The phrase like the man who fell out of the balloon, not in it refers to someone who stands no chance whatsoever in an undertaking.

The allusion is, of course, to someone falling out of a hot-air balloon. Such accidents did happen—for example, the following illustration and paragraph are from The Illustrated Police News (London, England) of Saturday 13^th October 1894:

Fatal Balloon Accident

A terrible balloon accident occurred on Saturday at Franklinville, New York, where a fair was being held. One of the chief items of the day’s entertainment was a balloon ascent from the fair grounds by a young woman named Beatrice Vandressen, eighteen years of age. The balloon rose to a height of 1,000 feet, and the spectators were then horrified to see the young aeronaut falling headlong to the ground. The body was terribly crushed.

—Cf. also lead balloon.

The phrase like the man who fell out of the balloon, not in it may have originated as a line in The World, a successful drama by Paul Meritt (1843/4–1895), Henry Pettitt (1848-1893) and Augustus Harris (1852-1896), first produced at Drury Lane Theatre, London, on Saturday 31^st July 1880, since the earliest occurrence that I have found is from a quotation from this play, in the review published in The Morning Post (London, England) of Monday 2^nd August 1880—Moss Jewell is “a Hebrew of the Whitechapel type”:

The comedy of the piece is principally in the charge of Mr. Harry Jackson, who in Moss Jewell has frequent opportunities for the display of those wonderful eccentricities of look, voice, and manner which are conventionally distinctive of the stage-Jew, and seldom fail to provoke the laughter of the true-born Gentile. Some of Mr. Jewell’s sayings are less remarkable for Attic salt¹ than for strangeness of illustration. Let these serve for specimens—“‘Here we are again,’ as the Queen says when she opens Parliament;” “Like the man who fell out of the balloon, ‘You’re not in it.’”

(¹ Attic salt: refined wit)

The second-earliest occurrence of the phrase that I have found is from a paragraph published in the St. Louis Post-Dispatch² (St. Louis, Missouri, USA) of Saturday 10^th March 1883—the St. Louis exposition and music-hall building was to be erected by public subscription; The Missouri Republican (St. Louis, Missouri, USA), a rival newspaper, had refused to participate in the subscription:

The payments of the calls on the stock of the Exposition keep coming on in a procession, like the animals into Noah’s ark, and a very few days will show the whole amount of stock half paid, according to the terms of subscription. None of this stock was to be paid for in advertising at $1 a line, or in good-will, puffing or blackmail, and so, of course, the Republican, like the man who fell out of the balloon, is not in it.

(² The St. Louis Post-Dispatch was owned by the Hungarian-born U.S. newspaper proprietor and editor Joseph John Pulitzer (József Pulitzer – 1847-1911).)

The third-earliest occurrence of the phrase that I have found is from a letter by a person signing themself ‘Looker on’, published in The Ulverston Mirror and Furness Reflector (Ulverston, Lancashire, England) of Saturday 30^th June 1883:

MR. CASSON AND THE RATEPAYERS’ ASSOCIATION.
To the Editor of the Ulverston Mirror.

Sir,—Truly we live in an age of surprises, and wonders never cease. About three months ago the annual election of members of our Local Board took place, and, thanks to the exertions of the Ratepayers’ Association, Mr. Casson, one of the retiring candidates, found himself in the same position as the man who fell out of the balloon, not in it, in other words at the bottom of the poll. Clearly this has led him to reflect, for last night, to my utter amazement, on attending a meeting of the ratepayers promoted by this association, whom should I find presiding but the veritable Mr. Casson, and with a full knowledge too of the objects of the meeting and its promoters?

An earlier phrase, we can’t help it, as the folks said when they fell out of the balloon, probably of theatrical origin too, occurred in a speech given by William John Hammond (1797/9-1848), who, in 1837, at the Strand Theatre, London, played the role of Sam Weller in The Pickwickians, a dramatisation of Charles Dickens’s The Pickwick Papers—in this speech, as transcribed in The Bell’s New Weekly Messenger (London, England) of Sunday 15^th October 1837, Hammond used several other phrases built on the same pattern:

Address Spoken by Mr. W. J. Hammond, in the Character of Sam Weller, at the close of the Strand season, on Thursday.—Ladies and Gentlemen! The time for Shutting up our House having come at last, I hope you’ll kindly allow Sam Veller, just to say a few vords on behalf of the Gov’ner.—“Ve dont part vith you because ve vant it—or because ve like it,—but because ve cant help it,”—As the folks said ven they fell out of the Balloon.—Ve sartainly have done our best to make things Comfortable, as “the Beadle did ven he put the Cobbler’s legs in the Stocks.”— Our House is small, that’s the fact on’t, but then, as the Maggot said ven he got in the Nutshell—“it’s wery snug” and ve are never so happy as ven vere vaiting on you “As the Flies remark’d to the Grocer.”—During the time vere shut up—for like the flowers in May, ve shall meet you again ve hopes next Easter, the Gov’ner means to get every thing in order for you. Of course I needn’t say I shall be here to wait upon you, for my birth’s bin so wery agreeable that all my vork, bin playing, and votever preferment I may have in a Larger House, I shall never for the chance of getting up in the vorld, forgit my friends here, for “Home’s Home, if its ever so Homely, as the cricket said when he got in the chimney corner.” He’s already begun to make preparations for your entertainments. He’s engaged two or three favourite Cooks to provide the Bill of fare, and to prevent breakages, means to follow the adwice of the Bull in the China Shop and look wery sharp arter the pieces. And having said these here few words, I’ve only now, Ladies and Gentlemen, to return you all our wery best thanks for all your kindness, and to vish you all possible health, wealth, and prosperity, till ve see’s you agin, as the Telescope said to the Comet ven they moved him out of the Observatory.

A variant of this phrase appeared among several Wellerisms published in John O’Groat Journal, and Weekly Advertiser for Caithness, Sutherland, Orkney, and Shetland (Wick, Caithness, Scotland) of Friday 15^th April 1842:

“Let’s take another turn,” as the old axe said to the grindstone.—“Out of place and nothing to take to,” as the man said when he fell out of the balloon.—“I’ve been roaming, I’ve been roaming,” as the schoolboy said who had played the truant; “and I’m coming, and I’m coming,” as the schoolmaster said while taking the rod out of pickle.