Why some of us do better than others?
All of us know of richer, or happier, or more competent, or better performing, or more blessed, people. From whatever angle we may wish to see, some people do better than others. And so is the case with institutions, sportsmen & teams, companies, governments etc.
Is it luck or skill? This is quite intriguing.
The concept ‘reversion to the mean’ (RTM) is useful to understand this.
RTM is based on the fact that, in most human endeavors, the outcomes are a combination of skill & luck. Of course, some (like chess) are based on pure skill while others (like casino games) are based on pure luck. But the vast majority fall somewhere in between.
In cricket, for example, a batsmen can lash with great skill, but yet he may score low because of chance events. Companies with great success streaks stumble (New coke). Political leaders adored in their ‘growing-up’ years prove to be disastrous failures after landing the top job.
The reverse also happens. The unseeded tennis player wins the championship. An upstart company startles the market leader.
RTM is a statistical concept which says everything hovers around an average. This means that things tend to average over time. This is because, by definition, luck is a chance event and not permanent. Luck comes & goes, only skill is constant. An amusing way to look at this is,
Success = some skill + luck
Great success = some skill + lots of luck
(this can be restated for failure as well)
We need to sort skill from luck, when contemplating people, or institutions or entities.
Tending to average doesn’t mean becoming mediocre, because skill is a individual or entity-specific characteristic. The average performance, over time, of a vastly talented sportsman will continue to be superior to the average performance, over time, of his lesser talented colleagues.
RTM also means that good and bad times don’t last for ever.
From a personal point of view, focusing on improving skills is more important, relevant & easier.
Luck also can be managed. Good exposure to positive events, people, books, locations, groups etc. can lead to delightful serendipity.
But skill first, luck next.