It can be difficult to tell the difference between luck and skill in certain games. Even in cricket. Captains often win several tosses in a row. We know that's luck. But teams also win many games in a row. For instance, the Australians have had several sequences of 10 plus wins. We "know" that is not luck but can you prove it is not luck mathematically?
It's not so easy. If you toss a coin a hundred times, it will come up with long running sequences of heads and tails, even if the ultimate ratio is 50:50. Each event is independent (the coin has no memory). In each toss, the probability of heads (or tails) remains 50 per cent regardless of the previous or following result.
One could argue that a team, which logs a sequence of wins, has done so simply through luck (though I wouldn't care to say this face-to-face with Steve Waugh, Viv Richards or Clive Lloyd). You would have to work hard and dig out more stats to prove a sequence of wins isn't all luck.
There is a similar problem in classifying investment returns and it's much bigger because luck plays a larger role. Every year some investors beat the market. Some do over long periods. Can you prove this isn't luck? It's very difficult, if at all possible.
Investors and traders have favourite methods. If they're successful, others emulate those methods. Take for example, George Soros, Carl Icahn, Jim Rodgers, Warren Buffett, John Bogle and Marc Faber. These are some famous and successful market players chosen almost at random.
Each of these icons employs methods that have worked for him over the long term. But the formulae are all very different. The frightening thought is that they may all have been very lucky
