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5 Ways to Create Luck in Investing and Life

A wise man once said, “I am a great believer in luck. The harder I work, luckier I get.”

Believers in this saying usually belong to the meritocratic school of thought. They claim, “If you’re good, you don’t need luck.”

If you’re successful it’s a natural human tendency to assume the credit for your success. After all, you must have worked hard for it and you surely deserve it. But when I think of my life, I have seen and met many individuals for whom, in spite of working extremely hard, success remained elusive.

Goes with saying that I have also met those who achieved great heights with relatively much lesser effort. These are the people who manage to attract much more than their fair share of luck. Usually, we look down on such people with some envy and disdain. It’s assumed that any success founded on an element of luck is inherently undeserving.

Do you know someone who always manages to find himself in the right place at the right time? Before you label him as lucky, ask yourself – do you think his luck is out of pure randomness? Perhaps he has a knack for arriving at the right place and at the right time.

Common sense tells us that luck can’t be controlled and it’s all about chance and probability. But what if someone told you that there was a way to control luck? Not in an esoteric way but in a rational way? If you feel like scoffing at such an idea, I would urge you to have an open mind. Just for the sake of curiosity.

Latticework of Mental Models: The Zero Price Effect

Would you buy something if it were discounted from Rs. 500 to Rs. 200? May be.

What if it was discounted from Rs. 500 to Rs. 10? Possibly.

How about if it were discounted to zero? Absolutely!

Getting something for free feels good. Isn’t it?

But don’t get too excited. Although the ‘cost of free’ is zero, it’s also a source of irrational behaviour. Remember those pile of free key chains, free pencils and notepads lying at some corner of your house? Well that pile may be harmless but there are other situations where this irrational affinity for FREE stuff can cause us to make bad decisions. The Zero Price Effect says that we often pay too much when we pay nothing.

I regularly give in to this zero price effect in my day to day decisions. Amazon offers zero shipping charges if I make a minimum purchase of Rs. 499. Every time I order a book which costs less than 499, I end up buying another book (which I don’t plan to read) just to avail the free shipping offer. I just can’t let go off the free offer.

So what explains our unusual love for FREE! stuff?

Latticework of Mental Models: Antifragility

As a kid, one of the most fascinating thing I ever witnessed while conducting my own zoology experiments, was to watch a lizard leave it’s tail behind.

I am sure many of you must have found it intriguing that a lizard, if threatened, can voluntarily let go of its tail. It’s common in many lizard species to shed a part of their tails. It’s a survival mechanism. The trick allows these reptiles to escape when captured by the tail by a predator. The detached tail writhes and wiggles, creating a deceptive sense of continued struggle, distracting the predator’s attention from the fleeing prey animal.

It’s a marvellous self-preservation mechanism that evolution has given to lizards. And what’s more fascinating is that the lizard can grow that tail back in a matter of few weeks. What a robust way to deal with loss!

If that sounds cool then you must also know about Hydra. It is a serpent-like creature from Greek mythology. Hydra grows two new heads every time you cut one off. In Indian mythology, there is a similar character called Raktavija. A demon (asura) who who has the magic boon that every drop of blood shed from his body gives rise to another Raktavija (literally the blood borne).

These apocryphal characters are very important metaphors to improve our understanding about fragility and robustness.

What is fragile? Something which breaks or disintegrates easily when subjected to a stress or disorder. Isn’t it?