Does the American Dream Really Come Down to Luck?

It's Kyle, and I'm flying solo this week. 

I originally had some grounded, practical advice slated for this week's Weekend Tea, but a late-week email from the University of Missouri School of Journalism changed all that.

Lucky you? Well, as it turns out … that's precisely today's topic of conversation.

Strap in, folks. I'm going well outside the numbers today.

Survey: More Than a Third of Young Adults Think Success Is More Luck Than Skill

If you're the kind of person who likes to keep their eyes on the headlines, then you're probably at least vaguely aware that, economically, the landscape doesn't look all that bright for America's young adults. 

For years, above-average inflation has sent housing, food, health care, and other essential costs through the roof … at the same time young adults are staring down less-than-promising financial prospects. Job openings have flattened out, internship postings have slowed to multiyear lows, and every other conversation about artificial intelligence (AI) is about what careers the technology will kill next.

Young and the Invested Tip: For instance, a lot of people seem to think AI is a financial-advice machine. But there are many reasons why you shouldn't unload your money questions on a robot.

You'll be unsurprised, then, to find that many of those young adults aren't taking it well. Indeed, these and a bevy of other factors have convinced many that the entire system might be rigged against them—and that "the American Dream" is likely just that: a dream.

From Mizzou's School of Journalism:

"According to a survey¹ of Americans ages 18-24, 37% of youth and young adults say achieving success in the United States today is more a matter of luck than skill."

The further you dig in, the bleaker it gets. A few more findings:

• 44% believe the American Dream was written for someone else.
• Nearly a third (27%) say the most effective strategy for achieving the American Dream today is "being born into the right family."
• Roughly two-thirds (67%) say the "standard American Dream" represents something discouraging rather than inspiring.
• That includes 25% of respondents who said the American Dream is "a goal where the rules change as they get closer."

And a pat on the back to survey creators, who also provided space for respondents to say it in their own words:

"Hard work alone? Maybe 30 or 40% of it," one respondent said. "External factors like luck, networking and your zip code play a huge role."

"The dream is rooted in consumerism and competition," another interviewee said. "It's a carrot dangling over your head. Why aren't you this?"

All right. Let's take a quick pause to let those thoughts breathe a little.

Good? Good.

If your initial response to all of the above was some form of "those kids are whiny/lazy/entitled," and you're still there after our moment of silence, I have a couple of thoughts:

1. Even if you disagree with their notions about the American Dream, if you put yourself in their shoes, you might at least be able to understand why they think that way. 

For instance …

"A goal where the rules change as they get closer?" I guarantee you every person reading this who was a would-be homebuyer during the COVID era is nodding furiously at the idea, remembering how their long-saved nest eggs went from being enough for a down payment to not even close virtually overnight. 

People for whom Social Security is a significant portion of their retirement income can also relate. I promise you they're fixated on the Social Security OASI Trust Fund's 2032 depletion date, at which point the benefits they rely upon could be drastically cut. (The Congressional Budget Office believes the typical couple could lose $18,400 in annual Social Security income!)

Young and the Invested Tip: Some people have misconstrued this to mean benefits will completely run out in 2032. That's not the case. But it's just one of many common Social Security myths, which you can read about here.

Or just think about who we generally tend to glorify as a society. How many times in your life did you watch a show or podcast about an office jockey who toiled for 45 years before retiring with a comfortable 401(k) balance and a reasonable retirement? OK. Now, how many times in your life did you watch The Simple Life, or My Lottery Dream Home,² or The Kardashians?³

Perception shapes people's reality.

2. They're right. 

Luck is undeniably a major factor in achieving the American Dream.

We Might Not Want to Admit It To Ourselves, But Luck Matters … A Lot

Before I say another word, I want to tell you that if you haven't already, go out and purchase The Psychology of Money by Morgan Housel. 

I'm not getting paid; that's not a sponsored link.

Whereas most of the financial books on my shelves are dedicated to definitions, market mechanics, rules, and other tangible ideas, The Psychology of Money instead deals in the mental aspects of managing your money, which are difficult if not impossible to calculate … including luck.

Indeed, some of the most wealthy people on the planet—people who really did build financial empires across decades of work—will readily admit that much of their success was built on luck and circumstance.

The Psychology of Money shares several anecdotes to this effect, but here's a very short summary of what I think is the book's most illustrative tale.

Bill Gates and Kent Evans

Microsoft co-founder Bill Gates went to Lakeside School, an all-boys high school outside of Seattle. At the time, it was one of the only schools in the world with a computer. A World War II navy pilot who taught at Lakeside convinced the Lakeside School Mothers' Club to spend the proceeds of a rummage sale to lease a Teletype Model 30 hooked up to General Electric's mainframe terminal. Gates, as well as classmate and Microsoft's other co-founder, Paul Allen, were "obsessed with the school's computer."

What are the chances? Funny you should ask.

