Alec Nevala-Lee

Thoughts on art, creativity, and the writing life.

Archive for August 27th, 2014

The oilman’s divorce, or the problem of luck

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Harold Hamm

Money may not be everything, but it’s certainly a clarifying force, especially when seventeen billion dollars are on the line. Right now, the news is filled with coverage of what may end up being the most expensive divorce in the history of the world, a courtroom battle currently being waged between Oklahoma oilman Harold Hamm and his wife Sue Ann. This kind of story possesses a certain guilty fascination of its own—if Ms. Hamm gets even a quarter of her husband’s fortune, she’ll be richer than Oprah—but it also raises some unexpected philosophical questions. At the moment, Hamm is claiming that his stake in Continental Resources, the company he founded almost five decades ago, was built entirely on luck, since the discovery of oil deposits depends on so many factors that are fundamentally beyond human control. Ms. Hamm, by contrast, says that it was all thanks to her husband’s skill and hard work. Which leaves us with the odd prospect of one of the world’s wealthiest men disclaiming all responsibility for his own success, while his soon-to-be ex-wife insists that he isn’t giving himself enough credit.

Of course, it isn’t hard to see why they’d stake out their particular positions. Under laws governing equitable division, assets that were actively earned over the course of the marriage are split between the two parties, while passive assets, or those in which chance played a role, remain undivided. The underlying presumption is that a marriage is a partnership in which both parties collectively participate, and the work of one can’t be separated from the presence of the other—an argument that breaks down when luck is involved. If Sue Ann can successfully argue that Harold’s fortune was derived from his own efforts, she’s entitled to up to half of everything; if Harold makes the case that it’s due to luck, he clings to the lion’s share. In the end, it’s likely that the decision will fall somewhere in the middle, and I’m very curious to hear Judge Howard Haralson’s final ruling on the subject. Because while Harold Hamm is clearly pressing his case beyond what he really believes about his own abilities—”He must be squirming inside,” as a psychologist notes in the NBC News story—he isn’t entirely wrong. And it took only a multibillion-dollar divorce suit for him to admit it.

Daniel Kahneman

We all tend to underrate the role that luck plays in human endeavor, whether successful or otherwise, especially when we’ve done well for ourselves. The truth is probably closer to what Daniel Kahneman sets forth in Thinking, Fast and Slow, using what he says is his favorite equation:

Success = talent + luck
Great success = a little more talent + a lot of luck

That’s particularly true of something like oil and gas, which remains a punishingly uncertain industry even with modern geological and technological expertise. There’s a reason why more than a few wildcatters used divining rods to locate petroleum deposits: even with considerable skill and experience, a lot of it comes down to luck, persistence, and time. David Mamet likes to say that everybody gets a break in Hollywood after twenty-five years, except that some get it at the beginning and others at the end, and the important thing is to be the one who stays after everyone else has gone home. And wildcatting, along with so much else, works much the same way.

So while it’s easy to dismiss Hamm’s argument as disingenuous—his success in building one of the largest energy companies in the country can’t be entirely divorced from his own actions and decisions—I’d prefer to think of it as a moment of rare candor, however little he might believe in it himself. As John Bogle likes to point out, choosing an investment fund manager based on past performance is a little like staking money on the winner of a coin-flipping contest: given enough participants, someone is bound to get ten heads in a row, but that doesn’t mean you should bet on the streak in the future. That’s as true of running a company as managing a mutual fund. What seems like a smart decision may really have been a lucky break, and it’s only in retrospect, as we construct a narrative to make sense of what happened, that we emerge with the myth of the business visionary. If Kahneman’s formula holds true, as it does in most things in life, Harold Hamm might well be entitled to keep most of what he earned. Admitting this would involve giving up many of our most cherished notions about success. But with seventeen billion dollars at stake, even one of the richest men in the world might have to concede that it’s better to be lucky than good.

Written by nevalalee

August 27, 2014 at 8:58 am

Quote of the Day

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Karl Mannheim

It has become extremely questionable whether, in the flux of life, it is a genuinely worthwhile intellectual problem to seek to discover fixed and immutable ideas or absolutes. It is a more worthy intellectual task perhaps to learn to think dynamically and relationally rather than statically.

Karl Mannheim

Written by nevalalee

August 27, 2014 at 7:30 am

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