Abstract: Luck is an omnipresent factor which influences experiences and outcomes for individuals and organizations. This article analyzes how lucky and unlucky outcomes influence future organizational learning, decision-making and performance. Team statistics and outcomes are analyzed over 769 National Football League seasons for 32 franchises from 1990-2015. Four specific sources of luck are identified and measured: 1) divergence of win outcomes from actual team quality; 2) difficulty of opposition; 3) fumble recovery rates and 4) player injuries. Teams and players have little or no influence over these lucky factors, which nevertheless influence game outcomes, and by extension, the careers of players and coaches. Luck alters game outcomes and in turn significantly influences the retention or firing of coaches and players, which shapes their career incentives and decision-making. In addition to negatively affecting future performance via distorted learning, luck can also generate perverse incentives; in this case, encouraging risk aversion and scapegoating. Mistaking noise for signal – and conflating luck with skill – is conducive to poorer future decisions and outcomes. Paradoxically, luck can provide a means of skill-based advantage for savvy decision-makers, who learn more effectively from noisy feedback than others who are misled.
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Lucky outcomes appear to induce distorted learning and suboptimal personnel decisions, which also degrades future performance.
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