David Frum has a really interesting take on the “you didn’t build that” comments by President Obama and I think he touches on the point that really irks a lot of people (his comments certainly bothered me). Frum says:
“(Frum): Obama combines two ideas: the familiar and broadly acceptable idea in Elzabeth Warren’s speech—and a second, much more destabilizing idea.
(Obama): ‘I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something—there are a whole bunch of hardworking people out there.’
(Frum): Obama’s second idea is that success is to a great extent random, a matter of luck. You think you succeeded because you were smart or hard-working? Listen—a lot of smart and hard-working people don’t succeed.”
This perspective raises an interesting point. To what extent does luck or chance play a role in someone’s success? Obviously, it’s an important factor. Where you’re born and what kind of environment you’re born into can give someone an enormous head start on the road to success. You can’t control that. But I’m also not a big fan of the idea that we’re all just wandering through life becoming victims or successes of the universe’s random outcomes.
While luck plays an important role in one’s success I think the idea that “you make your own luck” is also a dominant force in determining outcomes. That is, you can control your own outcomes to a large degree. Yes, there are plenty of people out there who work hard. But working hard doesn’t mean you’re working better. And that’s what successful entrepreneurs and people who build things end up doing – they end up not only working hard, but working better. And they supply goods and services that are in greater demand (commanding greater financial rewards) because their products are better, not just the result of a lot of work. More importantly, this isn’t merely a random outcome. It might be on some occasions, but more often than not it is due to a superior idea or a superior approach.
I’m a big fan of the idea that you get out of things what you’re willing to put in. If you’re a jerk to people you will be treated like a jerk. If you give much to society you will get much back (these are the best kinds of capitalists). But this isn’t just about effort or luck or sitting in the office thinking that working 80 hour weeks will get you to the top of the food chain. It’s about understanding that you make your own luck through the way you calculate risks, the way you plan your approach to generating output and the way you work better. Sure, there’s an element of luck in everything we do, but we are not just floating through our lives randomly becoming victims or successes of things we can’t control. To a large degree, we determine the outcomes of our lives. We determine what we build and how we build it.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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