Is it Better to Be Lucky than Smart?

It certainly is cheaper and easier.  But is it BETTER?

The main difference between lucky and smart is that smart is more likely to be able to repeat than luck.

But I think that there are two different types of smart, and one is much better than the other.

  • The first type of smart is able to discern patterns and trends.  This type of smart can do momentum trading.  They figure out what works in this phase of the cycle of the part of the world that they are in and they discern how to take advantage of one aspect of the trend.
  • The second type of smart is able to discern not just the trend, but they can see that the trend will not last.  So they can plan for the change in trend.  This type of smart is adaptable.
  • The lucky see nor care about trends or changes in trends.  What they choose works.  Some of the lucky are able to convince themselves and those around them that their “gut” can really pick out the right answers.  Those are the dangerous lucky.

If you are led by the lucky, your firm might fail at any time.  The formerly lucky CEO will not have a clue as to why they failed. Over time, they will have relied on their gut more and more and their success will get them more and more authority and autonomy.  People forget that if all business decisions were random coin tosses, someone will guess the right toss 10 times in a row with nothing more than luck behind their string.

If you are led by the Momentum leader, your firm will thrive as long as the wave that they identified keeps going.  In some cases, the leader and the firm come to believe that the trend that you follow IS the way that they world will be forever.  More and more of the company becomes dependent on the assumption that the trend continues.  When the trend fails, the company will falter or fail.  If enough people and enough firms have been following that same trend, the entire economy might falter.  If a trend last long enough, then it is quite likely that more and more people and firms will notice the trend and start to work on the assumption that the trend will continue.

But if you are working in a firm with an adaptable leader, then the firm will not do as well as peers during the peak of the trend.  Your firm will not be putting all of your eggs into the basket of trend immortality.  Your firm will be looking around for things that will work even if the trend changes.  Your firm will have the resilience to weather the change in trend and perhaps some business activity planned that will work even in a new environment.  Your firm will be working smart towards the long term.

So is it better to be lucky than smart?  Not in the long run, not in my mind.

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