Chris Rushton .com

I am very happy to announce the newest edition to the Chris Rushton network, http://www.myleedsproduce.co.uk

My Leeds Produce is a website designed to bring small companies in Leeds and consumers together. Businesses can promote their latest offers or best deals and anyone can visit the site for free and check them out. The site is brand new, with the finishing touches being made last night at around midnight! I am offering the first 3 months of the site’s life, free for anyone who wants to advertise on it, so go and check it out if you’re in or around Leeds.

The link again, http://www.myleedsproduce.co.uk

What is luck? Why are some people lucky and others unlucky?  How comes some people always seem to do well while others struggle?  Is there a way to improve your luck or is it just something you are born with?  It’s always been my firm belief that to be lucky, first you must be good.  Recently I have changed my mind a little and realized that there really isn’t any luck in the world, just cause and effect.  In some ways, to be lucky is to be good.  People who are naturally lucky at something aren’t really lucky, they’re naturally good at something.  Is David Beckham lucky because he’s got lots of money?  Not really, he’s got all that because he’s good at football and was smart enough to realize that he needed a good manager.  His manager was smart enough to see the potential of “Brand Beckham” (I assume, it could well have been David or Victoria’s idea for all I know) and savvy enough to make it a reality.  Luck has nothing to do with it.  The laws of the universe are the same for everyone living in it (at least as far as the best physicists are aware).  There is no room for luck in an objective world.

Luck Is In Your Mind

Luck doesn’t exist.  There is no such thing as luck.  There are no lucky people and there are no unlucky people.  Luck is a word that people use to shift responsibility from themselves when they don’t achieve something.  “I was unlucky”.  No you weren’t, you just weren’t good enough, or didn’t try hard enough or weren’t perceptive enough to spot something someone else did.  Quit kidding yourself and take responsibility for your self and your life.

OK, but I was playing poker with a friend the other day and 3 times he picked up strong hands on the last card and beat me.  Isn’t he lucky?  No! There are a few problems here.  Firstly, you aren’t seeing the whole picture.  Poker is a game of skill for a start.  Your friend is playing better than you.  He probably knows the odds or has a feel for the game.  This isn’t luck.  He’s outplaying you for whatever reason.  Secondly, you aren’t seeing the whole picture.  He’s not making massive hands on every deal.  He’s probably not even playing every hand he gets dealt.  The odds of a hand coming up are based on a probability.  The number of possible outcomes versus the number of favorable ones.  These rules apply to every game that’s ever been played.  There’s no reason, unless he’s cheating, for any one hand to be more likely to come up than any other.  Finally, you are remembering the bad beats but not the ones which went according to the numbers.  People are always scared by and remember outliers but they only occur around 4% of the time, assuming the outcomes are natural (or gaussian).  If your friend is making hands, it’s probably because he’s better than you.  Luck has nothing to do with it.  He’s putting himself in a better position to win based on his skill.

So, how is this useful?  I’ve written a post about how to be lucky and the first thing I say is that there is no luck?!  Am I serious?  Absolutely.  The most important thing about becoming luckier is to realize that there is no luck.  Once you do that, you accept responsibility for your actions.  Both your successes and your failures.

What Is Luck

Luck is often being in the right place at the right time.  Luck can also be being perceptive enough to see something someone else hasn’t spotted.  Lucky people know there is no good or bad luck.  They work on their skills to avoid failure.  These are all things that can be worked on.

I used to think that ice hockey goal tenders were more lucky than skilled.  A puck flying close to 100 miles per hour at them and they had to get something in the way of it to stop the team from scoring.  They have to be in the right place at the right time.  However, they can increase their chances of being in the right place at the right time by studying films, practicing on the ice and being in the best possible physical shape they can be.  They weren’t lucky when they stumbled into the gym.  They wanted to be there.  They didn’t guess that Alex Ovechkin was going to go high glove side, they studied his game tape and reacted accordingly.  They didn’t just fall onto the ice.  They decided to go to training.  All these things contribute to their ability to be in the right place to stop the puck from going in the net.  Luck has nothing to do with it.  Occasionally a keeper will make an awesome save and it’s put down to luck.  However, somewhere in the keeper’s mind, processes are happening.  Subconscious processes reinforced by all the training and practice.  They are more likely to make the save because of this.  Luck has nothing to do with it.

