Skill…or just luck of the draw?

Blind beginner’s luck

I’ll never forget the first time I set foot in a casino as an unworldly teenager, as the mate I went with immediately won an improbable 35 to 1 payout on a single number bet.

I strongly suspected he had no idea what he was doing, but no matter, we were well fortified and so we leveraged this outrageous early fortune into a series of spectacular wins at the wheel.

Of course, the next time we visited the very same establishment we promptly gave back all of our loot through a series of ill-advised Martingale bets, which was enough to put me off roulette pretty much permanently.

Luck versus skill

Roulette is a game of pure chance with the odds tilted in favour of the house, while at the other end of the skill spectrum lies a game such as chess.

I rank myself as a fairly decent chess player, but a Grandmaster would defeat me 100 times over 100 games due to their prowess & vastly superior aptitude for the board.

The world of investing lies somewhere between the two extremes of pure luck and pure skill.

Anyone can achieve average investment returns once they have a basic competence, but it’s not only a game of luck as some experts consistently outperform.

On the other hand, some of the greatest investors of all time have periodically lost significant sums of money, so there’s clearly quite an element of chance involved too.

A challenge related to financial outcomes if that we tend to like attributing successes to skill, but then dismiss losses or poor results as falling due to bad luck.

In other words, there tends to be a disconnect between what actually happens and how we interpret those same events in our own minds.

Tilting the odds

As an investor you can’t control the returns you achieve, so you must focus on the process, continually improving, learning from mistakes, and refining your skills.

Buying at sensible prices and limiting the downside is likely to help.

To the manor born

Whether or not we care to admit it, a great deal of success in life can, on average, be attributable to the circumstances of our birth.

For example, I’m by no means from a wealthy family, but simply by being born in a developed country & having parents that insisted on a thorough education instantly leapfrogged me in the uppermost decile of life’s lottery.

There’s little to be gained through envying those born into greater privilege, however.

For one thing they may be unable to achieve the same satisfaction as someone that’s steadily ticked off life’s goals from a lower base.

You can’t control the luck you’re born with; but you can resolve to maximise the opportunities afforded to you through life.

Oh, and give those casinos a wide berth 🙂