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Skill vs luck: who really deserves the rewards from success?

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Which is more important when it comes to rewarding success: that the achievement was earned through skill, or that it came courtesy of a lucky break?

Take football (soccer), for example, where the aim (like most games) is to score more goals than your opponent. What if a player aiming for goal strikes the post and the ball then goes into the net – is that down to skill or luck?

That’s something we looked at in a recent study. We isolated situations in which negligible differences in performance gave rise to very different outcomes in a game: that is, when players hit a post or crossbar while trying to score.

We collected the data from more than 13,000 shots that hit a post – in 10,679 cases the ball bounced away, but in 2,387 cases it deflected into the goal.

Using the location from where the shot was taken, we matched all scoring shots with non-scoring shots taken from a location within 45cm of each other.

We found that when comparing such shots, there are no visible differences in a player’s skill or performance. But the effect of this single shot on the assessment of their match performance was substantial.

Praise to the goalscorer

Players scoring goals from such shots had a much higher match rating from sports journalists, and their coach gave them more playing time in their next match.

This effect is not explained by a better performance after scoring or a better expected performance in the next match. Basically, a player with a successful goal was overly rewarded relative to a player with a very similar shot that missed by just a few centimetres.

The beauty of this exercise is that it allows us to isolate a situation in which the difference in performance between success and failure is very small.

In any success there is an element of luck: being at the right place at the right time, with the right people, having made choices that ended up having an unexpectedly good outcome.

Skill or luck?

Distinguishing performance from luck is an important problem when we need to know whether a successful person should be trusted and rewarded for his or her success.

For example, an employer needs to know whether achievements on a person’s resume signal skill and effort, or plain luck. A grant reviewer needs to form a view on whether a researcher with a good publication was just lucky to be part of a talented team.

Disentangling skill and effort from luck is hard, because success is an imperfect signal of performance. Skill and effort are typically imperfectly observable.

It is often impossible to know all the potential choices that could have been made to assess whether a decision was the best one, given the available options at the time. And it is usually impossible to know whether somebody could have tried harder in a given situation.

Economists have recognised that luck and performance are imperfectly separable. As a consequence, they advise to reward or sanction imperfect signals of performance in order to provide incentives for performance.

This conclusion is stated in the “informativeness principle” from economist and 2016 Nobel Prize winner Bengt Holmstrom: imperfect signals of performance should be rewarded to the extent that they are likely to signal performance.

To return to our football example, there is clearly an element of unpredictability in matches, with even the best teams at risk of losing against a weaker team.

But the evidence suggests that success is often overly rewarded, as if the element of luck in success tended to be neglected.

Reward breeds more reward

Our study suggests this over-rewarding of luck is likely to be present in a wide range of situations.

For example, a study of success in research careers found young researchers in the Netherlands who just qualify for a postdoctoral grant were 50% more likely to become a professor than those who just missed out.

This difference in success was not due to a greater publication record in the years following the award. Nonetheless, they secured much more funding afterwards, perhaps partly because their early award of a postdoctoral grant was interpreted later on as signalling that they were better researchers.

In the broader economic context, the role that luck plays in success tends to be underestimated.

Successful entrepreneurs are praised for their business acumen. Many of them sell books recounting how they made it to the top – and how you can too, if you follow their principles.

These books do not show you the multitude of people who tried to make it to the top, often with the same recipe, but who failed.

One of the most famous thinkers on free markets, the Austrian economist Friedrich Hayek, in his book Law, Legislation and Liberty, recognised this role of luck in economic success:

The element of luck is as inseparable from the operation of the market as the element of skill.

A measure of success

As a way to measure the role of luck in success, researchers recently created a model of economic success in which agents with different abilities faced several random events, either positive opportunities or negative accidents.

In simulations, the researchers observed that the distribution of success tended to be concentrated at the top with a few agents ending up being much more successful than the rest.

But they also found that the most skillful people were almost never the most successful. Instead, lucky individuals tended to be the most successful.

So be careful next time you are about to look up to someone for what you see as their success. Was it down to their skill and performance, or just a lucky break? And be careful not to overlook worthy performers who just happened to be unlucky.

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