Luck

In One Sentence

Success always takes some luck; own the whole market, and you get a small share of everyone's good fortune.

Why It Matters

This isn't telling you not to work hard; it's about putting your effort in the right place: run into less bad luck, and notice more good opportunities. At work, you can rely only on your own luck, but in investing you can borrow other people's. Nobody can guess who the next giant will be; once it grows big, the index will take it in on its own.

One Number

In 1935, Grace Groner paid US$180 for 3 shares of the company she worked for. She held them for 75 years, and they grew to about US$7 million. But she bet everything on a single company, so luck played no small part (ABC News 2010 · Chapter VII).

In the Book

Chapter VII starts its discussion of luck with the "game of life" simulation, then tells the stories of three ordinary people. The Preface says this path depends on time, not luck.

Go Further

• Broad-market index ETFs Buying the whole market is like placing a small bet on everyone who creates value.
• André Kostolany He listed luck as one of the four things an investor needs.
• Single-stock risk Betting on a few stocks depends heavily on luck; switch to the broad market, and you remove the risk of picking the wrong company.
• Patience and discipline What's worth learning from the three ordinary people is frugality, patience and time.
• The timing trap Buffett said that professionals as a whole lose over the long run to amateurs who simply sit still; I think a love of forecasting and frequent trading is one reason why.