Study says being rich is determined by chance rather than intelligence or talent

[rosepetals]

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.

We are the one holding our future it doesn't really matter on what level of education a person have, if a person is a degree holder or not as long as a person is willing to do everything to achieve their goals in life.Though being intellegent is a big factor on being rich but in some cases there are intellegent people that doesn't achieve anything due to loss of self trust. Although chances are already there in front of them but just ignore the opportunity .For me its all about having fate and perseverance.Since we are in this crypto community we are lucky enough to have this opportunity..and its time to work hard on this crypto business enabling us to earn for future usage.

[eagleman]

That's not truth, even life could not let you becamo rich, I think theres too much anarquist here, and theres people without a chance.

You're giving up too early? Your fate and your life is in your hands.
If you work hard then it will be paid off and you'll finally reap all those times that you've been with the use of your strength, sweat and blood. I believe in luck and if being rich is for you and you are destined to be, it will come but you have to do efforts for it.

Maybe OP only gains failure in life.thats why bitterness is what hes mouth talk.but in a point hes right not all of us given a chance,or maybe time for someone still on the process and will come soon

It's not the OP itself but the one that I have quoted. The OP is stating the article and few of his opinion which is correct.
There's no one in this world that is born of having no chance or opportunities. It really depends on the person if he's cheerful and doing all his best to gain everything that he can due to his encouragement and proper goals in his life of being successful.

[Dragon5]

Interestingly, it has never been a secret that intelligent or talented are usually far from being rich. Usually it happens accidentely or to cunning and often unscrupulous people. That's interesting to see a study about the problem)) And I admit, I'm to talented to be rich 

[Deathgamer]

Well, in my view. Anyone can be rich by any chance and can stay rich as much as they can because of talent and intelligence. We can have these reasons just to stay rich, being smart enough just to make sure we can still be rich not just having any chance.

[Slow death]

most of the people who have become rich by chance have once again become poor, see the cases of people winning the lottery, see the cases of singers, boxers and many famous who have become rich by chance, they become poor again. one and the other is saved because there are good managers who manage their money.

Now people who start a business and make this business something well spent and become rich, these people do not become poor so easily. That's why I believe in hard work as a way to achieve success and become wealthy.

[Dodoymabs]

Being rich is determined by chance rather than intelligence/talent is practically true and it is also called lucky. There are many reasons on how to become rich and its up to us on how we do it. But it is really difficult to become a  millionaire if we are only working in a company wherein our salary is only enough for our daily needs. That's why some of us are joining some games that can make us an instant millionaire and this is the reason why being rich is determined by chance.

[wesbrook00]

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.

Yes i agree with you, we must be open-minded in every time especially when it comes to money.

[Jating]

most of the people who have become rich by chance have once again become poor, see the cases of people winning the lottery, see the cases of singers, boxers and many famous who have become rich by chance, they become poor again. one and the other is saved because there are good managers who manage their money.

Now people who start a business and make this business something well spent and become rich, these people do not become poor so easily. That's why I believe in hard work as a way to achieve success and become wealthy.

Yes. One factor that can be attributed to a person success is hard work and that is no secret. How many people we has seen become successful not by chance but by everyday grinding like the wealthy Chinese businessman? Of course there some kind of luck, but if you don't have that much in your body so you better working hard to achieved your goals in your life.

I remember one shoe shine and shoe repair man about aged 30 that time at the corner of our neighborhood. I was about 10 at that time and everyday I will see him at that corner working hard everyday, rain or shine and he has a lot of customers because he really do a good job. Then later on I noticed the man not in his usual spot. And then eventually I discovered that he has already bought the place, the corner house that he used to rent. So there's no luck in there but pure perseverance and hard work and sweat.

[Scavagers]

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.

too long,did not read that much but I get some of your point. Well our life here in this world is not predestined to be like one another. Yes we need knowledge and skills, that were just attributes that help us reach our goal but that is entirely not just the key to success. In school, we were taught about solving problems using the formula and we can come up all to the same answer if we have done it right, well that is not the case here in real life. If we both graduate with the same school, same degree or course,  we are not always have the same track and someone might reach farther and be better. Luck is one factor that affects one's success but the person needs to be opportunity seeking so that he can take advantage of the small things that come into his life.

