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Author Topic: Study says being rich is determined by chance rather than intelligence or talent  (Read 2171 times)
Hydrogen
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March 01, 2018, 11:18:04 PM
Merited by ice18 (5), BrewMaster (1), paxmao (1), Beefcake (1), bitmover (1), aintnopassincraze (1)
 #1

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If you’re so smart, why aren’t you rich? Turns out it’s just chance

The most successful people are not the most talented, just the luckiest, a new computer model of wealth creation confirms. Taking that into account can maximize return on many kinds of investment.

The distribution of wealth follows a well-known pattern sometimes called an 80:20 rule: 80 percent of the wealth is owned by 20 percent of the people. Indeed, a report last year concluded that just eight men had a total wealth equivalent to that of the world’s poorest 3.8 billion people.

This seems to occur in all societies at all scales. It is a well-studied pattern called a power law that crops up in a wide range of social phenomena. But the distribution of wealth is among the most controversial because of the issues it raises about fairness and merit. Why should so few people have so much wealth?

The conventional answer is that we live in a meritocracy in which people are rewarded for their talent, intelligence, effort, and so on. Over time, many people think, this translates into the wealth distribution that we observe, although a healthy dose of luck can play a role.

But there is a problem with this idea: while wealth distribution follows a power law, the distribution of human skills generally follows a normal distribution that is symmetric about an average value. For example, intelligence, as measured by IQ tests, follows this pattern. Average IQ is 100, but nobody has an IQ of 1,000 or 10,000.

The same is true of effort, as measured by hours worked. Some people work more hours than average and some work less, but nobody works a billion times more hours than anybody else.

And yet when it comes to the rewards for this work, some people do have billions of times more wealth than other people. What’s more, numerous studies have shown that the wealthiest people are generally not the most talented by other measures.

What factors, then, determine how individuals become wealthy? Could it be that chance plays a bigger role than anybody expected? And how can these factors, whatever they are, be exploited to make the world a better and fairer place
?

Today we get an answer thanks to the work of Alessandro Pluchino at the University of Catania in Italy and a couple of colleagues. These guys have created a computer model of human talent and the way people use it to exploit opportunities in life. The model allows the team to study the role of chance in this process.

The results are something of an eye-opener. Their simulations accurately reproduce the wealth distribution in the real world. But the wealthiest individuals are not the most talented (although they must have a certain level of talent). They are the luckiest. And this has significant implications for the way societies can optimize the returns they get for investments in everything from business to science.

Pluchino and co’s model is straightforward. It consists of N people, each with a certain level of talent (skill, intelligence, ability, and so on). This talent is distributed normally around some average level, with some standard deviation. So some people are more talented than average and some are less so, but nobody is orders of magnitude more talented than anybody else.

This is the same kind of distribution seen for various human skills, or even characteristics like height or weight. Some people are taller or smaller than average, but nobody is the size of an ant or a skyscraper. Indeed, we are all quite similar
.

The computer model charts each individual through a working life of 40 years. During this time, the individuals experience lucky events that they can exploit to increase their wealth if they are talented enough.

However, they also experience unlucky events that reduce their wealth. These events occur at random.

At the end of the 40 years, Pluchino and co rank the individuals by wealth and study the characteristics of the most successful. They also calculate the wealth distribution. They then repeat the simulation many times to check the robustness of the outcome.

When the team rank individuals by wealth, the distribution is exactly like that seen in real-world societies. “The ‘80-20’ rule is respected, since 80 percent of the population owns only 20 percent of the total capital, while the remaining 20 percent owns 80 percent of the same capital,” report Pluchino and co.

That may not be surprising or unfair if the wealthiest 20 percent turn out to be the most talented. But that isn’t what happens. The wealthiest individuals are typically not the most talented or anywhere near it. “The maximum success never coincides with the maximum talent, and vice-versa,” say the researchers.

So if not talent, what other factor causes this skewed wealth distribution? “Our simulation clearly shows that such a factor is just pure luck,” say Pluchino and co.

The team shows this by ranking individuals according to the number of lucky and unlucky events they experience throughout their 40-year careers. “It is evident that the most successful individuals are also the luckiest ones,” they say. “And the less successful individuals are also the unluckiest ones.”

That has significant implications for society. What is the most effective strategy for exploiting the role luck plays in success?

Pluchino and co study this from the point of view of science research funding, an issue clearly close to their hearts. Funding agencies the world over are interested in maximizing their return on investment in the scientific world. Indeed, the European Research Council recently invested $1.7 million in a program to study serendipity—the role of luck in scientific discovery—and how it can be exploited to improve funding outcomes.

