In the book that I am reading, “Thinking in Bets” by Annie Duke, the author makes a distinction between outcomes determined by skill and those determined by luck.
In this context, “skill” is considered everything that you did and you had control on, while “luck” is conversely everything you had no control over.
As human beings, we tend to to link our positive results to skill and the negatives to (lack of) luck.
Vice versa, when judging somebody else’s results, we tend to attribute positive results to luck and negative ones to (bad) skills.
The author is a professional poker player. In her example, her winning of a hand of poker would be put down as skill, while bad luck would be the cause of her losing.
I could apply this template to many outcomes in my life. More recently, I think about the way I have been dealing with the selling of some apartments bought by my parents in Italy.
These apartments were bought in the early 2000s, for a total of 10 split between 2 buildings in two different towns.
The idea was to rent out the apartments. The belief at the time was that investing in real estate was a safe bet.
Unfortunately, things didn’t turn out the way my parents expected. The area they bought the apartments in started losing value year after year.
Most of the apartments were vacant. The few that my parents managed to rent out were generating very little rent, which was not even enough to cover property taxes and maintenance.
To make things worse, in the first half of the 2010s my dad had a heart attack. This led to both my parents neglecting the apartments to focus on my dad’s recovery.
At the time, I was not interested in real estate. I moved to Ireland in 2008 and I was trying to make a career in digital marketing.
Fast forward to 2022, the year I sold my company (a digital marketing agency I had founded in 2016) and bought an apartment with my wife Bianca, whom I married in 2019.
I was really fed up with digital marketing or better with the service aspect of regularly dealing with clients.
So I was looking for something new, that could also take me away from spending every day in front of a computer screen.
So I decided to give it a go with the apartments. The initial idea was to renovate one apartment and rent it as an Airbnb.
Residential rents in the area were very low, while short-term lettings were still OK.
With this idea in mind, myself and my wife Bianca decided to spend a month in Italy and work on one of the apartments.
However, I soon realised that managing an Airbnb property would require a lot of time, maintenance, management of people (cleaners), which I didn’t have because I am leaving in Ireland.
Plus, when you factor in maintenance, cleaning, bills and taxes, the daily rate for the area would not be as appealing as I thought.
It’s then that I decided to pivot and I made a bet: instead of renting the apartments, I would try to sell them and re-invest the money into a more profitable property in Ireland.
The first apartment was ready by the end of July 2022 and was sold in January 2023.
The second apartment was sold in June 2023.
Fast forward to 2024, and we are now close to selling 3 more apartments (all 3 are now sale agreed).
The author of “Thinking in Bets” taught me that no outcome is 100% skill or luck. There is always a mix of these two components.
The difficult part is figuring out how much of a role skill and luck play in our daily bets.
If I analyse my bet from this angle, I can certainly say that I tried to present the apartments in the best possible way.
Instead of selling only a vacant property, I decided to furnish it as if it were going to be rented to tourists.
So for each apartment I would buy furniture from IKEA and accessories from Amazon, along with home appliances where needed.
Initially, myself and my wife would do pretty much everything, from buying to assembling the furniture, from re-painting both walls and pieces of furniture to plumbing.
Later on I managed to put together a team that I could rely on, including a very much needed person for assembling the furniture.
The result of this home staging work was that the apartments we advertised would get a lot more traction and viewing appointments than the standard listing of empty, and often poorly photographed, properties.
So to go back to the initial point, the pivoting and home staging work is definitely down to the skill category.
However, with all this in mind I couldn’t be sure that the apartments would sell. I could only put them out there and hope for the best.
To be more specific, after selling the first two apartments fairly quickly between January and June 2023, I made the decision / bet to sign a contract with a real estate agency who would do both photography and home staging for us.
The logic of this was correct: I had put together a team including a plumber, builder, furniture assembler, surveyor, and now I was going for a photographer, home stager and estate agent.
Considering I am living in Ireland, this made a lot of sense because it would have saved me a lot of time and stress.
However, the outcome of this correct decision was a negative one. The agency turned out to be very disappointing. They barely managed to get any viewing of the apartments.
To make things worse, in August 2023 I signed a 6-month exclusivity contract, which meant that the estate agency was the only one that could sell the apartments.
This meant wasting over 6 months and losing momentum, which led to a lot of frustration and stress on all parties involved, especially myself.
Was this outcome due to bad luck? Could I have done a bit more research about the agency? Probably, but the way the estate agent decided to manage the property was not in my control.
This brings me back to the luck / not in my control part of this blog post.
The estate agent was something I could not control. I could just decide to stop the collaboration once the contract was over.
The property market is something I cannot control.
People’s preferences and budget is something I could probably learn from and figure out, although I cannot control it.
To make it short, to sell more apartments I had to make some tweaks, specifically I had to lower the prices that the estate agency had recommended for the properties and advertise them on a platform the estate agent decided against.
This again was down to skill and, more importantly, it showed that I had learned from the experience and changed based on the new information.
To use a pattern that Annie Duke mentions in her book:
- I started with a belief (It would be helpful to find somebody to delegate photography, home staging and viewings)
- I made a decision / bet (I could save time AND sell the apartments through a real estate agent)
- I got a (negative) outcome (the agent was useless and we didn’t sell any apartments for about a year)
- I revised my belief (to sell these apartments in that particular area I have to keep some tasks for myself)
To conclude, if I look at this whole experience, what percentage is down to skill and what part is down to luck?
It’s difficult to give numbers.
What I can say is that all I could do was giving my best to present and advertise the apartments in the best possible way.
The rest, is probably down to luck or better things I cannot control.
The featured image is taken from the very first apartment myself and my wife Bianca renovated back in July 2022.