If you’re so smart, why aren’t you rich? Turns out it’s just chance

an article by Emerging Technology from the arXiv [MIT Technology Review via 3 Quarks Daily]

The most successful people are not the most talented, just the luckiest, a new computer model of wealth creation confirms. Taking that into account can maximize return on many kinds of investment.

The distribution of wealth follows a well-known pattern sometimes called an 80:20 rule: 80 percent of the wealth is owned by 20 percent of the people. Indeed, a report last year concluded that just eight men had a total wealth equivalent to that of the world’s poorest 3.8 billion people.

This seems to occur in all societies at all scales. It is a well-studied pattern called a power law that crops up in a wide range of social phenomena. But the distribution of wealth is among the most controversial because of the issues it raises about fairness and merit. Why should so few people have so much wealth?

The conventional answer is that we live in a meritocracy in which people are rewarded for their talent, intelligence, effort, and so on. Over time, many people think, this translates into the wealth distribution that we observe, although a healthy dose of luck can play a role.

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Hazel’s comment
You will need a modicum of maths skills to understand parts of the argument but that luck plays a large role in the acquisition of wealth is something we can all understand, and most of us resent because we are not the lucky ones.

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