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    The article shows that the real wealth-distribution is modelled well by a simple pure-luck model, and simple luck-and-talent models with significant impact of talent describe the distribution worse.

    The model does assume some cutoff for entry and the author does say that the article describes the high end; so it is not about the prerequisites of playing pure-luck without a handicap.

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      A larger talent differential would produce a wealth distribution that is even more extreme than the real one, and that would not follow a power law.

      I disagree. A more talented wealthy class would not necessarily produce a more extreme distribution. They might be more liberal and therefore more accepting of curtailment of runaway wealth accumulation. This doesn’t even require altruism or empathy. It can be explained according to self-interest. If you’re rich, you want social stability (rather than revolution or chaos) and it’s not good for your situation if there’s a large, angry underclass looking to depose you.

      Economists have convincingly argued that even without talent differentials, you’d have a similar wealth distribution to what we have. This doesn’t mean “it’s all luck”. I think that it’s more complicated than that. You can’t really infer much, causally speaking, from the wealth distribution alone.

      Moving away from the topic of investing and into socioeconomic success more broadly, I think that it’s mostly luck insofar as opportunities emerge and are quickly exploited. Some people have the know-how and contacts necessary to find these artifacts in time (and exploit them before they disappear). It’s not “random” who acquires these resources. It’s patently and demonstrably unfair. White men at 6'4 have substantially better odds of getting into boardrooms than black women who are 5'1. There’s no good reason for this, as it clearly has nothing to do with a person’s talents, but it’s not random chance (except at birth) either.

      The truth about socioeconomic success in humans is that (a) it’s probably 95-99% non-talent/skill factors (one could debate whether natural talent is “luck”, but that side issue isn’t relevant to what we should do as a society) because (b) it’s full of positive-feedback loops and autocorrelations. There was a great Black Mirror episode, Nosedive, about how quickly a person can end up on the wrong side of one of the feedback loops that drive reputation and (more importantly) access to information.

      “Reward for performance” may actually be mostly a reward for luck.

      The thing that CEOs are great at, which most of us are not, is spotting “Heads, I win; tails, you lose” opportunities. They do it as a lifestyle. As in sailing, you can move with or against the wind (tacking) and the only thing that kills you is if there’s no wind at all. The metaphor breaks down in human affairs because one can actually create wind out of nothing, unlike with the weather.

      Their wealth is not “a reward for luck”. The CEOs (and, to a lesser extent, the hedge fund managers) created the luck, but they also managed to hack the way their performance is evaluated. If you’ve built a system around yourself that will separate you from failures but magnify successes, the strategy becomes “take every risk you can”. It’s not random.

      When I was younger, I looked at the world being run by people a lot stupider than me and assumed that they were just lucky. Now that I’m older, I recognize that there is some repeatable factor that makes them a lot more successful than us. It’s not correlated with meaningful creative or productive talents, and it’s probably negatively correlated with personal virtue, but it exists. It’s also ideology-independent: if we were a dysfunctional socialist system instead of an end-stage corporate capitalist system, the same goddamn people who are currently running corporations would, instead, be the communist party. In the 18th century, they’d be Louis XIV’s court. The same fucking people. A bug within the species (in its extreme manifestation, it is the psychopath who, like the cancer cell, is individually fit but ruinous to the organism) that no one has figured out to fix.

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        michaelochurch 5 hours ago | link | reply

        Except wealthy people talented or not still give proportionally less than the poor do. Also the phrase “more luck than talent” doesn’t mean all luck. That’s literally not even what the catchy title is claiming.

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        Misses the real point, I feel. It doesn’t matter whether those that hold all the wealth and power “deserve” it or not. The problem is partly the curve along which it is distributed, but more worryingly that it seems to be increasing.