Does Luck Play a Roll in Our Success

Whenever punters get together the question of ‘luck’ and the role it plays in our success (or lack there of) is never far from the surface. We have discussed the subject on previous editions of the ‘Sunday Sermon’ and concluded that for reasons unknown, some people just appear to be ‘luckier’ than others. Whether that is true or not (as superficially successful punters may be unlucky in other unseen aspects of their lives) some people consistently seem to have the rub of the green in matters relating to games of chance.

Conventional wisdom states that luck plays no part in long-term performance. Clumps of losers are simply due to naturally occurring variance and skilled practitioners will always succeed in the long run. Frustratingly, the term ‘long run’ is never defined’. Does it refer to a 12-month, 2-year or 10-year period? What about the skilled punter who has an inadequate bankroll due to circumstances outside of his control and runs out of money before variance can be corrected? Or the sharp punter who is run over by a bus or succumbs to a debilitating illness early in his gambling career and therefore unable to fulfil his potential? In both admittedly crude examples, luck does not even out due to existential factors because there is no ‘long run’. Warren Buffet, the legendary investor, attributes much of his success to the compound effect of his living to a great age. Would we still regard him as a Titan of the investment world if he had died in his 20s when he was largely unknown?

Many years ago, I was offered an opportunity that in retrospect would have changed the trajectory of my life. For reasons that I cannot recall, I became friendly with a guy who was suing an insurance company for several million pounds in damages resulting from their refusal to pay a claim. His lawyers were acting on a 100% conditional fee agreement (no win no fee) and had already spent tens of thousands of pounds in fees bringing the case to trial. Because the matter involved a relatively novel point of law, the opponents were unwilling to settle, and thus the case ended up in the High Court. 

After a trial lasting several days, the judgement arrived several months later and much to the disappointment of my friend, the learned judges found against him. Crucially, however, they gave him leave to appeal and dropped a heavy hint in the written reasons that should he elect to do so, he would likely succeed as the law on this matter was opaque and would benefit from the clarity which the Court of Appeal would bring.

The problem my friend faced at this point was a lack of cash. The After The Event insurers protecting his adverse costs risk,  demanded a supportive QC’s Opinion on merits, if they were to continue to provide cover. In addition, his solicitors also recommended that the same top commercial QC be retained to argue the case in the COA. If you know anything about the commercial bar, you will be aware that those operating at the very apex of the profession have no appetite for no win/no fee arrangements. Their reluctance is rarely related to a lack of confidence but is rather a reflection of the fact that they have no need to roll the dice in this fashion because there are numerous other well-healed commercial clients queuing up to pay them £1,500 an hour for their expertise.

Eventually my colleague managed to scrape together the necessary £30,000 demanded by the top insurance silk to review the papers and opine on the merits of an appeal. He concluded that the claim had a 60% chance of success for both liability and quantum which, in the context of the natural caution exhibited by top barristers, is roughly equivalent to a 1.20 chance. Of course, the worth of his assessment was obviously only as good as his historic ability to calculate accurately the probability of success, but the consensus view was that this individual was very smart, and his assessment should be relied upon.

Although this was very good news, my friend was still faced with the problem of scraping together the £100k demanded by the QC to argue the case in the COA. The solicitors were happy to continue to defer their fees but were not able to instruct and therefore be liable for the barrister’s costs.

My friend hit upon the idea of informally syndicating the case by way of offering a prorated slice of the upside to anyone who was prepared to contribute to the additional legal costs. From memory the case was conservatively valued at £5 million of which roughly £500k was due to the solicitors for fees incurred and circa £200k due in deferred after the event insurance premiums. This left a net return of £4.3 million due to the claimant. 

He therefore offered potential investors a multiple of 10x plus return of their investment (as approximately 60% of the claimant’s costs would be paid by the defendant in the event of event of success) in return for their contribution toward the additional legal fees arising from the appeal. In other words, this was a 10/1 chance. You don’t need to be Patrick Veitch to see that this proposition, having been assessed by the one of the UK’s leading insurance skills as a 3/5 chance, was available to back at 10/1. This undoubtedly represented the value bet of a lifetime and anyone with half a brain would have been falling over themselves to give my colleague their money. But the adage ‘scared money never wins’ (or in my case, was never given a chance to win) was brought into stark relief by my decision not to participate. Barney Curley once said that when contemplating a bet, you should never consider how many bags of groceries your stake would buy as this was guaranteed to induce dangerous feelings of doubt and hesitancy.

As you can guess, after a five-day trial the COA ruled in favour of the claimant and the well resourced opponent paid without demur the full damages sought plus a significant proportion of the costs incurred. The claimant, lawyers, ATE insurers and those who had the foresight to back the claim were handsomely rewarded. Was this bad luck or bad judgement on my part? Undoubtedly it was the latter, but more troublingly did this represent my one shot at achieving financial independence? What if such an opportunity never arose again? 

To give another example, in the 1950s my father’s best friend called him one day in a state of high excitement. He had apparently seen the future of female emancipation by way of a new-fangled shop called a ‘laundrette’ which offered beleaguered housewives the chance to wash and dry their family clothing for a few pence without the drudgery of hand washing and line drying. This, he correctly concluded, was the future and he had seen it in London and was convinced that it would be a roaring success in the small provincial town where they both lived. Such was his confidence; he had already signed a lease on some premises and placed orders for commercial washing machines etc. He needed a partner, however, and offered the opportunity to my Father, who excitedly accepted as he too could see the immense potential. The funds were scheduled to be made in one month after his friend returned from a honeymoon abroad and the legal documents were already signed before he left. 

In what can only be described as appallingly bad luck, his friend tragically died whilst on honeymoon leaving my dad liable for all the costs of this nascent venture. Being unable to meet his commitments he managed to persuade a wealthy local businessman to assume responsibility and distraught by the death of his friend, was just relieved to have escaped unscathed.

You can guess the rest. The venture was an immediate success and resulted in the new owner opening a chain of laundrettes across the south of England. He ultimately sold out to Hoover a few years later for several million pounds and died in the arms of his 20-year-old mistress aged 65 aboard his yacht in the French Riviera.

Sadly, this was the only opportunity of this type that ever came my fathers way. He worked in many different jobs, led a conventional life, never smoked or drank, ate muesli before it became fashionable, kept fit and died aged 65 of liver cancer. Bad luck or bad judgement?

To lighten the mood, I will leave you with this masterpiece from Bernard Manning:

An elderly man is on his deathbed being comforted by his wife of 60 years:

Man: You’ve been by my side for 60 years

Woman: That I have.

Man: You were by my side when I lost all my money and my business went bust.

Woman: I was

Man: You were by my side when I was diagnosed with cancer and given just weeks to live.

Woman: I was

Man: You were by my side when our house caught fire and killed our budgie

Woman: I was

Man: You’re a fucking jinx. ???

Part 1 Gambling! Why Do We Do It

Part 3 Luck Can Be Thy Doom

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