Nassim Taleb has written a wonderful book called Fooled by Randomness. It’s a book that has advice I think for people in life and of course particularly for those who are in financial markets. The point that Taleb makes is that you must distinguish between success that’s just a matter of chance or luck and success that’s down to your own aptitude. And he points out that there are a lot of people who particularly practice in financial markets who think they're winners but are really just gamblers. If you take a lot of gamblers, you're bound to have some winners because their gambles will pay off, the coin flip will go the right way for them, and the big mistake that they tend to make which they shouldn’t make is to think Oh I'm very clever, rather than I'm very lucky. It’s a big mistake because then they go on to repeat the same strategy, not realising that next time it probably isn’t going to work out, it was just luck the first time.
Now I think that is brilliant advice, everybody should read the book and it’s a very important finding about how we should view life and success. But the problem is that when you get away from the financial markets, and financial markets are quite simple, right, you can sort of look at probabilities and you can look at the way markets behave in a very exact mathematical kind of way, when you get out of the mathematics of all of this to more complicated areas of life, it becomes very, very difficult to decide what is luck and what is skill. And the reason is that actually luck is where an opportunity meets some preparation. It’s where someone who is ready to take an opportunity does so and has that opportunity. And do you really want to say it’s the opportunity that was just luck, or do you really want to say it’s their preparation and willingness to take the opportunity that is skill? The truth is it’s impossible to draw a line between the two.
So always remember that where you can draw a line between luck and skill, understanding which side of the line you're on is very important, but where you can't draw a line, never be complacent about how skilful you are, always remember that a wind in the sails is worth an awful lot, but always remember that luck is more than just luck, it’s also about preparation.
That’s my view; you can join the debate with the Open University.