Bill Gates Got Lucky (How you can get lucky, too.)

Since the mid-1990s, Bill Gates has held the title of the wealthiest person on the planet. As the CEO and founder of Microsoft, his estimated net worth has at times exceeded $100 billion, making him the world’s first (and only) “centibillionaire.”

We like to believe that we live in a logical, orderly, cause-and-effect world. For every outcome, there’s a clear-cut explanation and a direct connection. And once we understand the cause-and-effect connections, we want to believe that the same results will happen for everyone.

Water boils at 212 degrees, and 2 +2 = 4 … for everyone. But even in hindsight, can we really determine how Bill Gates became the richest person in the world? And if we can, is it something that can be duplicated?

Two widely held perceptions about becoming rich (as opposed to inheriting wealth) are that you need to be smart and you need to work hard. So if being smart and working hard are the keys to making a fortune, then Gates wealth would make him the smartest person in the world, and the hardest working. Is that true? No.

This is not to say that Gates isn’t smart. He is. It’s not to say that he hasn’t worked hard. He has. But the definition of smart is subjective. If he was a contestant on “Jeopardy,” Gates might lose because he wasn’t up on popular culture, or sports. Even in his field of specialty, it’s likely there are several people who know as much or more than Gates about computer programming. As for working hard, a day laborer in a developing country may expend more physical and mental effort than Bill Gates every day, just to make ends meet. So, if Bill Gates doesn’t owe his success to working smarter and harder than everyone else, how did he make so much money? Is there some other secret ingredient?

After deliberation and study, here’s our conclusion: He got lucky. While much credit is due Bill Gates for having good ideas and following through on them, the biggest factor in his mind-blowing financial success is that he was fortunate enough to be in the right place at the right time.

He was born in the United States, to parents that could afford private education, just as computers were becoming commonplace in business and commerce. Those are just three factors in the Bill Gates story that were entirely beyond personal control. Yet if you changed any one of those variables (or a dozen others in his life), Bill Gates, even with his intelligence and work efforts, wouldn’t be the richest person in the world.

Here’s an analogy to help explain the interplay of effort and luck. Imagine that Gates applied his intelligence and work to buy a lottery ticket. Other people used their smarts and work to buy a ticket, too. At the end of the 20th century, Bill Gates just happened to have the winning ticket. Call it fate, karma, destiny, random chance, the hand of God, whatever, but the financial rewards that Bill Gates has received far exceed his talent or effort. Like a lot of “success stories,” luck played a significant role.

Everyone Plays In Two Lotteries

Continuing the lottery analogy, it’s accurate to say there are two games of financial chance. The first lottery is the same one Bill Gates entered. Through certain productive behaviors, you can “buy a ticket” for the chance at happy financial circumstances. Although you may not always “win big,” at least you are in the game.

The second lottery is one that delivers financial tragedy. There’s not always a clear-cut cause-and-effect explanation, but some people just end up in the wrong place at the wrong time. They buy investments just as values are dropping, have an accident that wipes out their savings, get downsized out of the best job they ever had. Even the smartest, hardest working people can be overwhelmed by financial bad luck.

Considering the impact that random events can have on your financial life, the realistic goal of any financial strategy should be to give you as many chances as possible in the good lottery, while minimizing your exposure to the bad one.

How to get in the “good” lottery:

1. Develop a valuable skill in a field that you enjoy
2. Accumulate assets (i.e., Save)
3. Find opportunities to be an owner
4. Be diligent – stick with your plans

How to stay out of the “bad” lottery:

1. Take on minimal, manageable debt
2. Discipline your lifestyle – live within your means
3. Protect/insure your assets, including your economic value
4. Be vigilant – stay on top of your plans

Some people see the two lotteries as being separate games requiring separate solutions. As a result, they may ignore or overlook some of the actions. An entrepreneur focused on winning big with a business opportunity may take on too much debt, or not bother with insurance. Conversely, some people are so concerned about losses they may shun opportunities for great gain. They might turn down a lucrative job offer, or pass on a chance to buy a discounted property.

But the two lotteries are interrelated. The more you do to stay out of the bad lottery, the more chances you have in the good lottery. And while there are no guarantees of winning big, every good action improves your odds for success, and for avoiding failure.

Planning your Financial Future: Earning Your Luck

The essence of “planning” for your financial future is making decisions that improve your chances for success, while acknowledging that factors beyond your control may render some decisions irrelevant. This doesn’t mean planning your financial future is a futile exercise. Rather, it provides a framework for realistic expectations.

In the face of the uncertainties of life, there is an understandable desire for security and stability. This desire can make people susceptible to promoters of financial vehicles and strategies that promise “no-risk secrets” and “guaranteed results.” (When that booklet arrives in the mailbox with the headline “Let me show you the insider’s way to capture large profits – guaranteed!” we want to believe there really is a fool-proof formula for great wealth.)

But great wealth isn’t achieved through a secret formula. There are no secrets, there are no guarantees. The only practical approach is good financial management, but even the best management can’t guarantee great wealth. However, good management will usually result in more opportunities for good fortune.

Returning to the richest person in the world: On one hand, Bill Gates got lucky. On the other, Bill Gates earned his luck. Are your financial decisions putting you in a position to get lucky?

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Bruce Hildreth is a financial advisor with Wealth Strategies Northwest based out Portland, Oregon. Bruce specializes in helping his clients increase their long term wealth and making sure their assets are well protected. Bruce has been working with employers and their employees for over 15 years to improve each one of his client’s financial future. He may be reached at 503.221.1226 or bruce.hildreth@glic.com.

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