Talent, luck and success: simulating meritocracy and inequality

One of the biggest lie sold in the West is that if you work hard, give everything you should succeed. This has grave implications on policy and really blinds people born with a silver spoon to the real problems in society as they have a &#x27;i deserve it and they don&#x27;t syndrome&#x27;. Contrast this with a poor society that is growing rapidly where you see islands of wealths with certain individuals, at least people over there do not harbor illusions of meritocracy.<p>In general the more educated and developed a society is, it is much more meritocratic than others, however i still feel it is not enough especially for those who have everything stacked against them.<p>May be sometime in the future we would have a universal human rights charter that expands and decides what are the basic needs of a human that a society should provide in exchange for basic responsibilities. This way life will not always be a rat race and the poorest and unlucky can at least have some dignity.

One of the biggest issues that discussions of inequality ignore is generational issues. People view wealth as an individual thing. However, if you look at American society, probably the majority has been generational. Each generation worked and saved to better their children&#x27;s lives.<p>An example of this is probably in immigrants. Many people came with practically nothing but he clothes on their back. They took whatever job they could find and worked like crazy and saved like crazy and pushed their children like crazy. Their children in turn started out better than their parents and worked and saved and pushed their children and their children did even better. After a few generations, the descendants of immigrants have entered the highest ranks of society.<p>What drives the &quot;myth&quot; of the American dream is not necessarily that I who started out with nothing will be well off. It&#x27;s that through my hard work and their hard work my children will be better than me and my grandchildren and their children will be well off even though I started with nothing.<p>That version of the American dream has worked far more reliably than the individualistic model. Even once persecuted and discriminated against immigrant communities in the US have succeeded in this version of the American dream.

Is talent not just a form of luck? It doesn&#x27;t matter how hard you work at your low post game, you&#x27;ll never learn to be seven feet tall. Those who are of that height are extremely lucky, giving them a huge advantage over other contenders for that NBA center position.<p>Other forms of athletic talent are less visible than height but I see no reason not to attribute them to luck (genetics, access to nutrition, coaching etc.)<p>We can apply this reasoning to anything where success can be measured. A great deal of business success comes down to connections which provide access to capital and access to markets. All of these things accrue to the well-connected.

&gt; Since the talent follows a normal distribution, technically it can be negative or larger than 1, but for convenience we assume T~[0, 1]<p>Part of the answer to the original question is in this line. Normal distribution implies outliers - i.e. some are radically competent. In meritocratic conditions, you expect some to be radically successful, therefore creating a huge wealth asymmetry.<p>I’m not saying we do live in a pure meritocracy, far from it. Only that normal distribution of talent doesn’t imply wealth should naturally become normally distributed.

Everyone in this thread directly supports inequality through their buying decisions and I&#x27;m callin&#x27; them out.<p>Anytime you use Netflix, Google, HackerNews is supporting inequality. Every time you bought a Harry Potter book as a kid you supported inequality. You&#x27;re giving more money to the winners.<p>If you want to reduce inequality, then buy books from unpopular authors. Use unpopular OSes like TempleOS instead of giving even more market share to Google&#x2F;Apple&#x2F;Microsoft. Drive cars made by less popular manufacturers. Don&#x27;t read the New York Times, Fox News, or Washington Post - only blogs or magazines with a small subscribership. And don&#x27;t watch anything Disney.

Luck = Skill + Opportunity. That is, you must have the skill set to become successful, but also be in the right place at the right time to apply these skills.

<i>In a meritocratic society, there is positive correlation between talent and success. But how steep should this relationship be? If the talent-success slope is very steep (i.e., a small talent difference causes a large capital gap), you might end up having a wide distribution of wealth (severe economic inequality). On the other hand, if the slope is quite flat (i.e., a big talent difference makes little difference in capital), the society has weak meritocracy, which may disincentivize people from achievements. The right degree of steepness depends on how one defines fairness and how much inequality a society can handle.</i><p>This discussion misses one important element of returns to talent: more capital in the hands of more capable people should result in better allocation of resources, and consequently better outcomes for society as a whole. Too little inequality would, according to this view, result in destruction of capital over time, and in consequence impoverish the society.

