Robert Frank was playing tennis one cold Saturday morning in Ithaca, N.Y., when his heart stopped. Sudden cardiac arresta short-circuit in the hearts electrical signalingkills 98 percent of its victims and leaves most of the rest permanently impaired.
Yet two weeks later, Frank was back on the tennis court.
How did this happen? There was a car accident a few hundred yards away from where Frank collapsed. Two ambulances responded but the injuries were minor and only one was needed. The other ambulance, usually stationed five miles away, reached Frank in minutes.
Im alive today because of pure dumb luck, says Frank, a 71-year-old economics professor at Cornell University. Or you can call it a miracle. Either way, Frank cant take credit for surviving that day. From coincidence or the divine, he got help. Nine years later, he is still grappling with the concept of luck. And, applied to his field of economics, its led him into some dangerous territory: wealth.
Talk about luck and money in the same sentence, he says, and prepare to deal with unbridled anger. U.S. Democratic Senator Elizabeth Warren of Massachusetts and President Barack Obama were pilloried for suggesting rich Americans should be grateful for what Obama called this unbelievable American system that we have that allowed you to thrive. Even referring to the wealthy as the luckiest among usas I did a few months agocan spark some unhinged reactions.
There are people who just dont want to hear about the possibility that they didnt do it all themselves, Frank says.
Mild-mannered and self-effacing, he isnt about to tell the rich you didnt build that, as Obama did (and likely regretted). Franks new book, Success and Luck: Good Fortune and the Myth of Meritocracy, is a study in diplomacy. Combining memoir with academic research, its an earnest argument that all of useven the richwould be better off recognizing how luck can lead to success.
You did build thatmostly
First, Frank wants to make clear, you did build thatfor the most part. Bill Gates, Warren Buffett, or any other wildly successful person didnt merely get lucky. Its clear that most of the biggest winners in the marketplace are both extremely talented and hardworking, he writes.
In fact, a prerequisite of success in many fields may be a strong refusal to believe in luck. The idea of making your own luck is great motivation, while nothing can kill your drive more than suspecting the game is rigged. The reality, however, is that luck does matter. Its hard to see in your own life if things are going well: Frank says its like running with a tailwind, as opposed to a headwind.
Its easier to see in aggregate statistics: In professional hockey leagues, researchers have noticed, 40 percent of players are born in the first three months of the year, while just 10 percent were born in October, November, and December. The reason must be that Jan. 1 is the birth date cutoff for youth hockey teams, Frank says, and older kids end up getting a lifelong advantage over their peers.A similar phenomenon has been found among CEOs. A third fewer chief executives were born in June and July than youd expect by chance. Kids born in the summer tend to be the youngest in their classes starting school.
The influence of your birthdaycertainly something outside your controlmay be small in the grand scheme of subsequent wealth and success. But even the most talented people in the world can point to coincidences that gave them a crucial edge. Frank cites the 60-year-old Gates: Despite growing up in the 1960s, the co-founder of Microsoft Corp. happened to attend the rare school that offered students unlimited access to computers.
Or consider the actor Bryan Cranston. After decades as a well-respected performer on television and film, the series Breaking Bad made Cranston, 60, a true star. But, Frank notes, Cranston almost didnt get to play the shows central character, Walter White. Both John Cusack and Matthew Broderick turned down the role before producers agreed to offer it to the less-famous Cranston. You can have talent, perseverance, patience, but without luck you will not have a successful career, the actor has said.
Could Cranston or Gates have achieved wealth and fame without these lucky breaks? Of course its possible. But Franks thesis is that our economy is changing in ways that amplify the role of luck in making the difference.
For more than 20 years, Frank has been studying the rise of winner-take-all marketsfields of fierce economic competition in which only a few top performers take home the bulk of the rewards. More and more of the economy is starting to look like sports or music, Frank says, where millions of people compete and the winners are paid thousands of times more than the runners-up.