It turns out that Pluchino and co are well set to answer this question. They use their model to explore different kinds of funding models to see which produce the best returns when luck is taken into account.

The team studied three models, in which research funding is distributed equally to all scientists; distributed randomly to a subset of scientists; or given preferentially to those who have been most successful in the past. Which of these is the best strategy?

The strategy that delivers the best returns, it turns out, is to divide the funding equally among all researchers. And the second- and third-best strategies involve distributing it at random to 10 or 20 percent of scientists.

In these cases, the researchers are best able to take advantage of the serendipitous discoveries they make from time to time. In hindsight, it is obvious that the fact a scientist has made an important chance discovery in the past does not mean he or she is more likely to make one in the future.

A similar approach could also be applied to investment in other kinds of enterprises, such as small or large businesses, tech startups, education that increases talent, or even the creation of random lucky events.

Clearly, more work is needed here. What are we waiting for?

Ref: arxiv.org/abs/1802.07068 : Talent vs. Luck: The Role of Randomness in Success and Failure

https://www.technologyreview.com/s/610395/if-youre-so-smart-why-arent-you-rich-turns-out-its-just-chance/

A very interesting spin on anything that has ever been said about money, success or wealth!

I don't know what to think about this. The scaling argument which says 1% of the human population shouldn't own 40% of the world's wealth due to them not having IQ's of 200,000 or talent proportional to the highly disproportionate stake of wealth they control is something that will take time for me to digest and think about. Its certainly a novel concept.

Its also very interesting that they attempted to model along lines of standard deviation and wound up with a historical 20/80 wealth distribution. I think this is something which could use more exposure and media coverage. Its not often relatively original or new perspectives like this come along and the paradigm shift which can accompany them can often take decades to be fully appreciated within a pop culture vein.

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March 01, 2018, 11:55:03 PM
Merited by Hydrogen (1)
 #2

I am not entirely surprised by this at all actually, anecdotally I have always felt people who achieved success where mainly in the right place right time. Whether that be born to a certain family or class, or to a certain country, or area of a country, these things all effect where we will end up. Good to know us average folk can still make it in this rigged world Wink

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March 02, 2018, 12:09:09 AM
 #3

I know about your point, chances are not always come in our life, and the chances are  now born which the key to everybody become rich, it is the cryptocurrencies business, which is the sharp tools use to all people become rich. We know already that there is a lot of people becomes a rich because of bitcoin business by starting in a small capital invested. But it is not quick and easy to become rich by way crypto business, we must also adopt the total nature and the flow of crypto businesses.

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March 02, 2018, 12:12:33 AM
 #4

Being rich is according to fate and predestination
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March 02, 2018, 12:37:38 AM
 #5

Being rich is according to fate and predestination
It is a yes when according to fate but in predestination i dont think so. What you mean to say about predestination is people cant change their future. When they are born poor and in the future they are also poor is that what you want tyo point out. People has freedom, and they can change life they want to be in the future.

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March 02, 2018, 12:48:57 AM
 #6

They say that chance only knock ones you have to grab it but also you have to do something you have to work on it wisely. Chance combined it with intelligence it will be better a chance to be rich.
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March 02, 2018, 01:13:31 AM
 #7

Being rich is according to fate and predestination
Hmmmm..



They say that chance only knock ones you have to grab it but also you have to do something you have to work on it wisely.
Exactly and on point.

I have always felt people who achieved success where mainly in the right place right time
and with right decision.

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March 02, 2018, 01:22:45 AM
 #8

I believe in this, as long as the person is determined to change their life as long as they see a small chance that can change them for the better they will took it. But to become a billionaire you will not rely only on chance but also on your talent or intelligence a good example was some of the billionaires in the world, some of them didn't graduate some dropped out in school because they took the chance to invent something new, innovative so they focus in it and they become rich and famous with it.

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March 02, 2018, 01:29:34 AM
 #9

In a country that sovereignty is in question and following the standard of western mindset this write-ups contradicts what our surroundings teach us starting the day we born. That intelligence and hardwork  has to be in one person to success but in reality it isn’t and this proves me that all along what I observe is right. Grabbing every opportunity that comes to our life is what chances we shouldn’t ignore.

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March 02, 2018, 01:38:34 AM
 #10

Intelligent people are not willing to take risks and not willing to try risks!

The rich see the benefits behind the risks, and are willing to make bold attempts! Seize the opportunity!

A lot of wise people work under the rich!

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March 02, 2018, 01:51:49 AM
 #11

I say begin rich is determined by your ability (intelligence) to learn how to identify and seize your opportunities.

I heard about bitcoin in 2010. I had the chance to buy, I was a few googles clicks away from getting rich.  We all were. But I wasn't intelligent enough to see it. Or to give it a try.

