How big a factor does luck play in investment success?


Related content from my books

In my book “The Rules of Super Growth Stocks Investing“:

  • Section 1-1
  • Sections 1-4

And in my book “The Rules of 10 Baggers“:

  • In Sections 1-2, we discuss in detail for readers how big a factor does luck play in investment success? You are welcome to refer to this important issue.

Buffett’s view on success

Inspired by boat trackers

In 1995, Buffett and Bill Gates traveled to China for the first time, he saw boat tracker who had been pulling fibers for a living in the Three Gorges of the Yangtze River for generations. He himself is glad that he was born in the United States, which allows him to give full play to his investment talents. He said with emotion: “There may be another Bill Gates among those trackers pulling boats, but he was born here and is destined to work hard pulling boats all his life, with no chance of getting ahead. We have the opportunity to gain such wealth. Success is purely luck.”

Lucky sperm

When Buffett interviewed ABC news in 2010, he said: “I was born in the right country at the right time. Bill Gates has always told me if I had been born, you know, many thousands of years ago, I’d have been some animal’s lunch because I can’t run very fast, I can’t climb trees, and some animal would be chasing me and I say, well, I allocate capital. The animal would say, those are the kind that taste the best. You know?”

Not survive in primitive society

On February 25, 2008, students from Emory oizueta Business School and McCombs School of Business at UT Austin visited stock investor Buffett. In a series of questions and answers, Buffett responded to the students’ questions: “I was born in 1930 in the United States during the time of one of the greatest capital markets. I was born with the wiring for capital asset allocation. I had the right wiring at the right time.”

“Temperament is a large part of my wiring. I was naturally good at it, and I used some feedback to develop it better. There is nothing to be arrogant about. Gates says if I had been born earlier, I would’ve been some animal’s lunch. I can’t run, I can’t climb. I’d be talking about allocating capital and the animal would think, “Those are the kind that taste the best.” You have all won the ovarian lottery. There is no reason to feel guilty about it.”

Started very early

Buffett said in 2024 shareholder meeting: he was lucky to have settled on his niche early, and he would do the same thing that he started when he was 23 years old.

“I was very lucky because I found what fascinates me at 7 or 8 years of age,” he says.

Charlie Munger’s view

“The records of people and companies that are outliers are always a mix of a reasonable amount of intelligencehard work and a lot of luck.” Charlie Munger said.

Charlie Munger shared what he believed to be the secret to success: ““It’s so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, and do a lot of deferred gratification,” he said at Berkshire Hathaway’s annual shareholder meeting in May. “If you do all those things, you are almost certain to succeed. If you don’t, you’re going to need a lot of luck.”

Charlie Munger accepted a six-hour interview at his home in Los Angeles on April 23, 2020. He mentioned: “Good partners will accompany worthy people. Everyone who believed in me when I was young and persisted to the end People are getting rich. That gives me great comfort. But I also think there is some luck involved. Of course, our outstanding performance is a combination of good luck and ability. How else could we be successful?”

Munger ever emphasized“Another thing you have to do is have a lot of assiduity. I like that word because to me it means: “Sit down on your ass until you do it.” I’ve had marvelous partners, full of assiduity, all my life. I think I got them partly because I tried to deserve them, and partly because I was shrewd enough to select them, and partly because there was some luck. “

Buffett’s success factors

Charlie Munger’s speech at the 2014 shareholders meeting, he pointed out why Berkshire can do so well? Charlie Munger points to four factors:

  • Buffett’s constructive traits.
  • Constructive characteristics of Berkshire.
  • Luck.
  • There is an unusually strong and contagious loyalty among some shareholders and other admirers, including some in the media.

Charlie Munger acknowledges the role that luck plays in Berkshire’s success. But what does he mean by Buffett’s “constructive traits”? Buffett decided to limit his activities to a few types and focus on these activities to the maximum extent, and he persisted in these practices for 50 years──He is indeed a very outstanding person.

Luck in the eyes of ordinary people

Waiting for pie to fall from the sky

Of course any success has an element of luck! But the biggest difference between successful people and most people in the world is: most people think that since success requires luck, they should stop working hard and let luck create success for them, wait for the pie to fall from the sky or enjoy the gains, and regard gambling as the only way to turn luck around in life. possible.

Sour grapes psychology

Why do most people tend to treat successful people with sour grapes? Because people tend to ignore the long-term efforts behind successful people’s success. This is an important factor that is difficult to see.

This is why Buffett’s success has been recognized by most people in the world, and many people still think that he is just lucky. My previous post, “People believe successful investors are survivorship bias cannot succeed” was discussing this issue.

It is impossible to succeed by luck alone

Don’t believe that investment can be successful by relying on luck alone. Believe in science, because stock market investment is indeed a game of chance. The difference is how do you judge which investment should you make a big bet? What it depends on is that you need to invest for a long time, work hard to filter, and have a high degree of certainty that the probability of success is very high. Assess risks and, with careful consideration, increase your chances of success.

Luck is important but not the decisive factor

Luck does play an important role in success, but it is definitely not the most critical or important “determining” factor – this is the reason for whether a person can be successful in life.

Quick judgment

In my two books, as well as my post “A investor can be sustained or not? how to verify?” are analyzed in detail for everyone. List three quick and easy ways to judge an investor’s success

credit: Inc Magazine

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