The Ovarian Lottery — A Thought Experiment from Warren Buffett

The “Ovarian Lottery” is a short thought experiment popularized by Warren Buffett.

The idea is borrowed from John Rawls, a Harvard philosopher and author of A Theory of Justice. There are also earlier references like “Ovarian Roulette” from Dr. Reginald Lourie in the 1960s.

In The Snowball by Alice Schroeder (Amazon), Warren Buffett is quoted as saying:

“When I was a kid, I got all kinds of good things. I had the advantage of a home where people talked about interesting things, and I had intelligent parents and I went to decent schools. I don’t think I could have been raised with a better pair of parents. That was enormously important. I didn’t get money from my parents, and I really didn’t want it. But I was born at the right time and place. I won the ‘Ovarian Lottery.’

Ovarian Lottery Warren Buffett

The Ovarian Lottery — A Thought Experiment from Warren Buffett

I’ve found a few different versions Warren Buffett has shared over the years. The remainder of this post outlines two of them.

The Ovarian Lottery from Warren Buffett’s Annual Meeting in 19971

For this version, you can actually listen to Warren Buffett tell the story (beginning around the 4:15 mark in the video). The full transcript is also available below the video.

Imagine that you were going to be born 24 hours from now. And you’d been granted this extraordinary power. You were given the right to determine the rules — the economic rules — of the society that you were going to enter. And those rules were going to prevail for your lifetime, and your children’s lifetime, and your grandchildren’s lifetime.

Now, you’ve got this ability in this 24-hour period to make this decision as to the structure, but — as in most of these genie-type questions — there’s one hooker.

You don’t know whether you’re going to be born black or white. You don’t know whether you’re going to be born male or female. You don’t know whether you’re going to be born bright or retarded. You don’t know whether you’re going to be born infirm or able-bodied. You don’t know whether you’re going to be born in the United States or Afghanistan.

In other words, you’re going to participate in 24 hours in what I call the ovarian lottery.

It’s the most important event in which you’ll ever participate. It’s going to determine way more than what school you go to, how hard you work, all kinds of things. You’re going to get one ball drawn out of a barrel that probably contains 5.7 billion balls now, and that’s you.

Now, what kind of a society are you going to construct with that in prospect?

You would try to figure out a system that is going to produce an abundant amount of goods, and where that abundance is going to increase at a rapid rate during your lifetime, and your children and your grandchildren, so they can live better than you do, in aggregate, and their grandchildren can live better. So you’d want some system that turned out what people wanted and needed, and you’d want something that turned them out in increasing quantities for as far as the eye can see.

But you would also want a system that, while it did that, treated the people that did not win the ovarian lottery in a way that you would want to be treated if you were in their position. Because a lot of people don’t win the lottery.

When (Charlie Munger and I) were born the odds were over 30-to-1 against being born in the United States. Just winning that portion of the lottery, enormous plus. We wouldn’t be worth a damn in Afghanistan. We’d be giving talks, nobody’d be listening. Terrible. That’s the worst of all worlds. So we won it that way. We won it partially in the era in which we were born by being born male.

When I was growing up, women could be teachers or secretaries or nurses, and that was about it. And 50 percent of the talent in the country was excluded from, in very large part, virtually all occupations.

We won it by being white. You know, no tribute to us, it just happened that way.

And we won it in another way by being wired in a certain way, which we had nothing to do with, that happens to enable us to be good at valuing businesses. And you know, is that the greatest talent in the world? No. It just happens to be something that pays off like crazy in this system.

Now, when you get through with that, you still want to have a system where the people that are born — like Bill Gates or Andy Grove or something — get to turn those talents to work in a way that really maximizes those talents. I mean, it would be a crime to have Bill or Andy or people like that, or Tom Murphy, working in some pedestrian occupation just because you had this great egalitarian instinct.

The trick, it seems to me, is to have some balance that causes the people who have the talents that can produce goods that people want in a market society, to turn them out in great quantity, and to keep wanting to do it all their lives, and at the same time takes the people that lost the lottery and makes sure that just because they, you know, on that one moment in time they got the wrong ticket, don’t live a life that’s dramatically worse than the people that were luckier.

