Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort. They are so similar that you can’t believe in one without equally respecting the other. They both happen because the world is too complex to allow 100% of your actions to dictate 100% of your outcomes. They are driven by the same thing: You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.
If you give luck and risk their proper respect, you realize that when judging people’s financial success—both your own and others’—it’s never as good or as bad as it seems. Luck and risk are both huge elements of success.
Everything worth pursuing has less than 100% odds of succeeding, and risk is just what happens when you end up on the unfortunate side of that equation. Just as with luck, the story gets too hard, too messy, too complex if we try to pick apart how much of an outcome was a conscious decision versus a risk. When we don’t give risk and luck their proper billing it’s often invisible yet countless fortunes (and failures) owe their outcome to leverage.
The difficulty in identifying what is luck, what is skill, and what is risk is one of the biggest problems we face when trying to learn about the best way to manage money. But two things can point you in a better direction.
1. Be careful who you praise and admire.
2. Be careful who you look down upon and wish to avoid becoming.
Realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself. Risk and luck have a great part to play in the outcomes of life .
Focus less on specific individuals and case studies and more on broad patterns.
Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” When things are going extremely well, realize it’s not as good as you think. You are not invincible, and if you acknowledge that luck brought you success then you have to believe in luck’s cousin, risk, which can turn your story around just as quickly.
Failure can be a lousy teacher, because it seduces smart people into thinking their decisions were terrible when sometimes they just reflect the unforgiving realities of risk. The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there won’t wipe you out so you can keep playing until the odds fall in your favor.
Martina
Deborah
Bayor
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