So no, I wouldn't say the conclusion is foregone. It shows an example where something that can reasonably be called talent (the ability to capitalize) is not as important as luck (the chance encountering of an event where you can capitalize).
With the distribution of people and events over space and the distribution of talent the end result was a given because its more likely for an arbitrary person to trigger multiple good events than for very specific "talented" people to trigger multiple good events even if their factor means they don't need as many good events to be "even". Same way that if you had more events then people then the outcome would completely change because then "talent" would become a bigger factor than "finding an event".
Its just about what they decided to make scarce (events) in the model.
I see it as the same thing.
On the other hand, this might take the fun out of driving expensive cars, because in a society with such wealth-distribution, having an expensive car doesn't mean "I'm more successful than you", but rather something like "I have a pathetic need to show off".
I love driving cars. Not to show off or because of prestige, I just really like driving, for some reason. I don't care if it's a 300hp grand tourer or a 60hp supermini, it's the act of driving that's enjoyable to me personally.
Not everything is a matter of "keeping up with the Joneses".
1. What country you were born. 2. What teacher and friends you end up having. 3. Your parents. ($, gene, personality, parenting)
Of course, I would add just random luck as 4th factor.
None of these, you have any control over.
We're all here mostly through our good luck. Yes, some of us work very hard, but so do most people in impoverished countries.
Let's take a minute to count our blessings. :)
After a few times I stopped mentioning it. It is clear the world doesn't buy this idea.
I see it similar to asking "what is more important for a fruit - the peel or the meat?" while you can't have one without another, both are there together making a fruit what it is :)
Dead Comment
Dead Comment
"Talent vs Luck: the role of randomness in success and failure" by A. Pluchino. A. E. Biondo, A. Rapisarda
https://arxiv.org/abs/1802.07068
Are the rich wealthy because they somehow earned it? Examination reveals that this is not true and that the most extreme cases of wealth accumulation (which show a surprisingly consistent pattern across cultures) are attributable more to luck than to skill. Mark Buchanan examines this in his excellent book "The Social Atom" (pp.172-174):
https://www.amazon.com/Social-Atom-Cheaters-Neighbor-Usually...
A reference from that book:
Jean-Philippe Bouchaud and Marc Mezard, "Wealth Condensation in a simple model of economy":
https://arxiv.org/abs/cond-mat/0002374
See also Christopher Jencks, Inequality (New York: Basic Books, 1972) which focuses more on the effect (or non-effect) of education on income:
https://www.amazon.com/Inequality-Reassessment-Effect-School...
If extreme wealth is largely due to luck then I see no reason why government should not lop the "lucky" portion off for its purposes. Of course there will always be argument as to precisely where the line is drawn between luck and skill.
Finally we must not forget bad luck, which makes fools of us all. Just as there are those who are super-wealthy due to luck, there are those whose livelihood has been destroyed by luck. I do feel an obligation to help them back onto their feet.
You need a huge amount of luck before you can even start doing this.
So it's two-fold, one is that you have the resources to expose yourself to more possibly lucky situations, the second is being able to actually do something about it.