Editor’s Note: All of us here at The Oxford Club received some fantastic news last week: Chief Investment Strategist Alexander Green’s new book, The American Dream: Why It’s Still Alive… And How to Achieve It, has earned the title of #1 Amazon bestseller!
It’s a big honor, but if you’ve read any of Alex’s writings over the years, you know that it’s certainly not a surprise.
The most impressive part? The book won’t even be released for another two weeks!
Alex has put a ton of hard work into it, and I think this may be his best work yet.
– James Ogletree, Senior Managing Editor
One of the reasons that 70% of Americans say the American Dream is no longer attainable is that they believe achieving it is due to luck… not skill.
Is there any evidence to support this view? You might be surprised.
A few years ago, my friend and colleague Mark Skousen asked if I would debate Robert Frank at his FreedomFest conference in Las Vegas.
I agreed.
Robert Frank is a New York Times economic columnist and the author of several books, including Success and Luck: Good Fortune and the Myth of Meritocracy.
Frank puts forward a thought-provoking thesis in his book: If you have been so economically successful that your income and net worth put you in the top 1% or 2% in the country, the deciding factor was not talent, education, hard work, risk-taking, persistence, resilience or all of the above.
It was luck, plain and simple.
After reading the book, I took an informal poll of family, friends, and neighbors.
What I learned is that, with few exceptions, individuals who have experienced a great deal of economic success believe Frank’s thesis is mostly false.
They believe that hard work and persistence are the deciding factor in wealth creation.
But almost without exception, men and women who have experienced modest economic success strongly agree with it.
Psychologists would say that is because human beings tend to accumulate pride and shun regret. We tend to take most of the credit for the good things we achieve in our lives and blame negative outcomes on circumstances beyond our control.
However, I discovered another interesting pattern.
Self-described progressives tend to agree with Frank’s thesis. Self-described conservatives and libertarians do not.
This goes to the heart of political differences between the two major parties.
Democrats generally feel that economic outcomes in life are primarily determined by your group membership and your circumstances: whether you were born male or female, Black or white, rich or poor, etc.
Republicans tend to feel that, whether the hand you were dealt at birth was better or worse, your economic outcome is primarily determined by your willingness to educate yourself, work hard, and take responsibility for your actions.
This is a generalization of course, but – in my experience – a fairly accurate one.
We hear these thoughts echoed when Democrats argue for sharply higher taxes on “the fortunate” or, in former President Obama’s phrase, “society’s lottery winners.”
Republicans, on the other hand, often talk about “personal responsibility” or how affluence is the result of “earned success.”
The truth, of course, is that good and bad luck play a role in everyone’s life.
For starters, you were incalculably lucky ever to have been born.
We know this because the possible people allowed by our DNA so massively outnumbers the set of actual people.
You were also extremely fortunate to be born in the modern era.
For most of human history, we existed on the brink of starvation in a world filled with danger.
(For most of the last couple hundred thousand years, no one worried about saving for retirement because nobody lived that long. Most people were dead by 25, usually of unnatural causes.)
Even 200 years ago – 6,000 years after the advent of agriculture – 85% of the world’s population lived on the equivalent of less than a dollar a day.
Today approximately 85% of the world’s population lives in developing nations. That means the odds of you being born in the West were 6-to-1 against.
This is a pretty big deal.
As Warren Buffett has said…
If you stick me down in the middle of Bangladesh or Peru or someplace, you find out how much [my] talent is going to produce in the wrong kind of soil… I work in a market system that happens to reward what I do very well – disproportionately well.
Whatever your economic success or political views, let’s give Mr. Frank his due.
You were born against astronomical odds.
Even then, the dead outnumber the living 14-to-1. And 99.9% of these 109 billion people lived lives of incredible scarcity and hardship.
People alive today had just a 1-in-7 chance of being born in the West where democratic government, the rule of law, property rights, first-world infrastructure and education, and the lack of any class or caste system paved your way for success.
Furthermore, if you were born more than 50 years ago and are both white and male, you likely didn’t experience the institutionalized discrimination that would have made your economic success more unlikely.
But then also…
Billions of people have been born in the West – many of them white and male and from middle-class or better backgrounds – and the overwhelming majority of them did not experience the financial success of millionaires or billionaires.
Is it possible that the deciding factor for these individuals – and others like them – was just luck? Is the meritocracy truly a myth?
Let me know your take in the comments.
Good investing,
Alex
P.S. My new book The American Dream: Why It’s Still Alive… and How to Achieve It will be out on November 11.
(It’s available now for preorder on Amazon.)
If you want a copy, please act sooner rather than later.