The Ovarian Lottery from Warren Buffett’s Student Lecture in 19982

“Let’s just assume it was 24 hours before you were born and a genie came to you and he said, ‘…you look very promising and I have a big problem. I got to design the world in which you are going to live in. I have decided it is too tough; you design it.’

So you have twenty-four hours, you figure out what the social rules should be, the economic rules and the governmental rules and you and your kids and their kids will live under those rules.

You say, ‘I can design anything? There must be a catch?’

The genie says there is a catch. You don’t know if you are going to be born black or white, rich or poor, male or female, infirm or able-bodied, bright or retarded. All you know is you are going to take one ball out of a barrel with 5.8 billion (balls). You are going to participate in the ovarian lottery.

And that is going to be the most important thing in your life, because that is going to control whether you are born here or in Afghanistan or whether you are born with an IQ of 130 or an IQ of 70. It is going to determine a whole lot.

What type of world are you going to design? I think it is a good way to look at social questions, because not knowing which ball you are going to get, you are going to want to design a system that is going to provide lots of goods and services because you want people on balance to live well. And you want it to produce more and more so your kids live better than you do and your grandchildren live better than their parents. But you also want a system that does produce lots of goods and services that does not leave behind a person who accidentally got the wrong ball and is not well wired for this particular system.

I am ideally wired for the system I fell into here. I came out and got into something that enables me to allocate capital. Nothing so wonderful about that. If all of us were stranded on a desert island somewhere and we were never going to get off of it, the most valuable person there would be the one who could raise the most rice over time. I can say, ‘I can allocate capital!’ You wouldn’t be very excited about that. So I have been born in the right place.

Gates says that if I had been born three million years ago, I would have been some animal’s lunch. He says, ‘You can’t run very fast, you can’t climb trees, you can’t do anything.’ You would just be chewed up the first day. You are lucky; you were born today. And I am.

The question getting back, here is this barrel with 6.5 billion balls, everybody in the world, if you could put your ball back, and they took out at random 100 balls and you had to pick one of those, would you put your ball back in? Now those 100 balls you are going to get out, roughly 5 of them will be American, 95/5. So if you want to be in this country, you will only have 5 balls, half of them will be women and half men—I will let you decide how you will vote on that one. Half of them will below average in intelligence and half above average in intelligence. Do you want to put your ball in there? Most of you will not want to put your ball back to get 100.

So what you are saying is: I am in the luckiest one percent of the world right now sitting in this room—the top one percent of the world. Well, that is the way I feel. I am lucky to be born where I was because it was 50 to 1 in the United States when I was born. I have been lucky with parents, lucky with all kinds of things and lucky to be wired in a way that in a market economy, pays off like crazy for me.”

What are the morals of the story?

As of this writing, the global population of “lottery balls” is now somewhere around 7,800,000,000. Just by reading this, you’re in the 60% of the global population that has internet access. In some very real ways, you won the lottery. In other ways, you’ll probably feel you lost the lottery.

There’s an incredible amount of your life that you couldn’t control and therefore can’t take credit (or blame) for—much more than we realize on a daily basis. There’s also plenty of research out there that shows where you start in life has an incredibly overwhelming affect on where you end up in life. This is humbling and should be kept top of mind—in our relationship with ourselves and with others.

It can shape everything about how you see the world moving forward:

“The Ovarian Lottery had come to shape all of his opinions about politics and philanthropy; Buffett’s ideal was a world in which winners were free to strive, but narrowed the gap by helping the losers.”The Snowball by Alice Schroeder

What’s your reward for winning the ovarian lottery? You get to give back by helping those who didn’t.

“A just society is based on principles everyone would agree to if impartial and if starting from an original position behind a ‘veil of ignorance’ — not knowing who they would be or which side of an argument they would be on.” — Eric Rosenbaum paraphrasing John Rawls and Warren Buffett3

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Sources & Footnotes:

  1. https://buffett.cnbc.com/video/1997/05/05/morning-session—1997-berkshire-hathaway-annual-meeting.html?&start=6601&end=7219
  2. http://tilsonfunds.com/BuffettUofFloridaspeech.pdf
  3. https://www.cnbc.com/2016/08/30/a-birthday-message-from-lucky-warren-buffett.html

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The Ovarian Lottery — A Thought Experiment from Warren Buffett