The Chess Paradox

At first sight, it looks like the game of chess is all about skill. After all, there is no randomness in the board setup or the interaction between the pieces. The game is fully deterministic.

Yet, chess also contains a luck component.

We know it does because if chess were solely about skill, we would expect the stronger opponent to win all games. Instead, when players are of similar ability, the stronger one only wins a small fraction of games. For example, in the latest Chess World Championships, held in 2023 in Astana, Kazakhstan, the winner only won 4 out of 18 games against the other finalist (and lost three; the rest were draws).

Imperfect Information

One reason we believe chess is a game of pure skill is that we assume perfect information. If we knew which tactics our adversary prepared against, given enough skill, we could know what the best next move is. But if we do not know which tactics our adversary studied last night, we can only guess what the best move is. The most we can do is to assign a probability, such as “I think there is only a 20% chance that my adversary studied how to defend this move, so there is an 80% chance that this is the best move.” And if the best we can do is to assign a probability to what the best move is, of course, whether we are right depends on luck – luck and skill, obviously, but not purely skill.

(If you are not convinced yet, think about the children’s game of “rock, paper, scissors.” It is a fully deterministic game, yet it’s almost all luck-based – especially if played in its “closed envelop version” that prevents using fast reflexes to “cheat.”)

It’s important to remember this. Underestimating the importance of luck is a common reason for bad decisions. Use strategies that work even if you have bad luck.

Imperfect Execution

That said, even if chess players had perfect information, there would still be a luck element.

People do not always perform at their best. Even the strongest chess player might fall sick or make a blunder, and the eventuality of that happening is at least partially due to luck.

Consider the following example, in which the strongest chess player plays two chess games against the second-strongest player. Both players play one game in full health and one game while sick. If they fall sick on the same day, the strongest player is likely to win both games, whereas if they fall sick on different days, the weakest player has a chance of winning the game on the day he is healthy, and his adversary is sick.

In this example, whether the strongest player wins one or two games is entirely due to luck – even though, of course, were he to win both games, he would 100% deserve the victory, and it would be right to attribute it solely to his skills and hard work.

Of course, it’s possible to lower the role of luck by having two players play multiple games against each other. That’s what happens in chess championships, and this is the takeaway of this post. Even in contexts overtly about skill, luck plays a role, too. Therefore, you must manage its impact, for example, by leveraging the law of large numbers and guaranteeing you can make a large number of attempts.

Skill and Luck

As the Chess Paradox demonstrated, skill being of paramount importance does not imply that luck might not be important, either.

This is important because a common reason smart people fail is that they become so focused on the importance of skill and doing things right that they forget that even if they do everything right, they might still fail.

Your strategy should allow for the possibility that you do everything right and still fail. Therefore, it should contain fail-safes such as having a plan B or ensuring that even if you lose this time, you can try again in the future.

Case study: sports

It is obvious that basketball is a game of skill. And it’s evident that the best basketball players – think about Michael Jordan, LeBron James, etc. – won because of their extreme talent and hard work.

Yet, there is a reason why the NBA finals are played in a best-of-seven format instead of in a single game. It’s because luck still matters, and playing multiple games reduces its influence.

You should consider applying a similar approach to your ventures. Reduce the impact of luck by making multiple bets – the more you make, the more the Law of Large Numbers will apply to you, and the more likely you will be to grab the rewards your skill would allow.