Cumulative advantage
A process in which past success raises the chance of future success, so small early differences, including pure luck, grow into large and lasting gaps.
In plain English
It's modelled by Pólya's urn: each draw adds another ball of the same colour, so early draws shape the final mix. Outcomes become very unequal and hard to predict in advance, and the winners look far more talented than the starting differences justify. Results are no longer independent, so ordinary comparisons of winners and losers mislead.
Uncle Gary explains
With ten identical sales reps and each new deal assigned in proportion to deals already won, the top rep ends with 29% of all deals and the typical top-to-bottom ratio is about 40 to 1.
Why it matters for your money
Funds with a lucky early year attract money and attention that make them look even more successful. Size and popularity are not evidence of skill.
Where we tested it
Related terms
All glossary terms. Educational content, not financial advice.