This is why in personal finances we must be exposed to a diversity of risks.

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March 02, 2018, 02:12:02 AM
 #12

In my own opinion, I do believe that we can determined it by the ability of the a person. Many people were became rich just because of their abilities. Yes I do believe in chance, Of  course if you have a chance you should grab it. Some people also used their intelligence to become rich.
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March 02, 2018, 02:33:54 AM
 #13

I think luck and good timing also has something to do with it. We have seen intelligent and hardworking people trying to make it but most of them dont.

Being ruthless and cunning are also traits that one should have to get rich. Step on all those who are in front and who are better than you. If you need to, kill them.


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March 02, 2018, 02:35:30 AM
 #14

Another way to look at it, is that upward mobility is more or less a myth (in the USA).  That is why we have the terms 'old money' and 'new money'.  Many american dynasties, still fantastically wealthy today, were built on the backs of slaves.

Sure there is an occasional red herring.  But these families have so much wealth that their great-great gand children won't have to work.  And they use this wealth to generate MORE wealth.  

But yeah, really interesting read thanks for posting.  I don't have a problem with the wealthy.  Its just that when the guys building the nations infrastructure or cleaning everyone's toilettes barely make enough to pay rent, and a handful of fat cats on wall street make a grunt's salary every week (while destroying the economy none the less), something seems out of place.  I think things have swung in a bad direction and it started with that trickle down nonsense.  It used to be that the average CEO made 5x the average worker.  Now they make like 300x or something.  How many yachts do you need?  At what point is enough enough?  And its only going to get worse.  I am honestly afraid of the economy my children will have to face when they grow up.

Remember the spartans?  No one, with any size army could ever defeat them.  Those guys were the baddest ass warriors ever.  But they were defeated by economics, not war!

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March 02, 2018, 02:59:32 AM
 #15

Intelligent people are not willing to take risks and not willing to try risks!

The risk of what? Being rich? Everybody wants to be rich.

The rich see the benefits behind the risks, and are willing to make bold attempts! Seize the opportunity!

An attempt to what?

A lot of wise people work under the rich!

Yes, they are wise but not intelligent enough to make themselves rich. Thats the different between a wise person and an intelligent person.
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March 02, 2018, 03:00:46 AM
 #16

Being rich is according to fate and predestination
Hmmmm..



They say that chance only knock ones you have to grab it but also you have to do something you have to work on it wisely.
Exactly and on point.

I have always felt people who achieved success where mainly in the right place right time
and with right decision.

Absolutely that is right. Being rich people is can only be base thru it's personality and capability to do. No more, no less people on itself is the one who's responsible for what ever happen to their life in the future. No matter where they born or what their status in life when he/she was a child, all of this is nonsense because the most important is in present on what you need to do just to have a better life in the future.

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March 02, 2018, 03:03:43 AM
 #17

I think luck and good timing also has something to do with it. We have seen intelligent and hardworking people trying to make it but most of them dont.
It's a combination, hardwork, good timing, right execution and intelligence. I have watched some videos about on how to become millionaires.
And what I've learn from it is you don't have to be that smart or lucky just to become one, you need proper knowledge and you are good in decision making.
Helping others with your service and making lives easier, like the popular social media's now and search engine network.
Owners of it are good problem solvers.

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poplolnman
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March 02, 2018, 03:05:37 AM
 #18

They say that chance only knock ones you have to grab it but also you have to do something you have to work on it wisely. Chance combined it with intelligence it will be better a chance to be rich.
Yeah actually it should be done like that , otherwise this would sounds like being rich just about lucky or not. Mostly intelligent person know what to do for best and some of them prefer to leave the rich dream to serving people to make a better world to live , pretty different when you are an ambitious person , you do know the chance and take it whatever the consequences, just hoping to have a lot of money as many as you can , which I personally it wasn't smart move ideally.

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March 02, 2018, 03:24:59 AM
 #19

Intelligent people are not willing to take risks and not willing to try risks!

The risk of what? Being rich? Everybody wants to be rich.

Yes, being rich requires you to take risk. You won't become rich if you are working a job in some company, you need to start a business(I'm just assuming the most common way to become rich) and starting a business has a great lot of risks involved. An above average individual who is comfortable in his position wouldn't be willing to take that risk.
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March 02, 2018, 03:25:08 AM
 #20

There are lots of people born into a wealthy family or inherited money. So I could see that this percentage could be high as compared to people that actually have to work hard to become wealthy. There is also a percentage of people that just happen to invest in the right stock or buy a winning lottery ticket but I think this percentage is probably relatively low as compared to just being born wealthy.

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