Another example he gives is the humble neighborhood accountant. In the 20th century, the typical accountant was competing against nearby rivals. If you worked hard, there was a good chance of winning over the most lucrative clients in town. Today, neighborhood accountants face much more competition: Sophisticated global accounting firms can swoop in and sign up their biggest clients. Tax preparation, an accountants bread and butter, has been mostly swallowed up by two large playersH&R Block for storefront preparation and TurboTax online.
Technology has enabled people who are best at what they do to extend their reach geographically, Frank says. TurboTax was initially just one of a number of tax software programs on the market. But, as happened with search engines and social media sites, it was able to win over customers early, and its competitive advantage snowballed. TurboTax now dominates online tax preparationthousands of local accountants replaced by one company.
In these winner-take-all markets, luck can play a huge role. A simulation conducted by Frank shows how: Imagine a tournament in which every contestant is randomly assigned a score representing their skill. In this simple scenario, the most skilled person wins. The more competitors there are, the higher the score the winner will likely have.
Now introduce chance by randomly assigning each participant a luck score. That score, however, can play only a tiny role in the ultimate outcome, just 2 percent compared with 98 percent allotted to skill. This minor role for chance is enough to tilt the contest away from the top-skilled people. In a simulation with 1,000 participants, the person with the top skill score prevailed only 22 percent of the time. The more competition there is, the hardest it is for skill alone to win out. With 100,000 participants, the most skilled person wins just 6 percent of the time.
Winning a competition with a large number of contestants requires that almost everything go right. And that, in turn, means that even when luck counts for only a trivial part of overall performance, theres rarely a winner who wasnt also very lucky.
Winner-take-all markets can end up creating vast wealth differences between the lucky and unlucky. One personsmart, persistent, but unluckystruggles, while an equally (or even slightly less) talented and hard-working person gets a lucky break that can reap millions, or billions, of dollars.
How to make things fair? Guess
We cant control our luck, so what else can we do? Frank says the only solution is to invest more in education and infrastructure and all the other things we know help everyone succeed. The more we spend on these public goods, the more people have a chance to get lucky, he says. That, of course, means higher taxes. But Frank, ever diplomatic, assures the wealthy that this wont hurt nearly as much as they might fear.
Which would you rather drive, he asks, a $150,000 Porsche on a well-maintained highway, or a $333,000 Ferrari on roads with deep potholes? The question scores a couple points. First, Frank is arguing, everyone benefits if we invest more in the general public welfare, including the rich. Second, we need to think more about the difference between a $150,000 car and a $333,000 car.
The increasing concentration of wealth at the top of the economic spectrum has created fierce competition for the finer things. Its not that people are jealous or want to outdo each other, Frank says. Its just that everyones expectations have skyrocketedhow fast a car should be, how large a home to build, or how elaborate your wedding can be. Its hard to throw a $4,000 reception when everyone in your social circle is spending $100,000.
Frank likens us to male elk, whove evolved to grow huge antlers only because they provide an extra advantage in winning mates. If every bull elk could shrink his antlers at once, hed find it easier to walk through the woods and escape predators. Instead, male elks are stuck in a positional arms race.
For humans, at least, tax policy could help deescalate this wasteful competition, Frank says. He proposes a progressive consumption tax, one that would tax how much people spend by giving tax breaks for money they saved. The wealthy would pay more in taxes, sure, but it wouldnt hurt as much as they think. If everyone else in your income tax bracket also owes more to the Internal Revenue Service, you still maintain your relative position in the hierarchy.
The most successful people will still be able to afford the best stuffthe waterfront homes, the front-row seats, the haute couturebut theyll feel less pressure to spend, and theyll have less competition for the rarest luxury goods.
Frank knows this argument is a hard sell. But some perspective helps: The political consensus can flip rapidly if good arguments are offered, he contends. So he wants to spend the rest of his lifethe extra years he was given on that tennis court nine years agoexplaining how much better off wed be if we acknowledged our luck.
The fact that anyone exists at all is so astronomically improbable, Frank says. The fact that youre here to live and breathe and enjoy a sunsetwhat an unbelievably unlikely thing.