To succeed, you have to be lucky.  To be lucky, you have to go on lots of adventures.

I’ve just been re-reading one of my favorite thought-provoking – and sometimes irritating – books, The Black Swan.  One of Taleb’s characteristically sharp remarks jumped out at me.  “I disagree,” he says, “with the followers of Marx and those of Adam Smith: the reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill.”

Now, there is so much packed into this thought that I hardly know where to begin.  Did Adam Smith really claim that the wealth of nations was built on incentives?  This is a vulgar, modern, New York-centric view of free enterprise, whose true pillars are free trade, expansion of the market through increased reach and personal wealth, specialization, consumer sovereignty, the absence of large, intrusive and parasitical government, an independent and powerful framework of law, depth of autonomous social institutions, and huge variety of small and large companies.

But let that pass.

What Taleb is dead right about – and what nearly all supporters of free enterprise miss at their peril – is the absolutely cardinal role of trial and error in making the economy swing.

Another way of saying it is that luck is at the heart of capitalism and of any well-functioning economy.   Luck is also at the core of any really vibrant society or individual life.

Trial & Error is King

Nearly all experiments fail.  This is true in the laboratory, in politics, in society – remember communes? – in our personal lives, in the arts and literature, and, above all, in business.  Life and learning are chock-full of dead ends.

Perhaps the best illustration is nature and the evolution of life.  For every species that has endured, there were myriads of cruel extinctions.  For every planet that has worked in terms of sustaining intelligent life, there are millions that have not.

No inventor found his or her fame and fortune at the first attempt – it usually takes hundreds or thousands of experiments to make a breakthrough.  And for every scientist or inventor you have heard of, there were thousands who toiled all their lives to come up with a great product or insight – and never reached the Promised Land.

In business, we are used to the idea that most new ventures fail, but it is far worse – or perhaps better – than that.  Even the new businesses that survive are usually inconsequential; they neither change the world in any noticeable way, nor make their founders rich.  To make a dent in the universe is incredibly hard.  It is good to ignore this plain fact.  If we realized the odds against achieving anything considerable, we would all stay in bed.

Sadly, majestically, the 80/20 principle – soon to be rebranded the 95/5 or 99/1 principle – rules over all.  To arrive at the sunlit uplands of life, the universe, and everything, requires a stupendous amount of experimentation and failure; and in the end, for any kind of big leap forward, a quite astronomical degree of good luck.

But hold on, help is at hand.

Luck is a strange, paradoxical concept.

If you think about it hard enough, the distinction between luck and non-luck is vanishingly small.  Why?  Because it is possible to become systematically lucky.  This is almost a skill bordering on genius, but it is available to anyone.

The lucky people in life, society, and business are not the cleverest, nor the best connected, nor the most hard-working and persistent.  The most successful are the luckiest.  Yet, the luckiest are the experimenters – the folks who pull the handle of chance most creatively and most often.

The most successful are those who go on lots of adventures – mental, physical, and spiritual.  We can see this at the level of society, of business, and of individuals.

How Cities and Localities Can Create Adventure Zones

Trial and error takes many forms, but its single most potent incarnation is a new business enterprise.  Every such venture creates, at least for a time, employment, new opportunities, and learning experiences for individuals and teams.  A new company trials new consumer or business-to-business products and services, and sometimes new technologies or applications of technology; and it proves or disproves the existence and value of a new market.  Every new business provides lessons for subsequent ventures.

Clearly, however, the greatest benefit comes from having successful ventures, and, even more important, developing a whole ecosystem around them.  Once established, the ecosystem itself creates success, as ventures nestle within a benign, ever-expanding home.

There is something thrillingly local about such ecosystems.  Innovation is easier and strongest when there are several related networks in a particular narrow zone, than when there are isolated firms dotted here and there.  This is how large leaps are made.  In the industrial history of America it was steel in Pittsburgh, cars in Detroit, then, for example, banking in New York, medical equipment in Boston, and so on.  The half-rural enclave of Santa Clara County, better known as Silicon Valley, packs the world’s heartland of electronics innovation into a very small region.  It is the model for any other successful adventure zone, anywhere in the world.

In Silicon Valley success is local, physical, personal and contagious.  How come?  The answer probably comes best from British economist Alfred Marshall, writing way back in 1890:

Great are the advantages which people following the same skilled trade get from one near neighbourhood to one another.  The mysteries of the trade become no mysteries at all, but are as it were in the air … if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas.

