Investing Is More Luck Than Talent
I&#x27;ve read a bit into econophysics. In stat mech, the exchange of energy between atoms is assumed to be random. When the exchange of energy is random, the resulting distribution of energies is a Gibbs distribution, which means that the probability of atoms with higher energies falls off exponentially.<p>The application is that if you replace energy with money, and atoms with people, then the same equations hold for a model of people who randomly exchange money. Therefore if investments were truly random, you would expect the distribution of investors&#x27; wealth to follow an exponential distribution, not a power law! This directly contradicts the article.<p>Interestingly enough, the bottom 99% follows an exponential distribution, while the top 1% follows a power-law, and the transition is very sharp (eg, wealth plots have a &quot;kink&quot; in them).<p>Brief introduction to econophysics for the mathematically inclined:
<a href="https:&#x2F;&#x2F;arxiv.org&#x2F;abs&#x2F;0709.3662" rel="nofollow">https:&#x2F;&#x2F;arxiv.org&#x2F;abs&#x2F;0709.3662</a>