whether something is a learning opportunity. To reach our long-term goals, we have to improve at sorting out when the unfolding future has something to teach us, when to close the feedback loop.
And the first step to doing this well is in recognizing that things sometimes happen because of the other form of uncertainty: luck.
Luck vs. skill: fielding outcomes
The way our lives turn out is the result of two things: the influence of skill and the influence of luck. For the purposes of this discussion, any outcome that is the result of our decision-making is in the skill category. If making the same decision again would predictably result in the same outcome, or if changing the decision would predictably result in a different outcome, then the outcome following that decision was due to skill. The quality of our decision-making was the main influence over how things turned out. If, however, an outcome occurs because of things that we can’t control (like the actions of others, the weather, or our genes), the result would be due to luck. If our decisions didn’t have much impact on the way things turned out, then luck would be the main influence.* When a golfer hits a tee shot, where the ball lands is the result of the influence of skill and luck, whether it is a first-time golfer or Rory McIlroy.
The elements of skill, those things directly in the golfer’s control that influence the outcome, include club choice, setup, and all the detailed mechanics of the golf swing. Elements of luck include a sudden gust of wind, somebody yelling their name as they swing, the ball landing in a divot or hitting a sprinkler head, the age of the golfer, the golfer’s genes, and the opportunities they received (or didn’t receive) up to the moment of the shot.
An outcome like losing weight could be the direct result of a change in diet or increased exercise (skill), or a sudden change in our metabolism or a famine (luck). We could get in a car crash because we didn’t stop at a red light (skill) or because another driver ran a red light (luck). A student could do poorly on a test because they didn’t study (skill) or because the teacher is mean (luck). I can lose a hand of poker because I made poor decisions,
applying the skill elements of the game poorly, or because the other player got lucky.
Chalk up an outcome to skill, and we take credit for the result. Chalk up an outcome to luck, and it wasn’t in our control. For any outcome, we are faced with this initial sorting decision. That decision is a bet on whether the outcome belongs in the “luck” bucket or the “skill” bucket. This is where Nick the Greek went wrong.
We can update the learning loop to represent this like so:
Think about this like we are an outfielder catching a fly ball with runners on base. Fielders have to make in-the-moment game decisions about where to throw the ball: hit the cutoff man, throw behind a base runner, throw out an advancing base runner. Where the outfielder throws after fielding the ball is a bet.
We make similar bets about where to “throw” an outcome: into the “skill bucket” (in our control) or the “luck bucket” (outside of our control).
This initial fielding of outcomes, if done well, allows us to focus on experiences that have something to teach us (skill) and ignore those that don’t (luck). Get this right and, with experience, we get closer to whatever “-ER” we are striving for: better, smarter, healthier, happier, wealthier, etc.
It is hard to get this right. Absent omniscience, it is difficult to tell why anything happened the way it did. The bet on whether to field outcomes into the luck or skill bucket is difficult to execute because of ambiguity.