The simulation is run with the "events" wandering around randomly. If an event "hits" an agent, the agent doubles their capital (C_k) with probability T_k, trying to encapsulate the idea of "when preparation meets opportunity". In other words an agent's capital doubles proportional to their "skill" if a "lucky" event hits them.
An agent's capital is halved if an unlucky event hits them.
After running the simulation for a certain amount of time, a Pareto distribution is observed for the distribution of capital (C_k). That is, with an initial distribution of "skill" as Gaussian/Normal, the wealth distribution that results is power law.
I avoided it when I first came across it because I was worried (based off of the subtitle) that it'd just be fodder for learned helplessness. It turned out quite good though, and anything but (unless you're a movie studio executive).
Richard Wiseman argued quite convincingly that luck is mostly self-made.
In the famous picture-counting experiment, people were grouped into two categories (those who were considered successful/lucky and those unsuccessful/unlucky) and given the the task of counting the number of pictures in a newspaper.
People in the "lucky/successful" group found the correct number in less than half the time it took people in the "unlucky/unsuccessful" group.
There was a small footnote in the front page of the newspaper: "This paper has 47 pictures."
Guess which group was more likely to notice that.
I'm sure though, that if someone finds a group of successful people (even billionaire level), I can easily find a group of poor/unsuccessful people who will beat them at any specific task.
It's no coincidence that people often complain about their boss being an idiot. It's probably true. People don't get into leadership roles because of their talent or intellect - They get lucky; right company, right time.
We need more studies to back up this claim though.
Which misses the point. Of course you have to be good AND lucky to succeed. But not everyone can be lucky. So think of that the next time you're looking a few rungs down the ladder.
However, I'm not advocating a cynical mindset. I'm advocating a compassionate one, and a realistic one. If you don't think luck matters, you can delude yourself into thinking the people below you didn't work hard enough, or that you must be especially talented and driven to have gotten where you are.
I've also seen people hurt themselves with that mindset. The guy who risks everything on some business venture that's doomed to fail, yet he thinks he can beat the odds because he's smarter or more hard-working.
How about having an absurdist approach towards luck. "I'm probably going to fail, and I'm going to do it anyway." It's honest, it's compassionate, and it doesn't discourage you from trying the impossible. That's how I think, and it's worked well for me.
Attributing things too much to luck in your own endeavours might lead to learned helplessness, among other things. Whereas assuming that the bum on the streets quite possibly got into his predicament because of bad luck seems like a safer and more compassionate assumption to make.
But factually speaking, I'd say much more than we'd like to admit is out of our control, which is one of the reasons why I am in favor of societies with strong safety nets and hefty base-line of compassion.
The population distribution need not be normal.
It's also interesting that regardless of anything, in the end your genes and where/when you were born determine pretty much your whole life, and that's just luck. In the end success attribution to anything but luck is just ego.
One can be talented at many different things. Perhaps the people at the top were talented at a less obvious but more relevant skill than those who didn't "succeed".
Looking strictly at monetary success, people who succeed purely and obviously by luck (lottery winners) generally do not stay successful very long. They quickly lose their money.
AFAIK, the bankruptcy rate for people who get rich via working on something is far less than people who were randomly assigned riches. This would seem to imply that the former are doing something differently.
Interestingly, your genes arguably determine (and at the very least heavily influence) your talent also, implying that having talent itself is a result of luck.
That’s why I don’t like that thinking. I want to believe that you’ve were given a spectrum from a start and that you can move in that spectrum if you want to by exposing yourself to luck (you’ll probably say: depending on your genes...)
Anecdotally, I knew two identical twins who were both obese. They both tried to diet, but one always relapsed, while the other got serious and lost weight. Ultimately only one of the twins was "successful" at getting down to a healthy weight, while the other "failed".
Is it just luck, then, that one of the twins was born with more mental fortitude? Is that your logic?
Now, the idea that we are not a meritocracy is basically common knowledge, it seems that more or less everyone (even among the rich) accepts that this is the reality.
I don't think that society has ever been in such a state of economic self-awareness before.
Unfortunately, all this doesn't seem to change people's attitude towards wealth; if anything, the rich are getting even richer and the poor are literally being wiped out in the opiate epidemic.
It seems that luck plays a bigger role than ever and yet the consequences of winning or losing are becoming more extreme at the same time.
I wonder if they're measuring the right kind of input though. IQ is distributed in a bell curve but that is one input. There is hard work, common sense, ambition, and energy. I wonder if you have a multi dimensional bell curve as inputs, you may end up with a power distributed output (all the elements have to line up for success).
Although, as someone pointed out, talent too is often a matter of luck.
It seems to me that if the most talented are the most wealthy (etc. for the remainder of the people), then even if the distributions are not the same, talent can still determine wealth (?)