Bill Gates was lucky to invent DOS and Windows and run Microsoft.  Not really.  He made smart business decisions and was perceptive enough to spot a marketplace and savvy enough to build a company to take advantage of it.  Calling him lucky is an insult.  Luck had nothing to do with it.  He is successful based solely on his own merits and those that he was smart enough to employ to work for him.

How Can I Be More “Lucky” Then?

Hopefully you have taken the first step by realizing that there is no luck, but taken responsibility for your actions yourself.  Being perceptive is the cornerstone of what people call luck, so how can you be more perceptive?  This takes time and practice.  There are no quick fixes to problems like this. The way to improve yourself in this kind of area is to keep working on it.  The same way you work on muscles in the gym by constantly going back, the same you need to work on your perception, your ability to see opportunities or whatever it is you want to train.

Accepting failure as a result of you rather than bad luck is uncomfortable to a lot of people.  We are conditioned to believe that we are excellent human beings and can’t do wrong.  When something bad happens we put it down to bad luck.  Again, luck has nothing to do with it.  You’ve failed because of a shortcoming in yourself.  The good news is if you are able to accept that, you’re probably able to look at the situation and learn from it.  In the future you won’t make the same mistake.

An example:  Since I write a lot about finance on this blog, I’ll take it from that perspective.  How can I be more lucky in business?  How can I find that one beautiful idea that will make me millions?  The simple answer is conditioning your brain to look for opportunities.  If you want to be a businessman, every time you see a situation, ask yourself how can I make money out of that?  What opportunities does that situation give me?  The more you do it, the easier it will become.  Eventually you’ll spot money making opportunities all over the place and one day you may have an awesome idea that will revolutionize some aspect of someone else’s life.  People will call you lucky.  They’re wrong.  It’s a skill and like any skill it can be developed.

The standard financial advice that we all seem to hear when we grow up is something along the lines of work hard so you can buy a house, get a mortgage and sell the house for a profit when you retire.  Buying a house as an investment in the future doesn’t fit into my general life philosophy.  I think it’s bad, dangerous and incredibly limiting position to be in.  Here’s why:

House Prices Don’t Just Go Up

The whole of the reason people buy houses as an investment is based on the assumption that the housing market will only go up.  We’ve been lucky in the housing market until recently.  House prices have soared.  This has meant that people have been willing to take out huge mortgages with little to no deposit, buying houses that they can’t really afford on the assumption that the price will go up.  On the face of it, this hasn’t been a bad strategy.  The housing market has been booming.  Unfortunately, the houses themselves were becoming over valued.  This can be understood as a simple case of supply and demand.  When house prices go up, speculators build more houses or move to sell properties.  This increases supply.  Demand won’t be increasing so the prices drop.  If you have bought a house at the top of the housing bubble with a 100% mortgage, guess what?  You’re now in negative equity.  GREAT…  naaaat! Negative equity is where you owe more on your house than it’s worth, it’s not a good thing.

A crash in the economy robbed me of my family And no strategy
combats negative equitiy so that’s it. Like violence it’s drastic
I’m freaking’, and seekin’ to be more than just a house of crack

Faithless – Bring My Family Back

Low Liquidity

Liquidity is a fancy word which means how easily can something be changed into money.  A high liquidity asset can be changed, or sold, very quickly. An example for high liquidity would be a FOREX trade lot.  This can be sold almost instantaneously.  A house, on the other hand, takes much longer.  That’s assuming you can sell it in the first place.  This doesn’t immediately sound like such a big deal, right?  I mean how often do you sell your house?  Consider you get the opportunity to take a promotion but the job is the other side of the country.  You need to sell your house quickly so you can move, or you don’t take the job.  Either way, you lose out.  Selling a house quickly means you probably won’t get a good price for it.  Not taking the job is obvious really.

On the other hand, if you’d rented, you’d probably only be involved in a 6 month contract at maximum.  You could either sub-let or simply move out a few weeks early.  Most decent businesses will provide a moving fee.  Anyway, compared to losing £1000’s on selling a house for less than it’s worth, losing a couple of months rent isn’t that big a deal.  In terms of which is worse, the house always wins.

