The Paradox of Skill

Paradox of skill – the hard-to-swallow pill about luck

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“The more skilled you are, the less luck you need”, or?

We train to advance, we evolve new techniques, and we build experience. With one goal: to become better, perhaps even the best. This is true for individuals, athletes, and organizations.

If we are unskilled beginners, we need a lot of luck to be able to perform. If we have trained for years, we do not have to depend on luck at all. This is a common perception, but is it true? The paradox of skill provides an alternative perspective.

In this article we will explore not only the theory ‘paradox of skill’, but the potential insights and how understanding the concept can help you when developing your business offering, evaluating projects, and trying to get ahead of your competitors!

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The paradox of skill simplified

Imagine a new sport, with only a few athletes competing; the difference between the worst and the best will be vast and the results will be volatile. The sport will evolve with new techniques and strategies at a fast pace. The limit for what is possible will be continually improved. The collective skill is relatively low, meaning that luck is not very relevant. Even if the worst player has a lot of luck, it will not be enough to reach the most skilled player.

As the sport matures and more athletes strive to be the best, more time, energy, and money will be put into building skills. This will lead to higher collective skill, and consequently a reduction of the gap between the top and bottom players when everyone is using similar approaches. Hence, luck becomes increasingly important to stand out from the crowd!

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“But what do athletes have to do with my business?”, you ask

Just like athletes, organizations in many industries have worked for years to optimize their operations, communications, and sales. The collective skill has increased, and ways of working have matured and aligned across organizations. Therefore, customers finding you and purchasing your products is increasingly dependent on luck.

In a previous f(x)-article, we suggested that due to the development of large internet platforms, the connections between sellers and buyers are decreasingly dependent on relevance in terms of supply and demand, and increasingly on attention and profit-maximizing algorithms. Another consequence of these giants is that when all brands gather on the same platforms, there is an overload of information for the buyer. Countering relevance, and in favor of luck impacting the sales outcomes.

We can look at it like a game of numbers. When booking a flight ticket, or buying a t-shirt online, the more brands you as a seller present, the higher the chance you will land the customer. In this hypothetical example based on math, if everyone would have optimized their SEO, brand image, awareness etc. to the same level (highest level of collective skill possible), it’s almost exclusively due to randomness what brand the customer will choose. This can be a pill very hard to swallow for business owners. In reality, the choice will never be 100% dependent on randomness since customers’ demands and needs are everchanging, but in routine purchases where a low degree of emotions are invested in the choice, the degree of randomness increases.

Imagine two scenarios; you are the owner of company ABC, with competitors D and E. If your customer sees view 1 and randomly chooses, there is a 33% chance that your brand is chosen. If they are presented with view 2, there is a 60% chance that your brand is chosen.

Now, this is a simplified parable, but imagine a shopping platform with hundreds of clothing brands, book titles, or food items, and the idea still holds true. This gives a first hint to the importance of understanding the paradox of skill. But the concept can also be applied to how we conduct evaluations.

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What luck teaches us about causality - Or: the outcome is irrelevant (for evaluation)

Human brains are programmed to see cause and effect. If we see an outcome, we immediately think that it is caused by the input. Reasonable, but limiting. In many cases, luck has more to do with the outcome than we think. We might think that there is a direct causality between outcome and skill and assume that the observed outcome is in fact the same as the skill. Instead, the observed outcome is not solely dependent on the skill inputted, but also on luck.

By Randall Munroe

In the most simple equation, it would look like this:

This implies that if you evaluate a project based on the outcome, you are not getting a clean judgement of the skill going into the project since the findings would be contaminated by luck. Instead, focusing your evaluation on the process leading to the outcome will allow you to truly capture the value of the project and the skill going into it.

All too often, when we uncritically listen to success stories about companies, products, or projects, we fail to ask ourselves: what share of the outcome is due to luck? Now, some might argue that this way of thinking is jaundiced and destructive. But, if you truly want to evaluate a process, forget about the outcome. A project that results in a perceived failed outcome might still have been based on a better process than the project that became a success.

The trick lies in focusing on the factors that you can affect. Looking at the equation, luck is not something that you can affect, but skill is. In the long run, relying on a poor process is worse than a failed project.

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If you want to read more about why things don’t always work out the way it was intended, check out our previous f(x)-article on chaos theory.

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How to impact probability by doing things differently - Or: How you can beat any world champion

“How do you beat a world champion in boxing? Challenge him to a game of chess!”

To beat the boxing world champion in a boxing ring, you would need a lot of luck. But, if you change the game setting, all you need is skill - and luck is reduced to marginal importance. This is how you can rig the game, short term, by changing the rules. In the long term, the boxer will learn chess and become more skilled, again making luck more important in the equation, just like the example at the beginning of this article.

Changing the rules of the game can be done in two ways: stay in the same industry but disrupt it (you still provide entertainment, but you stream it online instead of renting it out in a physical store). Or expand to a new industry but keep your process (you are a world-leading phone producer, and you start selling headphones).

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If you do the same thing as everyone else, you need luck.

If you do things differently, luck becomes less relevant.

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Nils Van der Pohl, a Swedish distance ice skater, changed how to prepare for the Olympics. He proceeded to become the world champion, world record holder, and Olympic champion in both his distances. He then announced that he is ending his career, together with the release of his manifesto on how he disrupted the sport and how to train for it. In the long term, everyone could copy his manifest and prepare in the same way, and luck would play a bigger role, but short term he disrupted the game that was seemingly impossible to beat. And he got rewarded. Ending a Dutch monopoly of subscribing to the gold medal for the past decades. He had beaten the world champions in ice skating, by bicycling.

Olympics 2022

Another way to put it is that “he fixed what was not broken”, or “he changed a winning concept”. This is what most of us learn not to do. All the competitors had similar processes, and it worked great for decades. So, instead of doing what already worked and was the norm, he disrupted the market.

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“It’s just a matter of skiing”

Ingmar Stenmark, another Swedish athlete, skier, and multiple world champion once said: “I don’t know anything about luck, only that the more I train, the more luck I have”. This was of course not true; it was meant as a sarcastic joke. But what would have been true is that “The more I (and we as a collective) train, the more luck I need”. But again, as he said, he did not know anything about luck. But he knew how to ski better than anyone else. However, now you know about luck, and you know how you would beat him. Don’t you?

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Dive deeper by reading these books suggested by the team behind this article

Nassim Taleb: Fooled by randomness.

Daniel Kahneman: Thinking, Fast and Slow.

Michael J. Mauboussim: The success Equation: Untangling Skill and Luck in Business, Sports, and Investing.

Annie Duke: Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts

Not into reading?

Watch the movie ‘Inside Llewyn Davis’ for a glimpse of the harsh reality of the impact of luck

And of course

Stay tuned for future articles from the f(x)-team on related, and unrelated but relevant, topics!

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f(x) is an editorial product combining data analytics and in-depth, curated opinion pieces that create applicable value and direction for growth.

By experts – for leaders.

This article was written by Marcus Braun.

Supported by co-writers from the Brand & Content team at frog: Oscar Olsson, Linus Hartin, Frida Cederg?rdh, Erik Berggren, Anna J?fvert, Hamza Tauqir, Rim Reslan, Filip M?lberg, Johan Thuresson, Jacob Westfeldt, Lauri Horelli, Desirée Ekberg, and Freja Liljedahl.

The header was designed by Desirée Ekberg. Illustrations were curated by Marcus Braun.