There is indeed an element of luck, and no, there isn't. The prepared mind sooner or later finds something important and does it. So yes, it is luck. The particular thing you do is luck, but that you do something is not.

From this passage it is pretty clear what he thought luck consisted of when it comes to scientific research and how you should approach it. He sends a warning ("you must aim big") that still feels quite comforting ("you can/you'll eventually get there").

When pg and other people talk about luck, it seems like they mean slightly different things -- "there's a chance you'll die even if you do everything right" (= you need to play dice with God and win, among other factors), "most startups die from mostly common causes, so make sure you're not doing these mistakes I've written about 30x times" (= most founders are utterly clueless), etc -- that are all statistically true if you're speaking to an audience but can yield conflicting advice from an individual's point of view. It may be my own stupidity but it's not very clear what to make of this luck thing. How should one deal with it? Sometimes it seems rather grim, other times it feels encouraging.

Search pg's essays for "luck":

http://search.store.yahoo.net/paulgraham/cgi-bin/nsearch?catalog=paulgraham&query=luck&.autodone=http%3A%2F%2Fpaulgraham.com%2Fnsearch.html