In Las Vegas, the 2010 World Series of Poker was composed of 32,000 players and 57 separate tournaments. For the final event, $9 million was at stake. Freakonomics economist Steve Levitt and U. of Chicago law professor Thomas Miles studied the poker world series to determine whether luck or skill created winners.
Their conclusion? Poker is a game of skill.
The best players have more than a 30% return on their investment (ROI). Average players? The ROI is -15%. Translated into dollars and cents, that means the return to skill, per player, per event averaged over $1,200. For the less skilled, the loss was more than $400. (The ROI compared the tournament fees to amounts won or lost.)
Our bottom line? Similar to poker, in business, skill matters most. Using Bill Gates and Southwest Airlines as examples, this NY Times essay illustrates that skill, discipline, and knowledge turn good and bad luck into success.
The Economic Lesson
The NY Times piece says yes, Bill Gates was lucky. However, Mr. Gates was successful because his skills, decisions and willingness to persevere optimally converged. As a lesson for all aspiring entrepreneurs, Bill Gates depended on a lot more than luck.
An Economic Question: Which characteristics might be necessary for a successful entrepreneur?