Understanding How Skill, Systemic Factors, and Luck Interact—The Case of Bond Traders

Most stories about winners—on Wall Street or anywhere else—lean hard into narratives of raw skill or outsized intelligence. But a sharper view reveals that great outcomes often pivot on three forces: preparation, system dynamics, and good/bad luck. As Salomon Brothers exploded with mortgage trading profits, many people believed genius was the cause. In reality, arcane regulatory shifts, accidental tax breaks, and market timing poured money into the firm’s lap long before many traders even knew what bets they’d placed.

This led to distorted perceptions, with leaders sometimes convinced their personal brilliance justified every bonus, while others quietly stewed about unfair pay or missed opportunities. The traders’ environment rewarded risk-taking and adaptability—but also left many relying on a system vulnerable to external shocks and internal turnover.

After a few years, as regulations and competitors evolved, luck dried up and those same 'geniuses' often struggled. The self-assessment game became trickier: is the effort not enough, or is the landscape just shifting under everyone’s feet?

Behavioral economics labels this 'outcome bias' and 'attribution error.' Nobel Prize-winner Daniel Kahneman’s work makes clear: people reliably overcredit their personal skill for good results and overlook structure or chance. Separating these strands equips you to double down on real strengths and build resilience for when systems or luck shift.

Review your last few weeks, listing both big and small wins and losses—maybe a grade, a game, or even a new friend. Assign rough percentages for how much each result came from your skills, the system around you, or simple luck. Pick one example from each side and plan how you’ll focus your effort next round—maybe you need more practice, or maybe it’s about leveraging a good system, or simply being ready for fresh luck. This approach will anchor your confidence in reality, not hype, while still motivating your best work.