18 December 2014

Success = Competence + Luck

It is a frightening equation, really, because all your success is a function of your competence, which you control, and your luck, which you don't control. That we have accepted this equation as a good model of reality expresses itself in our attributions: When we succeed we attribute the outcome to our competence; when we fail we attribute it to bad luck. Most of us do.

In a perfect world, in a perfect meritocracy, everyone would get what they deserve and luck could be ignored. You work your way up the competence axis and reap the rewards on the success axis.

Image: Michael Baumann, 2014.

(Competence is of course a continuous variable. However, in the workplace it is treated discretely: Educational attainment, as a proxy for competence, is reflected in discrete salary scales; experience is reflected in discrete salary steps.)

In the real world, of course, you also need luck. Luck to be born in the right place at the right time. Luck to be physically and mentally healthy. Luck to have parents who care enough but not too much. Luck to receive a good education, to meet the right soul mate, to be in the right place at the right time.

Luck can be represented as the frequency distribution of successes at any given competence level.

Image: Michael Baumann, 2014.

We neither know what these distributions look like nor how wide they spread around the mean, i.e. the shape and magnitude of the luck component. We also don't know whether these distributions look the same for every competence level. But we do know that they overlap; we have all seen good people in bad positions, and bad people in good ones.

So what to take away from this?

  1. For most of us the labour market will decide our career path. That's the way it is, and ever was, and ever will be.
  2. The labour market is imperfect; a problem that may have a considerable cost to the economy.
  3. If you are in a position that undervalues your competence, keep moving within your competence level and regression to the mean will take care of you. (And don't make the mistake to assume that increasing your competence level will automatically put you in a better success position; we usually don't hire Ph.D.s into clerical positions.)
  4. If you are in a position that overvalues your competence, stay put or regression to the mean will take care of you, as it should.

Of course, there is the problem that we usually overestimate our own competence and underestimate that of everybody else. But that is another issue.