How To Win The Lotto Every Day

Twitter CEO Dick Costello said,  “You start one monster company, maybe you were lucky, maybe you were in the right place at the right time. You found two billion dollar companies? You officially know what the hell you are doing. Nobody is that lucky.”

A lot of people focus on luck.  You hear people say, “I was lucky” or “Better to be lucky than good”.  People have the impression that floor traders at exchanges were successful purely because they were lucky.  Were they?

Here are four definitions of luck based on some academic research:

1. Chance I-pure blind luck.  You bought a winning lottery ticket type luck.
2. Chance II-luck that comes out of undirected action. This is right place, right time sort of luck because you took the time to get off your butt and do anything.
3. Chance III-luck that comes out of focused action. Increasing chances of being lucky by doing lots of the right sort of things. This is repeatable.
4. Chance IV-isn’t really luck but good intuition.  This sort of luck takes discipline.  It’s the kind of luck that happens when you take separate unrelated events and turn them into a meaningful whole.   This luck comes to you because of who you are and how you behave.   In fact, it’s not luck at all.  It’s called “making your own breaks”.

The beauty of that framework is that it works with anything, anywhere, any business, any hobby.

In trading, I certainly saw the four types.  One time, I had an out trade.  That’s a miscommunication with another trader over a price, a quantity, or buying versus selling.  In open outcry it was a part of the business that gave you indigestion, and insomnia.  In this out trade, I happened to make a lot of money.  That’s Chance I luck.  How do I know?  I had other out trades that cost me money.

Sometimes, there was Chance II and Chance III luck.  But the really good traders used Chance IV luck.  You’d see a bunch of different things happen, remember different patterns from different times in your career, and then take action on it.  Put on a trade, take some measured risk, make or lose money.

Venture Capital works like that too.  Why do successful investors consistently invest in good companies?  Is it luck? I’d say sometimes lucky things happen to the companies they is invest in.  But, on the whole, it’s because of Chance IV luck.

Being an entrepreneur and starting companies also works like that.  Successful entrepreneurs that do it over and over again aren’t lucky.  They are skilled.  Sometimes lucky things happen to them, but those lucky things can be chalked up to the framework above.

It’s important to try and recognize what level of luck you are getting.  Sometimes a windfall is lucky.  What if you won the lotto?  If you continue to live your life utilizing Chance I luck, you will probably lose all that you won.  It’s more important what you do with the luck after you receive it than being lucky in the first place.

In order to get to Chance IV luck, you have to perform consistently at Chance III. Chance IV can’t happen by itself.  If you want to be lucky in your job, what are the daily “right sort of things” you have to do to perform at Chance III?  Once you do that, your mind will start to put totally random things together and you might come up with an idea that could be huge.