Their Way of Thinking May Be the Result, Not the Cause

Introduction: Which Way Does the Arrow Point?

Bold, optimistic, long in horizon, unafraid of failure. The way of thinking said to be shared by successful people is usually described in such terms. Let the observation stand for now.

Which patterns of thought to adopt, and how, are already well documented. What this article takes up is the question one step in front. Is that thinking the cause that produced the wealth, or the result the wealth brought about?

Here is the conclusion first. When two things always appear together, we frequently mistake which is cause and which is effect. And much of what is called a successful person’s way of thinking turns out, on inspection, to be a state of mind that only becomes available once success is already in place.

The Arrow May Point the Other Way

Consider. Perhaps a person can make bold bets without fear of failure because they hold savings that will absorb the failure. Perhaps they can hold a long horizon because next month’s rent is not chasing them. Perhaps they can be generous, magnanimous and trusting because financial stability underwrites the margin.

What was taken for the cause may in fact be the result. The order has been turned over.

The inversion becomes clearer from the side without margin. Someone pressed by next month’s payments finds a long horizon hard to hold, not because their mind is impoverished. It is because the crisis in front of them is urgent enough to force the field of view narrow. In a situation where a small failure leads straight to the collapse of a household, declining a bold bet is not timidity but good sense.

So much of what is labelled “how poor people think” is likewise a state of mind the situation is imposing on the person. Reading it as “because the heart is poor” is the cruellest application of the attribution error [Ross, 1977] — deciding “a careless person” without looking at the ice underfoot.

And if thinking is the result of wealth rather than its cause, copying the thinking alone has almost no point. If wealth produces optimism rather than optimism producing wealth, a transferred optimism is a castle in the air with nothing beneath it.

The Third Factor Standing Behind Both

Alongside the inversion of cause and effect there is another possibility. That thinking did not produce wealth, nor wealth thinking, but that something third produced both from behind at once.

Statisticians watch for a pitfall called confounding. Two things appear to move together while in fact a hidden third factor is operating both from behind. Ice cream sales and drownings rise and fall together. Ice cream does not drown people. Behind them sits a third factor — temperature — selling the ice cream and sending people to the water.

The same structure is suspected between a way of thinking and wealth. The third factor that first comes to mind is the environment a person grew up in. A child born into a wealthy household is surrounded early by books, hears talk of investment and enterprise at the table, and can attempt things inside a net that will catch a failure. As a result, the habit of reading, a vocabulary about money, and the nerve to take risk are acquired naturally. And the same environment brings wealth itself, through inherited capital and contacts.

Then “reading widely and thinking boldly” and “wealth” turn out to be two branches grown from a single root called an advantaged origin.

The third factor is not only origin. Education received, the economic condition of the era lived through, whether the industry one belonged to happened to grow, a fortunate turn at a decisive moment. Each of these has the power to draw a certain frame of mind and a certain result at the same time.

▸ How the sample of “common traits” itself is manufactured is taken up in how the common traits of successful people get made.

What the Uniformity of the Models Tells Us

That the menu of successful people held up as models is startlingly uniform also points to this third factor.

Those brought forward as people to copy are, as a rule, from a particular industry, a particular generation, a particular career. If success were determined purely by a way of thinking, the roster of successful people would be far more miscellaneous and far less predictable. In reality the outline of the successful has been narrowed heavily in advance by origin, era and industry.

Here is the weak point of imitation. If an advantaged origin produces both thinking and wealth, then someone without that origin who transfers only the branch called thinking has no reason to grow the other branch called wealth. There is no direct causation between one branch and another.

And awkwardly, the root is underground and invisible from outside. What is visible is only the two branches above ground. So we tie the visible branches together and take one to have produced the other.

The Higher the Peak, the Larger the Share of Fortune

One more element belongs on the stage: luck.

Raising luck may sound like a slight on ability or on what a person has built. It is not. Ability genuinely bears on results. The issue is that its effect varies completely with the kind of arena.

Robert Frank and Michael Mauboussin, who has long analysed the investment world, have both pressed a point here [Frank, 2016; Mauboussin, 2012]. The fiercer the competition and the more extreme the spread of outcomes, the larger the share of luck in the achievement of those at the very top. The reason is simple: at the summit, the abilities of contenders are nearly level. On top of that hair’s breadth, a chance turn — timing, an encounter, a following wind — becomes the final push separating winner from loser.

There is a simple test for telling which share is larger. Ask whether you can lose on purpose. At chess or a footrace a strong player can lose deliberately, because the outcome is tied firmly to their choices. At a lottery or a roulette wheel, even losing on purpose is not really available.

Reaching an extraordinary fortune in a single lifetime turns on countless accidents, and even the most able cannot reproduce it at will. It sits, in other words, quite close to the arena where losing on purpose is difficult. Trying to reproduce afterwards, by copying, what could not be reproduced deliberately, was never going to work.

And those selected as models to copy are, as a rule, the people standing at the most extreme summit of their field — precisely where the share of luck runs largest. Luck is not a habit, a phrase or a way of thinking. It cannot be copied. Extract and transfer only the copyable parts, and the factor that decided the outcome has been left out entirely.

The Model Itself Regresses Towards the Average

Statistics supplies one more support: regression to the mean, a plain finding with considerable destructive power [Galton, 1886].

The nineteenth-century scientist Francis Galton found that the children of tall parents were not as tall as their parents, and the children of short parents not as short. Extreme values are pulled back towards the average at the next occasion. This holds broadly wherever luck plays a part.

Why? Suppose a single result is the sum of ability and luck. When an outstanding result appears, high ability was often joined by a favourable turn. At the next occasion, ability stays where it was while luck returns to something average. So the result as a whole comes down towards the mean.

The phenomenon plants an illusion in stories of success. Someone just after an outstanding result stands exactly where the following wind blew hardest. Looking back, what they narrate is not the luck but their thinking and habits. That their later results lose the earlier brilliance is not because they abandoned the thinking. The wind that blew hard once has returned to its usual strength.

Here an unpleasant substitution arises. Watching results settle back towards the ordinary, we — or the person themselves — prefer to say they lost their edge, that they grew comfortable. The remedy then also points at the mind. A statistical necessity — what rises must eventually come back — gets commodified as a problem of the heart.

Conclusion: What Is Being Copied May Be an Explanation Added Afterwards

The successful people we take as models are cut out at exactly the moment their results swung most extreme. An extreme moment is, by definition, fated to return towards the average. Faithfully transfer the thinking and habits of that moment and even the model’s own results regress — so extraordinary success can hardly be reproduced by copying it afterwards.

We are, in effect, looking at a shore at the single moment the tide is fullest, believing that height to be the sea’s true form, and chasing the retreating water to learn its method. High tide is high tide, not the standard level of the sea.

None of this leads to the resignation that nothing can be done. Holding four gauges — reverse causation, confounding, luck and regression — changes how you look at another person’s achievement. Not “how do I copy this person’s thinking?” but “on what conditions does this result stand?” Looking at the same story, the direction you move next depends on whether you see a model to trace or a hypothesis to examine.

The whole picture is gathered in why copying a millionaire mindset does not make you rich.

References

Academic papers and theory

• Ross, L. “The Intuitive Psychologist and His Shortcomings” Advances in Experimental Social Psychology, 10 (1977)
• Frank, R. H. Success and Luck: Good Fortune and the Myth of Meritocracy (2016) Princeton University Press
• Mauboussin, M. J. The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (2012) Harvard Business Review Press
• Galton, F. “Regression Towards Mediocrity in Hereditary Stature” The Journal of the Anthropological Institute of Great Britain and Ireland, 15 (1886)