"What we’re allowing to expire is the tax cuts that President Bush put in place for the most fortunate, the richest 2 to 3 percent of Americans." – Treasury Secretary Timothy Geithner, recently on Charlie Rose.
The Economix blog picked up the question, “Are the Rich Just Lucky?” The Tax.com blog argued that it’s not about luck: “There’s a saying that I’m fond of: Trying to blow out somebody’s candle won’t make yours burn any brighter. I’m fully aware of the growing gap in this country between the haves and the have-nots. But building class warfare by arguing that the land of opportunity has changed into the land of the fortunate few is not the answer. The tone at the top matters.” This exchange invites the question, if the rich aren’t just lucky, what accounts for their success?
Louis Pasteur said that “fortune favors the prepared mind.” Thomas Jefferson said that he aspired to see an aristocracy (that is, the class of fortunate people) based not on inheritance, but on virtue and talent. Preparation, talent, and virtue characterize many, if not most, of the people I’ve known who have earned great wealth. Also, many were characterized by a strong work ethic and a bias for action. And certainly, to the list of attributes, we might add something about intelligence. But bundling all these attributes into a person would be no guarantee of gaining great wealth. Any reader will know at least one smart, virtuous, well-prepared, talented, or hard-working person who lived a life that was solitary, poor, nasty, brutish, and short.
Luck must play a role. And I believe that to gain real success requires a certain amount of humility based on a respect for luck. Absent that, you are bound to overreach in decisions about business and life, to court disaster. Nicholas Nassim Taleb has written bestsellers dripping with disdain for those who ignore the possibility of “black swan” events. Darden’s Batten Fellow, Jim Collins in his book, From Good to Great, describes the humble leadership that such a transition requires. The Millionaire Next Door by Smith and Danko profiles economically successful people who don’t live large; they live humble.
One way to gain some humility about the role of luck is to look at the opposite of economic success, poverty. This summer, I finished reading Creating the Opportunity Society, by Ron Haskins and Isabel Sawhill. I commend the book. It grants a sobering view of the poor in the United States and the factors that contributed to their poverty. Haskins and Sawhill write, “Mobility and the chance to move ahead in life depend in large part on the circumstances into which one was born.” Genetics play a part in one’s possible advancement in society. So do diligent parents, a cohesive family, a safe neighborhood, education at least through the completion of high school, and marriage before having children—avoiding poverty is a matter of self-discipline and the luck to carry some good genes and grow up in supportive circumstances.
Of course, schools should have something to say about luck. Darden certainly does. Numerous courses address the issues of risk and uncertainty. The case studies by which we teach are realistically ambiguous enough to make even the more self-confident student anguish about “things that go bump in the night.” We gave generously last year to disaster victims (Haiti!) Our community actively supports charities such as Building Goodness in April, the Food Bank, and Shelter for Help in Emergency. We find time to be mentors and tutors in public schools. Our faculty offer trips and courses (such as Global Business Experiences and Markets in Human Hope) that widen one’s appreciation to the disparate economic outcomes in society and what one might do about them. And a group of faculty (one of them is me) is offering a pilot course this year to First Year students on Business and Success—you can bet that we’ll spend part of our time exploring the role of luck.
I’m no advocate for class warfare, higher taxes, or wealth transfers. I’ve blogged and argued that the only way we’ll cure the economic malaise in America is to grow our way out through value-creating investment and a stable business environment. But if the economically successful people aren’t fortunate, what are they? There are no “sure things” in life—except maybe death and taxes.