Richard Gill, CFA, reviews a new book by Max Gunther that explains why some people are luckier than others – and how you can become one of them.
“Luck” is a concept which means different things to different people. For some, luck may manifest itself in a lottery win, your horse winning a race or the roll of a double six in a board game. Of course, a successful dice roll can clearly be attributed to chance – probability theory tells us that.
For others, luck is pure mumbo jumbo, with every event that happens in life able to be attributed to probabilities or a person’s own abilities. For example, someone with a high flying career and big house may be referred to as being “lucky” without any reference to years of academic study, job experience and sheer hard work. This is a situation when luck is, perhaps unfairly, used as a synonym for “success”. The ability to attract a good-looking partner may also be put down to luck. But other factors may be at play – as the wonderful comedy character Mrs Merton asked Debbie McGee, “So, what first attracted you to the millionaire Paul Daniels?”
Despite the fact that maths and science can provide clear explanations of events, some people still believe that luck, or being lucky, is a characteristic which is inherent to a person. Almost as if they were born with it. Some also believe that luck can be increased, attracted or bestowed, possibly by wearing a lucky charm, performing a ritual like blowing on dice, or wishing others “good luck” before an interview or an exam.
In The Luck Factor, author Max Gunther examines the theories of luck that have been developed over history, covering areas as diverse as maths, pseudoscience and even magic. By the end, based on his observations, he provides a scientific set of conclusions as to its true nature and, perhaps more importantly, how luck can potentially be managed. I’ll give you a clue, successfully managing luck isn’t based on wearing a rabbit’s foot around your neck or putting on your left shoe before your right shoe.
Part of the Harriman House “Classics” series, the book was first published 1977 and has now been republished with an updated foreword written by portfolio manager Gautam Baid. Max Gunther was an Anglo-American journalist who died in 1998 and over his career published a number of investment books including The Zurich Axioms, Wall Street and Witchcraft and, on the subject of luck, The Luck Factor and How to Get Lucky.
The Luck Factor is split into four parts of several chapters each. Part One is entitled The Breaks, setting out the stories of some particularly lucky and unlucky individuals and to what they attributed their notably positive and negative life events. It begins with the story of an American man, Eric Leek, who won $92,000 a year for life on the New Jersey lottery. He put his chance down to a pre-cognition. Jeanette Mallinson meanwhile believes that bad luck is a person’s destiny and that horoscopes can predict her future.
There are many different and sometimes conflicting definitions of luck. But Gunther steps in here to provide a definition which he believes everyone will accept – “events that influence your life and are seemingly beyond your control”. He goes on to explain how even small chance events can change the entire course of someone’s life, giving the example of an administrative assistant catching the flu leading to him meeting his future wife and in turn their having three children.
Parts Two and Three go on to speculate on the nature of luck, respectively covering the scientific and then more mystical theories. The first scientific approach covered is randomness theory, which as the name suggests puts lucky events down to coincidences and patterns that inevitably show up over time. For example, while the odds of receiving a royal flush in a 5 card poker hand are 649,739:1, the number of hands played around the world must mean that this “rare” event happens frequently. While a holder of this hand might claim unbelievable luck, it is in fact a commonplace event in the grand scheme of things.
Moving on to the mystical, my favourite chapter covers “charms, signs and portents”. This section tells the stories of people who look to horoscopes, crystal balls and the like as a means of predicting their future. Gunther also looks at the ability of dreams to provide insights into the unknown. I once had a dream about 15 years ago that the manager of Bradford City would get sacked, after a recent bad run of results. A few days later, he was. So was that dream a prediction of the future or, as randomness theory suggests, a coincidence? I will let the reader decide.
Finally, part four covers “the luck adjustment”, the end goal of the quest embarked upon in previous chapters, with the author providing guidance on how we can change our luck. It is not a theory in itself but a set of observations which the author has made of lucky people against consistently unlucky people. In other words, what lucky people do that unlucky people don’t. The premise involves people making changes to their lives to improve the odds of good luck and also reduce the odds of bad luck. Without spoiling the climax of the book too much, the author identifies five outstanding characteristics that distinguish the lucky from the unlucky, including building up networks of friendly people, being bold and, interestingly, having a degree of pessimism.
As an end note, I said above that Gunther’s guidance on managing luck doesn’t involve wearing a lucky charm. That isn’t strictly true as he suggests personal superstitions are at worst harmless and may even be useful. This is because they may prompt us into taking action when otherwise we would remain idle, potentially missing out on a life changing opportunity. So don’t throw away that four leaf clover just yet!
Give it a chance
In the final part of the book Gunter says, “It is unlikely that your own personal views of luck have been changed radically since you started the book…” He goes on to say that wasn’t the purpose of the book but nevertheless, in my case, he is correct. I continue to hold the belief that “lucky” things are caused either by the expected probability of events or by a combination of hard work and knowledge. Nevertheless, it is a fascinating read, covering a range of individual life stories, mathematical and magical explanations for luck and practical advice for improving your chances in life. If you apply some of the suggestions provided to your investing, you might just be lucky enough to make your fortune!