The key element in the spread, amplification and adaptation of good new ideas is face-to-face discussion, just as it was a century ago.  Knowledge is “in the air”.  This doesn’t mean cyberspace; it means very local air.  Anyone who has worked in Silicon Valley knows this.  As the Spanish sociologist Manuel Castells says:

Silicon Valley kept churning out new firms, and practicing cross-fertilization and knowledge diffusion by job-hopping and spin-offs.  Late-evening conversations at the Walker’s Wagon Wheel Bar and Grill in Mountain View did more for the diffusion of technological innovation than most seminars in Stanford.

What regions and cities need is a local equivalent of Silicon Valley – there are several reasonably successful imitators, but there need to be many more.  Whether such zones are high-tech or no-tech, or both, they should be the first priority of any nation’s economic policy, because new ventures alone can provide an increase in sustainable employment and high future profits and cash flow – these will not come from big corporations or government or quasi-public entities, all of which are increasingly parasitical on the wealth-creating entrepreneurial sector.

But how to create such hubs of adventure?  It is relatively easy to make zones bigger and stronger once they exist, but seeding them is hard.  What is needed is a kind of concentration of the tribe of entrepreneurs in any one country or smaller area – we need to shepherd entrepreneurs from similar or diverse industries into a small zone, so that they are forced to rub shoulders and learn from each other.

How can this concentration be achieved?

Cities or districts such as counties should have the power to offer everything that will attract new and young ventures into the zone – science parks, excellent office and facility space that is rent-free for a few years, subsidized equity and loans, low taxes and no red tape, together with a really attractive social scene – cafes and restaurants, gyms, bars, and quirky shops should already be in situ by whatever means necessary.   Ideally these enclaves should have no taxes on corporate income, reduced flat-rate income taxes for all employees of small companies, and no capital gains tax either for investors or entrepreneurs and their staff.  Of course, there would be a loss of tax revenues to the national exchequers, but these would be more than made up by the prosperity that, before long, would ooze out of the entrepreneurial hotspots into the economy as a whole.  Unemployment would fall as job-seekers were attracted to the new zones, not just by jobs but also by the buzz pervading the place.  To further stimulate the influx of talent, the zones should have the freedom to grant work visas – valid only within their areas – to qualified entrepreneurs and investors from around the world.

Luck congregates in certain places, so to be lucky, we must go to where luck is abundant – and create more such places.   In my next post – on June 7 – I will turn to how individuals can take their lives to a new level by deliberately cultivating lucky adventures.

Image credit – Pixabay

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  1. Testard says:

    Currently reading The Black Swan for the first time; can’t help but taking notes :

    “-The Black Swan phenomenon is very useful for those prepared to take a chance”;
    -“In life, you either bet that the Black Swan will happen, or that it will never happen”;
    -Maximise serendipity; “you search for what you know (India) and you find something you didn’t know was there (America)
    -Creating luck by sheer exposure
    -Luck favors the prepared (Pasteur)
    -The best way to get maximal exposure is to keep researching,

    -and finally : “the ultimate test whether you like an author is if you’ve reread him”

    So, you like him…

    • Richard Koch says:

      All true. I plead guilty to liking him!

      Fooled by Randomness, his first book on this theme, is probably better than The Black Swan – but there is a lot of overlap.

      • Wow!! What a wonderful post!! Lots of information, great pictures!!! Always learning here…Look forward to reading you at Blratootter!Hgve a great week; we'll be busy with the X-mas celebrations…

      • serenity, contentment and focus will be my watchwords for today. The cat does have to be sleeping – not purring, rustling among the notebooks, weaving precariously around the objects on your desk, hovering by the keyboard…..serenity…contentment….focus

      • Miriam, yo no conozco las paciencias, pero estas se ven geniales….no será q los recuerdos a veces nos engañan? y si no, como tu bien dices, les cambias de nombre y a esperar q un alma caritativa te pase la receta correcta…Un abrazo y animos, q seguro q al final encontraras tus paciencias…

      • Ok, I feel like I’m sounding like a broken record, but for real, I think our taste buds are identical twins. My bookmarks folder is saturated with your posts. This one’s joining them!