Diversification

We are constantly advised not to put all our eggs in one basket.  I agree totally when it comes to investment.  A varied portfolio is important.  It puts you in a stronger position financially if your value is spread over a range of assets.  Since markets move in cycles and aren’t always aligned, it’s OK to assume that not everything will be going down at the same time.  If the weather gets hotter, the sales of jackets decreases but the sale of ice cream increases.  If you notice the weather getting warmer you’d be smart to buy ice cream futures (or something like that, I don’t think ice cream is a traded commodity).

With that in mind, if you are spending the vast majority of your money on a mortgage, you can’t spend money diversifying your other assets.  This sets you up for failure in the long run.  By investing 20 to 30% of your income in mutual funds and other similar types of fund and re-investing the dividends and profits, you will have considerably more money in the long run and these kinds of investments are less likely to be affected by bubbles since they are more diverse.  This kind of thing can be set up by a bank easily enough.  If you’re a pro investor, there’s no reason you can’t use the money and invest it yourself. It’s easier to let a bank take care of it for you though, if you aren’t a professional entrepreneur.

Low Mobility

Hinted at in the previous post, low mobility is a problem in it’s self.  Simply put, you can’t move around as quickly and easily as someone who doesn’t own their own property.  Individually, this isn’t always that big an issue.  Scale this out across the whole workforce and you do have a problem.  The low mobility of a workforce means that it is harder for large scale companies to take advantage of new opportunities.

At an individual level, this means that people can’t always take opportunities that are presented to them.  This is a big no no in my world.  Failing is OK as far as I’m concerned.  What is not OK is missing out on opportunities, especially when it’s due to poor planning on my part.

High Maintenance

Houses take a lot of maintenance.  Windows need to be cleaned, damage needs to be fixed, electrics and plumbing need to be kept in order.  The list goes on.  Anyone who has owned a house will attest to that.  In fact, anyone who has lived in a house which they’ve been responsible for will attest to that.  I certainly do.  Imagine which is better:  Maintaining a house yourself or having someone do it for you?  That someone is generally the land lord in a rented property.  In an owned one, it’s you.

I’ve never lived in rented property where I had to do anything other than pay to change the lightbulb.  That’s it!  Generally speaking, if you live in a high quality house or apartment, the landlords will make sure it’s kept high quality.  That’s how they sell it on after you leave after all.  Often this isn’t the case, in terms of student houses for example, where profit is king.  The rules of housing don’t apply to students though, everything is different.

Pre Furnished Appartments

Having your own stuff is OK, but it can be a hassle to transport it around.  It all has to be accounted for and replaced when it’s damaged.  A far better case would be a furnished rental property.  The vast majority of rental properties in the UK come furnished.  There are some exceptions but in my experience they are few and far between.  They’re kind of like Big Foots, I’ve heard rumors that they exist, but I’ve never seen one with my own eyes. Again, the rules of student digs don’t apply to the real world. If you’re only basing your opinion on those types of houses, stop right now and look around at some real properties.  You will be amazed at what’s available, I certainly was.

Everyone likes to have their own things, a few ornaments, a comforting bed quilt, an X-Box and HDTV.  That’s understandable.  Also, those kind of things are usually quite easy to move and can be done with one trip in a car.  Unless you have a 56 inch TV that is.  (Un)Fortunately, I don’t… yet.  When I can afford that sort of luxury, I’ll probably be able to afford to rent a van for the day to help me move too.

Change Of Scenery

So let’s say that you have a good job in a city you like but you’re a bit bored of where you live and fancy a change.  This is a whole lot easier if you don’t own your house.  It’s also a whole lot more justifiable too.  They (the wizards) say that one of the most stressful things you can do is move house.  So why make life hard on yourself?  It’s far easier just to stay in the same place, the same neighborhood with the same neighbors.  Granted, this may not be a bad thing and there’s no timer saying that you need to move house every year or you won’t be happy.  However, having the option to move is always a good thing.

The hardest part about changing rented accommodation is finding somewhere cool and new to live.  Most agents make this easy for you though. After all, they are trying to sell you a property.  They’re probably making a commission.  You might as well make them earn it, right?  Typically your lease will only be 6 months to a year anyway, why get stuck in the same place for the rest of your life?  A change of scenery can lead to a new perspective, especially if you’re feeling a bit stuck in a rut.