How Much of Merit is Due to Luck? Evidence on the butterfly effect of luck

Progressive societies aspire to eliminate discrimination and promote equal opportunities and meritocracy. The crucial question remains: does the pursuit of equal opportunities and merit-based evaluation truly lead to a fair society? To test the presumed fairness of meritocracy, this paper quantitatively analyzes the impact of luck in the absence of initial differences in individual characteristics. This study utilizes a unique experimental setting involving Japanese speedboat races. Participants are randomly assigned engines with different capacities in each tournament, ensuring probabilistic fairness across racers but introducing variability in the timing of luck. By identifying racers assigned ''lucky'' motors during their debut periods as the treatment group, I trace their performance trajectory, examining factors such as the number of first-place finishes and earnings. The findings unveil a growing performance gap over time, accompanied by increased opportunities and a tendency for risk-taking behavior. Over four years, the initially modest advantage of the treatment group results in a remarkable 69% more cumulative first-place finishes and 48% more cumulative earnings for male racers. Additionally, male racers in the treatment group exhibit a lower market exit rate compared to the control group. These results underscore the pivotal role of early-stage luck in shaping substantial differences in merit, challenging the presumed fairness of meritocracy.