      • True but thats revisionist history. Maybin was the center piece of that deal at the time he might have been the #6 prospect in all of baseball. Miller may have been #10. Now history shows they had that wrong.Also Miguel had an alcohol problem and he was about to start making big money. Those issues don’t exist for Stanton.

      • Hi Brendan,a handy utility. However, have you left out a “last” function i.e.> binary_eval(two.out.of.3.marker[C!=”A”],Test2)AUC = 0.807Predictions seem to be real-valued scores, so using naive cutoff 0:Error in binary_eval(two.out.of.3.marker[C != “A”], Test2) : could not find function “last”last<-function(x){ sort(x)[length(x)] }seems to fix it and gives sensible plots so I am assuming that is all that last doesByeRob

      • La tua sicurezza in questo caso mi porta a pensare che tu sappia cose che noi comuni mortali non sappiamo…E' chiaro, altrimenti perché la CIA lo pagherebbe più di noi? E' il valore aggiunto…

      • November 5, 2009 Thanks Glen. I think your two posts are a good read on this. The six thoughts especially.On the Athanasius quote, which I like, I guess I’m also wondering whether, even pre-lapsarian man was ‘supposed’ to “look into the height of heaven” through the lens provided by special revelation (such as Yahweh’s words and self-revelation in Genesis 1-2). We always needed special revelation, we always needed Yahweh’s personal covenantal self-disclosure in words.?Heather, you’re bang on about lenses. We all have them. We can’t not have them. They impact everything.

  2. I’ve had the same thought about sparking growth through tax breaks and resource discounts like rent. The visa options and employee tax breaks are brilliant, too. In this climate, I’m sure a lynch mob would show up if the investors didn’t pay taxes on the gains. Bernie’s crew would make quite the scene about it 😉

    • Richard Koch says:


      On taxes, why should anyone pay tax until they spend the money? It makes no sense at all.

  3. Excellent article. It is amazing how in most autobiographies of successful people luck is rarely give its due credit. But agree that both a willingness to take on adventure and who/where you spend most of your time can massively contribute towards being luckier.

    • Richard Koch says:

      It’s a dialectic between putting yourself in the path of luck, being lucky, and riding the luck to the utmost. Those who ignore the existence of luck can’t notice or ride it, so they get only one-third of the benefit!

      We all rewrite our past and tell ourselves stories that are just not true. But hey, they make us feel good and often increase our effectiveness.

  4. Hi Richard,
    you wrote about star principle and the simplify principle, they work every time, there is no room for luck.

    I think we can outsmart the randomness.

    In business the best way is to copy successful business model and then just make one thing better, cheaper or simpler.
    Starting from scratch with trial and error is painfull, if there are millions of combinations and nobody knows which one will work.
    There is also no need to reinvent the wheel. Evolution also uses what works and makes only small improvements.

    • Richard Koch says:

      A fair challenge.

      The principles do work every time, but there is still always luck.

      For example, what if Ray Kroc had never met the McDonald brothers precisely at the time that they wanted to take life easier?

      He might have ended life as a milkshake-machine salesman.

      His genius was to realize they had a gold-mine and to move heaven and earth to get control of it. He made the most of his luck, but he still needed it in the first place.

      Of course, he never read SIMPLIFY. Maybe it’s different now!

  5. Richard, I was contemplating the idea of 99/1. I remember you had said something about it so I searched it out. Here it is in this post.

    “Sadly, majestically, the 80/20 principle – soon to be rebranded the 95/5 or 99/1 principle – rules over all.”

    I understand 80/20 but i’m curious to know your thinking behind the shifting balance?


  6. Matthew Higgs says:

    I’ve reflecting on your great idea of going on adventures and my first reaction is of course Im adventurous. But then I realized that no I have only really been a tourist not an adventurer. Adventurers take risks , tourists don’t.
    With Risk there is a potential for personal pain which not many confront.

  7. Hi Richard,

    This is a very interesting thought and these articles may be of interest as Tony Hseiu (CEO Zappos) has become quite passionate about “serendipity” and “collisions” trying to create environments to foster this “luck creation” such as his downtown Las Vegas project.

    Personally I find this happens at business events. For example one chance off handed idea is enough to change the entire direction of you business or personal pursuits.

    For example, one off handed thought while I saw you speak Richard focused in my investment strategy which otherwise was still trying to find its path.

    Thank you for the article.




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