There are plenty of &quot;soft factors&quot; at work in being successful or not. Confidence adds a lot of perceived value to an individual; their ability to work smart instead of just hard; their ability to prove they can do well in the specific context of their job rather than just be generally intelligent but not practical; their ability to make others look good or feel confident in their ability will make them get promotions sooner.<p>There are obviously lots of practical conditions outside of our control such as local conditions, state of the job market, being willing to relocate etc. There is also the understanding that you need to look better than the other applicants rather than just look good in isolation.<p>Another major issue that is rarely covered is personality types and the fact that insecurity, paranoia or other physical conditions that are obvious to the interviewer will cause you to look bad, regardless of whether they actually measure your ability to do a job.<p>And then there&#x27;s luck!

&gt; The new term, wT is the amount of one’s paycheck. w represents the importance of the paycheck. The higher it is, the more pay you get. w is multiplied by the talent parameter T to implement a meritocratic idea: the more talented you are, the fatter the paycheck you get.<p>Perhaps I misunderstand the situation, but it seems like the author is baking meritocracy directly into the model: <i>if</i> you have high talent <i>then</i> you automatically get a higher paycheck. By increasing the paycheck importance or simply reducing the event probability towards 0, this model will always produce a perfect meritocracy.<p>So on the one hand we have random events that have a chance to double or halve capital, but somehow a persons paycheck is a constant over their life, nobody is ever between jobs, and paycheck is entirely deterministic. I think the author really missed the opportunity to link paychecks to the random events (but paychecks would otherwise persist between events).

One model I don&#x27;t see here is &quot;success requiring a certain amount of capitol to obtain&quot;. If you don&#x27;t have the, say, 6 capital to invest in an opportunity, you can&#x27;t get the rewards for that opportunity. This applies even if you provide debt, since going into debt typically requires having existing assets in excess of the debt amount.<p>My hypothesis is that the starting capital will impact the distribution of capital more than talent.<p>Another potential model: Vary the chance to participate in opportunities. Not everyone has equal chance to take advantage of opportunities; someone living in NY will have more opportunities they can leverage than someone living in Iowa (and being able to move to NY is an opportunity in itself).<p>My hypothesis here is that the chance for being able to take advantage of opportunities will play as big of a role in the final capital distribution as talent.

I don&#x27;t even know where to begin to critique this. It entirely leaves out factors like race and gender that are known to have an impact.<p>I&#x27;ve spent a lot of years trying to understand the details of exactly how my gender is a factor and trying to find solutions to those details. I don&#x27;t believe it has to be a problem, but we know it currently is a problem, and these cleaned up models seem to never include the idea that if you are female or a person of color or gay etc, you will tend to have &quot;demerits&quot; or be handicapped (in the horse racing sense of carrying an extra burden).<p>If talent, work and luck were everything, then we shouldn&#x27;t have such consistent outcomes that certain groups overall do better than others.

About a year ago, I asked similar questions about the 80-20 rule and income distributions. It seems that the simple explanation works surprisingly well. Simulate the following system and it matches real world distributions surprisingly well.<p>r1) Actors have normally distributed abilities r2) Actors are chosen randomly based on current winnings, the more you have won, the more you compete. r3) Winner of competition wins one point from the loser<p>You can find what I wrote about this at<p><a href="http:&#x2F;&#x2F;www.cs.toronto.edu&#x2F;~arnold&#x2F;research&#x2F;80-20&#x2F;" rel="nofollow">http:&#x2F;&#x2F;www.cs.toronto.edu&#x2F;~arnold&#x2F;research&#x2F;80-20&#x2F;</a><p>including the code. It&#x27;s interesting!

“Things worthwhile generally don’t just happen. Luck is a fact, but should not be a factor. Good luck is what is left over after intelligence and effort have combined at their best. Negligence or indifference are usually reviewed from an unlucky seat. The law of cause and effect and causality both work the same with inexorable exactitude. Luck is the residue of design.” -- Branch Rickey

I&#x27;d like to see a model which separates talent into many constants:<p>* job&#x2F;income talent<p>* exploiting luck talent<p>* avoiding unlucky event talent<p>* mitigating unlucky event talent

If you don&#x27;t even have the ability to quantitatively differentiate luck and talent, what is the point in developing an economic model completely dependent on those two things?

Appealing to luck is absolutely unscientific.