Build your character in a way so luck becomes deterministic.
Nivi: I think it’s pretty interesting that the first three kinds of luck that you described there are very common cliches for them that everybody knows. And then for that last kind of luck that comes to you out of the unique way that you act, there’s no real cliche for it.
So, for the first three kinds, there’s “dumb luck,” or “blind luck.” That’s the first kind of luck. The second kind of luck there’s the cliché that “fortune favors the bold.” That’s a person who gets lucky just by stirring the pot and acting. The third kind of luck, people say that “chance favors the prepared mind.”
But for the fourth kind of luck, there isn’t a common cliché out there that matches the unique character of your action, which I think is interesting and perhaps an opportunity and it also shows that people aren’t necessarily taking advantage of that kind of luck the way they should be.
Naval: I think also at that point, it starts becoming so deterministic that it stops being luck. So, the definition starts fading from luck to more destiny. So, I would characterize that fourth one as you build your character in a certain way and then your character becomes your destiny.
Build your character so opportunity finds you
One of the things I think that is important to making money, when you want the kind of reputation that makes people do deals through you. I use the example of like, if you’re a great diver then treasure hunters will come and give you a piece of the treasure for your diving skills.
If you’re a trusted, reliable, high-integrity, long-term thinking deal maker, then when other people want to do deals but they don’t know how to do them in a trustworthy manner with strangers, they will literally approach you and give you a cut of the deal or offer you a unique deal just because of the integrity and reputation that you have built up.
Warren Buffett, he gets offered deals, and he gets to buy companies, and he gets to buy warrants, and bailout banks and do things that other people can’t do because of his reputation.
But of course that’s fragile. It has accountability on the line, it has a strong brand on the line, and as we will talk about later, that comes with accountability attached.
But I would say your character, your reputation, these are things that you can build that then will let you take up advantage of opportunities that other people may characterize as lucky but you know that it wasn’t luck.
Nivi: You said that this fourth kind of luck is more or less a destiny. There’s a quote from that original book that was in Marc’s blog posts from Benjamin Disraeli, who I think was the former prime minister of the UK. The quote to describe this kind of luck was, “we make our fortunes and we call them fate.”
You have to be a little eccentric to be out on the frontier by yourself
There were a couple other interesting things about this kind of luck that were mentioned in the blog post, I think it’ll be good for the listeners to hear about is that, this fourth kind of luck can almost come out of eccentric ways that you do your things and that eccentricity is not necessarily a bad thing in this case. In fact, it’s a good thing.
Naval: Yeah, absolutely. Because the world is a very efficient place, so, everyone has dug through all the obvious places to dig and so to find something that’s new and novel and uncovered, it helps to be operating on a frontier.
Where right there you have to be a little eccentric to be out on the frontier by yourself, and then you have to be willing to dig deeper than other people do, deeper than seems rational just because you’re interested.
Nivi: Yeah, the two quotes that I’ve seen that express this kind of luck in addition to that Benjamin Disraeli one, are this one from Sam Altman where he said, “extreme people get extreme results.” I think that’s pretty nice. And then there’s this other one from Jeffrey Pfeffer, who is a professor at Stanford that, “you can’t be normal and expect abnormal returns.” I’ve always enjoyed that one too.
Naval: Yeah. And one quote that I like which is the exact opposite of that is, “play stupid games win stupid prizes.” A lot of people spend a lot of their time playing social games like on Twitter where you’re trying to improve your social standing and you basically win stupid social prizes which are worthless.
Nivi: I guess the last thing that I have from this blog post is the idea that by pursuing these kinds of luck especially the last one, basically everything but dumb luck, by pursuing them you essentially run out of unluck. So, if you just keep stirring the pot and stirring the pot, that alone you will run out of unluck.
Naval: Yeah, or it could just be reversion to the mean. So, then you at least neutralized luck so that it’s your own talents that come into play.