Tuesday, June 14, 2011


Ask someone their opinion on luck and my guess is that more people (at least Americans) think that luck is overrated than underrated. There are probably even a good percentage of people that completely discount the importance of luck in any life events. Those type of people might believe that "everything happens for a reason" or that poor people deserve to be poor. For them luck has no place in their perfectly reasoned, black and white world.

I reject the hypothesis that luck isn't important. That doesn't mean I don't believe in the value of hard work or that someone can overcome bad luck. I believe in both. However, sometimes I really think people attribute some amount of skill to what really was just a lucky occurrence. Or on the flipside they place some level of blame on what was just a poor bounce.

One good example of this is the housing market. Are 27% of the people who are underwater on their mortgages idiots? No. I believe most of them are normal people, who wanted to own a home and just happened to buy a home at the wrong time. If they would have bought the home 5 years earlier or 5 years later then would be in a much better situation. The fact that they bought a home that is now worth a lot less is primarily due to luck.

Another example would be the job market. Do I have a job right now because I spent my senior year interviewing with as many companies as I could? Do I have a job because I spent time working on my resume and networking? Yes, but there is one big caveat that I could have done the same exact thing and still not had a job if I would have graduated at the wrong time. I had the fortune of graduating in 2005, which wasn't a bad year for the economy and also just happened to be one of the last few years that my first employer hired graduates from Miami University. And when I decided to look for a new job in 2007, the Dow Jones was hitting an all-time peak on what seemed like a daily basis. I would have to be very naive to not recognize the importance of luck in getting me a job.

I could go through other examples of school, family, etc, but overall you will see a trend where luck is a big part of the equation.That isn't to say that you can't manage your luck. In buying a home you shouldn't overextend yourself or buy a home when you plan on moving in a year or two. If you put a decent % down and plan on staying 5-10 years then the odds are in your favor that you won't be underwater. With employment you should always try and do a good job. If you are a good employee then the odds of you getting fired are obviously much better.

There is a difference between managing your luck and not believing in luck at all. Luck is an important part of life and sometimes is the reason why things happened. It is a futile effort trying to assign a reason to everything that happens, but a lot of people do that.  Correlation doesn't always equal causation, and credit/blame is too often doled out for what really was a lucky occurrence. I will end this post with one of my favorite quotes from football coach Barry Switzer:
"Some people are born on third base and go through life thinking they hit a triple."


Mary V. said...

This post sounds a lot like a recent conversation we had. BTW - Happy 1st Anniversary to you and Mary!

Kevin Malphurs said...

I enjoyed our conversation and thought it would be a good topic for the blog.

Thanks for the congrats.

Mary said...

What do you think of how timing plays into the equation? For example, I think timing has a lot to do with when a person is ready to take the plunge and get married.

I'm not discounting luck, but I do think there have been some poor decisions on the part of college grads and home buyers who didn't go into the process prepared.