[cpfreeplz]

You can't really have a blanket statement that the top 20% of people out there with more money than the other 80% are lucky or not as talented. It could just be that they work a hell of a lot harder too. Of course some people have bad luck or come down on hard times, but we all have before in some capacity. It's when you give up and stay in your little bubble that you can never move forward.

Being rich also isn't everyone's goal! Money drives the world, but some people just literally don't care and would rather live their life to the fullest the way it is right now and not worry about how much money they're making.

[v0rtecxz]

remember that the wheel of life is always spinning, and so with human life is a difficult thing to predict how it is in the future, to become fortuitously fortuitous is not impossible, there are several possibilities that can make a person get rich in just a short time, some of the many people who will be lucky to experience it, there are some of them who accidentally found the objects of great value and the results they become rich in a short time.

[jamids]

It is rather a a combination of chance and intelligence/talent. There is a difference between street smart and school smart people and I observe that most of the successful ones are the street smart because they know how to deal with the circumstances in any given situation because they know or experience the actual circumstances while those school smart are basing their solution in what they have learned in school which are mostly hypothetical problems so a street smart has a high chance of being rich than the school smart. The street smart has a higher chance of getting the right solution in their problems financially and striking more opportunities and would take more risk than the school smart do that's why a higher chance of being rich.

[supermam]

There are so many reasons of becoming rich one is through inheritance and also some people become rich because they have the knowledge and luck in life, they are also devoted in their work so they become successful and rich.

[bechay20]

To be rich,sometimes its not  only because you are smart,but to be devoted and to be hardwork.The key of being successful in life is  combine knowledge,hardwork,patience and focus on what you want to achieve.

[genocide]

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.

Being rich is not that easy. It involves a lot of effort, time and money. And I also believe that being rich is determined by chance rather than intelligence or talent. You need not to be an intelligent or talented person for you to become rich. If you are determined to be rich, you will work harder and smarter plus the strong guts in your personality. It is their mindset "no need to study about the business, just take the risk for a positive outcome" and take the chance of being rich.

There are some intelligent and talented person who afraid to do something as it is very risky on their part because before they enter, let's say in business, there are a lot of pros and cons they have to consider because there is always a study behind that, that sometimes end in nothing and forgot about the business.

[munareal]

Being rich is not determine by intelligence or talent but utilizing your opportunities to the fullest. I also belief that you go with your destiny whether good or bad.

[jcarlo]

Well, in my view. Anyone can be rich by any chance and can stay rich as much as they can because of talent and intelligence. We can have these reasons just to stay rich, being smart enough just to make sure we can still be rich not just having any chance.

I am believe that everyone have a chance to be rich. If we do hard work, result will not be lie. Being educate is important because to maintain being rich need intelligence and shoul be smart to face challenge

[denny27]

Which's clear from the many people is certainly not all rich because by a chance only, however it depends on each of us, sometimes the intelligence and talent can lead to a success/reach due it's accompanied by a strong intentions and optimism to deepen it, till can get many chance to taken.
Of course in a strong soul there are a various kinds of success in it, is another case when related with a gambling, it's more tended to the more chance/fortune only.

[burnchan]

Being rich is not purely by your intelligence. Luck indeed a factor of being rich but we cannot depend our future to luck. The key to being rich is the flexibility of Being rich is not purely by your intelligence. Lucky is indeed a factor of being rich but we cannot depend our future to luck. The key to being rich is the flexibility of a person to find ways how to have earn a living. It's a matter of how a person is motivated on achieving to be rich. They don't let any opportunity slip in their hands. And some of them are risk takers. So we need to stay focus and aim to be a wealthy person.a person to find ways how to have earn a living. It's a matter of how a person is motivated on achieving to be rich. They don't let any opportunity slip in their hands. And some of them are risk takers. So we need to stay focus and aim to be a wealthy person.

[miradorme]

Yes I agree to that because sometimes luck is one reason why people become rich.  Luck in terms of many ways. Being rich by intellegence or talent is also one reason why people become rich because they use their knowledge and talet but I mostly agreed of being rich by chance.