"In 1968 there were roughly 303 million high-school-age people in the world, according to the UN. About 18 million of them lived in the United States. About 270,000 of them lived in Washington state. A little over 100,000 of them lived in the Seattle area. And only about 300 of them attended Lakeside School. Start with 303 million, end with 300."

Gates himself told Lakeside's 2005 graduating class that "if there had been no Lakeside, there would have been no Microsoft."

But Gates and Allen weren't the only two mega-fans of the Model 30.

The best student in the class, according to Gates himself, was Kent Evans—Gates' best friend as of the eighth grade. He was every bit as skilled as Gates and Allen, and he shared the same big dreams of what they could become in the future.

"After reminiscing on his friendship with Kent, Gates trails off.

'We would have kept working together. I'm sure we would have gone to college together.' Kent could have been a founding partner of Microsoft with Gates and Allen. 

But it would never happen. Kent died in a mountaineering accident before he graduated high school.

Every year there are around three dozen mountaineering deaths in the United States. The odds of being killed on a mountain in high school are roughly one in a million.

Bill Gates experienced one in a million luck by ending up at Lakeside. Kent Evans experienced one in a million risk by never getting to finish what he and Gates set out to achieve. The same force, the same magnitude, working in opposite directions."

The book goes farther into both luck, risk, and other concepts far more deeply than I can here, which is among the many reasons I recommend it.

However, I'm sharing the story as an extreme but very tangible example of how, yes, luck is sometimes not just a factor, but a significant one, in our success. 

One of the world's most accomplished and richest people—a person who also was extremely intelligent, forward-thinking, and by all accounts an exceptionally hard worker—would absolutely not have accomplished what he did if it weren't for where he went to school, as well as the teacher who had advocated for a school computer.

Can most of us point to a similarly extreme disparity in luck within our own lives? I doubt it—you won't find many canyons wider than "70-year-old billionaire" or "kid whose life was cut short in high school." 

But it's a fair bet that a sincere self-reflection would reveal that, for many of us, our present financial situations have indeed been strongly affected (for better or worse) by influences outside our control.

OK. So … What Now?

This isn't a guide to rebalancing your portfolio or buying ETFs.⁴

I'm talking about intangibles. I literally can't measure this. I'm illustrating a point through an anecdote. I'm vibe-maxxing⁵ my way through this letter.

I honestly started writing this because I thought about numerous childhood interactions with my dad in which I would complain that something wasn't fair, and he would respond, "That's tough. Life's not fair."

Before you think my dad was some unsympathetic lout, think again. The man had a knack for subtext. It wasn't ever said cruelly, just matter-of-factly. "Life's not fair." Then, in parentheses, "So you just have to do the work."

So, to those who think the road to financial success is unfair and that the American Dream is rigged, I say the same to you: "Life's not fair."

But I'm no unsympathetic lout, either. Indeed, I wrote this week's newsletter for you. Because there aren't many feelings worse than feeling, believing, realizing the happiness we've all been told can be ours isn't exactly meant for all of us.

"Life's not fair. (So you just have to do the work.)"

And by "the work," I mean this:

• Work. We all have to work. It is what it is. 99% of us will have to work for our money at some point, according to a study I made up but that all of us would agree feels accurate.
• Work smart. Don't just work long hours. Figure out how to maximize the rewards reaped for your work. The University of Missouri's School of Journalism noted in the report's press release that these beliefs might explain higher job mobility among younger workers. "Some employers view this shift as job-hopping whereas this generation sees careers as a series of strategic moves rather than a single long-term ladder." And I see it as working smart. If the system dictates that you have a better chance at financial success by doing that rather than remaining faithful to a corporation that isn't faithful to you … do that.
• Make your money work, too. This wouldn't be Young and the Invested if we didn't remind you to save and invest what you can. Compound interest and time, when combined, make for one of the most powerful forces in all of finance.
• Work on yourself. Read the book. One of the most important lessons in The Psychology of Money is that the road to financial success isn't IQ—it's behavior. Emotional intelligence, patience, discipline, and simply a healthy view about what truly makes you happy will all go a long way toward making better financial decisions for yourself.
• Work on making life fair. If you think the American dream has effectively boiled down to a lottery … do what you can to make the world not like that. Donate. Volunteer. Mentor. Build a company that ensures hard work is properly rewarded. Heck, get elected and make changes to your city, your state, even your nation—and build a place where people think the American dream is something that's truly earned, not just won.

¹ A national survey of 700+ 18- to 24-year-olds, along with interviews, done by researchers at the University of Missouri School of Journalism.

² I want to make it clear that I'm not criticizing David Bromstad (who seems like one of the warmest-hearted people on the planet) nor most of the people on the show (who seem like decent, regular people who got lucky).

³ If you're between the ages of 18 to 24, I know you probably didn't watch any of these things. These are just examples for the olds.

⁴ I have to put in a few contextual backlinks. Corporate says so.

⁵ I said this for my own amusement, nothing more.

—

Thank you for reading, and don't worry—next week, we'll get back to the more practical stuff.

Riley & Kyle

Young and the Invested

Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.

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