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Hitler Had Something Lehman Lacked -- Gobs of Dumb Luck

April 01, 2012

"Luck"

The book jacket of ``Luck: What It Means and Why It Matters'' by Ed Smith. Source: Bloomsbury via Bloomberg

In 1931, two men were hit by cars, one in New York, the other in Munich. Winston Churchill and Adolf Hitler survived to tell the tale and change the fate of nations.

“For a few seconds, perhaps, I held the history of Europe in my rather clumsy hands,” John Scott-Ellis, the late baron and racehorse owner, liked to say, describing the day his red Fiat almost mowed down the future Fuhrer in the Bavarian capital.

“He was only shaken up, but had I killed him, it would have changed the history of the world.”

Lives can turn, for better or for worse, on the outcome of such chance encounters, writes Ed Smith in “Luck: What It Means and Why It Matters.”

Serendipity molds everything from sports and schooling to politics and finance, argues Smith, a former international cricketer who went on to write editorials for the London-based Times. No matter how hard we work or how much faith and willpower we muster, the vicissitudes of chance are with us.

“The intervention of luck is like a boulder that diverts the course of a stream: the course is changed -- and stays changed forever, whatever happens downstream,” he writes. “By then it is a different life that is being altered. Luck not only intervenes; it persists.”

Baseball Burnout

Employing a technique and style that will be familiar to readers of Malcolm Gladwell, Smith illustrates his argument with personal anecdotes and piquant stories from athletic contests, academia, history and literature.

We learn how being born in a small city increases a boy’s chance to play major league baseball: He’s exposed to less competition, reducing the risk of premature specialization, injury and burnout.

We’re reminded, too, of why oil was found off Norway in 1969: A prospector had prepaid for a rig and, unable to sublease it, kept drilling long after being ordered to stop. A hole-in- one on the golf course, it turns out, results from a less-than- perfect shot.

Some of what Smith calls “luck” boils down to the good fortune of being born in an advanced nation -- what Warren Buffett calls winning the “ovarian lottery.” Nor does he dispute the view that practice makes perfect, allowing hard workers to make some of their own luck.

Roger Federer

Yet toil and sweat aren’t enough, Smith says. He cites the international tennis circuit that Ivan Lendl once dominated because he worked the most. Now that everyone trains hard, natural talent is what often gives a player such as Roger Federer an edge, he writes.

The downfall of hedge fund Long-Term Capital Management LP in 1998 illustrates the danger of ignoring chance, Smith shows, while electoral victories depend more on the strength of the world economy than on the competence of politicians at home. References are made to the works of investor Nassim Nicholas Taleb, playwright Tom Stoppard and scientist James Watson.

As in Smith’s previous three books, the lessons of sports dominate, and the recourse to cricket -- which entertained this reader -- may alienate those with little interest in Andrew Strauss’s random walk to the England captaincy. The placing of Lehman Brothers Holdings Inc. (LEHMQ:US)’s collapse in 2007 rather than 2008 also jars.

‘Bad Luck’ Banned

Smith’s thesis -- that the role of luck carries more weight than we care to admit -- is one he himself dismissed in his days as a professional athlete, which included a brief spell batting for England. For him, luck could be conquered with more practice, superstition or both. One season, his team banned its players from saying “bad luck” to each other.

A few years later a broken ankle ended his cricket career. Forced to retire, he now accepts it may have been a lucky break: Without the accident he may have prolonged his time as a paid sportsman beyond when it made sense.

“Sometimes something bad must happen before something good can happen,” he says.

Smith’s embrace of kismet was complete when he met the woman who would become his wife -- on a train neither had planned to catch.

“There was no guiding hand of fate,” he concludes. “It was much more interesting than that.”

“Luck” is from Bloomsbury (244 pages, 16.99 pounds). It’s now available in the U.K. and will be released in the U.S. in June. To order this book in North America, click here.

(Simon Kennedy is chief international economics correspondent for Bloomberg News in London. The opinions expressed are his own.)

To contact the writer on the story: Simon Kennedy in London at skennedy4@bloomberg.net

To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net.


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